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Facts 1. The present cross-appeals concern a dispute arising out of a commercial agreement made between Xiamen Xinjingdi Group Co Ltd (the “Plaintiff”)and Eton Properties Limited and Eton Properties (Holdings) Limited (collectively “D1-D2”) in July 2003 (the “Agreement”). 2. The Agreement provided that the Plaintiff would acquire from D1-D2 the right to develop a piece of land in Xiamen (“Lot 22”) owned by the PRC-incorporated Legend Properties (Xiamen) Company Limited (“D5”). D1-D2 wholly and indirectly owned D5 through a Hong Kong-incorporated company sharing the same name as D5 (“D4”). The Agreement required D1-D2 to transfer their shares in D4 (the “D4 Shares”) to the Plaintiff’s nominee upon receiving the total transfer price. Under the Agreement, delivery of Lot 22 was to take place within 6 months of the date of the Agreement. 3. Tan Lucio C (“D6”), who controlled the group of companies, later procured D1-D2 to terminate the Agreement and develop Lot 22. In response, the Plaintiff commenced arbitration proceedings against D1-D2 at the China International Economic and Trade Arbitration Commission (“CIETAC”) in Beijing in August 2005. 4. Between November 2005 and March 2006, restructuring of the corporate shareholdings relating to Lot 22 began, so that all the D4 Shares came to be held by Eton Properties Group Limited (“D3”) as legal and beneficial owner in place of D1-D2. This restructuring allowed D3, via D4, to hold D5, which owned the rights to develop Lot 22. This made it impossible for D1-D2 to transfer their D4 Shares to the Plaintiff’s nominee as agreed. 5. In October 2006, the Plaintiff obtained an arbitral award from CIETAC requiring D1-D2 to continue to perform the Agreement (“First Award”). The Plaintiff attempted but failed to enforce the First Award in Xiamen before the Xiamen Municipal Intermediate Court in July 2007. The Plaintiff then successfully applied to the Hong Kong Court of First Instance (“CFI”) to enforce the First Award in HCCT 54/2007. D1-D2 then appealed unsuccessfully to the Court of Appeal (“CA”). 6. Having lost the appeal, D1-D2 returned to CIETAC to ask for a determination that the Agreement could no longer be performed and that the parties to it be discharged. This application was dismissed in April 2009. 7. In May 2008, the Plaintiff commenced a common law action against D1-D2 to enforce the First Award as an alternative to the statutory action, and also against D3, D4, and D5 before the CFI to raise the following additional claims. The Plaintiff asserted proprietary rights over the D4 Shares held by D3. Those proprietary rights were said to have arisen out of alleged breaches of fiduciary duty by D1-D2 in effecting the restructuring, with D3, the recipient of the D4 Shares, knowing that they were the product of those breaches and thus subject to a constructive trust in the Plaintiff’s favour. 8. In 2010, the Plaintiff further amended its claim to add 5 individuals, including D6, as defendants, and to seek damages for failure to honour the First Award, damages in tort for inducing breach of contract and unlawful means conspiracy, and equitable compensation for breach of fiduciary duty as constructive trustees. 9. In June 2012, the CFI dismissed all of the Plaintiff’s claims. On appeal by the Plaintiff, the CA, in April 2016, awarded damages to the Plaintiff for D1-D2’s failure to perform the First Award (setting aside, at the Plaintiff’s election, the enforcement order granted in HCCT 54/2007) and dismissed the rest of the claims. 10. The Plaintiff and D1-D2 sought leave to appeal to this Court. The Plaintiff appealed against the parts of the CA judgment dismissing its claims collectively against D1-D2, D3, D4, and D6. D1-D2 appealed against the part of the CA judgment which allowed the appeal in relation to the damages award. The FACV 3/2019 Appeal 11. The main question in this appeal by D1-D2 concerned the scope of the relief that the Hong Kong court, enforcing a Mainland award at common law, may grant. In particular, the question was whether the court can only make an order which mirrors and does not go beyond the award made by the arbitral tribunal. In the present case, First Award required D1-D2 to continue to perform the Agreement. Was it open to the enforcement court to award damages to the Plaintiff? 12. The Court held that the enforcement court is not restricted to duplicating the arbitral award. While at the arbitration phase, the arbitrators determine the parties’ mutual rights and liabilities, at the enforcement stage, the court has power, if necessary, to fashion an appropriate remedy to give effect to the arbitral award. 13. The second question was whether (referring to a case called Johnson v Agnew) the fact that the First Award requiring continued performance was still in existence prevented the enforcement court from awarding damages on the basis that such relief is inconsistent with the award. The Court held that the answer is “No”. D1-D2’s argument was based on a failure to distinguish between the arbitration and enforcement phases of the claim. The FACV 5/2019 Appeal 14. The first main question on this appeal by the Plaintiff concerned the tort of inducing a breach of contract. The Plaintiff alleged that D3 to D6 had caused it loss by inducing D1-D2 to hand over to D3 their D4 Shares and complete control of D4 and D5 and thus to breach their contractual obligation to transfer their D4 Shares to the Plaintiff’s nominee under the Agreement. The Defendants argued that since D1-D2 had firmly decided two years earlier not to perform the Agreement, the restructuring had not caused them to breach the contract. The Court held that the claim against the Defendants failed, not so much for lack of a causal connection, but because, on the facts, D3 to D6 could not be said to have had the necessary intent to frustrate the share transfer envisaged in the Agreement in effecting the restructuring. 15. The second main question (expressed as three separate questions at the hearing) related to the Plaintiff’s claim that, upon entering into the Agreement whereby D1-D2 contracted to transfer the D4 Shares to the Plaintiff’s nominee, the Plaintiff acquired by virtue of the Agreement an immediate beneficial interest in the D4 Shares and that, since D3 to D6 had notice of the Plaintiff’s interest, in D3 receiving the D4 Shares as a result of the restructuring, it became liable as a constructive trustee of those shares in favour of the Plaintiff. D4 to D6 were alleged to be liable for knowingly assisting D1-D2 and D3 in their breach of fiduciary duty in respect of those shares. 16. The Court held that this claim failed because the Agreement, which was expressly made subject to PRC law, did not have the characteristics of a contract which, if governed by Hong Kong law, would have been enforceable by an order of specific performance. The Agreement did not qualify for specific performance because the obligation to transfer the D4 Shares to the Plaintiff’s nominee was subject to conditions precedent and because the Agreement’s terms were such as to require close cooperation between the parties and D1-D2’s performance to be supervised by the court. Disposition 17. Accordingly, the Court unanimously dismissed both appeals. |
1. The basic issue of principle raised on these appeals is whether a person other than the Secretary for Justice (“the SJ”) who wishes to bring proceedings for criminal contempt of court must obtain the consent of the SJ before commencing such proceedings. 2. The action underlying the instant contempt application (“the underlying action”) arose from a dispute concerned with the control of a motor vessel “Grain Pearl” (“the Vessel”), which was owned by Joint Silver Limited (“JSL”), a company (i) 50% owned by the Respondent and two associates; and (ii) 50% ultimately owned by Lau Wing Yan and his associates, and the 1st and 2nd Appellants (“Lau and associates”). 3. The Respondent fell out with Lau and associates, and the disagreements between them included a dispute as to what, if anything, had been orally agreed as to how decisions relating to JSL would be made, as to the role of the 3rd Appellant in managing the Vessel, and as to the 3rd Appellant’s fee entitlement. 4. The disagreements led to the commencement of the underlying action, in which Lau and associates and the 3rd Appellant relied, among other things, on three emails (“the emails”) which were exhibited to the 1st Appellant’s affirmation, to support their ex parte application for an injunction against the Respondent. 5. The emails had actually been altered by one Yan Donghai (“Yan”) so as to bolster the case of Lau and associates. The Respondent contended that the 1st and 3rd Appellants were aware of these alterations, whereas the 1st Appellant, while accepting that the emails were altered by Yan, said that she was unaware of this until January 2016. 6. The Respondent applied on 17th August 2016 for leave to commence contempt proceedings against the Appellants and Yan in respect of their use of the emails. 7. DHCJ Kent Yee granted the Respondent leave to bring the contempt proceedings on 20th December 2016, but the grant of leave was set aside by DHCJ Saunders on 5th July 2017 on the ground of material non-disclosure. However, DHCJ Saunders held that it was unnecessary for the Respondent to obtain the SJ’s consent to bring the contempt proceedings. 8. On 25th July 2018, the Court of Appeal allowed the Respondent’s appeal against DHCJ Saunders’s decision, overruling DHCJ Saunders’s finding of material non-disclosure, but agreeing that the SJ’s consent to the bringing of the contempt proceedings was not needed. 9. On 18th July 2022, the Court of Final Appeal granted the Appellants’ application for leave on four questions: (1) Whether the SJ has the exclusive right to bring criminal contempt proceedings against an alleged contemnor; (2) if the answer to the first question is “no”, whether a private litigant who seeks to commit another for criminal contempt under Order 52 of the Rules of the High Court (Cap 4A) is or should be required to consult the SJ; (3) if the answer to the second question is “yes”, and the SJ declines to bring the proceedings, whether the private litigant is required to join the SJ as party, and/or lay the relevant facts before the court including any views expressed by the SJ; and (4) if the answer(s) to any of the above questions is/are “yes”, whether the leave granted to the Respondent to commence committal proceedings against the Appellants and Yan should be set aside, and these contempt proceedings dismissed. The court’s jurisdiction on contempt of court 10. The function of the contempt jurisdiction is to prevent or punish conduct which tends to obstruct, prejudice or abuse the administration of justice. The Court held that an essential ingredient of “justice being effectively administered” is the ability of a court to entertain applications for contempt of court and the power to punish those who commit contempts. This power represents a well-established aspect of the court’s inherent jurisdiction, as part of the authority of the judiciary to uphold, to protect and to fulfil the judicial function of administering justice according to law in a regular, orderly and effective manner. Nature of criminal contempt proceedings 11. The Court held that criminal contempt proceedings are ultimately civil in nature, and that the initiation of contempt proceedings should not be described as a “prosecution”. While it is open (and indeed normal) for criminal contempt proceedings to be initiated by an individual interested in the proceedings or the SJ, the court has jurisdiction to punish a person for criminal contempt of its own motion. Reasoning of the Court 12. The Court held that no entity other than the court itself should be able to fetter the ability of any person to bring an alleged contempt, whether civil or criminal, to the attention of the court. The SJ cannot prevent a court from prosecuting criminal contempt proceedings of its own motion. This view is not undermined by the fact that the SJ can initiate or intervene in or take over the conduct of criminal contempt proceedings brought by an individual. The court decides whether to let an application proceed since its leave is needed to bring contempt proceedings. 13. The Court rejected the argument that the SJ’s consent is necessary to prevent abuse by a private party bringing contempt proceedings with a vindictive or otherwise improper motive because the need for the court’s leave is a sufficient safeguard. Disposition 14. Accordingly, the Court unanimously dismissed the appeals. |
1. This appeal concerns the assessment of the rateable value for 2004/2005 of certain fixed equipment used by the Respondent, an electricity company, at its generating stations in the New Territories and on Lantau Island. The Appellant is the Commissioner of Rating and Valuation (the “Commissioner”). 2. The items of equipment in issue in this appeal include (collectively, the “Disputed Items”): (a) The supporting steelwork for boilers at Section B of the Castle Peak Power Station (“CPPS ‘B’”); (b) The cooling water circuits at CPPS ‘B’ and the Black Point Power Station (“BPPS”); and (c) Ancillary pipework and electrical cables within the power stations. 3. The Commissioner contended that the supporting steelwork for boilers at BPPS also formed part of the Disputed Items but this was objected to by the Respondent. 4. At the Lands Tribunal, the Disputed Items (including the supporting steelwork for boilers at BPPS) were held to fall within the definition of “plant” under section 8A of the Rating Ordinance, Cap 116 (the “Ordinance”) and thus form part of the Respondent’s tenement for rating assessment. The Respondent contended that the Disputed Items were process machinery within the meaning of section 8(b) of the Ordinance and thus not rateable. The Court of Appeal set aside the Lands Tribunal’s ruling and held that section 8A of the Ordinance did not cover cases like the present one where there is already a rateable tenement and the issue of the rateability of the Disputed Items was remitted back to the Lands Tribunal for consideration of evidence. The Commissioner further appealed to this Court. 5. Four questions arose on this appeal: First, what is the correct construction of section 8A, in particular its statutory purpose and its reach? Secondly, what is the interaction of section 8A with section 8, and especially the relieving provision in section 8(b)? Thirdly, is there a unique rule in the law of rating that in deciding whether an item is plant, it is not permissible to have regard to its function as part of a larger whole (the “piecemeal principle”)? Fourthly, should the Court of Appeal have remitted the matter back to the Lands Tribunal? The construction of section 8A 6. The Court held that section 8A was to apply to any equipment which is plant by means of which any land, building or structure is occupied by a person “whether or not such land, building or structure is otherwise a tenement”. It achieves that result in two stages. Subsection (1) deems the land, building or structure (to the extent of its being occupied by the relevant plant) to be a separate tenement, and subsection (2) provides that the plant is to be regarded as part of that separate tenement for the purpose of ascertaining its rateable value. 7. The purpose of subsection (1), which treats land occupied by the relevant plant as a separate tenement, is partly to avoid difficulty with the long-standing principle of rating law that a tenement can have only one person at a time in rateable occupation of it, although as a matter of practical administration, the theoretical “separateness” of all the relevant tenements would be overridden by an in cumulo assessment (meaning valuing 2 or more tenements together as a single unit in certain circumstances) under section 10 of the Ordinance. 8. The application of section 8A is not limited to cases where there is not already a rateable tenement. Based on their natural meaning, the words in section 8A(1) “whether or not such land, building or structure is otherwise a tenement” make clear that the plant occupying the relevant land, building or structure may be either plant that would not otherwise be recognised as a tenement at all, or plant that would otherwise be treated as part of a larger tenement. The relationship of section 8 and section 8A 9. The Court held that section 8A altered the effect of section 8 in a technical way in that if plant occupying some land, building or structure within the meaning of section 8A also happens to be machinery which is an adjunct to a tenement within the meaning of section 8(a), then the words “shall be regarded as part of the tenement” in section 8(a) must be displaced as the plant cannot simultaneously be a separate tenement and part of another tenement. However, it is a technicality with little practical significance since in practice the Commissioner will make an in cumulo assessment under section 10. 10. In other respects, section 8 remains in full force despite the existence of section 8A. In particular, the relieving provision in section 8(b) continues to apply in respect of “any machinery in or on the tenement for the purpose of manufacturing operations or trade processes”. 11. It is possible that most adjunct machinery falling within section 8(a) will also be occupying plant falling within section 8A. This overlap could be avoided by treating the inclusive definition of “plant” in section 8A(3) as limited to ancillary equipment which is not adjunct machinery falling within section 8(a), and is one of the seven types of ancillary equipment specifically mentioned in the definition. The piecemeal principle 12. There is no such thing as the piecemeal principle. Nor are there any sort of unwritten common law principles which apply in the specialized field of rating. The decisions relied on by the Commissioner in deriving the so-called piecemeal principle, namely, Shell-Mex and BP Ltd v Holyoak [1959] 1 WLR 188 and Manchester Marine Ltd v Duckworth (Valuation Officer) [1973] 1 WLR 1431, were both results of applying general principles of statutory construction to specific English statute law on rating, which is very different from the rating law in Hong Kong. The issue of remission 13. The Court held that supporting steelwork for boilers fell squarely within the definition in section 8A(3) and cannot reasonably be described as a machine or part of a machine. Likewise, the ancillary pipework and electrical cables as well as the whole of water-cooling systems cannot be regarded as a machine, or part of a machine, falling within section 8(b). Therefore, there is no need to order a remitter to the Lands Tribunal in respect of the rateability of these items. 14. As for the supporting steelwork for the boilers at BPPS, the issue as to whether it forms part of the Disputed Items was not resolved either before the Lands Tribunal or at the Court of Appeal. Given that the Lands Tribunal did not make findings of fact on this issue and the reference year 2004/2005 is now so long ago, also given that the Court of Appeal did not set aside or direct remitter of the Lands Tribunal’s judgment so far as it affects the structural steelwork at BPPS, the Court held that it should leave in force the Lands Tribunal’s judgment on this issue, namely, the supporting steelwork for the boilers at BPPS is rateable. Conclusion 15. Accordingly, the appeal was allowed and no remitter to the Lands Tribunal was directed. |
1. These proceedings concern the questions (a) whether the oaths purportedly taken by Mr. Leung and Ms. Yau at the LegCo meeting on 12 October 2016 before the Clerk to the LegCo (“the Clerk”) contravene the requirements under Art. 104 of the Basic Law (“BL104”) and/or the Oaths and Declarations Ordinance (“ODO”), and (b) if so, whether they shall be regarded as having vacated their respective office (“the Office”) of a LegCo member as a matter of law. 2. BL104 constitutionally mandates, among others, an elected LegCo member when assuming his office to take an oath in accordance with the laws under the ODO (a) to swear to uphold the Basic Law and (b) to swear allegiance to the Hong Kong Special Administrative Region of the People’s Republic of China. 3. Sections 16 and 19 of the ODO further require that a LegCo member elect must take the Legislative Council Oath (“the LegCo Oath”) which is in the form prescribed under the ODO. Section 21 of the ODO further relevantly provides that if a LegCo member who “declines or neglects” to take the LegCo Oath when requested to do so shall vacate the Office (if he has already entered on it); or shall be disqualified from entering on it (if he has not yet entered on it). 4. There is no dispute among the parties that, on 12 October 2016, Mr. Leung and Ms. Yau purported to take the oath in the following ways and manners: (a) Each of them used the term “Hong Kong nation” at the outset of the oath-taking; (b) After the interjection by the Clerk, each of them mispronounced the word “China” as “Geen-na” or “Sheen-na” (“支那”); (c) Ms. Yau mis-pronounced “People’s Republic of China” as “the People’s Refucking of Sheen-na”; (d) Each of them unfolded and displayed a blue banner bearing the words “HONG KONG IS NOT CHINA”; (e) Mr. Leung displayed dismissive and not-serious tone in taking the oath after the Clerk’s interjection and crossed his index and middle finger of his right hand over the Bible; and (f) Ms. Yau emphasized “Hong Kong” with a distinctly loud tone of voice but adopted a lower voice and hurried manner for the rest of the oath. 5. The Court notes that Mr. Leung and Ms. Yau have not put forward any positive case by way of submissions or evidence that the oaths they purportedly took on 12 October 2016 complied with BL104 or the requirements under the ODO. Nor have they put forward any positive case by way of submissions or evidence that their above conducts did not amount to declining or neglecting to take the LegCo Oath under BL104 or the ODO. 6. Instead, Mr. Leung and Ms. Yau oppose the application on the principal grounds that the court could or should not intervene in the matters now under challenged in light of: (1) the non-intervention principle; and (2) the LegCo member’s immunity provided under Article 77 of the Basic Law (“BL77”) and sections 3 and 4 of the Legislative Council (Power and Privilege Ordinance (Cap 382) (“LCPPO”). So far as the President is concerned, his only objection is that he should not be joined as a party in these proceedings. 7. On 7 November 2016, in exercise of its power under Article 158 of the Basic Law (“BL158”) the Standing Committee of the National People’s Congress (“NPCSC”) pronounced an interpretation of the meaning of BL104 (“the Interpretation”). The Interpretation is binding on all Hong Kong courts and the courts should give effect to it[1]. 8. Relevant for the present purposes, the meaning of BL104 under the Interpretation essentially provides that an elected LegCo member when assuming office must take the LegCo Oath as prescribed under the ODO (being the laws of HKSAR) solemnly and sincerely and in compliance with it both in substance and in form. If he intentionally declines to so take the LegCo Oath, whether in form or in substance, the oath taken is invalid and he shall be disqualified from assuming the Office. 9. On the other hand, the Court also accepts CE/SJ’s submissions that the laws of Hong Kong as set out in relevant provisions of the ODO, when properly construed independent of the Interpretation, carry effectively the same meanings and legal effects as those of the above meaning of BL104. 10. Adopting a purposive construction and common law[2], the Court holds that sections 16, 19 and 21 of the ODO have the following meanings and effects[3]: (a) These relevant provisions in the ODO reflect and underline the requirements under BL104; (b) A LegCo member must take the oath as soon as possible after being elected and before his assumption of office; (c) A LegCo member must take the oath in the same form, manner and substance of the LegCo Oath as prescribed under the ODO; (d) An oath must be taken solemnly and sincerely and is a form of attestation by which a person signifies that he is bound in conscience to perform an act faithfully and truthfully. An oath of allegiance or loyalty means that a person promises and binds himself to bear true allegiance to a particular sovereign and government and to support its constitution. In determining the validity of the taking of an oath, the essential question to be answered is whether it can be seen objectively that the person taking the oath faithfully and truthfully commits himself or herself to uphold and abide by the obligations set out in the oath. (e) For the purposes of the ODO, the word “decline” means an intentional act to refuse or object to the taking of the oath as prescribed by law; and the word “neglect” means a deliberate or willful (in contrast to an inadvertent or accidental) omission to perform the duty to take the oath as prescribed. (f) If a LegCo member “declines or neglects” to take the LegCo Oath whether in form or in substance, by the operation of law, he must (“shall”) be regarded as having vacated his office if he has entered upon it, or be disqualified from entering his office if he has not done so. 11. The Court agrees with the CE/SJ that the undisputed and unchallenged evidence in the present cases shows that (a) Mr. Leung and Ms. Yau had been requested to take the LegCo Oath on 12 October 2016, (b) the manner and way in which they purported to take the oaths show objectively and clearly that they did not truthfully and faithfully intend to commit themselves to uphold and abide by the two obligations under the LegCo Oath and BL104, as they objectively clearly did not recognize the principle of “one country, two systems” and the importance of “one country” under that principle, which (as well recognized by the Court of Final Appeal[4]) is the foundation for the establishment of the Hong Kong Special Administrative Region under the People’s Republic of China and of the Hong Kong’s constitutional model under the Basic Law. 12. In the premises, Mr. Leung and Ms. Yau therefore objectively manifested a clear conduct to refuse (thus “decline”) to take the LegCo Oath, whether in form or in substance, as required under BL104 and the ODO. It is again noted that neither Mr. Leung nor Ms. Yau has suggested otherwise by way of submissions or evidence. 13. In such circumstances, s.21 of ODO should apply and operate as a matter of law to disqualify Mr. Leung and Ms. Yau from continuing to be a LegCo member. 14. The Court rejects the opposition ground based on the non-intervention principle. The principle has its origin in common law based on the doctrine of separation of powers as practised in England, where there is the principle of Parliamentary supremacy and the absence of a written constitution. The extent and limit of this principle’s application in another jurisdiction must be subject to and considered in the context of that other jurisdiction, in particular where there is a written constitution. 15. In Hong Kong, there is a written mini-constitution of the Basic Law and the Basic Law is supreme instead of the legislature (see: Cheng Kar Shun v. Li Fung Ying[5]). The scope and limit of the non-intervention principle as applied in Hong Kong has since been laid down by the CFA in Leung Kwok Hung v. The President of the Legislative Council (No. 1)[6]. Deriving from the CFA’s judgment: (1) the principle of non-intervention as applied in Hong Kong is necessarily subject to the constitutional requirements of the Basic Law; (2) where the Basic Law confers law-making powers and functions on the legislature, the court has powers to determine whether the legislature has a particular power, privilege or immunity; and (3) what can be properly regarded as the “internal business” or “internal process” of the LegCo must be viewed under the above caveat. 16. Applying the above principles, the non-intervention principle as applied in Hong Kong therefore does not prohibit the court from determining the questions of (a) whether an oath taken by the LegCo member complies with the important constitutional requirements under BL104 (and hence also the legal requirements under the ODO), and (b) whether, in failing to so comply with these constitutional and legal requirements, the LegCo member shall be disqualified from the Office under BL104 and/or section 21 of the ODO. 17. In this respect, neither sections 19 and 21 of the ODO nor paragraph (4) of the Interpretation provides expressly that the decision of those administering the oath as to whether an oath is in compliance with BL104 and the laws of Hong Kong is final. Accordingly, although the Clerk or the President has an incidental duty and power to determine whether the oath taken is in compliance with the law as and when circumstances practically require, the Court holds that it does have power to finally adjudicate the matters under challenged in the present cases. 18. The court also rejects the ground based on LegCo members’ immunity. The Court holds that, on proper construction, the protection provided under BL77 and sections 3 and 4 of the LCPPO only covers statements and speeches made by a LegCo member in the course of official debate on the floor of the LegCo when exercising his powers and discharging his functions as a LegCo member. The words expressed by a LegCo member in taking an oath cannot be properly regarded as falling within these meanings nor could they be regarded as expressed in the course of the exercise of a LegCo member’s power or carrying out his functions since he has not yet validly assumed the Office. 19. The Court also holds alternatively that, in any event, the court must have jurisdiction as expressly granted by section 73 of the Legislative Council Ordinance (Cap 542) (“LCO”) to adjudicate the underlying question of whether a LegCo member has been disqualified when proceedings are brought under that provision against a person purporting to act as a LegCo member when disqualified. The Court rejects Mr. Leung and Ms. Yau’s submissions that section 73 of the LCO does not intend to cover the circumstances where a member has been disqualified under section 21 of the ODO. 20. The Court further holds that the decision of the President to allow Mr. Leung and Ms. Yau to re-administer the oath in substance and in effect implies that Mr. Leung and Ms. Yau did not decline or neglect to take the LegCo Oath on 12 October. Hence, the decision of the President has a substantive effect and is amenable to judicial review and the President was properly joined as a party. 21. As regards the locus of CE, the Court holds that, since under Article 48 of the Basic Law, the CE has the constitutional responsibility for the implementation of the Basic Law and other laws in Hong Kong, the CE therefore does have locus to bring either the judicial review or HCMP 2819/2016. On the other hand, in so far as proceedings concerning section 73 of the LCO are concerned, the Court accepts that the CE in his capacity as the CE has no locus to bring such proceedings against Mr. Leung and Ms. Yau. However, this does not materially affect these proceedings, as the SJ as one of the plaintiffs is a proper party to bring the section 73 proceedings. 22. Finally, Mr. Leung and Ms. Yau contend that the Court is not bound by the Interpretation since, properly construed under common law, the Interpretation amounts to amendments of BL104 instead of an interpretation as understood under BL158. The Court does not find this submission to be relevant to the present cases as it agrees with the submissions of CE/SJ that, with or without the Interpretation, the Court would reach the same above conclusion. The Court therefore does not see the need to determine on this question. 23. Upon the President’s request, the Court further clarifies that Mr. Leung and Ms. Yau have vacated their office since 12 October 2016. [1] See: Director of Immigration v. Chong Fung Yuen (2001) 4 HKCFAR 211 [2] Having referred to authorities such as Leung Kwok Hung v. Clerk to the Legislative Council (HCAL 112/2005, 6 October 2004, per Hartmann J), Haridasan Palayil v. The Speaker,Kerala Legislative Assembly AIR 2003 Ker 328, 2003 (3) KLT 119, and AG v. Bradlaugh (1885) 14 QBD 667 [3] These are in any event not disputed or challenged in a material way by the President, Mr. Leung and/or Ms. Yau. [4] See Ng Ka Ling v. Director of Immigration (1999) 2 HKCFAR 4, and HKSAR v. Ng Kung Siu (1999) 2 HKCFAR 442 [5] [2011] 2 HKLRD 555 [6] (2014) 17 HKCFAR 689 |
1. The appellant challenged the constitutionality of section 63B of the District Court Ordinance (Cap. 336) (“Section 63B”), contending that it was inconsistent with Article 82 of the Basic Law (“Article 82”) whichvests the power of final adjudication in the Court of Final Appeal. 2. While Article 82 does not confer on litigating parties any constitutional right of appeal to the final court, the Court held that any restrictions on rights of appeal cannot be arbitrarily imposed. 3. Section 63B restricts the right of appeal by expressly providing for finality when leave to appeal is refused, aiming to prevent a class of cases from reaching the Court of Final Appeal. 4. The Court found that the statutory restrictions are justified under a proportionality analysis on the basis that it legitimately aims to screen out cases which have no reasonable prospect of success and also to maintain a balance between litigation costs and the amounts at stake. 5. Thus, the Court found Section 63B both proportionate and constitutionally valid and does not go beyond what is reasonably necessary for the achievement of the legitimate aim. 6. Accordingly, the Court dismissed the appeal. |
1. These were appeals against sentences of imprisonment imposed by the Court of Appeal, in place of community service orders originally imposed by the trial magistrate on the appellants, following a review of sentence pursuant to section 81A of the Criminal Procedure Ordinance (Cap. 221) (“CPO”). 2. The appellants had been convicted of unlawful assembly contrary to section 18(3) of the Public Order Ordinance (Cap. 245). The convictions arose from a protest that took place outside the Legislative Council (“LegCo”) on 13 June 2014 against development works in the North East New Territories New Development areas. At around 8:45pm, while LegCo’s Finance Committee was in session, the appellants, who were amongst protesters in the designated demonstration area, rushed towards the entrances of the LegCo building and used Mills barriers, bamboo poles and metal bars to batter and to try to prise open the locked doors in order to force their way in. As a result of this violent unlawful assembly, a security officer was injured and damage was caused to the LegCo facilities which cost over HK$400,000 to repair. 3. At the conclusion of the hearing, the Court of Final Appeal (“the Court”) allowed the appeals and set aside the sentences of imprisonment imposed by the Court of Appeal. The Court, however, did not reinstate the magistrate’s community service orders but instead proceeded to sentence the appellants to terms of imprisonment equal to the length of time each had already been in prison, which ranged from 3 months and 9 days to 5 months and 24 days. 4. In its Reasons for Judgment, the Court concluded that the magistrate erred in principle in imposing community service orders on the appellants because he effectively ignored the element of violence involved and also their lack of genuine remorse. Also, given the scale of the violence involved, the magistrate’s sentences of community service orders of between 80 and 150 hours were manifestly inadequate. The Court of Appeal was therefore entitled to increase the sentences on review. The appropriate sentences in the present case would be custodial sentences rather than community service orders. 5. However, as was accepted by the Director of Public Prosecutions on behalf of the respondent, it was clear that the Court of Appeal could only have imposed sentences with a 15-month starting point by retrospectively applying the new sentencing guidelines laid down by it in Wong Chi Fung for unlawful assemblies involving violence. This was wrong in principle, as the Court of Final Appeal had laid down in Wong Chi Fung, and so the appeals must be allowed and the sentences imposed by the Court of Appeal quashed. 6. Furthermore, section 109A of the CPO required a court not to sentence a young person under the age of 21 to imprisonment unless of the opinion that no other method of dealing with him was appropriate. For the purposes of section 109A, it was the person’s age at the time he was sentenced to imprisonment that was strictly relevant. However, although the 5th and 6th appellants were both 21 years old when sentenced to imprisonment by the Court of Appeal, given that they had passed the threshold age of 21 after committing the offences, the Court of Appeal should have had regard to the conceptual approach laid down in section 109A and imposed sentences on them that were in substance much the same as those which would have been imposed on an offender aged just under 21. 7. As to the disposition of the appeals, it was necessary for the appellants to be re-sentenced on the basis of the sentencing regime for the offence of taking part in an unlawful assembly in accordance with the pre-Wong Chi Fung guidelines. Although this would usually be done by the Court of Appeal as a sentencing court, the Court of Final Appeal itself had jurisdiction to re-sentence and would do so here. 8. On the applicable pre-Wong Chi Fung guidelines, none of the appellants would have been sentenced to more than 6 months’ imprisonment. Given the normal discount when a sentence was increased on review and also allowing for time off for good behaviour, the periods of imprisonment already actually served by each of the appellants (which varied only because of the different dates on which each applied for bail) were such that none of the appellants should now be required to return to prison. Accordingly, they would be sentenced to terms of imprisonment equal to the length of time respectively served by each. |
The facts and prosecution case 1. The 1st appellant was appointed Chief Secretary of the HKSAR Government on 30 June 2005, and thus also became an Official Member of the Executive Council. The 2nd appellant was a Co-Chairman and Managing Director of Sun Hung Kai Properties Limited (“SHKP”), a major property developer and publicly listed company in Hong Kong. The 3rd appellant was an executive director of SHKP, while the 4th appellant was a close friend of the 1st appellant. 2. In the period between 27 and 30 June 2005, immediately before, and in anticipation of, the 1st appellant taking office as Chief Secretary, payments totalling HK$8.5 million were made into his bank account. The payments were made on the ultimate directions of the 2nd appellant, in a convoluted manner through the 3rd and 4th appellants. 3. While the 1st appellant was Chief Secretary, there were substantial commercial negotiations between SHKP and the HKSAR Government, including the Ma Wan Park Project and the West Kowloon Cultural District Project, in which SHKP had a significant interest. 4. The prosecution case was that the payments of HK$8.5 million were bribes, not in contemplation of any specific act or omission, but in order to secure an improper inclination and that, in return for the payments, the 1st appellant agreed to be or remain favourably disposed, in office as Chief Secretary, to SHKP, its subsidiaries or associated companies and/or the 2nd or 3rd appellants. The conviction and issue on appeal 5. The appellants were convicted, before a jury, of a conspiracy the alleged object of which was for the 1st appellant to engage in misconduct in public office. Their appeals against their convictions were dismissed by the Court of Appeal and they further appealed to the Court of Final Appeal. 6. The appeal involved the question of whether such an agreement is capable of answering the description of an agreement on the part of the 1st appellant to misconduct himself in the course of or in relation to his public office. The appellants contended that no relevant act of misconduct was involved and that what was alleged to constitute the intended misconduct was merely a state of mind. The Court’s consideration of the issue and analysis of the charge against the appellants 7. The Court considered the law on misconduct in public office and bribery in Hong Kong. Ever since the first Hong Kong legislation on bribery in 1898, the essence of an advantage being corrupt was its tendency to obtain improper influence or secure a disloyal inclination. Subsequent legislative development has widened the anti-corruption net without abandoning this concept. 8. A broad range of different acts and omissions can constitute the conduct element of the common law offence of misconduct in public office. There must however be a relationship between the act or omission constituting the misconduct and the public office. The essence of the offence is the abuse of public trust by the officer. The misconduct must be serious, not trivial, having regard to the responsibilities of the office and the officeholder. 9. The appellants were charged with a conspiracy to commit misconduct in public office. It was therefore necessary to focus on the character of the conspiratorial agreement alleged by the prosecution. 10. As the Chief Secretary, the 1st appellant was the second most senior officer in the HKSAR Government. Being part of the Executive Council, he played an important role in the development of Government policy. He was privy to highly confidential information, in relation to matters in which SHKP had substantial interests. He was also a Principal Official and was hence subject to Government Regulations relating to conduct and conflicts of interest. 11. The conspiratorial agreement concerned the 1st appellant being paid HK$8.5 million in return for his favourable disposition while in the office of Chief Secretary. This bargain was therefore clearly corrupt. Its purpose was to cause the anticipated Chief Secretary to be inclined to show favour to the other conspirators’ interests. 12. The conspiratorial agreement was made in anticipation of his entering into that public office and was wholly concerned with his anticipated holding of it. Once he had accepted the HK$8.5 million in relation to his holding the office of Chief Secretary, his independence when he assumed office would be hopelessly compromised and he could not properly discharge his duties nor be trusted to do so. This involved a continuing offence that commenced from the time he entered into his public office and infected the entire period he held that office under the influence of the payment made to him. 13. So analysed, the conspiracy alleged was an agreement under which, in return for a substantial payment of money, the 1st appellant would incline himself in a manner inconsistent with his duty as a public officer. This improper inclination was wholly inimical to his duties as Chief Secretary and involved a serious abuse of office and public trust. 14. The abuse of public trust contemplated by the conspirators was clear and, by agreeing to place himself in such a compromised state, the 1st appellant made an agreement which contemplated a continuing act of misconduct whilst he was Chief Secretary. The fact that the payment made to induce that compromised state was made before he assumed his public office did not mean the abuse of trust occurred at the time of the making of the payment. That payment was made to secure an ongoing inclination on the part of the 1st appellant towards SHKP once he assumed the office of Chief Secretary and it was by agreeing to act as Chief Secretary whilst in the “golden fetters” constituted by that payment that he conspired to commit an act of misconduct sufficient to satisfy the conduct element of the offence of misconduct in public office. Disposition 15. The appeals were accordingly dismissed. |
1. Television Broadcasts Limited (“TVB”) produced a New Year’s Eve Countdown show broadcast from Olympian City on 31 December 2009. At the material time, Chan was the General Manager (Broadcasting) of TVB while Tseng was the sole director of Idea Empire Advertising & Production Company Limited (“IEAP”) and acted as Chan’s agent for outside engagements. 2. Chan accepted $112,000 from Olympian City through IEAP to host a live edition of his “Be My Guest” show as part of the Countdown broadcast. Tseng, being the sole director of IEAP, was charged with offering, and Chan with accepting, that sum in contravention of section 9 of the Prevention of Bribery Ordinance. They were also charged with and convicted of a conspiracy to commit those offences. 3. The Court considered the mental fault element in relation to different variants of the section 9 offence, explaining what has to be intended by persons offering, and agents soliciting or accepting, advantages as inducements or rewards in such cases. 4. The Court also considered the requirement in section 9 that the prosecution prove that the advantage was offered, solicited or accepted as an inducement or reward for or otherwise on account of the agent doing or forbearing to do the relevant act “in relation to his principal’s affairs or business”, the main focus of the appeal being as to the meaning of that phrase. Applying and expanding upon a decision in the Privy Council in 1997 (Commissioner of the ICAC v Ch'ng Poh), the majority of the Court disagreed with the Court of Appeal and held that Chan’s appearance on the “Be My Guest” segment of the Countdown show, was not an act “in relation to his principal’s affairs or business”, and gave guidance as to the proper interpretation of that phrase. The majority of the Court also considered how a provision in the Ordinance which places the burden of proving the defences of lawful authority and reasonable excuse on the accused operates in relation to a charge of conspiracy to contravene section 9. Tang PJ gave different reasons for arriving at the same conclusion as the majority. He held that Chan’s performance on the show did constitute an act “in relation to his principal’s affairs or business” but held that he had a reasonable excuse for so acting. 5. The Court unanimously allowed the appeals and quashed the appellants’ convictions. |
1. This appeal concerns the Appellant’s counterclaim against the Respondent for damages. The Appellant was appointed a technical representative by the Respondent, an insurance agent, by a contract dated 23 January 2007. On 23 August 2007, the Appellant’s appointment was duly terminated by notice. The Appellant complained that the Respondent had failed to report (1) the termination of his appointment to the Insurance Agents Registration Board (“IARB”) and (2) his Continuing Professional Development (“CPD”) credits to the IARB. 2. Under the relevant provisions of the Code of Practice for the Administration of Insurance Agents (“Code”), an insurance agent should inform the IARB of cessation of appointment of technical representatives within seven days of such cessation, and a person cannot act as a technical representative for more than one insurance agent. The relevant Guidance Note issued by the IARB also provides that an insurance agent is responsible for reporting the technical representative’s CPD credits to the IARB. Should such reporting be not complied with, the technical representative would suffer a mandatory de-registration for three months. 3. The District Court held in favour of the Appellant at trial, but the judgment was reversed on appeal. The Court of Appeal held that there was no actionable breach of statutory duty and that the Respondent owed the Appellant no duty of care at common law. The Court of Appeal also held that the Appellant suffered no loss because he could work as an insurance agent for more than one insurer. The Appellant now appeals to the Court. 4. The Court held that the Respondent owed a tortious duty of care to the Appellant. There was a clear foreseeability of loss to the Appellant in the event of the Respondent’s failure to report the cessation of appointment and the CPD credits. Since the Respondent was assigned a role under the Code to report these matters, and the Appellant relied on the Respondent to perform its role, the Respondent must be taken to have assumed the responsibility to comply with the reporting requirements. In these circumstances, it would be fair, just and reasonable to impose a duty of care on the Respondent. The contract was not inconsistent with the tortious liability and could not exclude the duty of care. 5. The Court also held that the Court of Appeal was wrong to on its own initiative refer to the Appellant’s registration history and take a new point against the clear and uncontradicted evidence at trial that the Appellant could not work before the cessation of his appointment by the Respondent had been reported. The important difference between a technical representative and an insurance agent is that while an insurance agent could work for four principals with the requisite consent, a technical representative could not act for more than one insurance agent. The fact that the Appellant had been an insurance agent for two insurers in the past was therefore not to the point. 6. The appeal was therefore unanimously allowed. |
1. The appellant was charged with five counts of raping a girl, X, contrary to section 118(1) of the Crimes Ordinance (Cap. 200). The prosecution’s case was that the appellant raped X on five occasions in a rental premise in the New Territories, when X’s mother, Y, was not home. Counts 1 to 4 identified that the offences were committed on various unknown dates from March to May 2014 respectively, while a specific date, 4 June 2014, was identified for count 5. The appellant contended that the whole case was fabricated, that Y was his “kept woman”, and that Y had abetted X to falsely accuse him of rape in order to extort money from him. 2. The appellant stood trial before a trial judge and a jury, during which he gave alibi evidence regarding count 5. The trial judge observed in her directions to the jury that this was a word-against-word case where the evidence basically consisted of the oral evidence of X against that of the appellant. The appellant was convicted on counts 1 to 4 by a majority verdict of five to two, and unanimously acquitted of count 5. He was later sentenced to 10 years’ imprisonment. 3. The appellant appealed against his convictions to the Court of Appeal. The Court of Appeal rejected the appellant’s submissions that his acquittal on count 5 rendered his conviction on counts 1 to 4 unsafe and unsatisfactory. His appeal was therefore dismissed. 4. The appellant further appealed to this Court. At the conclusion of oral argument, the Court ordered that the appeal be dismissed. The reasons are summarised as follows. ISSUES 5. The first issue before this Court was whether the standard direction to the jury – that they should consider each count separately, and may accept part of a witness’ evidence and not the other parts of the same witness’s evidence (the “separate offences direction”) – should be qualified in cases of sexual offences where the only direct evidence of the commission of the offences came from the complainant. 6. The appellant contended not only that the trial judge should have indicated to the jury that any reasonable doubt they form concerning one aspect of the complainant's evidence must also be taken into account in assessing the overall credibility of the complainant and hence in relation to other counts (a “Markuleski direction”), but also that the trial judge should have given a more detailed direction to the jury that they may consider it very difficult to find the appellant guilty on counts 1 to 4 if they find him not guilty on count 5. 7. The Court held that a Markuleski direction was not always necessary or desirable as a counterweight to the separate offences direction. The direction should only be given when necessary, and only where a risk of unfairness to the accused had truly arisen. The overarching criterion was the conduct of a fair trial. 8. In the present case, the trial judge had already given a Markuleski direction during trial with particular reference to count 5, which at trial counsel did not request to expand in the detailed terms suggested before this Court. The Court therefore rejected the appellant’s submission that he was denied a fair trial. 9. The second issue before this Court concerned the proper approach of an appellate court towards inconsistent verdicts where, although not logically inconsistent, the verdicts were based on the uncorroborated evidence of the complainant. The Court reaffirmed the previous position in Hong Kong that in order to successfully appeal on the grounds of “factual inconsistency”, the appellant had to show that no reasonable jury which had applied their minds properly to the facts of the case could have returned the verdict in question. 10. On the facts of this case, the Court rejected the appellant’s submission because the absence of corroborated evidence could not of itself be decisive; there had been no undue delay in making the complaint; and that there had been an apparent difference in the quality of X’s evidence between counts 1 to 4 and count 5, as count 5 was contradicted by the alibi. The different verdicts were not inconsistent such as to necessitate intervention on appeal. DISPOSITION 11. The appeal was unanimously dismissed. |
1. This case concerns the public reprimand and fines imposed upon Moody’s Investors Service Hong Kong Limited (“Moody’s”) for its preparation and publication of a report published on 11th July 2011, entitled “Red Flags for Emerging-Market Companies: A Focus on China” (the “Report”), in breach of section 193(1)(d) of the Securities and Futures Ordinance, Cap. 571 (“SFO”). FACTS 2. In the Report, Moody’s applied a framework of five “red flags” to analyse 61 high-yield non-financial Chinese companies. These 5 “red flags” covered concerns in relation to corporate governance, business models, business strategies, quality of earnings or cash flow, and quality of auditors and financial statements. 49 of these companies were analysed under the framework with relevant figures tabulated. 3. Moody’s made various statements in the Report, including that its “findings show that screens for governance or accounting risks can help identify areas to investigate but cannot serve as mechanisms to rank order credit risk”, and that “[t]he red flags provide further clarity and detail, but do not represent a change in our rating methodologies”. It was also stated that “[t]he identified issues that we flag do not represent a change to our analytical approach”, and that a company’s “tripping of many red flags does not represent an immediate rating concern”. 4. Following its publication, the Report received extensive media attention. The price of the shares of many of the 49 companies covered in the Report fell substantially (well over 10% in some cases). 5. The publication of credit ratings in Hong Kong is an activity regulated by the Securities and Futures Commission (the “SFC”) and subject to a Code of Conduct. The SFC formed the view that, in preparing and subsequently circulating the Report, Moody’s had “failed to have the required procedural safeguards in place to ensure the integrity of the Report and that the Report itself was in a number of material respects misleading, confusing and inaccurate to the extent that the publication was, or was likely to be, prejudicial to the interests of the investing public, including Moody’s own clients, and prejudicial also to the integrity of the market”. Moody’s was therefore found to have failed to live up to the standards to be expected of a licensed Credit Rating Agency (“CRA”), and breached provisions of the relevant Code of Conduct. Moody’s was fined HK$23 million and declared unfit. 6. Moody’s sought a review against SFC’s decision at the Securities and Futures Appeals Tribunal (the “Tribunal”). One of Moody’s arguments was that the publication of the Report was not a regulated activity since it was not a “credit rating” nor was it “an act or omission relating to the carrying on of [a credit rating]” under section 193(1)(d) of the SFO, and therefore cannot possibly constitute misconduct. The argument was rejected, though the fine was reduced to HK$11 million for other reasons. 7. On appeal, the Court of Appeal, while deciding, in disagreement with the Tribunal, that the Report did not constitute a “credit rating”, agreed with the Tribunal that its publication constituted “an activity relating to credit ratings”, since it included “additions and clarifications which were meant to be read together with such classic ratings”. Moody’s brought a further appeal to this Court. ISSUES (1)The meaning and effect of the phrase “relating to” under SFO section 193(1)(d) 8. The main question is whether the preparation and publication of the Report is an act “relating to” the carrying on of the provision of credit rating services. 9. Bokhary PJ had previously commented in Mariner International Hotels Ltd v Atlas Ltd (2007) 10 HKCFAR 1 that “relating to” is a phrase which is, if anything, even wider than “involving”, which is “one of the broadest words of association known to the English language”. Where the legislature used words which are very general in their natural ambit such as “relating to”, it is inappropriate, in the absence of a cogent reason, to give a relatively specific meaning to those words. 10. There are no such reasons to narrow down the meaning of the phrase, especially given how the purpose of this law is to serve the public interest, and aimed at encouraging high standards and penalises substandard work that affects financial markets and investors. (2)Does the Report “relate to” Moody’s credit rating services? 11. The correct approach to determining whether a publication “relates to” credit rating services should be to consider the publication by reference to what it says, reading it in a practical and realistic way in its commercial context, and to decide “how the market would reasonably have been anticipated to treat” it, rather than referring to its compiler’s own thoughts and intentions. In this process, the Tribunal can also take into account how the market actually reacted. 12. Applying this approach, the following factors led this Court to find that the Report is “related to” credit rating. 13. Moody’s is a licensed CRA renowned for its credit rating services. There must be a substantial risk that many people in the market will assume that any report by Moody’s will in some way be related to its credit rating services, especially given that it is concerned with accounting, governance, and quality of earnings. 14. Furthermore, all 61 companies covered by the Report were also the subject of Moody’s existing published credit ratings. The text of the Report also makes frequent references to the credit ratings of some of these companies. The “red flags” were also presented according to “rating category”, and the number of “red flags” tripped by the company in each case were also compared with its credit rating. 15. Moreover, it is telling that the announcement Moody’s made accompanying the Report described it as “supplemental to Moody’s methodological approach to rating non-financial corporates”. If the Report is said to be “supplemental” to credit rating, it would likely also to “relate to” the same. 16. There is also the further external factor of the actual negative reaction of the market, which should have been foreseen by Moody’s given the importance accorded by the market on its ratings. 17. A clear and convincing disclaimer might have changed the view of the public that the Report was related to credit ratings, but there was none. DISPOSITION 18. Accordingly, the appeal was unanimously dismissed, and Moody’s is ordered to pay costs of this appeal to the SFC. |
1. The Basic Law, not the legislature, is supreme in Hong Kong. It provides for the exercise of the independent judicial power of adjudication of the Hong Kong Special Administrative Region by the courts and the courts alone. 2. When a constitutional requirement in the Basic Law is in issue, the common law doctrine of separation of powers and of non-intervention must give way to the court’s constitutional duty to apply the Basic Law to adjudicate and rule on the matter. In so doing, the court does not undermine the Legislative Council (“LegCo”)’s authority or function, or diminish the mandate the electors gave to its members. It ensures that the LegCo and its members exercise their powers lawfully in accordance with the constitutional requirement of the Basic Law. 3. Article 104 of the Basic Law lays down a constitutional requirement on oath taking by members of the LegCo. The scope of the constitutional requirement extends to the consequence of its non-compliance which is laid down in article 104 itself as interpreted by the Standing Committee of the National People’s Congress under the Interpretation dated 7 November 2016 (“the Interpretation”), as well as section 21 of the Oaths and Declarations Ordinance (Cap 11) (“ODO”). Compliance with the constitutional requirement under article 104 of the Basic Law is not a matter of the internal business or process of the LegCo. 4. The court, and the court alone, has the constitutional power and duty to adjudicate on the question of non-compliance with the constitutional requirement and its consequence, and the principle of non-intervention does not apply. 5. In deciding this question, the court conducts a full merit review. The views of the oath administrator may be of evidential value but are not binding on the court. 6. Under article 104 (as interpreted) and section 21(a) of the ODO, disqualification and vacation of office are automatic by operation of law. Proceedings under section 73 of the Legislative Council Ordinance (Cap 542) (“LCO”) are not confined to the situations described in section 15(1) of the LCO, or dependent on a declaration by the LegCo President under article 79(1) of the Basic Law. In fact, article 79(1) does not apply to the relevant situation described in article 104 (as interpreted) and section 21(a) of the ODO. 7. The Chief Executive has a constitutional responsibility to implement the Basic Law pursuant to article 48(2) of the Basic Law. He may do so by means of judicial review under sections 21J and 21K(1)(b) of the High Court Ordinance (Cap 4) in the present type of dispute. Section 73(7) of the LCO does not prevent him from doing so. 8. The immunity from suit granted under article 77 of the Basic Law to LegCo members does not extend to cover a LegCo member’s taking of the LegCo Oath when assuming office as required by article 104. 9. The Interpretation sets out the true and proper meaning of article 104 from day one. It speaks from 1 July 1997 and applies to all cases save as provided in article 158(3) of the Basic Law. It is binding on the courts in Hong Kong. The court does not have jurisdiction under the Basic Law to entertain the argument that the Interpretation is in substance a purported amendment of the Basic Law and therefore not binding. In any event, no evidential foundation has been laid for the argument. 10. On the facts, Leung and Yau declined to the take the LegCo Oath when duly requested to do so on 12 October 2016. By operation of law under article 104 (as interpreted) and section 21, they were disqualified forthwith and have automatically vacated their offices. There is no question of allowing them to retake the oath as a matter of law. |
1. The Plaintiff is the mother of the Defendant, her daughter. The case concerned the transfer of a flat and a shop (collectively “the properties”) by the Plaintiff to the Defendant in 1999. The Assignments of the properties showed on their face a purchase by the Defendant of the Plaintiff’s interest in them. The consideration for the shop was said to be $300,000, the consideration for the flat, $500,000. The Plaintiff also signed receipts for these amounts. It was common ground that the Plaintiff did not receive these (or any) amounts from the Defendant. 2. The main issue in the courts below was whether the properties were transferred by way of trust or by way of gift. The Court of First Instance found that the Plaintiff’s intention in making the Assignments was to avoid the threatened actions by the Plaintiff’s husband and not to make a gift of the properties to the Defendant. The legal effect was that the properties were held by the Defendant on resulting trust for the Plaintiff. The Court of Appeal could not fault the Court of First Instance’s analysis of the evidence. 3. The Defendant appealed to the Court under the now repealed “as of right” provision in the Hong Kong Court of Final Appeal Ordinance (Cap 484). 4. The Court held that it did not, save in rare and exceptional cases, review concurrent findings of fact. It was no part of the Court’s function to debate “yet again the factual findings made at first instance and previously reviewed by the Court of Appeal” in the hope on the part of an appellant of finally obtaining favourable findings. Given that the determination of the factual disputes on the evidence was critical to the outcome of the present case and there were concurrent findings of fact before the Court, this appeal was hopeless and amounted to no more than a third attempt by the Defendant to seek to persuade a court to try the case again. 5. The Court held that other legal issues raised by the Defendant were all equally hopeless. 6. Finally, the Court reserved a detailed consideration of the doctrine of the presumption of advancement for another occasion, in particular whether a modern view should be taken of the presumption to include transfers from mother to daughter. 7. Accordingly, the Court unanimously dismissed the appeal with costs. |
1. These two appeals involve questions concerning the requirements of the offences of unlawful assembly and riot under sections 18 and 19 respectively of the Public Order Ordinance (Cap 245). 2. The Appellant in FACC 6/2021 (“Lo”) was charged with and convicted of taking part in a riot in Portland Street in Mongkok on 8 and 9 February 2016. 3. Lo’s appeal against conviction was dismissed by the Court of Appeal. On his main ground of appeal, it was held that the defendants’ common purpose of conducting themselves in a disorderly, intimidating, insulting or provocative manner or in a manner endangering the public peace was sufficient to satisfy a requirement of common purpose. 4. The Appellant in FACC 7/2021 (“Tong”) and two others were jointly charged with taking part in a riot with others in the area of Des Voeux Road West near Western Street on 28 July 2019. Tong was acquitted after trial. 5. In the light of his acquittal, the Secretary for Justice referred two questions of law to the Court of Appeal for its opinion pursuant to section 81D of the Criminal Procedure Ordinance (Cap 221). The Court of Appeal held that the common law doctrine of joint enterprise is applicable to the offences of unlawful assembly and riot, so that a defendant may be convicted of those offences even if not present at the scene. 6. On appeal to the Court of Final Appeal, the following issues regarding the offences of unlawful assembly and riot were addressed: (i) whether there is a requirement for proof of a “common purpose” shared by the defendant and other persons taking part in the unlawful assembly or riot; (ii) the applicability of the doctrine of joint enterprise and whether liability can be established without the defendant being present at the scene; (iii) whether a defendant can be found guilty on the basis of mere presence at the scene; and (iv) whether there was any “substantial and grave injustice” arising from the indictment having made no mention of any participants in the riot other than the named co-defendants who were not convicted after trial. 7. The Court examined the inter-related structure of the two offences and noted that both are participatory in nature. The defendant must be shown not just to have been acting alone but to have taken part in the unlawful or riotous assembly together with others so assembled, being aware of their related conduct and with the intention of so taking part. The Court held that there is no requirement for the persons taking part to share some extraneous common purpose. 8. The Court also held that a defendant who is not present at the scene of an unlawful assembly or riot cannot be found guilty as a principal offender because “taking part” in the criminal assembly is a centrally important element of these statutory offences. That requirement cannot be overridden by the common law doctrine of joint enterprise. 9. The Court further held that the basic form of joint enterprise is not applicable to the offences of unlawful assembly and riot even if the defendant was present at the scene, since its application would give rise to duplication and possible confusion regarding the central element of “taking part” in the criminal assembly. 10. However, the Court emphasised that culpable conduct of both present and absent defendants who promote, encourage or act in furtherance of a criminal assembly is covered by secondary and inchoate liability offences and punishable to the same extent as principal offenders. 11. The Court also held that the extended form of joint enterprise may operate to fix participants in the unlawful assembly or riot with liability for more serious offences if they can be proved to have agreed to take part together in the criminal assembly and foreseen commission by one or more of their number of that more serious offence as a possible incident of the execution of their joint plan. 12. The Court held that mere presence at the scene of an unlawful or riotous assembly without more does not give rise to criminal liability. However, a defendant who, being present, provides encouragement by words, signs or actions may be held guilty of “taking part” or as an aider and abettor of the offences of unlawful assembly or riot committed by others. 13. The Court held that that the indictment of Lo was defective but there was no miscarriage of justice given the ample evidence for the jury to be satisfied of Lo’s guilt beyond reasonable doubt. Disposition 14. Accordingly, the Court unanimously dismissed Lo’s appeal. |
1. The appellants are directors of a dental company that employed a dentist (“JT”) who (unknown to them) continued to practise after failing to renew his practising certificate and consequently was removed from the General Register. They were found guilty of unprofessional conduct by the Dental Council of Hong Kong (“the Council”) for doing so. 2. The Court stated that it would be slow to interfere with a disciplinary body’s assessment of matters which call for clinical judgment or other professional expertise, but the present case does not concern such matters. 3. Three questions arose: First, was the Council right to find the appellants guilty of unprofessional conduct even though they did not know of JT’s unregistered status? Secondly, could they be convicted of unprofessional conduct on the basis that their absence of knowledge was due to their gross negligence? Thirdly, was the Court of Appeal right to hold that directors of dental companies have a professional duty to ensure that only registered dentists are employed by the company and that by inserting a person’s name in an annual return filed by such companies with the Council the directors were warranting that he was a registered dentist? 4. When the case got to the Court of Final Appeal, the Council conceded that the appellants’ convictions could not stand because of procedural unfairness but it asked for the case to be sent back to the Council for a re-hearing. The appellants objected, arguing that there is no power to order a re-hearing and that the Court should in any case refuse such an order on discretionary grounds. 5. In relation to the first two questions, the approach of the Council and the Court of Appeal to unprofessional conduct was closely based on their interpretation of section 12 of the Dentists Registration Ordinance, Cap 156 (“DRO”), which makes it an offence for companies to carry on business using unregistered persons to provide dental services. In so far as the appellants’ convictions were based on section 12, those convictions could not stand since section 12A gives directors a defence if they show that they did not know that the company was carrying on business in breach of section 12, whether or not their lack of knowledge was due to gross negligence. 6. An alternative approach adopted by the Court of Appeal was to uphold the convictions on the basis of a head of unprofessional conduct not based on the section 12 offence. The Court held that this approach was unsound because it did not apply the statutory definition of unprofessional conduct which requires proof of acts or omissions which would be reasonably regarded as disgraceful or dishonourable by registered dentists of good repute and competency. The Court of Appeal’s attempt to justify the convictions solely on the basis of a perceived need to reinforce the statutory registration regime and without reference to the statutory definition was therefore held insufficient. 7. As to the third question, the Court held that the Court of Appeal was wrong to imply the asserted warranty from the words of section 12(3) of DRO. The Court also did not agree that the appellants had “undermined the effectiveness of the registration regime”, as their conduct did not have such a consequence. 8. The Court and the Court of Appeal have jurisdiction to remit a case to the Council for a re-hearing by virtue of the Rules of the High Court. Nevertheless, there are strong reasons why an order should be refused in the present case. Having answered the three questions in the negative, the Council’s purpose would not be achieved by sending the case for a re-hearing. Furthermore, it would not be fair for the appellants to be subjected to a new set of charges tailored to this Court’s judgment. Accordingly, the Court allowed the appeal and refused to send the matter back to the Council. |
Background to the Appeals 1. Since June 2019, Hong Kong has experienced a series of protests in opposition to the Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation (Amendment) Bill 2019. The protests have escalated into serious social unrests and public disorder, including assaults on persons, arsons, and vandalisms on public transport facilities and highways. In response to the dire situation, the Chief Executive in Council (“CEIC”) exercised the power under section 2 of the Emergency Regulations Ordinance (“ERO”) and announced the enactment of the Prohibition on Face Covering Regulation (“PFCR”). The applicants in these appeals brought judicial reviews challenging the constitutionality and legality of ERO and PFCR. 2. In its judgment, the Court of First Instance (“CFI”) declared that the ERO was not compatible with the Basic Law (“BL”) and ruled that, while sections 3 and 5 of the PFCR were rationally connected to the legitimate social aims, the restrictions that sections 3(1)(b), (c), (d) and 5 imposed on the fundamental rights went beyond what was reasonably necessary for the furtherance of those objects. It declared that such sections were null, void, and of no effect. The respondents appealed, and each of the applicants cross-appealed. Judgment 3. The Court of Appeal (“CA”) partially allows the respondents’ appeals and dismisses the applicants’ cross-appeals. The CA upholds the constitutionality of the ERO insofar as it empowers the CEIC to make emergency regulations on any occasion of public danger. In respect of the PFCR, there is no challenge against section 3(1)(a) relating to unlawful assembly. The CA upholds the constitutionality of section 3(1)(b) relating to unauthorized assembly. The CA holds that sections 3(1)(c) and (d), relating to public meeting and public procession respectively, and section 5 on police powers in relation to facial covering, are all unconstitutional. Reasons for the Judgment Constitutionality of ERO 4. In holding that the ERO does not contravene the BL as it does not confer on the CEIC general legislative power to make primary legislation: (1) The CA reiterates that the court has jurisdiction and constitutional duty to scrutinize the constitutionality of a pre-1 July 1997 law adopted as part of the laws of the HKSAR. In so doing, the court upholds the preeminence of the BL as a living constitutional instrument over all pre-1 July 1997 law even after adoption as laws of the HKSAR, which is consistent with the purpose of article 160 of the BL and the Decision of the Standing Committee of the National People’s Congress (“NPCSC”) dated 23 February 1997. (2) The CA holds that the constitutionality of the ERO is informed by the theme of continuity. After reviewing the relevant law and authorities, the CA observes that for the exercise of the general legislative power, the constitutional arrangement under the BL broadly resembles the past before 1997 subject to the change of constitutional order. (3) Before 1997, the Pre-97 LegCo was the legislature of Hong Kong vested with general legislative powers exclusively by the Letters Patent. The Governor was not. The Pre-97 LegCo was bound by the Letters Patent and other constitutional requirements in exercising its general legislative powers. Under the common law, subject to the restriction that it could not abdicate its general legislative powers, the Pre-97 LegCo could delegate to the Governor limited legislative power to make subordinate legislation by virtue of a specific enabling ordinance. When called upon, the courts would examine the enabling ordinance and the regulations made thereunder to see if they were ultra vires the Pre-97 LegCo or the enabling ordinance, as the case might be. (4) After 1997, the LegCo is the only institution vested with general legislative powers exclusively under the BL. The CE does not have the general legislative power to legislate. In exercising its functions and powers, the LegCo is bound by the BL and other constitutional requirements. Under the same common law principle, the LegCo can delegate to the CE power to make subordinate legislation by an enabling ordinance, as acknowledged under article 56(2) of the BL. When a challenge is made, the court can examine the constitutionality of the enabling ordinance, or the constitutionality of the subordinate legislation made thereunder, as the case may be. (5) The CA therefore holds that under the constitutional framework of the BL, the LegCo can delegate to the CEIC legislative powers by an enabling ordinance to make emergency regulations provided that they are subordinate legislation. (6) The CA further holds that the BL contemplates a wide range of options available to the NPCSC and the Government allowing different and specific measures to be made to address the varying exigencies of emergency or public danger generally: (a) In the case of a declared state of war or turmoil endangering national unity or security beyond the control of the Government, the Central People’s Government (“CPG”) may issue an order applying the relevant national laws in Hong Kong: article 18. (b) The Government may ask the CPG for assistance from the garrison for maintenance of public order or disaster relief: article 14(3). (c) The CE may adopt executive and administrative measures in emergencies: article 56(2). (d) The CE may make a request to the President of the LegCo to convene an emergency session of the LegCo: article 72(5). (e) The CE may invoke the ERO to make emergency regulations. As article 56(2) of the BL recognizes, under the common law, the CE can make emergency regulation pursuant to an enabling ordinance. As at 1 July 1997, the only piece of enabling ordinance in that regard was the ERO. So both the ERO and the CE’s power to invoke it to make emergency regulations were clearly within the contemplation of the drafters of the BL. They must have regarded the ERO to be compatible with the BL so that it would remain as part of the laws of HKSAR after 1997. Based on past invocations, it is powerful and versatile enough to enable the CE to legislate speedily and effectively to meet all and every kind of emergency and public danger that imposes serious and subsisting threats to Hong Kong and its citizens. (7) The theme of continuity strongly suggests that the ERO, as an integral option for tackling emergency and public danger, is constitutionally compliant. If the ERO were held to be unconstitutional, it would leave a significant lacuna in the law. The CE would be deprived of the powers to respond swiftly, flexibly and sufficiently by the necessary making emergency regulations even though the circumstances clearly warrant it and it is in the public interest to do so. (8) The CA further holds that the constitutionality of the ERO is also supported by a proper construction adopting an updated analysis of its principal features with reference to contemporaneous jurisprudence. The ERO confers on the CEIC limited power to make subordinate legislation, and not primary legislation, in a state of emergency or public danger: (a) Under the relevant law, if a sudden emergency arises it may be essential to give the executive wide and flexible powers to deal with it by emergency regulations whether the legislature is sitting or not. By nature, emergency or public danger is not capable of exhaustive definition, which means that usually a general or board definition is used. It requires an urgent and effective response to avoid an imminent threat, prevent a worsening of the situation or mitigate the effects of the emergency. The executive needs wide and flexible powers to deal with every and all exigencies expeditiously and effectually. The emergency regulations are necessarily wide and extensive in scope. They may even dis-apply or amend a primary legislation. Considered in this proper context, the width and extensive scope of emergency regulations that can be made by the CEIC under the ERO does not render them to be primary legislations in nature. (b) Because of the contrary context, various provisions of the ERO have dis-applied the relevant provisions of the Interpretation and General Clauses Ordinance (Cap 1). (c) The CE’s decision to invoke the ERO and the emergency regulations made are subject to close scrutiny. She can only invoke it when there is a public danger, which condition must be strictly adhered to. Her decision that an occasion of public danger existed is subject to judicial review. She must also act bona fide in furtherance of the statutory purpose of the ERO. The emergency regulations are subject to judicial review on their constitutionality and vires. Their duration is also subject to judicial review. (d) The emergency regulations made under the ERO are subject to the negative vetting procedure. Under the procedure, the Government will ordinarily present a LegCo Brief, which is a public document and supply further information as requested by the LegCo. The LegCo Brief and such information will provide the necessary materials to facilitate the mounting of a legal challenge. (e) The LegCo exercises control over the emergency regulations made by the CE under the ERO by means of the negative vetting procedure or by repeal by primary legislation. Constitutionality of PFCR 5. The PFCR imposes restrictions on fundamental rights and must satisfy the prescribed by law requirement and the proportionality test. In determining whether the PFCR satisfies the proportionality test, the CA adopts the stricter standard of no more than necessary. It was accepted by the applicants’ counsel that section 3(1)(a) of the PFCR (prohibition in respect of unlawful assembly) was proportional. 6. Section 3(1)(b) concerns the use of facial coverings at an unauthorized assembly. The CA first points out that the rights of demonstration and of assembly are not absolute. Restriction on freedom of peaceful assembly in public places may serve to protect the rights of others with a view to preventing disorder and maintaining an orderly flow of traffic. In analyzing different scenarios of unauthorized assembly as envisaged under section 17A(2) of the Public Order Ordinance (“POO”), the CA rules that the power under POO must be exercised for the purpose of maintenance of public safety, public order, and the protection of the rights and freedom of others. Further, such exercise must be subject to the test of proportionality on an operational level. Unless there are violent or other reprehensible conducts of the part of some demonstrators posing serious and imminent risk to public order, there should be prior warnings and the issuance and announcement of an order under section 17(3) of the POO before more drastic actions like arrests and dispersals are taken. After an order for stop and dispersal, the gathering should be discontinued. A person cannot be found to have refused, or willfully neglected, to obey such an order unless that person is aware of the order; and a person cannot be regarded as knowingly taking part in an unauthorized assembly unless he or she is aware of the unauthorized nature of the gathering or the order for stop and dispersal. 7. The CA holds that there are valid and serious public order concerns for unauthorized assembly. The CA highlights the pre-emptive nature of the provisions relating to unauthorized assembly and there are safeguards in the actual operation of the POO regime against unjustified interference with the rights of peaceful demonstration and assembly. 8. The CA construes person “at an unauthorized assembly” to include those remain at the assembly after being aware of the unauthorized nature of the assembly and reasonable opportunity have been given to him to disperse and leave the scene. The CA stresses that it should be the duty of all citizens who treasure the rule of law as the core value to maintain the rule of law. Hence, in the wake of an order for stop and dispersal, a responsible law-abiding citizen should follow the direction instead of remaining there in defiance of such order and direction. By remaining at the assembly, even without the commission of further act of violence, such person perpetuates the worsening situation which could potentially escalate to serious violent confrontations and frustrate the crowd control scheme. 9. On the other hand, a mere bystander or passer-by cannot be regarded as people “at the assembly”. 10. When a person lawfully wears a mask in a lawful public assembly or procession, which is somehow hijacked by others participating in it, that person should be able to resort to the defence of reasonable excuse under section 4of the PFCR so long as they are not aware of any order made under section 17(3) of the POO or they have not had a reasonable opportunity to leave the scene after becoming so aware. 11. Section 3(1)(b) can be considered on its own. Given the public order concerns in respect of unauthorized assembly amidst the fluidity in terms of the rapid deterioration of many large scale processions and demonstrations into violent riots with most of the rioters adopting the black bloc strategy to escape from responsibility for very serious criminal acts, the CA is of the view that such ban is no more than necessary to achieve the legitimate aims. The need to deter people from wearing facial coverings to frustrate the legitimate aims of the statutory scheme under the POO applies with equal force in the context of unlawful assembly as well as unauthorized assembly. 12. The CA is also satisfied that on a systemic level the prohibition under section 3(1)(b) of the PFCR strikes a fair balance between the societal benefits pursued by the restriction and the inroads made to the rights of the individual subject to the same. 13. For these reasons, the CA reverses the CFI’s holding on the proportionality of section 3(1)(b). 14. In light of the power to regulate the safe and peaceful conduct of lawful assembly and the power to disperse a gathering when it was hijacked by violent or disorderly conducts, the CA finds no justification for the further restrictions on the lawful public assembly or public procession under sections 3(1)(c) and (d). 15. As regards section 5 of the PFCR, the CA considers that the police have already had the power to order a person to reveal identity by removing facial covering under section 54(1)(a) of the Police Force Ordinance and section 49(1) of the POO. The powers conferred under section 5 are much wider. It involves a temporary restriction on the liberty of a person, and an interference of the privacy of a person. It finds that the statutory powers already in place are sufficient to address the law enforcement objectives. The CA finds no justification for a wider power envisaged under the section, and that such wide and unqualified power also contravenes the concept of law providing proper safeguard against arbitrary interference of fundamental rights. For these reasons, the CA upholds the CFI’s decision that section 5 failed to meet the proportionality test. ERO not impliedly repealed 16. The CFI held that the ERO was not impliedly repealed by the Hong Kong Bills of Rights Ordinance (“HKBORO”). The applicants in HCAL 2945/2019 cross-appealed against this ruling. The CA agrees with the CFI that a permissible, and indeed the proper, construction is that the ERO is to be read subject to section 5 of the HKBORO. The CA rejects the submission that such a construction was inappropriate and unworkable. When and even if a regulation enacted by the ERO does have the effect of derogating from any rights protected under the HKBORO, such a regulation is still subject to the tests of “prescribed by law” and “proportionality”. For these reasons, the CA upholds the CFI’s ruling in this respect. ERO is prescribed by law 17. The CFI also held that the ERO did not fall foul of the “prescribed by law” requirement. All the applicants in these appeal cross-appealed against this ruling. It was submitted that section 2(1) of the ERO did not meet the “prescribed by law” requirement because it was too uncertain in law as to the scope of the power conferred on the CEIC and the manner on which it exercised its power. The CA agrees with the CFI that the ERO does not by itself restrict or limit any fundamental rights. It is therefore not subject to a “prescribed by law” requirement challenge. Rather, if and when a particular regulation enacted under the ERO which does provide restrictions on the rights, such a regulation must then meet the “prescribed by law” requirement. The CA further holds that, in any event, on a proper construction, the ERO cannot be said to have conferred “unfettered and unlimited” power on the CEIC with “no independent safeguards against abuses or excesses”. The reasons are that first, the true nature of emergency regulations makes it impossible to provide exhaustive definition in advance. Second, the mere use of general wordings in an enactment does not by itself necessarily mean that it falls foul of the legal certainty test. Whether it does so is still a question of construction made in its proper context. Finally, the exercise of power under the ERO and the emergency regulations are subject to negative vetting and judicial review scrutiny. For these reasons, the CA rejects the applicants’ cross-appeal on this ground. ERO permits the enactment of PFCR 18. The CFI rejected the applicants’ argument that the general wordings of section 2(1) of the ERO did not allow the Government to adopt measures that infringe the fundamental rights of an individual and hence the PFCR was illegal. By a Respondent’s Notice, the applicants in HCAL 2945/2019 asked the CA to affirm the CFI’s judgment also on this ground. The CA rules that, by adopting purposive interpretation, in using the general wordings, the legislature objectively intended section 2(1) to permit, if necessary, the imposition of restriction on rights and freedoms when enacting a relevant regulation under the ERO. This is so as, because of its nature, the general wordings of the ERO were intended to confer a wide power on the CEIC to enact regulation and to implement measures to combat emergency and public danger. The CA also accepts the respondents’ submissions that, when reading the ERO as a whole, the legislature when enacting the ordinance did have the objective intent that regulations enacted under the ERO may, if necessary, impose restrictions on rights and freedoms. For these reasons, the CA refuses to affirm the CFI’s decision based on this ground. |
1. The Taxpayer was Group CFO and executive director of his employer. On 20 July 2008, they entered into a Separation Agreement, terminating the Taxpayer’s employment. The Taxpayer was (i) paid a sum of money (“Sum D”) described as taking the place of a discretionary bonus, and (ii) given share options which ultimately resulted in a gain for the Taxpayer (the “Share Option Gain”). 2. The appellant assessed these two items to salaries tax. The Taxpayer successfully challenged this at the Court of Appeal, having previously lost before both the Board of Review and the Court of First Instance. Issue 3. The issue was whether Sum D and the Share Option Gain were income “from employment” under section 8(1) of the Inland Revenue Ordinance (Cap 112). That provision would include payments that were rewards and/or inducements for past, present or future employment. On the other hand, payments that were for something else were not caught and not chargeable to salaries tax. 4. In relation to Sum D, the Court looked at the substance of the payment to see if it was paid in substitution for a discretionary bonus the Taxpayer might have received as an employee. Where bonuses are concerned, an employer’s results and an employee’s performance are both matters of substance. Since the bonus decision process had not even begun when the Taxpayer was terminated, Sum D was wholly different in nature from any discretionary bonus. It was paid to make him go away quietly, and was the “antithesis” to a reward for past services. 5. In relation to the Share Option Gain, the Court found that the share options had been an acceleration, under the Separation Agreement, of prior share option rights given to the Taxpayer while employed. However, those prior rights were lost upon termination. Without the acceleration, the Taxpayer would never have received anything at all. It was plain from the evidence that the acceleration was not given to the Taxpayer as a reward for past services, but for something else: to make the Taxpayer go away quietly. 6. Generally, the Court distinguished between two situations; sometimes what an employee received was in satisfaction of his rights under his contract, at other times it was in abrogation of those rights. The former was taxable but the latter was not. Considered in terms of abrogation, the Separation Agreement abrogated whatever rights the Taxpayer may have had under his employment contract. He agreed to this in return for what was given to him to make him go away quietly. 7. Therefore, both Sum D and the Share Option Gain were not income from employment, and not therefore chargeable to salaries tax. DISPOSITION: 8. Accordingly, the Court unanimously dismissed the appeal. |
Background 1. This appeal raises issues concerning the principles applicable where a party seeks leave to resist enforcement of a 1958 New York Convention arbitration award out of time. 2. The eight respondent companies, members of a Malaysian media group (“Astro”), were the claimants in the arbitration. The appellant (“First Media”) is a substantial company listed on the Indonesian Stock Exchange and part of an Indonesian conglomerate (“Lippo”) and was the main respondent in the arbitration. 3. The arbitration was brought by Astro against Lippo pursuant to an agreement for arbitration in Singapore applying Singapore law. The arbitral tribunal joined three of the Astro claimants (“the Additional Parties”)even though they were not parties to the arbitration agreement, overriding Lippo’s objections, and made awards in favour of Astro including an award in a sum exceeding US$130 million. 4. However, when Astro sought to enforce the award in Singapore, the Singapore Court of Appeal reversed the decision of the lower courts (“the SCA Judgment”), and held that the tribunal lacked jurisdiction to make awards in favour of the Additional Parties since they were never parties to the agreement to refer the dispute to arbitration. The Singapore enforcement orders in favour of the Additional Parties were set aside. 5. In Hong Kong, in reliance on the SCA Judgment, First Media applied for an extension of time to set aside Hong Kong orders, entered some 14 months earlier, granting Astro leave to enforce the tribunal’s awards in Hong Kong (“Hong Kong orders”). Decisions of the Courts below 6. The Court of First Instance (“CFI”) refused to set aside the Hong Kong orders, finding that First Media had not acted in good faith by keeping the challenge to the tribunal’s lack of jurisdiction in reserve while proceeding with the arbitration, so that the Court should exercise its discretion to allow Astro to enforce the awards even though First Media came within an exception which would justify refusal of enforcement. Separately, it also refused to extend time for First Media to set aside the Hong Kong orders given (i) the length of the delay, (ii) the fact that a deliberate decision was taken not to apply to set aside within the time prescribed and (iii) the fact that the awards had not been set aside at the seat of the arbitration. 7. The Court of Appeal (“CA”) overturned the CFI’s decision based on the good faith principle, holding that it had failed to take sufficient account of the fundamental defect that the Awards were sought to be enforced for the benefit of the Additional Parties who were never parties to the arbitration agreement and were therefore made without jurisdiction. 8. However, the CA declined to interfere with the CFI’s exercise of discretion not to extend time and endorsed his reliance on the three factors mentioned above. Decision of this Court 9. This Court held that the proper test for considering extension of time involves looking at all relevant matters and considering the overall justice of the case, eschewing a rigid mechanistic approach. This Court also held that except in cases where section 44(2)(f) of the Arbitration Ordinance, Cap. 341 (now repealed) is relied on, the fact that the award has not been set aside by the courts of the seat of arbitration is not a relevant factor to the question of whether time should be extended. 10. Looking at all relevant matters and considering the overall justice of the case, this Court decided to set aside the decisions below and granted the appellant an extension of time. To refuse an extension would be to deny First Media a hearing where its application has decisively strong merits and would involve disproportionately penalising it for a delay which caused Astro no uncompensable prejudice to the extent of permitting enforcement of an award for US$130 million. 11. The Court allowed the appeal and extended time by three months for First Media to file its application for leave to set aside the Hong Kong orders. |
The Respondent is a Hong Kong company whose principal business consists of trading in marketable securities quoted in Hong Kong. According to the applicable accounting principles, unrealised gains or unrealised losses on trading stock were recognized in its profit and loss accounts for the relevant periods. For accounting periods where there were such unrealised gains, in computing the assessable profits for profits tax purposes for the relevant period, the Respondent excluded the unrealised gains on trading stock. However, for accounting periods where there were unrealised losses, such losses were taken into account for the purposes of profits tax assessment. The Appellant was of the view that the unrealised gains arising from revaluing the unsold stock should be included in the profits tax assessments and accordingly issued profits tax assessments to this effect (“Tax Assessments”). The Appellant contends that profits tax should be assessed according to the applicable accounting principles, and since unrealised losses were recognized for profits tax purposes in accordance with the applicable principles, unrealised gains should also be recognized for profits tax purposes in accordance with the applicable principles. The Respondent appealed against the Appellant’s Tax Assessments. The question for decision, therefore, is whether for the purposes of profits tax unrealised increases in the value of trading stock held at the end of the accounting period as a result of the revaluation should be included in the computation of “the full amount of the profits…arising in or derived from Hong Kong during the year[s] of assessment”. The Court of First Instance allowed the Respondent’s appeal. Both the Court of Appeal and the Court of Final Appeal affirmed the Court of First Instance’s decision. The Court of Final Appeal held that the Respondent’s financial statements, prepared in accordance with mandatory international accounting standards, record both profits which the taxpayer has realised during the accounting period and which are assessable to tax and increases in the value of its trading stock during the period which represent unrealised profits and are not assessable to tax. In preparing its tax computations, the Respondent was entitled to remove the amounts of its unrealised profits as not chargeable to tax. It is clear beyond argument that accounts drawn up in accordance with the ordinary principles of commercial accounting must nevertheless be adjusted for tax purposes if they do not conform to the underlying principle of taxation enunciated by the courts even if these are not expressly stated in the statue. In particular, principles of commercial accounting must give way to the core principles that profits are not taxable until they are realized and that profits must not be anticipated. |
1. These appeals arose in the context of matrimonial proceedings. The respondent husband had made a claim in the District Court for ancillary relief in relation to the assets of his wife, the petitioner. He asserted that she held the legal and beneficial interest in 20 million shares in a private company established and controlled by her father. The wife and her father asserted, on the other hand, that although the shares were registered in her name, she held them on trust for the father. The District Court Judge ordered that issue to be tried as a preliminary issue. 2. The case for the father and his daughter at trial was that he controlled the company and he only transferred shares to those of his adult children who helped him in his business with an understanding that if they left the business they were to return the shares and he relied in part on the fact that when one of his sons left Hong Kong he transferred his shares to his father, as did another son when there had been a falling out. The point of transferring shares to his daughter, he said, was to give her more status when dealing with third parties. He also said that he would not have allowed the company to buy properties after the divorce proceedings were in prospect had he thought that the shares were part of the daughter's assets. 3. The District Court Judge held that the shares were part of the wife’s assets. The judge said that the father’s explanation for transferring shares to his daughter was not logical, that had he intended her to hold the shares on trust for him, he would have executed a written declaration of trust as he had previously with one of his sons and once with the daughter, that the daughter was his right hand and that he intended to transfer the shares to her outright. 4. The judge’s decision was upheld and endorsed by the Court of Appeal. That Court noted that the relevant transfers of shares to the wife were made without declarations of trust at a time when the father, according to his own admission, knew what a declaration of trust was and had used such declarations; and the Court agreed that the evidence was entirely consistent with an intention to gift the shares to the daughter. 5. The wife and her father thereupon appealed to this Court, seeking to challenge the findings of the lower courts as to the beneficial ownership of the shares. At the time of the Court of Appeal’s decision in December 2014, the fact that the matter in dispute amounted to more than $1 million was a fact which, on its own, gave a right of appeal to this Court. These appeals came to this Court under that “as of right provision”, a provision which has since been repealed. 6. The appeals were appeals against concurrent findings of fact; in other words the same findings of fact by both the District Court and the Court of Appeal. The established practice is that the Court will not interfere with concurrent findings of fact other than in exceptional and rare circumstances. 7. The wife and her father argued that there were exceptional circumstances which warranted a review by the Court. They said that the trial judge had made inconsistent findings; that he wrongly rejected their evidence even though key assertions by them when they testified had not been challenged; that he did not apply the correct approach in deciding what the father’s intention was when he transferred the shares to his daughter; and that he failed to give enough weight to the history of the father’s dealings with his daughter and her brothers; and that the judge failed to provide adequate reasons for deciding as he did. 8. The Court held that most of the complaints did not warrant other than summary disposal since they did not lend themselves to reasonable argument justifying a full review of concurrent findings. The judge made no inconsistent finding: he found that the father intended to gift the shares to the daughter; the challenge to the father and daughter as witnesses was clear enough; and the judge adopted the correct test in deciding the father's intentions. 9. The Court held that the only issue which warranted review was whether the judge explained what weight he gave to the key events relied on by the father and daughter in support of their case and why, despite those events, the judge found as he did. Those events were the occasions on which shares were returned to the father and the property purchases by the company of property after divorce proceedings were in prospect. 10. The Court held that whilst it would have been preferable for the judge to explain in terms how these events sat comfortably with his finding that, nonetheless, father's intention was to gift shares to his daughter, the judge’s reasoning was sufficiently apparent from a sensible reading of his judgement as a whole. It was the same reasoning as articulated by the Court of Appeal, namely, that the account offered by the father and the wife made no sense either in practical terms or in the light of the documentary history and that since no consideration was paid for the shares the only rational conclusion was that a gift was intended. In the context of this case, the findings were not at odds with the incidents of return of shares on which the father relied. 11. Accordingly, the Court dismissed the appeals. |
Background 1. In August 2014, the Appellant visited an adult website on which the girl had posted an advertisement, describing herself as aged 17 and offering sexual services at listed prices. They arranged to meet and the Appellant took the girl to a guesthouse where they showered together and the Appellant ran his hands over her body. The girl then performed oral sex on him. At trial, the Appellant’s defence was that he held an honest and reasonable belief that the girl was aged 17. He testified that he did not doubt the girl’s age when he looked at her photo or on the day they met. She was in fact 13 years of age. 2. There was no dispute that the girl consented to the Appellant’s acts. However, he was charged with indecent assault, contrary to sections 122(1) and (2) of the Crimes Ordinance (Cap.200) on the basis that a person below under the age of 16 cannot in law give consent to an act of indecent assault. 3. The magistrate acquitted the Appellant, finding that he honestly and reasonably believed that the girl was aged 16 or over, but the Court of First Instance decided that the offence of indecent assault in relation to a girl who is in fact under the age of 16 is one of absolute liability, meaning that the Appellant’s honest and reasonable belief as to her age was no defence. Decision of this Court 4. In deciding whether an offence is one of absolute liability, the starting point is that a statutory offence is presumed to require proof of mens rea (i.e. knowledge or intention on the part of the accused) unless the statute expressly or by necessary implication makes the presumption inapplicable. The Court did not consider absolute liability necessary to achieve the statutory purposes of section 122, and held that the Judge was wrong to treat it as an offence of absolute liability regarding the girl’s age. 5. The Court held that section 122(2) treats girls and boys under the age of 16 as a vulnerable class in need of a high degree of protection against sexual exploitation (deeming them incapable of giving consent to indecent acts) and necessarily implied that the prosecution does not need to prove mens rea as to the girl’s age. It held, however, that the accused has a good defence if he can prove that it was more probable than not that he honestly and reasonably believed that the girl was 16 or over. 6. Given the magistrate’s findings, the Court allowed the appeal, set aside the decision of the Court of First Instance and restored the Appellant’s acquittal. |
Article 24(2)(4) of the Basic Law (the “Article”) provides that persons not of Chinese nationality who have entered Hong Kong with valid travel documents, have ordinarily resided in Hong Kong for a continuous period of not less than 7 years and have taken Hong Kong as their place of permanent residence shall be permanent residents of Hong Kong. The Appellants are both Philippine nationals who entered Hong Kong for employment as foreign domestic helpers (“FDHs”) and have lived here continuously for well over 7 years. However, section 2(4)(vi) of the Immigration Ordinance (“IO”) states that a person employed as a FDH who is from outside Hong Kong is not to be treated as “ordinarily resident” in Hong Kong and so cannot become a Hong Kong permanent resident. The appellants contend that they come within the “natural and ordinary meaning” of the words “ordinarily resided” in the Article so that the restriction in the IO is inconsistent with the Article and unconstitutional. The Court of First Instance accepted their argument but was reversed by the Court of Appeal. The Court of Final Appeal dismissed their appeals. The Court held that the words “ordinarily resided” are capable of assuming different meanings in different contexts and that the meaning asserted by the appellants was not the only meaning. It is always necessary to examine the factual position of the person claiming to be ordinarily resident to see whether there are any special features affecting the nature and quality of his or her residence. The Court held that the immigration status of persons must be taken into account in deciding whether they satisfy the 7-year ordinary residence requirement. The Article requires a valid travel document at the point of entry and makes immigration control a constant feature in the process of building up eligibility during the 7-year qualifying period. The imposition of such controls is consistent with Article 154(2) of the Basic Law which allocates constitutional responsibility for immigration control on the HKSAR Government. The nature of FDHs’ residence in Hong Kong is highly restrictive. Permission for a FDH to enter Hong Kong is tied to employment solely as a domestic helper with a specific employer with whom the FDH must reside under a specified contract. The FDH is obliged to return to the country of origin at the end of the contract and is told from the outset that admission is not for the purposes of settlement and that dependents cannot be brought to reside in Hong Kong. The quality of their residence is therefore far-removed from what would traditionally be recognised as “ordinary residence” and the Court thus held that FDHs do not, as a class, come within the meaning of “ordinarily residence” as used in the Article. As the meaning of the Article interpreted purposively and in context was clear, there was no basis for referring to any extrinsic materials in aid of its interpretation. The respondents argued that if and insofar as the Court considers it necessary to consider the effect of the Interpretation adopted by the Standing Committee of the National People’s Congress on 26 June 1999 (the “1999 Interpretation”), the Court would be bound under Article 158(3) of the Basic Law to refer to the Standing Committee two questions: (i) what is the meaning of an “interpretation” under Article 158(1) of the Basic Law; and (ii) whether the 1996 “Opinions on the Implementation of Article 24(2) of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China” referred to in the Interpretation covering the legislative intent of the Article is binding on Hong Kong courts. The Court affirmed that in deciding whether or not to refer questions to the Standing Committee, the Court and the Court alone must be satisfied on 3 conditions: (i) classification – that the provision of the Basic Law in question relates to (a) affairs which are the responsibility of the Central People’s Government or (b) the relationship between the Central Authorities and the HKSAR; (ii) necessity – that it is necessary to interpret provisions covered in condition (i) to adjudicate the case and the interpretation will affect the judgment; and (iii) arguability – that the argument that necessitates an interpretation is not a “plainly and obviously bad” one. If all 3 conditions are satisfied, the Court must make a reference to the Standing Committee. The Court held that while the classification condition is satisfied in the present case since Article 158 of the Basic Law concerns the relationship between the Central Authorities and the HKSAR, the necessity condition is not met since the Court has reached a conclusion on the meaning of the Article without need to refer to the 1999 Interpretation. Hence, it is unnecessary to consider whether the arguability condition is satisfied. The request for a reference was therefore rejected. |
1. Tang was the registered owner of a property developed under a government housing scheme for civil servants (“Property”). Under the legal assignment by which Tang purchased the Property, there was a non-alienation clause, which prohibited Tang from assigning or charging the Property without the consent of the Financial Secretary Incorporated (“FSI”). Such consent would usually be granted upon payment of a premium. To secure the performance of the non-alienation clause, a legal charge in favour of FSI was created. 2. In 2014, Tang took a loan of $2.2 million from the Appellant. To comply with the non-alienation clause, Tang assigned the balance of all future sale proceeds of the Property receivable by himself as security for the repayment of the loan. The loan agreement was registered in the Land Registry. 3. Subsequently, Tang took another loan of $1 million from the Respondent. In 2015, Tang defaulted in the repayment of the loan. After obtaining judgment on the debt, the Respondent also obtained charging orders nisi and absolute against the Property. An order for sale of the Property in enforcement of the charging order was later made and the Property was agreed to be sold to a purchaser. Both the charging orders and the order for sale were registered in the Land Registry. 4. The Court of First Instance held that (a) as the assignment of sale proceeds to the Appellant did not create any interest in or otherwise affect the Property, the Appellant’s loan agreement was not registrable and had to be vacated in the Land Registry; (b) as the charging order obtained by the Respondent was a charge on Tang’s beneficial interest in the Property itself, the Respondent’s interest had priority over any unregistrable interest that the Appellant had in any future sale proceeds. 5. The Appellant only appealed against the decision on the issue of priority, but not the decision to vacate the registration of the Appellant’s loan agreement. The Court of Appeal dismissed the appeal on the ground that the Appellant's interest was in a different class from that of the Respondent. On appeal, the only issue before this Court was the priority to the sale proceeds of the Property between the Appellant and the Respondent. 6. The Court held that pursuant to section 20B(3) of the High Court Ordinance (Cap 4), a charging order shall have the like effect of an equitable charge created by the debtor by writing. An equitable charge confers on the chargee a right to have the charged property made available by a court order. Therefore, a charging order or an equitable charge gives the chargee a proprietary interest in the property. It affects the land itself and is an encumbrance on the property. This is so despite that (a) the charge does not involve any transfer of legal or equitable ownership, (b) the interest in the charged property is inchoate and ineffectual until a court order is made. 7. On the other hand, the equitable assignment of the sale proceeds did not give the Appellant any proprietary interest in the Property itself at all, and did not constitute an encumbrance on the Property. The charge over the Property created by the charging order in favour of the Respondent was therefore not subject to the earlier assignment of the future sale proceeds. The Appellant’s entitlement to the sale proceeds was only derived from Tang’s entitlement to the surplus of the sale proceeds, if any, upon the sale of the Property. 8. The Court therefore held that the Respondent ranks prior to the Appellant in relation to the sale proceeds. DISPOSITION 9. Accordingly, the Court unanimously dismissed the appeal. |
1. The respondent was injured at work and brought proceedings against his employer for common law damages of over $4.7 million. The appellant (“the Board”) administers the Employees Compensation Assistance Fund, a last resort fund for injured employees who establish liability for work-related injuries but who are unable to recover from their employers or any insurer. Since the respondent’s employer had no insurance cover, the respondent’s claim was potentially payable out of the Fund, and so the Board joined in the proceedings to participate in the assessment of damages. 2. At the start of the trial, the respondent and the Board settled his potential claim against the Fund for $1,420,000. The employer was not party to this settlement and the trial went ahead, damages payable by him to the respondent eventually being assessed at HK$1,428,547, with the employer being ordered to pay the respondent’s costs. The trial judge held that the court has power to order the Board to pay costs, but declined to do so, ordering the respondent and the Board each to bear their own costs. The Court of Appeal dismissed the respondent’s appeal against the refusal of costs against the Board and did not accept the Board’s argument that there was no jurisdiction to order costs against it in such proceedings. 3. The Board raised two questions before this Court. The first was whether the courts have power to make costs orders against the Board in proceedings for common law damages to which it has been joined as a party. The second was whether the Board has the power to enter into binding settlements regarding potential claims for payments out of the Fund, and the legal effect of such settlements. First question: the courts’ power to order the Board to pay costs 4. The Court rejected the Board’s argument that section 20B(3) of the Employees Compensation Assistance Ordinance (Cap 365) (“the Ordinance”) deprived the court of power to order the Board to pay costs in common law actions. It held that section 20B(3) only means the Board cannot be liable for costs awarded against the employer, but does not otherwise address or limit the court’s power to order costs against the Board. 5. Instead, the Court held that such a power exists by virtue of the general power to order costs conferred upon the courts by the High Court Ordinance. Moreover, section 29 of the Ordinance also recognises such a power, as it envisions the Board making settlement offers that may entail costs consequences. 6. The Court further held that where the Board has been joined as a party and properly carries out its functions, the appropriate starting-point for costs orders should be for each party to pay its own costs instead of the “loser pays the costs” principle, but that the court retains a wide discretion to order otherwise. Second question: the Board’s power to settle 7. The Court held that section 29 of the Ordinance empowers the Board to settle claims. Settlement is an alternative route to obtaining relief and disposing of the employee’s claim against the Fund. The Board has power to decide whether to settle and to determine what amount is reasonable, arriving at its decision in good faith after making due inquiries. 8. Once the potential claim against the Board is settled, the employee should not need to pursue the action against the employer further. The settlement agreement is a binding contract between the Board and the employee and is not affected by the outcome of any subsequent judgment which the employee might obtain against the employer. DISPOSITION: 9. Accordingly, the Court unanimously dismissed the Board’s appeal. |
The applicant pleaded guilty before the District Court Judge to a charge of incitement to secession, contrary to Articles 20 and 21 of The Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (“NSL”). The judge categorized the applicant’s case as serious, warranting a prison term between 10 years and 5 years as prescribed in NSL 21. After adopting a starting point of 5 years and 6 months, the judge was minded to give a one-third discount to reflect the guilty plea but, upon submission by counsel, held that the minimum of 5 years was mandatory. She consequently sentenced the applicant to 5 years’ imprisonment. The applicant sought leave to appeal against sentence, arguing that the judge erred in (1) categorizing his offence as serious; and in (2) construing NSL 21 as mandating a minimum of 5 years’ imprisonment for serious cases and in failing to take into account NSL 33(1) to bring the sentence below 5 years. The Court of Appeal dismissed the applicant’s application for the following reasons. 1. Applying HKSAR v Ma Chun Man [2022] HKCA 1151, the Court of Appeal agreed with the Judge’s categorization of the case as serious: 1.1 As admitted by the applicant, he was one of the two administrators of the Telegram channel in question. The channel carried posts and re-posts of a secessionist nature, inciting hatred against the Central Authorities, the People’s Republic of China, the HKSAR and the police, and were related to subjects such as Hong Kong independence and anti-communism. The posts contained slogans and expressions such as “光復香港，時代革命” (“Liberate Hong Kong, Revolution of our times”) and “香港獨立” (“Hong Kong independence”). The channel organized polls and/or shared polls by others with secessionist contents, with many responses, and offered for sale weaponry and gear. The administrators also used the channel to raise funds for the secessionist cause. 1.2 The Court of Appeal took the view that although the scale and severity of violent protests had declined by the time the offence was committed, Hong Kong was still facing considerable threats and risks to national security and public disorder. The threats and risks posed by the applicant’s incitement were real. 1.3 The Court of Appeal reiterated that incitement by the use of social media is an aggravating feature. The aggravation lies in the extreme effectiveness of social media in providing a means or platform to individuals with the ease and ability to communicate or disseminate instant messages or content to a vast audience without physical contact or geographical constraints, thereby amplifying the effects of the incitement and increases exponentially the threats and risks it poses to national security. Telegram is a widely used platform. The applicant used a public channel which all Telegram users could access the posts therein. There were 1,040 users who had joined and subscribed to the channel at or about the time of the applicant’s arrest, not a negligible number. 1.4 The Court of Appeal found that there were other aggravating factors in the applicant’s conduct. They included denouncing the NSL as a piece of waste paper; posting secessionist messages and videos on sensitive dates with high risks of provoking secessionist and other unlawful acts; acting in joint enterprise with another; arousing public attention and discussion in the guise of organizing and/or sharing polls; using secessionist materials with a view to advocating secession; offering for sale of weaponry and gear, thus encouraging the use of violence; and using the channel to raise funds for the secessionist cause. 2. The Court of Appeal further agreed with the judge’s finding that the offence fell within the lower end of the serious category of NSL 21. As the adopted starting point of 5 years and 6 months’ imprisonment was within reasonable bounds, there was no basis for the Court to disturb it as being manifestly excessive. 3. The Court of Appeal identified two core issues concerning the legislative intention and effect of NSL 21 and NSL 33(1): 3.1 Whether, in prescribing the range of penalty for serious offences, it is the legislative intention of NSL 21 to lay down a range of starting points between 10 years and 5 years or to set 5 years as a mandatory minimum? 3.2 Whether, in specifying the three conditions, it is the legislative intention of NSL 33(1) to set out exhaustively the mitigating circumstances that may allow the court to adjust the penalty for a serious NSL 21 offence to below the minimum of five years? 4. In ascertaining the legislative intention of NSL 21 and NSL 33(1), the Court of Appeal adopted the contextual and purposive approach laid down by the Court of Final Appeal in HKSAR v Lai Chee Ying (2021) 24 HKCFAR 33 in their construction. The Court of Appeal held thus: 4.1 The NSL was enacted against the background of grave and unprecedented national security risks in the HKSAR; and that the NSL and local sentencing laws should operate in tandem to achieve the aim of safeguarding national security in the Region, giving priority to NSL provisions in case of inconsistency. 4.2 As an integral component of safeguarding national security, preventing, suppressing and imposing punishment for NSL offences is distinctly stated in NSL 1 as a primary purpose of the NSL (“the Primary Purpose”), highlighting its immense importance in the overall scheme of the NSL. 4.3 The NSL specifically emphasizes the Primary Purpose when referring to criminal proceedings and penalty, requiring strict and full application of the NSL and local laws to effectively prevent, suppress and punish offences endangering national security: NSL 3(3), NSL 8 and NSL 42(1). 4.4 The imperative in the NSL on strict and full application of laws to further the Primary Purpose (“the Imperative”), when applied to the penalty regimes in the NSL, means that priority should be given to the penological considerations of deterrence, retribution, denunciation and incapacitation (“the Penological Considerations”). It follows that the construction of NSL 21 must give full effect to the Penological Considerations. 4.5 In the context of the NSL, because of the Imperative, not all mitigating circumstances are applicable to the sentencing of NSL offences. Only those which do not compromise the Primary Purpose are permissible. This informs the construction of NSL 33(1). 4.6 The Imperative governs the application of local sentencing laws to the sentencing of NSL offences. To achieve convergence, compatibility and complementarity with NSL 21, local sentencing laws on mitigation can apply only if they do not prejudice the Penological Considerations. To achieve the same result with NSL 33(1), local sentencing laws on mitigation can apply only if they do not compromise the Primary Purpose. 4.7 The choice of imprisonment as the only penalty option for serious NSL 21 offences and the stipulated range reflects the drafters’ judgment as to the gravity of these offences and how to give full effect to the Penological Considerations to further the Primary Purpose in their sentencing. Viewed purposively, the minimum of 5 years is mandatory. 4.8 On a proper construction, NSL 33(1) provides for three disposals by the sentencing court: (1) 從輕處罰, imposing a lighter penalty within the applicable tier; (2) 減輕處罰, reducing the penalty from the upper tier to the lower tier; (3) 免除處罰, exempting penalty. 4.9 It is the weight of the mitigation that determines if the court should從輕處罰 or 減輕處罰. In sentencing an NSL 21 offence, if the court decides to從輕處罰, it may impose a lighter penalty within either of the applicable tiers. For serious offences, whatever discount the court may give, the ultimate sentence cannot go below the mandatory minimum of 5 years’ imprisonment. In contrast, if the court decides to減輕處罰, it may reduce the penalty below 5 years’ imprisonment. 4.10 The three conditions specified in NSL 33(1) do not compromise the Primary Purpose. They are in fact conducive to achieving it because they are broadly consistent with such purpose. 4.11 Moreover, among all forms of mitigation, the specification of the three conditions, without more, is intentional. It reflects the drafters’ judgment that they are the only relevant conditions in the context of national security which may allow the court to not only 從輕處罰 (impose a lighter penalty) but also 減輕處罰 (reduce a penalty), without prejudicing the Penological Considerations or compromising the Primary Purpose. The legislative intention is plainly that as specified conditions in NSL 33(1), they are exhaustive. 4.12 However, it is also the legislative intention that local sentencing laws on mitigation are to operate in tandem with the NSL, provided that they do not prejudice the Penological Considerations or compromise the Primary Purpose. Thus, as accepted by the respondent, other mitigating factors not specified in NSL 33(1) but recognized under the common law, such as guilty pleas, can operate in full for the court to consider 從輕處罰 (imposing a lighter sentence within the applicable tier). For whatever the discount those mitigating factors may afford, the ultimate sentence stays within the range for the tier, and thus accords with the drafter’s judgment as to the gravity of and Penological Considerations for NSL 21 offences. As such, they do not compromise the Primary Purpose. 4.13 However, these other mitigating factors cannot apply to 減輕處罰 (reducing the sentence for a serious case below the minimum of 5 years). For if they were to apply to discount the sentence below 5 years, it would contradict the drafter’s judgment as to the gravity of serious NSL 21 offences and prejudice the Penological Considerations for such offences, thereby compromising the Primary Purpose. As such, they are not compatible with either NSL 21 or NSL 33(1). 5. In conclusion, the Court of Appeal held that the applicant’s offence was correctly categorized as serious; and that his guilty plea could not apply to adjust the ultimate sentence below the mandatory minimum of 5 years. The Court of Appeal therefore upheld the imposed sentence of 5 years’ imprisonment and dismissed the applicant’s application for leave to appeal against sentence. 6. With regard to the respondent’s attempt to rely on Mainland sentencing law for the construction exercise, the Court of Appeal observed that according to the Explanation on the “Draft [NSL]” addressed to the 19th Session of the 13th Standing Committee of the National People’s Congress by the Responsible Official of the Legislative Affairs Commission under the Standing Committee of the National People’s Congress (18 June 2020), one of the working principles for drafting the NSL was to strive to address the convergence, compatibility and complementarity between the NSL, and the relevant national laws and local laws of the HKSAR. Accordingly, the relevant Mainland law may in principle inform the construction of the NSL or a particular NSL provision. As to which particular Mainland law is relevant for the construction exercise, how and to what extent it is relevant, and how to make reference to it must depend on the actual circumstances of the case before the court. For the present case, the need to refer to Mainland sentencing law for construing NSL 21 and NSL 33(1) did not arise. |
1. This appeal concerned 13 parking spaces in Gold King Industrial Building, an industrial building in Tsuen Wan (the “Building”). The 1st Appellant was the agent of the other Appellants, who were the first owners of the Building (the “First Owners”). The Respondent is the Incorporated Owners of the Building. The First Owners let the 13 parking spaces to the Respondent between 1998 and 2006. 2. The Appellants claimed that the 13 parking spaces are owned by the First Owners, while the Respondent contended that they are common parts of the Building. Both the trial judge and the Court of Appeal found in favour of the Respondent. 3. The Court agreed with the lower courts for four main reasons. First, the 13 parking spaces fell within the definition of “common areas” in the Deed of Mutual Covenant in respect of the Building. Second, only ownership shares but not management shares were issued in respect of the 13 parking spaces, which suggested that they were intended for common ownership. Third, the 13 parking spaces had to be reserved for common areas to comply with conditions in the Government Grant for the parking, loading and unloading of vehicles. Fourth, there would be considerable practical difficulties if the 13 parking spaces were not common areas. 4. The First Owners could not rely on the principle of estoppel by convention. This principle is concerned with persons entering into a transaction or legal relationship in reliance on a common assumption. However, since the trial judge had denied the Respondent’s claim for repayment of the rent paid in respect of the 13 parking spaces, the First Owners failed to show that any detriment had arisen from the transactions with the Respondent. 5. Accordingly, the Court dismissed the appeal. |
1. The Appellant was charged with an offence of contempt, contrary to s.17(c) of the Legislative Council (Powers and Privileges) Ordinance (Cap. 382) (“LCPPO”). S.17(c) LCPPO provides that: “Any person who – … (c) creates or joins in any disturbance which interrupts or is likely to interrupt the proceedings of the Council or a committee while the Council or such committee is sitting, commits an offence…” 2. The Prosecution alleged that on 15 November 2016, during a joint meeting of the Legislative Council (“LegCo”) Panel on Housing (of which the Appellant was a member) and the Panel on Development, the Appellant, then a LegCo member, snatched the Under Secretary for Development’s folder from the bench in front of him. He then passed the folder containing confidential documents to another LegCo member to read. The Appellant ignored the Chairperson’s repeated demands for him to return the folder and resume his seat. Eventually, the joint meeting was suspended. 3. At the defence’s request, the Magistrate gave a ruling on preliminary issues concerning the ambit of s.17(c) LCPPO. The Magistrate ruled that s.17(c) LCPPO did not apply to the Appellant as a LegCo member. Upon appeal by the Prosecution, the Court of Appeal held that s.17(c) LCPPO did apply to LegCo members and that the privilege under s.3 LCPPO (as explained below) did not apply to conduct contrary to s.17(c) LCPPO. 4. In the appeal before this Court, the Appellant contended that he was not subject to liability under s.17(c) LCPPO for the following reasons. 4.1.First, the constitutional protection of freedom of speech and debate or proceedings in LegCo, as provided by s.3 LCPPO, in addition to s.4 LCPPO and art.77 of the Basic Law (“BL”), was absolute. Section 3 provides that: “There shall be freedom of speech and debate in the Council or proceedings before a committee, and such freedom of speech and debate shall not be liable to be questioned in any court or place outside the Council.” 4.2.Second, the principle that the courts will not intervene in the conduct of LegCo proceedings, as explained by this Court in Leung Kwok Hung v President of the Legislative Council (No.1) (2014) 17 HKCFAR 689. 5. At the outset, the Court held that “disturbance” was defined as the interruption or breaking up of the proper functioning of LegCo, particularly when the rights of others have been interfered with. On its face, the Appellant’s alleged conduct was caught by s.17(c) LCPPO. Freedom of speech and debate or proceedings in LegCo 6. However, the Appellant argued that, so long as his alleged conduct occurred during the business of a LegCo meeting, s.3 LCPPO granted him, as a LegCo member, immunity from prosecution. The Appellant relied on art.9 of the UK Bill of Rights 1689 (on which s.3 LCPPO is modelled), which extended its protection to “proceedings in Parliament”. The Court noted that s.3 LCPPO and art.9 of the Bill of Rights 1689 are different. Unlike art.9, s.3 LCPPO does not refer to “proceedings” generally, but to “speech and debate”. Similarly, s.4 LCPPO refers to “words spoken…or written”, whilst art.77 BL refers to “statements”. At the same time, s.17(c) provides a criminal offence of contempt for interruptive disturbances. 7. The question of whether any particular conduct falls within the protected freedom of speech and debate therefore depends on a proper construction of the relevant provisions of the LCPPO as a whole. The LCPPO is designed to protect the freedom of speech and debate in LegCo, allowing members to express their opinions without inhibition. Equally, the LCPPO is also designed to create a secure and dignified environment in LegCo, allowing it to perform its constitutional functions without disruption or disturbance. 8. The Court held that the Appellant’s conduct did not fall within the speech or debate protected by ss.3 and 4 LCPPO or art.77 BL. If the Prosecution’s case were to be established, the Appellant’s conduct would have created a disturbance by various acts, including crossing the floor of the chamber during a debate and snatching property belonging to someone else which he passed to a third party over the owner’s objections. In doing so, he was not making a speech, nor was he participating in debating any business that was before the meeting. 9. The Court observed that its conclusion the Appellant did not come within the protection of ss.3 and 4 or art.77 BL did not mean that the freedom of speech and debate in LegCo was qualified. The freedom of expression includes the manner in which a person expresses their views. Nevertheless, conduct which does not form part of any speech or debate in LegCo falls outside the s.3 LCPPO privilege. Here, the Appellant plainly was not engaged in speech and debate in LegCo when he acted in the way alleged. Non-intervention principle 10. The Appellant further submitted that courts should not exercise jurisdiction over charges under s.17(c) LCPPO, as the courts recognise the exclusive authority of LegCo in managing its own internal processes in the conduct of its business. 11. The Court rejected this argument and held that it is for the courts to determine the scope of the legislature’s privilege. By enacting s.17(c) LCPPO as primary legislation, LegCo had deliberately conferred criminal jurisdiction on the courts. As to any concern of overlapping jurisdiction between LegCo and the courts, should LegCo commence internal disciplinary proceedings over a particular incident, it would be a factor for the Secretary for Justice to consider before consenting to any prosecution, as required under s.26 LCPPO. Disposition 12. The Court unanimously dismissed the appeal and held that the Appellant is not immune from prosecution for the alleged offence and that the courts are not precluded from exercising jurisdiction over the charge. |
1. The Appellant was caught hiding drugs in his underpants. He admitted to possession of the drugs in question (“Confession”) and was charged with trafficking in a dangerous drug, contrary to section 4(1)(a) and (3) of the Dangerous Drugs Ordinance Cap 134. 2. At trial, the Appellant’s defence was that the Confession was involuntary and thus inadmissible. He claimed that the Confession was induced by certain promises made to him by one of the arresting police officers (“PW2”). 3. A hearing known as a “voir dire” was held to determine the admissibility of the Confession. However, when PW2 was about to give evidence one afternoon, the Appellant fell ill. The Appellant’s barrister applied to adjourn the hearing to the next morning while the Appellant sought a doctor, but the Judge refused. The Judge concluded that the Appellant had a choice to stay or leave and would not be prejudiced by being absent because his barrister had full instructions. The Appellant was therefore absent for the whole of PW2’s evidence at the voir dire. The Confession was held admissible and the Appellant was convicted. 4. The Court of Appeal (“CA”) dismissed the Appellant’s application for leave to appeal against conviction on grounds unrelated to the present appeal but in an Addendum to its judgment, noted the Appellant’s absence from part of the hearing due to illness. 5. On appeal before the Court of Final Appeal, the Appellant argued that a substantial and grave injustice had been done because the Judge’s refusal to adjourn the hearing and decision to continue in his absence deprived him of a fair trial. 6. The Court held that the right of an accused to be present at his trial, which includes a voir dire hearing, provided for by Article 11(2)(d) of the Bill of Rights, is part of the broader right to a fair trial. However, that right is not absolute. The trial judge has a discretion to continue the trial in the accused’s absence in exceptional and appropriate circumstances. A proper exercise of the discretion would require the trial judge to proceed with utmost care and caution, and to consider all factors relevant to ensuring a fair trial including, without limitation, whether the accused’s absence was voluntary or involuntary, the risk of prejudice to his defence, and the length of the required adjournment. 7. The Court held that the Judge should have exercised her discretion with greater care and consideration. In the present case where a brief adjournment is weighed against the Appellant’s important right to be present at all stages of his trial, an adjournment would have been the better course. 8. Nevertheless, the Court held that the trial must be viewed as a whole in determining whether the Appellant, in all the circumstances, had a fair trial. It concluded that the Appellant’s short absence neither prejudiced his defence nor rendered his whole trial unfair, and was in fact counterbalanced by other safeguards he enjoyed in his trial. Accordingly, no substantial and grave injustice had been done to the Appellant. DISPOSITION: 9. The Court unanimously dismissed the appeal. |
1. On 10 April 2011, a prize ceremony of a MTR charity race walking event was held on a stage in Statue Square, Chater Road, Central. A number of demonstrators were present, protesting about MTR fare increases. While the Secretary for Transport and Housing, Madam Eva Cheng (the “Secretary”), was delivering a speech, Mr Chow (a demonstrator) rushed on to the stage and scattered “hell money”. After Mr Chow had been taken away from the stage, Mr Wong rushed on to the stage and snatched away the microphone, which was being used by the Secretary. 2. Mr Chow and Mr Wong were charged with the offence of behaving in a disorderly manner in a public place with intent to provoke a breach of the peace or whereby a breach of the peace was likely to be caused, contrary to section 17B(2) of the Public Order Ordinance. They were also charged alternatively with the offence of acting in a disorderly manner for the purpose of preventing transaction of the business of a public gathering, contrary to section 17B(1). They were found guilty under section 17B(2) after trial by the magistrate and were sentenced to 14 days’ imprisonment. The Court of First Instance quashed their convictions under section 17B(2) but found them guilty under section 17B(1). The sentences of 14 days’ imprisonment were substituted by a fine of HK$2,000 for Mr Chow and a fine of HK$3,000 for Mr Wong. Mr Chow and Mr Wong sought to overturn their convictions. The HKSAR sought the restoration of their earlier convictions. 3. All the judges of the Court of Final Appeal considered the conduct of Mr Chow and Mr Wong unacceptable as a form of demonstration that is constitutionally protected. Both could have been charged with common assault and could have been bound over by a magistrate to keep the peace in the future. But they were not dealt with in that way and the Court had to consider whether the offences charged had been established. 4. Four of the members of the Court held that “disorderly” was an ordinary word and that whether behaviour was “disorderly” in any particular case was a question of fact that should be left to the trial court. The Courts below were clearly entitled to find that both Mr Chow and Mr Wong had acted in a disorderly manner. Tang PJ adopted a different view of “disorderly” conduct, holding that conduct could be properly regarded as disorderly only when it went well beyond what any citizen would have to tolerate. In Tang PJ’s view, although Mr Chow’s conduct could amount to disorderly conduct, it was unsafe to treat the findings made by the magistrate as a sufficient finding of disorderly conduct on the part of Mr Chow. 5. The gathering in the present case was interrupted for only around one minute. The evidence did not show an intention to “prevent” the prize ceremony taking place. Therefore, the Court unanimously allowed Mr Chow’s and Mr Wong’s appeals in relation to section 17B(1). 6. An offence under section 17B(2) requires the intended provocation or a likelihood of a breach of the peace by some other person. On the facts, it had not been shown that anybody was likely to breach the peace as a result of Mr Chow’s or Mr Wong’s conduct. Therefore, the Court unanimously dismissed the HKSAR’s cross appeal. |
The appellants were police officers. The 1st appellant was a prosecution witness in a criminal trial in 2007 (the “earlier proceeding”); the 2nd appellant was an exhibits officer in the same trial. During that proceeding, a defence lawyer produced a tape which recorded a discussion between two persons concerning the giving of false evidence. The present proceedings were brought against the appellants, it being alleged that they were the two persons having the recorded discussion. They were subsequently convicted by the District Court of “doing acts tending and intended to pervert the course of public justice” and “misconduct in public office”. Their convictions were upheld by the Court of Appeal. There was no evidence against the appellants of where, when and by whom the recording was made and they argued that evidence of their identity was insufficient. In concluding that the recorded voices were those of the appellants, the District Court Judge took into account both direct and circumstantial evidence, including (1) evidence from a Mr. Lau that he recognized their voices, having had many opportunities to hear them speak; (2) references to certain events on the tape; and (3) evidence as to the actual occurrence of and the appellants’ involvement in the events so referred to. The Court of Final Appeal was of the view that the combination of Mr. Lau’s evidence of identification with the abovementioned circumstantial evidence justified the lower courts in sustaining the appellants’ conviction, having duly noted the dangers of misidentification of voices. |
The question at issue on this appeal is whether a sewerage undertaker under the Water Industry Act 1991 has a statutory right to discharge surface water and treated effluent into private watercourses such as the Respondents canals without the consent of their owners. Discharge into a private watercourse is an entry on the owners land, and as such is an unlawful trespass unless it is authorised by statute. It is common ground that no express statutory right is conferred by the Water Industry Act. The question is therefore whether it should be implied. A statutory right to commit what would otherwise be a tort may of course be implied. But since this necessarily involves an interference with the rights of others, the test has always been restrictive. The implication must be more than convenient or reasonable. It must be necessary. As a general rule, this will involve showing either that the existence of the power is necessarily implicit in the express terms of the statute, or else that the statutory purpose cannot be effectually achieved without the implication. In particular a right to commit what would otherwise be a tort may be implied if a statutory power is incapable of being exercised or a statutory duty is incapable of being performed without doing the act in question: Manchester Corporation v Farnworth [1930] AC 171, 183 (Viscount Dunedin), Allen v Gulf Oil [1981] AC 1001, 1013 (Lord Wilberforce). The law before 1991 It has been said that a court should not routinely investigate the statutory predecessors of provisions in a consolidation statute: R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349, 388 (Lord Bingham of Cornhill). This is not so much a rule of construction as a valuable warning against the over ready assumption that a consolidating Act means exactly the same as the enactments which it replaces. There are, however, cases where a consolidating Act cannot be understood without reference to the state of the law as it was when it was enacted. This is one of them. Until 1973, sewerage services in England were generally provided by local authorities, initially under powers conferred by local Acts of Parliament and then under powers successively conferred by the Public Health Acts of 1848, 1875 and 1936. The Water Act 1973 transferred the sewerage and water supply functions of local authorities to statutory regional water authorities. The Water Act 1989 privatised the water industry, transferring the sewerage and the water supply functions of the regional water authorities to commercial water undertakers and sewerage undertakers, and comprehensively restated the powers and duties of those charged with these functions. The Water Industry Act 1991 is a consolidating Act which was passed on the recommendation of the Law Commission in order to tidy up the statute law relating to water and sewerage services. It consolidates with amendments the provisions of the Act of 1989, together with a number of other statutes concerned with water management. At the same time, the Water Consolidation (Consequential Provisions) Act 1991 repealed a number of earlier statutory provisions, including some thought to be spent and unnecessary: see section 3(1). It is on these changes that the issues on this appeal turn. No right to discharge from public sewers into private watercourses has ever been expressly conferred by statute. It is, however, common ground that such a right existed at least until 1989 and was the basis on which the industry operated for many years. In Durrant v Branksome Urban District Council [1897] 2 Ch 291, the Court of Appeal held that a right to discharge surface water and treated effluent into private watercourses was impliedly conferred on local authorities by the Public Health Act 1875. Section 15 of that Act imposed on local authorities a duty to cause such sewers to be made as might be necessary for effectually draining their district. The extent of that duty was largely demand led. This was because section 21 entitled any owner or occupier of premises in a local authoritys area to connect to a public sewer, and section 18 provided that a local authority should not be entitled to discontinue the use of a sewer unless it made available another sewer which was as effectual for the use of those served by the existing one. The critical sections from which the Court of Appeal derived the right of discharge into private watercourses were sections 16 and 17. Section 16 empowered a local authority to carry any sewer through, across or under any street or road or, on notice to the owner or occupier, any land within their district. Section 17 was a proviso in the following terms: Nothing in this Act shall authorise any local authority to make or use any sewer, drain or outfall for the purpose of conveying sewage or filthy water into any natural stream or watercourse, or into any canal pond or lake until such sewage or filthy water is freed from all excrementitious or other foul or noxious matter such as would affect or deteriorate the purity and quality of the water in such stream or watercourse or in such canal pond or lake. The Court of Appeal did not say that an implied right of discharge into private watercourses was necessary to the efficacy of a local authoritys statutory powers and duties. Nor did they derive it from the mere existence of a power under section 16 to lay sewage pipes through streets, roads or private land. Since the Public Health Act 1875 conferred extensive powers of compulsory purchase on local authorities for the purpose of enabling them to perform their sewerage functions, neither point would have been sound. What they said, adopting the reasoning of North J, the trial judge, was that the right of discharge was implicit in the express terms of section 17, which by restricting the right to discharge foul water into any watercourse impliedly recognised the existence of a right to discharge treated effluent and surface water: see pp 295 (North J), 302 (Lindley LJ), 303 (Lopes LJ), 304 305 (Chitty LJ). There was no provision requiring local authorities to pay for mere exercise of their rights under sections 16 and 17, but they were required by section 308 to pay full compensation for any damage caused by the exercise of any of their powers. This was held to be a sufficient answer to any objection based on the adverse effect on property owners. All of the features of the Public Health Act 1875 on which the Court of Appeal relied in Durrants Case were reproduced in the Public Health Act 1936, which replaced the earlier Act and continued to govern the sewerage powers of local authorities and then of the regional water authorities and privatised sewerage undertakings until 1991. In particular section 17 of the Act of 1875 (the protection against discharges of foul water) and section 308 (the compensation provision) were re enacted with no material changes as sections 30 and 278 of the Act of 1936. When the water industry was privatised by the Water Act 1989, the transfer of sewerage functions and associated assets, rights and duties from the regional water authorities to the new sewerage undertakers was achieved by section 4 of the Water Act 1989 and by schemes made under that section. The object of the schemes was to transfer the property, rights and liabilities of the regional water authorities: see section 4(1). Their contents were regulated by Schedule 2, paragraph 2(1) of which provided that with effect from the transfer date the scheme would transfer to the privatised undertakers in accordance with its provisions all the property, rights and liabilities of the statutory water boards which were not required to be transferred to the National Rivers Authority. In accordance with that provision, the transfer scheme in this case transferred to the undertaker on the transfer date all property, rights and liabilities to which the water authority is entitled or subject immediately before that date. The object of these provisions is to achieve a seamless transfer of the relevant functions, assets, powers and duties to the new undertakers. Under section 4(1), the Secretary of State was empowered to appoint the transfer date on which the functions of the regional water authorities would be transferred to the new undertakers and the transfer schemes would come into effect. Section 194(3)(b) of the Water Act 1989 provided that among other provisions Part II, Chapter III (Provision of Sewerage Services) should automatically come into force on the transfer date, i.e. simultaneously with the transfer of the rest of the undertaking. Part II, Chapter III included all the relevant provisions governing the duties of the privatised sewerage undertakers. These included sections 67 and 69. Section 67 imposed on the privatised sewerage undertakers the duty of effectually draining their area. Section 69 provided that Schedule 8 should have effect for transferring to sewerage undertakers the functions of water authorities relating to the provision of sewerage services and for making amendments of the enactments relating to the transferred functions. Subject to immaterial amendments, Schedule 8, paragraph 1 applied to the privatised sewerage undertakers certain of the provisions of the Public Health Act 1936 which had governed the powers of the regional water authorities since their inception in 1973, as if references in those provisions to a water authority were references to a sewerage undertaker. The incorporated provisions of the Act of 1936 included section 22 (which prevented them from discontinuing the use of a sewer without providing an alternative sewer), section 30 (the protection against the discharge of foul water into watercourses), section 34 (the right of the owner or occupier of any premises to void his drains or sewers into a public sewer) and section 278 (the obligation to make full compensation for any damage sustained by the exercise of the undertakers powers). These provisions included all the provisions of the 1936 Act previously found in the Act of 1875 from which the Court of Appeal in Durrants Case had derived a general right of discharge into private watercourses. The draftsman must therefore have intended in 1989 that that right should subsist. The legislation of 1991 All of these features can be traced through the labyrinthine scheme of amendments, repeals and re enactments into the legislation of 1991, but with significant changes of both form and context. Section 94 of the Water Industry Act 1991, which corresponds to section 15 of the Act of 1875, provides: (1) It shall be the duty of every sewerage undertaker (a) to provide, improve and extend such a system of public sewers (whether inside its area or elsewhere) and so to cleanse and maintain those sewers as to ensure that that area is and continues to be effectually drained; and (b) to make provision for the emptying of those sewers and such further provision (whether inside its area or elsewhere) as is necessary from time to time for effectually dealing, by means of sewage disposal works or otherwise, with the contents of those sewers. Sections 106 and 116 re enact the provisions originally found in sections 21 and 18 respectively of the Act of 1875 conferring a right on owners and occupiers of premises to connect to a public sewer and forbidding local authorities to discontinue the use of a sewer without providing another equally effective sewer for the use of those served by it. Sections 158 and 159 substantially re enact the power to lay pipes across streets, roads and other land which dated back to section 16 of the Act of 1875. The protection against the use of the powers conferred by the Act to discharge foul water into any watercourse, which was originally enacted as section 17 of the Act of 1875 and section 30 of the Public Health Act 1936, is now to be found in modified form in section 117(5) and (6) of the Water Industry Act. These provide: (5) Nothing in sections 102 to 109 above or in sections 111 to 116 above shall be construed as authorising a sewerage undertaker to construct or use any public or other sewer, or any drain or outfall (a) in contravention of any applicable provision of the Water Resources Act 1991; or (b) for the purpose of conveying foul water into any natural or artificial stream, watercourse, canal, pond or lake, without the water having been so treated as not to affect prejudicially the purity and quality of the water in the stream, watercourse, canal, pond or lake. (6) A sewerage undertaker shall so carry out its functions under sections 102 to 105, 112, 115 and 116 above as not to create a nuisance. The provision for compensation for damage caused by any exercise of sewerage powers, which had originally been found in section 308 of the Act of 1875 and section 278 of the Act of 1936, is now represented by the provisions of Schedule 12 of the Water Industry Act 1991, which are at the same time more specific and more elaborate. Paragraph 2 of Schedule 12 is confined to the pipe laying functions of a sewerage undertaker. It confers a right to compensation in respect of the depreciation of the value of land on which pipe laying works are carried out, injurious affection of other land, and other loss or damage attributable to the exercise of an undertakers power to lay pipes through private land. Paragraph 4 confers a right of full compensation for damage occasioned by the exercise by a sewerage undertaker of its powers under the relevant sewerage provisions. I will return later to this expression. The issues There are two bases on which a right of discharge into private watercourses might be implied into the current statutory regime. The first is that a right corresponding to the one recognised by the Court of Appeal in Durrants Case is implied into the corresponding provisions of the Water Industry Act 1991. The effect of such an implication would be to authorise discharge from future sewage outfalls as well as from those already in use when the Water Industry Act 1991 came into force. The second possibility is that the only right of discharge into private watercourses which survives under the Act of 1991 is a right of discharge from existing outfalls which were already in use on 1 December 1991 when the Act came into force. The alleged general right of discharge: section 159 of the Water Industry Act 1991 The argument for the sewerage undertakers on this appeal is that a general right to discharge into private watercourses should be implied into the Water Industry Act 1991 from the power conferred on an undertaker by section 159 to lay pipes across private land for the purpose of carrying out its functions, together with the definition of those functions in section 94. The problem which confronts this argument is that the particular provisions of the earlier legislation which justified the implication of such a right before 1991 are re enacted in the Water Industry Act 1991 in a somewhat different form and as part of a much more elaborate statutory scheme in which such an implication is more difficult to accommodate. For substantially that reason the Court of Appeal rejected an identical argument in British Waterways Board v Severn Trent Water Ltd [2002] Ch 25. The judgments, and particularly that of Chadwick LJ, contain a detailed analysis of the relevant provisions of the Water Industry Act which makes it unnecessary to repeat the exercise here. In summary, the Court of Appeal held that the Water Industry Act had to be construed as a coherent scheme in its own right, without any a priori assumption that it was intended to reproduce everything in the previous statute law. They considered that that scheme did not include an implied right of discharge into private watercourses, for five main reasons. The first was that section 159 merely authorised the laying of pipes across private land and in itself provided no basis for any implication about the places where those pipes were authorised to discharge. Second, any power derived from section 159 to discharge into private watercourses would not be qualified by the statutory protection in section 117(5) and (6) against the discharge of foul water. This was because in the Act of 1991 these provisions qualify only specified sections of the Act, not including section 159. Therefore, if such a right existed, it would authorise the discharge not only of treated effluent and surface water but foul water, routinely and in unlimited quantities. Third, the provisions of Schedule 12, paragraph 2 of the Act of 1991 for compensation for the exercise of a water undertakers statutory power to lay pipes through private land did not extend to damage caused by discharges from those pipes. The wider duty under paragraph 4 to pay compensation for damage occasioned by a sewerage undertakers exercise of its powers under the relevant sewerage provisions, would not apply because the relevant sewerage provisions is a defined term and does not include section 159. Fourth, although section 159 applied to both water and sewerage undertakers, section 165 conferred an express power of discharge from pipes on water undertakers only. On the face of it, the distinction was deliberate. Fifth, a right of discharge into private watercourses was not necessary to the exercise by the sewerage undertaker of its statutory powers or the performance of its statutory duties. They could discharge into rivers or the sea, or onto their own land, or onto private land or watercourses by agreement with the owner. Any rights which they required but could not obtain (or could not obtain on reasonable terms) could be acquired by compulsory purchase, paying the proper statutory measure of compensation. The Courts conclusion is summarised by Chadwick LJ at para 71: The fallacy, as it seems to me, lies in the underlying (but unspoken) premise that Parliament must have intended that sewerage undertakers should have facilities to discharge (which, plainly, they do require in order to carry out their functions) without paying for those facilities. Whether or not that premise could have been supported in the context of a public authority charged with functions imposed in the interests of public health, it cannot be supported, as it seems to me, in the context of legislation enacted following a decision to privatise the water industry. We were invited to hold that British Waterways Board v Seven Trent Water Ltd was wrongly decided. In my view we should decline that invitation. The reasoning of the Court of Appeal in that case is compelling as applied to the only argument that they were actually considering, namely that a power of discharge could be derived from sections 94(1) and 159 of the Act of 1991. Survival of pre existing rights of discharge This issue might have arisen in British Waterways Board v Severn Trent Water Ltd. That case arose out of a dispute about discharges from a sewer outfall into the Stourbridge canal which had been constructed by a regional water authority in about 1976, under the previous statutory regime. The relevant outfall was therefore already in use at the transfer date pursuant to a right enjoyed by the regional water authorities under the Public Health Act 1936 and transferred to the privatised sewerage undertakers under the Water Act 1989. However, no argument was addressed to the Court of Appeal in that case about the significance of this fact. Its factual and legal significance is, however, critical to the outcome of the present appeal. Manifestly, the purpose of a sewer is to carry away effluent and surface water and discharge it elsewhere. A sewer can be lawfully used only if it is lawful to discharge from it. A sewerage undertaker bringing an outfall into use for the first time after 1 December 1991 can reasonably be expected to have obtained any necessary consents to discharge onto private property in advance of laying the pipes, either by negotiation or by compulsory purchase in the course of the planning or the works. But if the outfall was already in use at that date, it cannot do this. The pipes will already have been laid. The location of their outfalls will have been determined. Where they discharge into a private watercourse, those outfalls will have been created under a statutory regime which entitled the sewerage undertaker or its statutory predecessors to discharge from them. The compulsory acquisition of such a right cannot be achieved overnight. Statutory procedures have to be observed, which may include a public inquiry. It is obvious, and confirmed by the evidence in this litigation, that by 1989 drainage from the existing public sewerage system depended to some extent on outfalls into private watercourses. After well over a century in which sewerage authorities were entitled as of right to construct and discharge from such outfalls one would expect the degree of dependence to be significant. Unless the entitlement to discharge from existing outfalls into private watercourses survives the transfer to privatised water undertakers, the consequence is that in law such discharge must cease forthwith on 1 December 1991. Any continuing discharge thereafter will become tortious from that date. Under the Water Industry Act, the statutory duties of a sewerage undertaker include a duty to operate the system of public sewers so as effectually to drain their area (section 94) and a duty to allow the owners or occupiers of premises to connect to the public sewer system (section 106). Moreover, the undertaker is not permitted to discontinue the use of a sewer until it has provided an alternative sewer capable of serving as effectually (section 116). The result, if the right to discharge into private watercourses ceases as the canal owners suggest, is to make it impossible for the sewerage undertakers lawfully to perform their statutory functions or observe the statutory restrictions on the discontinuance of existing sewers from the moment that the new Act comes into force. This state of affairs will continue thereafter for a considerable period while the existing sewerage system is partially redesigned and rebuilt or the necessary easements are acquired by negotiation or compulsory purchase. When pressed to say how a sewerage undertaker was to comply with this view of the law immediately after 1 December 1991, the canal owners had no answer except that the law would not in practice be enforced by injunction but that if it was they must block the outfalls and allow surface water and treated effluent to backwash through the system into the streets. In fact, section 116 of the Act would rule out even that possibility. This is not just a practically inconvenient way of dealing with an issue which engages an important public interest. It is legally incoherent. Without the clearest possible indication that Parliament intended such a preposterous result, I decline to accept that it is the effect of the current legislative scheme. In my opinion, when the Water Industry Act 1991 (i) imposed on the privatised sewerage undertakers duties which it could perform only by continuing for a substantial period to discharge from existing outfalls into private watercourses, (ii) at the same time applied to them the statutory restrictions in section 116 on discontinuing the use of existing sewers, it implicitly authorised the continued use of existing sewers. A restriction on discontinuing the use of an existing sewer until an alternative has been constructed is not consistent with an obligation to discontinue its use forthwith under the law of tort. The inescapable inference is that although there is no provision of the Act of 1991 from which a general right of discharge into private watercourses can be implied, those rights of discharge which had already accrued in relation to existing outfalls under previous statutory regimes survived. The basis of this implication is not section 30 of the Public Health Act 1936, whose statutory predecessor was the basis of the decision in Durrants Case, but section 116 of the 1991 Act viewed against the background of the general duties of sewerage undertakers under the Act. It follows that the repeal of section 30 by the Water Consolidation (Consequential Provisions) Act 1991 is irrelevant. In any event, its repeal would not affect rights of discharge which had already accrued by virtue of the use of existing outfalls: see section 16(1)(c) of the Interpretation Act 1978. It is true that although over a period of time after the coming into force of the Water Industry Act new rights of discharge could have been acquired by negotiation or compulsory purchase or existing sewers or outfalls replaced, the effect of the conclusion which I have reached is that a sewerage undertaker is entitled under the Water Industry Act 1991 to continue discharging into private watercourses from existing outfalls indefinitely. The solution is therefore more extensive than the problem. But that is a lesser anomaly and one which is inherent in the nature of the issue. Once one concludes that because of the time required to do these things after the law was changed, the right of discharge for existing outfalls must survive, it is not possible to arrive by a process of construction at a positive obligation to address the issue after transfer in a different way by acquiring new easements or replacing sewers or outfalls. I should finally deal with the suggestion that this conclusion leaves the owners of private watercourses in a worse position than they were under the Water Act 1989, because of the more limited provisions for compensation for damage and the more limited protections available against abuse. This is a serious objection to the attempt to imply a general right to discharge into private watercourses from section 159 of the 1991 Act, as the Court of Appeal pointed out in British Waterways Board. It does not give rise to difficulty if, as I consider, a more limited right to continue discharging from existing outfalls into private watercourses is to be implied from the restrictions in section 116 on discontinuing the use of existing sewers. As far as compensation is concerned, Schedule 12, paragraph 4 of the Water Industry Act confers a right of full compensation for any exercise by a sewerage undertaker of its powers under the relevant sewerage provisions. Unlike section 159, section 116 is one of the relevant sewerage provisions: see section 219(1). Turning to the question of statutory protection, the Act of 1991 contains a large number of protections against the abusive or harmful use by undertakers of their statutory powers. This is not the place to examine all of them, and many are of no potential relevance. The most important are to be found in sections 117(5) and 186(3). Section 117(5)(b) protects against the discharge of foul water into watercourses. It is the successor of section 17 of the Public Health Act 1875 and section 30 of the Act of 1936. Section 186(3) protects against the injurious affection without consent of any canal or watercourse or the supply, quality or fall of water in any canal or watercourse. Both provisions expressly qualify powers derived from specified provisions of the Act, which do not include section 159 but do include section 116. Conclusion I would accordingly allow the appeal to the extent of declaring that subject to section 117(5) of the Water Industry Act 1991, the Appellants are entitled to discharge into the Respondents canals from any sewer outfall which was in use on or before 1 December 1991. For the avoidance of doubt, I should make it clear that this in no way affects any binding agreement under which the parties may have regulated for themselves the use of particular outfalls. We were informed that here may be such agreements with some proprietors, but we have not been concerned with them. I would leave the precise form of the declaration to be agreed between counsel. LORD TOULSON I agree that under the Water Industry Act 1991 sewerage undertakers are impliedly empowered to continue to discharge surface water and other non pollutant water through sewers vested in them into watercourses to which they were already discharging at the time the Act came into force, but have no right to create new outfalls into canals or rivers without the agreement of the body which owns or is responsible for the canal or river. The case has assumed a complexity which I do not think is necessary. In disagreeing with the Court of Appeal, I have sympathy with the court which seems to me to have been led into a forest. The reasons for my conclusions are simple and accord essentially with those given by Lord Sumption. As to the broader power claimed by the appellants, the argument that section 159 gives to a sewerage undertaker the right to create a new public sewer by connecting pipework, laid under the powers given to it by the section, into a river or canal without the agreement of the river or canal owner or operator, is in my view untenable for the reasons given by the Court of Appeal in British Waterways Board v Severn Trent Water Ltd (summarised by Lord Sumption). The purpose of section 159 is to enable a sewerage undertaker to obtain the means of access for foul or surface water to reach wherever it proposes (lawfully) to treat or dispose of the water (such as a sewage treatment plant), and no more. To treat the section as silently empowering the undertaker to dispose of the water by discharging it onto the land of another person without their consent requires an unnatural and unwarranted reading of the section. The appellants argument for giving the section a wider meaning is based on comparison with the Public Health Acts 1875 to 1961. That argument overlooks the major change in the scheme of water legislation introduced by the Water Act 1989 (which was consolidated, with other enactments, by the 1991 Act). The 1989 Act did much more than to introduce privatisation of the water industry. Its purposes, stated in the long title, included to amend the law relating to the provision of sewers and the treatment and disposal of sewage. It provided a much more comprehensive statutory code than the previous legislation. There is no warrant for assuming that Parliament intended under the new legislative scheme that the privatised authorities should have a general right to create new outfalls, discharging water onto the property of other parties, without having to pay for the facility. On the question of the lawfulness of the continued use of public sewers established prior to the coming into force of the Act, I agree with Lord Sumption that the answer lies in section 116 of the 1991 Act, read in conjunction with sections 106(1) and 117(5) and (6). Under section 106 the owner of premises in the area of a sewerage undertaker has the right to have his drains or sewer communicate with the undertakers public sewers and has a continuing right thereby to discharge foul water and surface water from those premises. Section 116 prohibits the sewage undertaker from depriving that person of the use of the public sewer for that purpose, unless the undertaker provides alternative means of communication (which Parliament cannot realistically have supposed that the undertaker would be in a position to do instantly on the passage of the Act). Section 117(5) provides that nothing in section 116 is to be construed as authorising a sewerage undertaker to use a public sewer for the purpose of conveying foul water into any natural or artificial stream, watercourse, canal, pond or lake, without the water having been treated so as not prejudicially to affect the purity and quality of the water into which it is being discharged. Section 117(6) also requires a sewerage undertaker to carry out its functions under section 116 in such a way as not to create a nuisance. The conditions for section 116 to apply are, in the words of subsection (1), that the sewer is a public sewer which is vested in the undertaker, but I do not understand it to be disputed that the relevant sewers are public sewers as defined in section 219 of the 1991 Act: public sewer means . a sewer for the time being vested in a sewerage undertaker in its capacity as such, whether vested in that undertaker by virtue of a scheme under Schedule 2 to the Water Act 1989 or Schedule 2 to this Act or under section 179 above or otherwise . As a matter of history, it would appear that the sewers vested in the sewerage undertakers by virtue of schemes under Schedule 2 to the 1989 Act but I do not see that it is necessary to refer to the 1989 Act for any other purpose. Since section 116 of the 1991 Act expressly prohibits a sewerage undertaker from discontinuing the use of an existing public sewer vested in it, unless it creates an alternative means of disposal, it thereby impliedly (if not expressly) empowers the undertaker to continue to use such sewers, subject to the qualifications in section 117(5) and (6) that the undertaker must not cause pollution or a nuisance. For those reasons, it seems to me that the answers to the questions in this case are to be found within the sections of the 1991 Act to which I have referred. Save where necessary for the limited purpose of establishing as a fact that a sewer is a public sewer vested in a sewerage undertaker within the definition section in the 1991 Act, I see no need to go back to examine the position under the 1989 Act. There is no claim for damages for trespass during the period when the 1989 Act was in force. However, if it were necessary to do so, I would conclude that there was no trespass during that period. Section 69 of the 1989 Act provided that Schedule 8 to the Act should have effect for the purpose of transferring to sewerage undertakers the functions of water authorities relating to sewerage services and for making amendments of the enactments relating to the transferred functions. Paragraph 1 of Schedule 8 provided that references to water authorities in sections 30 and 278 of the Public Health Act 1936 were to be construed as references to sewerage undertakers. Those sections re enacted the sections in the 1875 Act which were the subject of the decision in Durrants case, as explained in para 6 of Lord Sumptions judgment. Reading those sections as amended by paragraph 1 of Schedule 8 to the 1989 Act (ie as applying to sewerage undertakers from the commencement of the 1989 Act), the conclusion is clear in my view that sewerage undertakers did not commit the tort of trespass by continued use of the public sewers which they inherited. Although that historical examination of the position under the 1989 Act is unnecessary to my conclusion about the 1991 Act, it fortifies it for this reason. If, as I have concluded, sewerage undertakers did not commit the tort of trespass between 1989 and 1991 by continued use of public sewers vested in them under schemes made under the 1989 Act, Parliament cannot be taken to have intended to change that position by the 1991 Act, which was presented to it as a consolidation Act with minor immaterial amendments explained in the Law Commissions report. Consolidation Acts have a speedy parliamentary process precisely because they are not intended to involve changes meriting detailed scrutiny. It follows also from what I have said that I do not think that it is necessary to invoke the provisions of the Interpretation Act; but if I am wrong, I would agree with Lord Neubergers analysis of its effect. LORD NEUBERGER (with whom Lord Clarke and Lord Hughes agree) This appeal raises two questions in relation to the statutory right of sewerage undertakers to discharge surface water and treated effluent from their sewers into streams and private watercourses. The first question is whether sewerage undertakers have such a right in relation to all their sewers, irrespective of when they came into use ie present and future sewers. The second question, which only arises if the answer to the first question is no, is whether sewerage undertakers have such a right in relation to any of their sewers, and, if so, whether it is those which were in use immediately before (i) the transfers effected pursuant to the Water Act 1989 (the 1989 Act) or (ii) the coming into force of the Water Industry Act 1991 (the 1991 Act). In my view, the composite answer to these questions is that sewerage undertakers have the statutory right to discharge surface water and treated effluent into streams and canals (subject to payment of compensation for any damage thereby caused), but only in respect of outfalls in existence before the coming into force of the 1991 Act. I agree with the reasons given by Lord Sumption and Lord Toulson although I would place greater weight on the assistance which can be gained from the provisions of the earlier legislation relating to public sewers and the Interpretation Act 1978 (the 1978 Act). The relevant statutory provisions The statutory provisions relating to sewerage before 1989 By section 13 of the Public Health Act 1875, all existing and future sewers within their districts were vest[ed] in local authorities. Certain rights were granted to local authorities, including, in section 16, the right to construct sewers into, through or under any lands whatsoever in their district. Duties were also imposed on local authorities, including the duty to provide and maintain sewers to drain their districts in section 15, and the duty to enable property owners and occupiers to be connected to sewers in section 21. The right to discharge from sewers was not expressly granted to local authorities by the 1875 Act. However, section 17 of the 1875 Act stated that [n]othing in the Act authorise[s] the use of sewers constructed under the Act for the purpose of conveying sewage or filthy water into any natural stream or watercourse until such sewage or filthy water is freed from all foul or noxious matter. Section 308 of the 1875 Act contained a rather generally expressed right to full compensation to anyone who suffered damage as a result of the exercise of a local authoritys statutory rights with regard to sewerage. The Public Health Act 1936 repealed the relevant provisions of the 1875 Act, and re enacted many of its provisions in very similar, if somewhat more modern, terms. The opening part of subsection (1) of section 20, the successor to section 13 of the 1875 Act, provided that any sewers vested in a local authority under the 1875 Act shall continue to be vested in them. Section 20(1)(b) of the 1936 Act stated that all sewers subsequently constructed by local authorities shall also vest in them. Sections 14, 15, 22, 34 and 278(1) of the 1936 Act were to the same effect as, respectively, sections 15, 16, 18, 21 and 308 of the 1875 Act, albeit that section 15 of the 1936 Act was considerably more detailed in its terms than section 16 of the 1875 Act. Section 30 of the 1936 Act was in very similar terms to section 17 of the 1875 Act, although it used somewhat different language, referring to foul water [having to be] so treated as not to affect prejudicially the purity and quality of the water rather than sewage or filthy water [having to be] freed from all foul or noxious matter, and it extended its reach to artificial, as well as natural, watercourses and streams, and to canals. The provisions of section 17 of the 1875 Act, supported by those of sections 15, 16, and 308, were held by the Court of Appeal in Durrant v Branksome Urban District Council [1897] 2 Ch 291 to lead to the inevitable or irresistible inference that a local authority could discharge treated effluent and surface water from its sewers, whether constructed before or after 1875, into natural streams and watercourses see at pp 302, 303 and 304 305 per Lindley, Lopes and Chitty LJJ respectively. In other words, the Court of Appeal held that the 1875 Act impliedly granted a right to discharge from that sewer, a right whose width was cut down by section 17. That right was continued by the 1936 Act, as it contained provisions which were very similar to those in the 1875 Act, and in particular section 30 and, albeit of lesser significance in this connection, sections 14, 15 and 278, whose statutory predecessors were considered by the Court of Appeal to support its conclusion in Durrant [1897] 2 Ch 291. The statutory rights and duties of local authorities in relation to sewerage became vested in water authorities pursuant to sections 14 and 15 of the Water Act 1973. Section 14(2) provided that the functions of local authorities under, inter alia, sections 15 24 and 27 31 of the 1936 Act shall be exercisable by water authorities, and that references [therein] to a local authority shall be construed as references to a water authority. Para 33 of Schedule 8 to the 1973 Act amended section 20 of the 1936 Act to make it clear that all sewers in an area were vested in the relevant water authority. The Water Act 1989 During the 1980s, as part of the drive for privatisation, it was decided that the water supply and sewerage functions of water authorities should be taken out of public ownership and vested in water undertakers and sewerage undertakers respectively. This was effected through the medium of the 1989 Act, which provided for the creation of these new undertakers in section 11. Section 4(1)(a) of the 1989 Act stated that the sewerage functions of water authorities should become the functions of the new sewerage undertakers from a day appointed by the Secretary of State, and section 11 enabled the Secretary of State or the Director General of Water Services to appoint a company as a sewerage undertaker for any area of England and Wales. Section 4(1)(b) provided for schemes under Schedule 2 for the division of the property, rights and liabilities of the water authorities to, inter alia, the sewerage undertakers. The effect of section 67 of the 1989 Act, which replaced section 14 of the 1936 Act, was to impose a duty on sewerage undertakers from the date of the transfer of the sewerage functions to drain the area for which it was responsible. Section 153 of, and Schedule 19 to, the 1989 Act empowered sewerage undertakers to lay sewers, and they effectively replaced section 15 of the 1936 Act. Section 69 of the 1989 Act stated that Schedule 8 had the effect of transferring to sewerage undertakers the functions of water authorities relating to the provision of sewerage services and for making amendments of the enactments relating to the transferred functions. By para 1 of Schedule 8, such functions included those set out in sections 22, 30 and 34 and (at least in so far as it related to surviving sections of the provisions of the 1936 Act) section 278 of the 1936 Act. However, section 20 of the 1936 Act was repealed by the 1989 Act. Para 2 of Schedule 2 to the 1989 Act was concerned with transfers by scheme, and it provided that there should be transferred to a sewerage undertaker the property, rights and liabilities of a water authority, and para 2(3) stated: The property, rights and liabilities of a water authority that shall be capable of being transferred shall include (a) property, rights and liabilities that would not otherwise be capable of being transferred or assigned by the water authority; (b) property situated anywhere ; (c) rights and liabilities under enactments, including (i) such rights and liabilities as may arise after the transfer date by virtue of enactments amended or repealed by this Act and, in pursuance of provision contained in Schedule 26 to this Act, may be the subject of an allocation made by a scheme under this Schedule; and (ii) other rights and liabilities under enactments which are amended or repealed by this Act subject to a saving; (d) In so far as it dealt expressly with the ownership of, or equivalent rights over, existing sewers, the 1989 Act was laconic. Section 153(1) granted powers to sewerage undertakers to lay and maintain sewers, and section 153(2)(a) provided that sewers so laid should be vested in that undertaker (subject to irrelevant exceptions). However, they were not concerned with existing sewers, which were obliquely referred to in section 153(6), which stated that the provisions of section 153 were without prejudice to the vesting of anything in a company appointed to be a sewerage undertaker, in accordance with a scheme under Schedule 2 Section 70, which dealt with sewers which crossed two local authority areas, referred in subsection (1) to such sewers being vested in a water authority and set out how they were to be treated [f]or the purposes of any scheme under Schedule 2, and subsection (3) referred to a case [w]here any part of a sewer is vested in any sewerage undertaker by virtue of this section. The definition of public sewer in section 189(1) was a sewer vested in a sewerage undertaker whether . by virtue of a scheme under Schedule 2 or under section 153. On the same day as the 1989 Act came into force, 1 September 1989, various transfers came into effect, as contemplated by section 4. They were (or at least the one we were shown was) expressed in relatively general terms, so far as identifying what precisely was transferred to the new sewerage undertaker, namely the property, rights and liabilities specified in . Schedule 2. With effect from 1 September 1989, the new sewerage undertakers took over the sewerage rights and responsibilities of the previous water authorities, subject of course to such amendments as were laid down in the 1989 Act. The 1991 legislation Some two years later, the law relating to the water supply and sewage industries was comprehensively re enacted and consolidated in 1991, principally by the 1991 Act, but also by the Water Consolidation (Consequential Provisions) Act 1991 (the 1991 Consolidation Act), which received Royal Assent on the same day, 25 July 1991. The long title of the 1991 Act described its purpose as being to consolidate enactments relating to the supply of water and the provision of sewerage services, with amendments to give effect to recommendations of the Law Commission. The long title of the 1991 Consolidation Act explained that its purpose was to effect consequential amendments and repeals, and for transitional and transitory matters and savings, in connection with the consolidation of certain enactments in the Water Industry Act 1991, and to repeal certain related enactments which are spent or unnecessary. As the long title to the 1991 Act indicated, its purpose was largely to consolidate the law, but it was also to implement the recommendations of the Law Commission, which were made in a report presented in April 1991, Law Com No 198. Although there were some recommendations relating to drainage, none of them impinges on the issues raised in this appeal. Accordingly, much of the 1991 Act simply re enacted the provisions of the 1989 Act and (in so far as they related to water and sewerage services) the surviving provisions of the 1936 Act, sometimes with modifications. Such provisions included sections 158 and 159, which gave sewerage (and water) undertakers the power to lay pipes in streets and in other land respectively (replacing paragraph 1 of Schedule 19 to the 1989 Act). Section 94 imposed a duty on sewerage undertakers to operate a sewerage system so as effectually to drain their area (replacing section 67 of the 1989 Act), and section 106 required them to allow the owners or occupiers of premises to connect to the public sewer system (replacing section 34 of the 1936 Act). Section 116(1) empowered a sewerage undertaker to discontinue and prohibit the use of any public sewer, subject to providing an alternative and equally effective sewer (replacing section 22 of the 1936 Act). Section 117(5) provided that nothing in section 116 entitled a sewerage authority to discharge foul water into a natural or artificial waterway (replacing, albeit in a limited respect, section 30 of the 1936 Act). Section 179 of the 1991 Act provided that, subject to agreement to the contrary and subject to certain other exceptions, any sewer laid by an undertaker shall vest in the [sewerage] undertaker which laid it. The definition of public sewer in section 219 includes any sewer vested in [an] undertaker by virtue of a scheme under Schedule 2 to the Water Act 1989. Paragraph 4(1) of Schedule 12 to the 1991 Act effectively replaced section 278 of the 1936 Act in relation to sewerage undertakers. By Schedule 3, the 1991 Consolidation Act repealed certain statutory provisions, including section 30 of the 1936 Act. Section 2(5) of the 1991 Consolidation Act provided that those repeals were without prejudice to sections 16 and 17 of the Interpretation Act 1978. The Interpretation Act 1978 The 1978 Act lays down general rules applicable to the interpretation of statutes. Section 16(1)(c) of that Act provides that where an Act repeals an enactment, the repeal does not, unless the contrary intention appears, affect any right, privilege, obligation or liability acquired, accrued or incurred under that enactment. The traditional view is that section 16(1)(c) (like its statutory predecessors) applies only to existing or vested rights. However, the precise nature of a vested right is somewhat elusive. The problem is very close to that thrown up by the presumption against retrospective legislation, which was illuminatingly discussed by Lord Rodger in Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816, paras 186 201. At para 196, Lord Rodger said this of the cases on vested rights: It is not easy to reconcile all the decisions. This lends weight to the criticism that the reasoning in them is essentially circular: the courts have tended to attach the somewhat woolly label vested to those rights which they conclude should be protected from the effect of the new legislation. If that is indeed so, then it is perhaps only to be expected since, as Lord Mustill observed in LOffice Cherifien des Phosphates v Yamashita Shinnihon Steamship Co Ltd [1994] 1 AC 486, 525A, the basis of any presumption in this area of the law is no more than simple fairness, which ought to be the basis of every general rule. At para 201, Lord Rodger suggested that the test could well be expressed thus: would the consequences of applying the statutory provision retroactively, or so as to affect vested rights or pending proceedings, be so unfair that Parliament could not have intended it to be applied in these ways? In answering that question, a court would rightly have regard to the way the courts have applied the criterion of fairness when embodied in the various presumptions. The first question So far as the first question is concerned, Mr Karas QC, on behalf of United Utilities, a sewerage undertaking, relied primarily to support his case for a positive answer, on the provisions of section 159 of the 1991 Act. I would reject that case and there is nothing I can usefully add to what Lord Sumption and Lord Toulson say in paras 13 15 and 26 28 of their respective judgments. At least in relation to sewers laid after the 1991 Act came into force, United Utilities argument is not supported by the language of section 159 or any other provision of the 1991 Act. It is inconsistent with some other provisions of the 1991 Act, and it is not supported by any practical considerations (although it is fair to add that it is not undermined by any practical considerations either). The reasoning of all three members of the Court of Appeal in British Waterways Board v Severn Trent Water Ltd [2002] Ch 25, summarised in para 14 above, appears to me to be unanswerable. The second question The question whether sewerage undertakers can claim any rights in respect of any outfalls must ultimately turn on the 1991 Act, but in my view, the issue should be addressed by first identifying the water authorities rights in respect of outfalls from public sewers immediately before the 1989 Act came into force. Mr Karass argument is that it is a necessary inference from the terms of the 1991 Act that sewerage undertakers have a right to discharge from existing outfalls. A court should not be easily persuaded that a new right has been created by implication, particularly where that right (i) interferes with the private rights of third parties (in this case waterway owners), and (ii) arises out of a long and detailed statute. There is in my view a strong presumption that (i) private rights are only to be taken away by a statute by means of clear and specific words, and (ii) where a statute deals in considerable detail with the rights and obligations in a certain field, it is intended to be exhaustive particularly where the legislation is both consolidating the law and giving effect to Law Commission recommendations. Accordingly, in my judgment, the inference which we are invited to draw is, at least in principle, far more likely to be justified if sewerage undertakers had the right to discharge from existing outfalls under the 1989 Act, when their sewerage functions started, than if they did not. The rights vested in the sewerage undertakers by the 1989 Act were based on the rights vested in the water authorities, whose rights and obligations in relation to sewers and sewerage were derived from the 1936 Act, as amended. Accordingly, I start by addressing the position under the 1936 Act, and only then turn to the 1989 and 1991 Acts. For the reasons I shall give below, it appears to me that there are two alternative reasons for concluding that the new water undertakers had the right to discharge from existing outfalls under the 1989 Act, and one reason for concluding that that right continued under the 1991 Act. The position prior to the 1989 Act As explained in para 43 above, the provisions of section 17 of the 1875 Act, supported by those of sections 15, 16 and 308, were held by the Court of Appeal in Durrant [1897] 2 Ch 291 to lead to the inevitable or irresistible inference that a local authority could discharge treated effluent and surface water from its sewers (subject to payment of compensation in case of damage), and that right continued under the 1936 Act. As I see it, the effect of the reasoning in Durrant is that the inclusion of section 17 in the 1875 Act had two relevant consequences. First, it indicated clearly that Parliament intended that local authorities had the right to discharge from the sewers vested in them by section 13. Secondly, it equally clearly cut down the way in which that right could be exercised. As to the first point, section 17 did not itself grant the right: it merely enabled the courts confidently to conclude that the right was intended by Parliament to be granted to local authorities under the 1875 Act. As to the second point, it is clear from the terms of section 17 itself that that right was capable of being cut down or regulated by statute. These two points apply equally to the 1936 Act. Accordingly, as at the date the 1989 Act came into force, water companies had vested in them the right (subject to payment of compensation in case of damage) to discharge water through existing outfalls, by virtue of the continued existence of section 30 (supported by sections 14, 15 and 278) of the 1936 Act as amended by the 1973 Act. The first argument in relation to the 1989 Act It appears to me that the reasoning in Durrant compels the conclusion that the 1989 Act impliedly granted the new sewerage undertakers the right to discharge from outfalls from sewers vested in them (subject to payment of compensation in case of damage). Section 30 of the 1936 Act (the provision which precluded discharge of foul water) was not repealed by the 1989 Act; indeed, by virtue of paragraph 1 of Schedule 8 to that Act, it remained in force, save that it was amended so as to apply to sewerage undertakers. Given that it was held in Durrant [1897] 2 Ch 291 that section 17 of the 1875 Act, the statutory predecessor of section 30 of the 1936 Act, had the effect of implying a right in water authorities to discharge from their sewers into canals and streams prior to September 1989, then, in the absence of a good reason to the contrary, section 30 as amended by the 1989 Act must have had the same effect in relation to those sewers when vested in the new sewerage undertakers after August 1989. Far from there being a good reason to the contrary, there are two significant factors which support this conclusion. The first is based on the statutory provisions. As mentioned above, the Court of Appeal in Durrant [1897] 2 Ch 291 placed some reliance on other provisions of the 1875 Act. Albeit in re enacted and modified form, those provisions remained in existence after the 1989 Act was in force. Sections 15 and 16, which had been replaced by sections 14 and 15 of the 1936 Act, were in turn replaced by sections 67 and 153 of the 1989 Act, and section 308 was replaced by section 278 of the 1936 Act, which continued to apply after 1989 by virtue of paragraph 1 of Schedule 8. Secondly, the practical implications of a new sewerage undertaker having no right of discharge from existing outfalls of existing sewers from the date of the transfer under the 1989 Act are striking. Such an undertaker was, from the date of the transfer of sewerage functions to it, under statutory duties to drain its area, to permit people to connect into its sewers for the purposes of drainage, and to provide new sewers in the event of shutting off existing sewers. A sewerage undertaker could only have complied with such obligations in practice if it had a right of discharge from the existing outfalls of the sewers vested in it. Lord Sumption and Lord Toulson develop this argument more fully in paras 17 18 and 30 35 of their respective judgments, albeit in relation to the 1991 Act, but the argument is equally sound in relation to the 1989 Act. The alternative argument under the 1989 Act Were the argument based on the 1989 Acts retention and amendment of section 30 of the 1936 Act to be rejected, I would accept United Utilities alternative argument that the transfers to sewerage undertakers pursuant to the 1989 Act included the water authorities existing rights of discharge. This would be on the basis that the water authorities rights of discharge from existing outfalls under the 1936 Act (as amended by the 1973 Act) constituted property or (as I tend to think is more likely) rights, which would have been transferred as part of the water authorities property, rights and liabilities in section 4(1)(b) of the 1989 Act. It seems to me that, whether such rights were property or rights, they were vested in the water authorities, and it would be unrealistic to think that the 1989 Act could have intended that they be removed when the functions of those authorities were being transferred to other entities. In the absence of any transitional provisions, the ability to be able to discharge through existing outfalls was essential: indeed, it was an integral part of the sewerage authorities continuing functions and duties, as explained in para 66 above. It would have been so unfair, or the better but equally appropriate expression may be so absurd, if the water authorities existing rights of discharge had been removed by the 1989 Act that Parliament could not have intended it, to quote Lord Rodger in Wilson [2004] 1 AC 816, para 201. In answer to this, Mr McCracken QC for the Manchester Ship Canal Company Limited, a canal owner, relies, first, on the precise terms of paragraph 2(3) of Schedule 2 to the 1989 Act, and, secondly, on the anomalous nature of the right involved. As to the first point, he says that paragraph 2(3) restricts the breadth of the expression property, rights and liabilities, and in particular that subparagraph (c)(ii) limits the transferable rights to those under enactments which are amended or repealed by this Act subject to a saving. He points out that section 30 of the 1936 Act was amended by the 1989 Act without a saving provision. I do not accept that argument, because, in my view, paragraph 2(3) was intended to widen, not to narrow, the meaning of property, rights and liabilities, as is apparent from the phrase shall include. In any event, it is highly arguable that (i) the right involved was not in fact granted under section 17 of the 1875 Act as I have explained in para 62 above, and (ii) section 30 of the 1936 was not relevantly amended for the purpose of subparagraph (c)(ii). However, given that paragraph 2(3) is not a definition provision, it is not necessary to consider those two points. Mr McCrackens second argument is summarised in para 64 of Arden LJs judgment in the Court of Appeal, where she said that she thought that the right of discharge enjoyed by the water authorities was not within the expression property, rights and liabilities, as used in section 4 and elsewhere in the 1989 Act. She explained that this was because the implied right of discharge was not a right in the usual sense and was simply an incident of the statutory functions of the sewerage undertaker. For my part, I do not see why the fact that a right is implied or incidental prevents it from falling within the word rights in the 1989 Act, or indeed from being a vested right for the purposes of section 16(1)(c) of the 1978 Act. This view is reinforced by the fact that the precise legal characterisation of the rights of local authorities as a result of sewers being statutorily vested in them appear to be somewhat unclear see the discussion in Taylor v North West Water (1995) 70 P & CR 94, 96 110. Thus, there is, as was pointed out by Lord Russell CJ in Bradford v Mayor of Eastbourne [1896] 2 QB 205, 211, a number of cases which support his view that the vesting [under section 13 of the 1875 Act] is not a giving of the property in the sewer and in the soil but giving such ownership and such rights only as are necessary for the purpose of carrying out the duties of a local authority. Yet there can be no doubt but that those rights were regarded as vested rights which survived the repeal of section 20 of the 1936 Act, and were transferred to sewerage undertakers pursuant to the 1989 Act. The 1989 Act: conclusion Accordingly, it seems to me to follow that the sewerage undertakers had an implied right (subject to payment of compensation in case of damage) to discharge from existing outfalls from the sewers vested in them in 1989, because (i) the provisions of the 1989 Act conferred such a right on them by implication in accordance with the reasoning in Durrant or, if that is wrong, (ii) the implied right to discharge from those outfalls enjoyed just before the 1989 Act came into force was transferred by the water authorities to them. The effect of conclusion (i) is, as I see it, that the right to discharge applied to outfalls created after 1989, including those from sewers brought into use after the 1989 Act came into force, as section 30 (as amended to apply to the sewerage undertakers) continued in force, and, following the reasoning in Durrant, so did the right to discharge. The position under the 1991 legislation Section 30 of the 1936 Act (as amended by the 1973 and 1989 Acts) was repealed by the 1991 Consolidation Act (and section 278 of the 1936 Act was effectively replaced with new compensation provisions in the 1991 Act), and therefore there was no further express statutory basis, as established in Durrant [1897] 2 Ch 291, for saying that any sewerage undertakers could claim any right of discharge in respect of outfalls created after 1991. As Arden LJ rightly pointed out in para 22 of her judgment in the Court of Appeal, although section 30 of the 1936 Act, which she called the foul water proviso, was re enacted in the 1991 Act, it was only in a limited form by section 117(5) so that there was no foul water proviso applying to the pipe laying power. Accordingly, as section 30 was repealed, the sewerage undertakers cannot rely on the arguments which, in my view, justify their first argument under the 1989 Act. However, the repeals effected by the 1991 Consolidation Act were, rather unusually and arguably unnecessarily, expressly without prejudice to section 16 of the 1978 Act, which applies unless a contrary intention appears. Far from the contrary intention appearing, it seems to me clear that the factual context of the Acts of 1991, as discussed in paras 17 18 and paras 30 35 of the judgments of Lord Sumption and Lord Toulson, and more summarily discussed in paras 66 67 above, strongly supports the statutory presumption that the existing right to discharge from existing outfalls survived the repeal of section 30 (and the replacement of section 278) of the 1936 Act by the 1991 Act. Indeed, it seems to me that the notion that the 1991 Act removed the rights of discharge in relation to existing outfalls from sewers vested in the sewerage undertakings is even more unlikely than the notion that this was the effect of the 1989 Act. The 1989 Act was intended to give effect to a wholesale overhaul of the water and sewerage industries, and in particular to bring them into private ownership, and to subject them (subject to modifications to protect the public interest) to market forces. While it is impossible to accept for the practical reasons already mentioned that in 1989 private sewerage companies were to be deprived of the right to discharge from existing sewers and were to be left to negotiate what rights they could, the proposition is not fanciful, at least in principle. However, even in principle, it seems very unlikely indeed that such a deprivation could have been intended to have been effected sub silentio, without any consultation or recommendation from the Law Commission, by the 1991 legislation, and in particular by two Acts whose purposes were as described in their long titles (as set out in para 51 above). My scepticism is reinforced by the fact that it is even more unlikely that such a deprivation was intended so soon after the 1989 Act. Some concern was expressed in argument about the fact that the right of discharge (which in the light of this conclusion exists under the 1991 Act) is potentially more onerous on waterway owners, than the right when it existed under the 1936 Act. I agree with what Lord Sumption says about this in para 22 above. Quite apart from that, as explained in para 62 above, the right identified in Durrant was, as I see it, a right of discharge, which could be qualified by the provisions of the same or other legislation. I see no cause for concern if Parliament, having given a right of discharge, is free to change the terms as to conditions and compensation (subject to complying with common law and human right principles) upon which such discharge can be effected. On the contrary: such a conclusion appears to me to make good sense. Conclusion In these circumstances, it appears to me to follow that sewerage undertakers had, and therefore continue to have, a statutory right to discharge surface water and treated effluent from existing outfalls from sewers which had been vested in them by the time that the 1991 Act came into force, but not from subsequently created outfalls or outfalls from sewers which they may have laid after that date. |
The members of the Court are well aware of the limited nature of the issue which we have to decide in this appeal. But many of the general public (who are understandably taking a close interest in the matter) are not so well aware of its limited scope. It is therefore appropriate to spell out at the outset that the Court does not have the task of deciding whether the system of charging personal current account customers adopted by United Kingdom banks is fair. The appellants are seven of the largest banks in the United Kingdom and one building society (but I shall for convenience refer to them all as the banks). The appellants accept that the system of free if in credit banking prevalent in this country involves a significant cross subsidy (amounting to about 30 per cent of the banks total revenue stream from current account customers) provided by those customers who regularly incur charges for unauthorised overdrafts (a cohort, we were told, of the order of twelve million people) to those customers (a cohort of about 42 million people) who are in the fortunate position of never (or very rarely) incurring such charges. Banks in other European countries adopt different forms of cross subsidy; French banks for instance, concentrate their charges on processing standing orders and debit card transactions. Some would regard the United Kingdom system as being, in some sense at least, obviously unfair, though Mr Sumption QC (for the banks) vigorously disputed Lord Mances suggestion that his clients were engaged in a sort of reverse Robin Hood exercise. That is an imponderable question which depends partly on whether ones perception of the average customer who incurs unauthorised overdraft charges is that he is spendthrift and improvident, or that she is disadvantaged and finding it hard to make ends meet. But it is not the question for the Court. The question for the Court is much more limited, and more technical. It is whether as a matter of law the fairness of bank charges levied on personal current account customers in respect of unauthorised overdrafts (including unpaid item charges and other related charges as described below) can be challenged by the respondent the Office of Fair Trading (the OFT) as excessive in relation to the services supplied to the customers. That issue depends on the correct interpretation (in its European context) and application of Regulation 6(2) of the Unfair Terms in Consumer Contracts Regulations 1999 SI 1999/2083 (the 1999 Regulations). Regulation 6(2) is as follows: In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate (a) to the definition of the main subject matter of the contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange. The context requires adequacy to be read in the sense of appropriateness, as Lord Rodger of Earlsferry pointed out in Director General of Fair Trading v First National Bank plc [2001] UKHL 52, [2002] 1 AC 481, para 64. The Directive and the Regulations The 1999 Regulations were made under section 2(2) of the European Communities Act 1972 in order to transpose into national law Council Directive 93/13/EEC on unfair terms in consumer contracts (the Directive). The 1999 Regulations revoked and replaced similar regulations made in 1994 (SI 1994/3159) in order (as the explanatory note to the 1999 Regulations puts it) to reflect more closely the wording of the Directive. Regulation 6(2) of the 1999 Regulations does indeed follow closely the English text of Article 4(2) of the Directive, which is as follows: Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other, in so far as these terms are in plain intelligible language. The Court has had available the texts of Article 4(2) in French, German and some other languages, but they cast little light on the interpretation of the English text. Both Mr Sumption (for the banks) and Mr Crow QC (for the OFT) made submissions about the background to the Directive, its travaux prparatoires, and academic commentaries on it. The Directive in its final form applies only to contractual terms which have not been individually negotiated. That is the effect of Article 3, which sets a fairly high threshold for meeting that test. The Councils original proposals had been more far reaching but they attracted a lot of criticism, especially from commentators in France and Germany, who were concerned at such extensive inroads into freedom of contract. An article by Professor Brandner and Professor Ulmer of the University of Heidelberg ((1991) 28 CML Rev 647) was particularly influential. In September 1992 the Council brought forward new proposals which can be described as a compromise solution balancing the need for consumer protection against residual freedom of contract. Recital (19) reflects part of this compromise, though it does not contribute very much to the understanding of Article 4(2): Whereas, for the purposes of this Directive, assessment of unfair character shall not be made of terms which describe the main subject matter of the contract nor the quality/price ratio of the goods or services supplied; whereas the main subject matter of the contract and the price/quality ratio may nevertheless be taken into account in assessing the fairness of other terms; whereas it follows, inter alia, that in insurance contracts, the terms which clearly define or circumscribe the insured risk and the insurers liability shall not be subject to such assessment since these restrictions are taken into account in calculating the premium paid by the consumer. Another element of compromise is the so called greylist set out in Schedule 2 to the 1999 Regulations, exactly reproducing the annex referred to in Article 3(3) of the Directive. This is an indicative and non exhaustive list of terms which may be regarded as unfair. Originally it was proposed as a blacklist of terms which would be conclusively presumed to be unfair. The list contains 17 items, four of which refer in one way or another to the monetary consideration paid by the consumer: (d) permitting the seller or supplier to retain sums paid by the consumer where the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the seller or supplier where the latter is the party cancelling the contract; (e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation; (f) authorising the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract; . (l) providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price without in both cases giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded; The basic test of fairness is in Regulation 5(1) of the 1999 Regulations, transposing Article 3(1) of the Directive. Regulation 5(1) provides: A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer. The consequences of unfairness are set out in Regulation 8, transposing Article 6(1). Regulation 8 provides: (1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer. (2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term. The Court of Justice has not yet had occasion to rule on the scope of Article 4(2). Not all the member states have precisely transposed the Directive into their national laws, since Article 8 provides that they may adopt or retain more stringent provisions for consumer protection, so long as they are compatible with the Treaty. France and Italy, like the United Kingdom, have precisely transposed the Directive. The Netherlands and Spain have enacted more far reaching legislation affording greater protection to consumers. Germany considered it unnecessary to transpose the Directive in any form, as its national law already offered a greater degree of consumer protection. The First National Bank case The Law Lords have already considered Article 4(2) in Director General of Fair Trading v First National Bank Plc [2001] UKHL 52, [2002] 1 AC 481. They considered it in the slightly different form in which it was transposed by Regulation 3(2) of the 1994 Regulations: In so far as it is in plain, intelligible language, no assessment shall be made of the fairness of any term which (a) defines the main subject matter of the contract, or (b) concerns the adequacy of the price or remuneration, as against the goods or services sold or supplied. So in the old provision the words in exchange did not appear, and the nature of the assessment was expressed a little differently. Before your Lordships neither side attached much importance to these points of difference, since the dominant text (as Lord Steyn put it in First National Bank at para 31) is that of the Directive itself. In First National Bank the Director General of Fair Trading (the predecessor of the OFT, which was established by Part 1 of the Enterprise Act 2002) sought an injunction to restrain the bank, which was active in the consumer credit market, from using a standard term under which (on enforcement of an overdue debt) interest was to continue to accrue at the contractual rate until payment after as well as before any judgment (such obligation to be independent of and not to merge with the judgment). At first instance Evans Lombe J held ([2000] 1 WLR 98) that the term was a default term and not (as the banks counsel had submitted) a core term within Regulation 3(2) of the 1994 Regulations, but that it was not unfair in the statutory sense. The Court of Appeal ([2000] QB 672) allowed the Director Generals appeal, agreeing with the judge as to Regulation 3(2) but differing as to the fairness of the term. Peter Gibson LJ (giving the judgment of the Court) deprecated the expression core term (at p686): The test in respect of the relevant term is not whether it can be called a core term but whether it falls within one or both of paragraphs (a) and (b) of Regulation 3(2). On a further appeal by the bank the House of Lords allowed the appeal, unanimously agreeing with the Court of Appeal as to the Courts power to review the term, but unanimously reversing the Court of Appeal as to the terms fairness. The key passages on the scope of Regulation 3(2) of the 1994 Regulations (now Regulation 6(2) of the 1999 Regulations) are para 12 of the opinion of Lord Bingham of Cornhill and para 34 of the opinion of Lord Steyn. Lord Bingham observed in para 12, after references to the then current editions of two leading textbooks (Treitel, The Law of Contract, 10th ed. (1999) p248 and Chitty on Contracts, 28th ed. (1999) para 15 025), The object of the Regulations and the Directive is to protect consumers against the inclusion of unfair and prejudicial terms in standard form contracts into which they enter, and that object would plainly be frustrated if Regulation 3(2)(b) were so broadly interpreted as to cover any terms other than those falling squarely within it. In my opinion the term, as part of a provision prescribing the consequences of default, plainly does not fall within it. Later in that paragraph Lord Bingham referred to the term as an ancillary provision. Lord Steyn observed in para 34: Clause 8 of the contract, the only provision in dispute, is a default provision. It prescribes remedies which only become available to the lender upon the default of the consumer. For this reason the escape route of Regulation 3(2) is not available to the bank. So far as the description of terms covered by Regulation 3(2) as core terms is helpful at all, I would say that clause 8 of the contract is a subsidiary term. In any event, Regulation 3(2) must be given a restrictive interpretation. Unless that is done Regulation 3(2)(a) will enable the main purpose of the scheme to be frustrated by endless formalistic arguments as to whether a provision is a definitional or an exclusionary provision. Similarly, Regulation 3(2)(b) dealing with the adequacy of the price or remuneration must be given a restrictive interpretation. After all, in a broad sense all terms of the contract are in some way related to the price or remuneration. That is not what is intended. The background and course of this litigation A complaint of infringement of the 1999 Regulations may be pursued in proceedings in the county court commenced by an individual consumer by reference to the terms of a particular contract that he or she has entered into. It may also be pursued by the OFT which was established, as already mentioned, by Part 1 of the Enterprise Act 2002 and is a general enforcer of Community infringements under section 213(1)(a) of that Act (read with section 212 and Schedule 13, para 5). This dual system (of what Lord Steyn, in para 33 of his opinion in First National Bank, referred to as ex casu challenges and pre emptive or collective challenges) is provided for by Article 7 of the Directive. Both types of challenge form part of the background to this appeal. As Andrew Smith J put it at first instance (para 2): The Relevant Terms and Relevant Charges are being challenged on two fronts: the [OFT] is investigating under the [1999 Regulations] the fairness of the terms under which banks make such charges, and cases have been brought by individual customers in county courts disputing charges levied by banks, many of them relying not only on the 1999 Regulations but also on common law rules about the unenforceability of penalties. There have, we were told, been many thousands of individual claims in the county courts, many brought by litigants in person with the assistance of on line forms and advice. All or virtually all of these proceedings have been stayed to await the outcome of these proceedings. The volume of litigation speaks for itself as to the dissatisfaction (to use no stronger an expression) felt by many thousands of customers affected by the challenged charges. In March 2007, following complaints made to it, the OFT started a formal investigation of the fairness of terms relating to overdraft charges (these were referred to in the pleadings and in the lower courts as the Relevant Terms and the Relevant Charges and it is convenient to adopt the same terminology). At the same time the OFT began a market study in order to consider (in the words of the first witness statement of Mr Cavendish Elithorn, a senior director of the OFT) wider questions about competition and value for money in the provision of personal current accounts in the UK, such as: (a) the low levels of cost transparency and; (b) the ease with which consumers can switch accounts. At an early stage of the investigation the banks raised a preliminary objection based on Regulation 6(2) of the 1999 Regulations. The same issue had been raised in many individual claims in the county courts. In order to resolve the issue, and in accordance with written agreements reached between the OFT and the banks, the OFT on 27 July 2007 issued proceedings in the Commercial Court seeking a declaration that Regulation 6(2) did not apply to the banks Relevant Terms then current. The banks, in order to obtain a more comprehensive answer covering related issues raised in individual claims, counterclaimed not only for declarations to the opposite effect to those sought by the OFT (including an express declaration as to plain and intelligible language) but also for further declarations that their Relevant Terms were not capable of amounting to a penalty at common law, and declarations relating to good faith under regulation 5(1). These issues were raised both in relation to the banks then current sets of terms and in relation to terms which were no longer current. The judge heard argument only on the then current terms, for case management reasons. But our decision is likely to cover almost all the historic terms as well. We were told that the OFT and the banks have so far been able to agree that the lower courts decisions on the current terms should be treated as applicable to the historic terms as well. In these circumstances Andrew Smith J had three groups of issues to decide: issues as to Regulation 6(2) (including particular issues as to plain intelligible language); issues as to Regulation 5(1); and issues as to common law penalties. He gave judgment on 24 April 2008 after 14 days of hearings during January and February 2008. His judgment ([2008] EWHC 875 (Comm), [2008] 2 All ER (Comm) 625) runs to 450 paragraphs and the Court of Appeal rightly paid tribute to its quality and clarity. In brief, the judge decided the issues as follows (the paragraph numbers specified below being the conclusions at the end of the relevant discussion): (1) on the first group of issues, that the Relevant Terms were in plain intelligible language except (in the case of four banks) in certain specific and relatively minor respects (para 293); that they were not exempt under Regulation 6(2) from assessment in point of fairness (para 421); and that the excluded assessment construction was correct (para 436); that none of the terms amounted to the imposition of a common law (2) penalty (para 323); and (3) that it was inappropriate to give any declaratory relief as regards Regulation 5(1) (para 447). The banks appealed, with the permission of the judge, against the decision that Regulation 6(2) did not apply to the Relevant Charges. The judge refused permission to the four relevant banks on the plain intelligible language issue. The OFT did not seek to appeal but put in a respondents notice with further grounds for supporting the judges decision on Regulation 6(2). The argument in the Court of Appeal was therefore mainly focused on the scope of Regulation 6(2). The Court of Appeal (Sir Anthony Clarke MR, Lord Justice Waller V P and Lloyd LJ), in a judgment of the Court delivered on 26 February 2009 by the Master of the Rolls ([2009] EWCA Civ 116), dismissed the banks appeal for reasons which the Court described (para 112) as somewhat broader than those of the judge. The Court refused to extend the permission to appeal to the plain intelligible language issue. The banks further appeal to the House of Lords (with leave granted on 31 March 2009) was heard in June 2009 but our judgment is (under transitional provisions in the Constitutional Reform Act 2005 and the Supreme Court Rules) a judgment of the Supreme Court of the United Kingdom. The Relevant Terms and Charges It will be necessary to come back to a detailed consideration of the Court of Appeals reasoning, which Mr Sumption has subjected to robust criticism. But I must first say more about the Relevant Terms and the Relevant Charges of the banks. They are the material to which Regulation 6(2), properly construed, has to be applied. The Relevant Terms and the Relevant Charges were covered in detail in the pleadings, and annexes to the pleadings. There is a clear summary in annexes B E to the OFTs joint reply and defence to the counterclaims. The judge gave a general description of the operation of current accounts and authorised and unauthorised overdrafts (paras 42 82). He then (in order to deal with a range of questions as to plain intelligible language) covered a mass of detail in a masterly fashion. His summaries of the eight banks terms and charges starts with Abbey National (paras 130 154) and ends with Royal Bank of Scotland (paras 274 292). This part of his judgment has not been challenged in any way, and the Court of Appeal adopted it. For present purposes it is sufficient to set out the summary in paras 7 and 8 of the Statement of Facts and Issue agreed by the parties: There are four basic categories of Relevant Charges, as defined in the Judgments below, not all of which are charged by all Banks: Unpaid Item Charges; Paid Item Charges; Overdraft Excess Charges; and Guaranteed Paid Item Charges. a. An Unpaid Item Charge is levied when the customer gives an instruction for payment or, in some cases at least withdrawal, that the bank declines to honour because the customer does not have sufficient funds in his account or an arranged facility which covers it. b. A Paid Item Charge is levied when the customer gives an instruction for payment or, in some cases at least withdrawal, for which he does not have sufficient funds in his account, or an arranged facility which covers it, and which the bank honours. c. A Guaranteed Paid Item Charge refers to a charge distinct from a Paid Item Charge which some of the banks levy when they honour, in accordance with the guarantee, a cheque issued in conjunction with a cheque guarantee card (or, in the case of some banks, a debit card payment made under a guaranteed debit payment system) for which the customer does not have sufficient funds or a sufficient arranged facility. d. An Overdraft Excess Charge is levied if, during a specified period (typically a day or a month) an account is and/or goes overdrawn (and there is no overdraft facility), or the debit balance is and/or goes above the limit on an existing overdraft facility. Annexed hereto are summaries (one for each bank) that identify the relevant contractual documents, the Relevant Terms and the Relevant Charges. In all cases, there is a terms and conditions document, and an accompanying leaflet or tariff, which it is the Banks practice to make available to the customer as part of the process of opening the account. This litigation assumes the incorporation of the Relevant Terms into the contract between the Banks and their respective customers. The Banks standard rates of interest and charges are usually set out in the tariff/leaflet. Prior notice of any material changes in the tariff (or terms generally) has to be given to the customer under the terms of the Banking Code to which the Banks voluntarily subscribe. The opposing arguments in summary The appeal has been argued with conspicuous clarity and skill by Mr Sumption and Mr Vos QC (the latter instructed on behalf of Nationwide) for the banks and Mr Crow for the OFT. This brief summary is no more than a sketch drawing attention to some salient points. The general thrust of Mr Sumptions submissions for the banks was that both the judge and the Court of Appeal had adopted an over complicated approach to an issue which, however important both for the consumers and for the banks, is ultimately quite a short point of construction. Article 4(2) of the Directive, now transposed by Regulation 6(2) of the 1999 Regulations, is expressed in fairly simple and non technical language, as is appropriate for a Community measure which has to be applied across a variety of national systems of contract law. It represents a compromise between consumer protection and freedom of contract. The courts below, in seeking to identify and give effect to the underlying purpose of the Directive, misread Regulation 6(2) as concerned (in paragraph (b) as well as in paragraph (a)) only with what was a core or essential part of the bargain, to which the consumer may be supposed to have consented in a meaningful sense. The courts below had overlooked that core term, if that expression is to be used at all, must be understood as no more than shorthand for the contents of paragraphs (a) and (b). Mr Vos supplemented Mr Sumptions submissions by what he referred to as the debit/credit argument, which focuses on the fact that customers who incur Relevant Charges will view the essence of their contract with the bank differently from those customers who never (or rarely) incur those charges. Against that Mr Crows primary submission was that the Court of Appeal had reached the right conclusion for the right reasons. The fairness of payment obligations falling within Regulation 6(2)(b) is exempt from assessment in point of adequacy (appropriateness) only if they form part of the essential bargain between the parties. The essential bargain constitutes only so much of the contract as the consumer can be said to have consented to freely. The banks had misunderstood the travaux prparatoires and drawn the wrong conclusion from them. The Court of Appeals decision was supported by the decision of the House of Lords in First National Bank. The Relevant Charges were ancillary payment obligations and were not incurred in the normal performance of the contract. The typical consumer would not clearly recognise them as the price of services supplied by the banks in exchange. The Court of Appeal's reasoning It is therefore necessary for the Court to look closely at the Court of Appeals reasoning. The general structure of the reasoning on the construction issue is a summary, with some discussion, of the judges main conclusions (paras 12 to 22); discussion of First National Bank (paras 40 to 58), the travaux prparatoires (paras 59 to 69), academic writings (paras 70 to 80) and the relevant principles and the Courts conclusions on the issue of construction (paras 81 to 92). This is followed by a relatively short section (paras 93 to 112) applying the Courts conclusions to the facts. The first point to note (in order to get it out of the way) is the Courts treatment of the excluded terms/excluded assessment controversy which the judge had dealt with at some length. This point arose on the wording of Regulation 3(2) of the 1994 Regulations (and may have been one of the reasons for their replacement). It may appear an abstract point but it is potentially of great practical importance, as Lord Phillips explains in his judgment (paras 60 and 61). The judge put the issue in these terms (para 422): If Regulation 6(2)(b) applies to a term, is any assessment of its fairness excluded (the excluded term construction), or does the Regulation exclude only an assessment relating to the adequacy of the price (the excluded assessment construction)? He decided in favour of the excluded assessment construction and that was not challenged in the Court of Appeal or before this Court. Mr Sumption described it as a distraction. For present purposes, I am inclined to agree. The precise nature of the exercise in assessing the fairness of a reviewable term is no more than marginally relevant to deciding whether or not a term is reviewable in the first place. But in the long run it may become an issue of great practical importance. The Court of Appeal then addressed the issue whether paras (a) and (b) of Regulation 6(2) should be construed conjunctively (as the OFT had argued before the judge) or disjunctively (as the banks had argued). The judge decided that they should be construed disjunctively. The Court of Appeal commented (para 15): The OFT does not challenge his decision. We do not therefore express a different view, although in our opinion it is important to construe paragraph (b) of Regulation 6(2)(b) in the context of the whole of the Regulation including paragraph (a). Here the Court of Appeal was, I think, putting down a marker for what was to become one of the most important themes in its decision. I have to say that I do not find it particularly helpful to consider whether paragraphs (a) and (b) should be read conjunctively or disjunctively. The Court is not faced with a text (such as charitable or benevolent in the will of Caleb Diplock: Chichester Diocesan Fund & Board of Finance v Simpson [1944] AC 341, 349, 369) where the two approaches are stark alternatives. In my view the two paragraphs must be given their natural meaning, and read in that way they set out tests which are separate but not unconnected. They reflect (but in slightly different ways) the two sides (or quid pro quo) of any consumer contract, that is (a) what it is that the trader is to sell or supply and (b) what it is that the consumer is to pay for what he gets. The definition of the former is not to be reviewed in point of fairness, nor is the adequacy (appropriateness) of the latter. The Court of Appeal then discussed First National Bank at some length, focusing (entirely correctly, in my opinion) on Lord Binghams and Lord Steyns description of the relevant clause as a default provision. The Court also focused on Lord Binghams description of it as ancillary and Lord Steyns description of it as subsidiary. That led to what I regard as a more questionable conclusion (para 49): As we see it, it follows from the reasoning of the House of Lords that what article 4(2) of the Directive was seeking to exclude from the assessment required by the national authorities (here the OFT) was the core bargain or the core price but not ancillary or incidental provisions. In our judgment, Regulation 6(2) of the 1999 Regulations should be construed with that underlying purpose in mind. The Court went on similarly (para 52): In our view these considerations support the conclusion that the purpose of Regulation 6(2)(b) was to limit the exclusion to the essence of the price, just as the purpose of Regulation 6(2)(a) was to limit it to the main subject matter of the contract. As appears below, the reason for the limitation was to reflect the fact that the parties would be likely to (or might well) negotiate the main subject matter of the contract and the essential price but not the detail. The considerations referred to were that Regulation 6(2)(b) referred to the price or remuneration and not to part of the price or remuneration. This impressed both the judge and the Court of Appeal. I do not see much force in it, as the Directive is expressed in terse, simple language, and the 1999 Regulations follow the same style. This part of the Court of Appeals reasoning ends with a firm conclusion. After approving the judges reliance on passages in successive editions of Treitel (11th ed. (2003) p273 and 12th ed. (2007) para 7 101) the Court went on (para 55): This last point is of some importance because the Banks submit that, once the conjunctive construction has been rejected, there is no room to apply the principle of essential bargain to price clauses, if only because of the difficulty in deciding to which it applies and to which it does not. We are not able to accept that submission. We accept the OFTs submission that it all depends upon the circumstances of the particular case and that it is a question of fact whether a clause which might otherwise fall to be assessed is outside the essential bargain between the parties. The Court found support for this not only in First National Bank but also in the travaux and in some academic writings. It identified the purpose of the Article 4(2) exception as being (para 69) that standard form contracts should be subjected to a test of fairness except so far as their terms have been negotiated (the implication being that it was essential terms, both as to specification and as to price, that a consumer would actually negotiate). Therefore (para 69 (iii)): Ancillary or incidental price, remuneration or payment terms will not fall within the exception in article 4(2) because they do not fulfil the purpose or essential rationale of the exception. The Court noted that a similar view had been taken in a Joint Consultation Paper issued in 2001 by the Law Commission and the Scottish Law Commission (though paragraph 3.32 of the Paper, set out in para 79 of the judgment, is expressed in terms of understanding rather than consent). The next section of the judgment contains a discussion of the relevant principles of construction followed by a restatement of the conclusion that the Court had already reached (para 86): The question is whether to import the notion of essential bargain into the construction of article 4(2) and into both paragraphs (a) and (b) of Regulation 6(2). Our answer to that question is yes, essentially for the reasons we have already given when discussing the First National Bank case and the travaux prparatoires. We would summarise them in much the same way as Mr Crow did in the course of the oral argument: (i) The concept of the essential bargain flows naturally from the structure of the Directive, from the purpose of the Directive, from the purpose of the exemption and from the decision in the First National Bank case. These points are then elaborated in (ii), (iii) and (iv). The Court of Appeal then went on to consider whether the Relevant Terms and the Relevant Charges were or formed part of the essential or core bargain between the parties. The Court recorded (para 99) fifteen points made by Mr Crow, the general thrust of which was that an unauthorised overdraft was something to which a customer was not entitled; it was exceptional and unnecessary; in consequence Relevant Charges were contingent, uneconomic, unadvertised and imperfectly understood. Against this Mr Vos (leading the banks submissions in response to the fifteen points made by Mr Crow) pointed (para 101) to the banks having earned 2.56bn from Relevant Charges in 2006 (against 4.1bn in net interest earned on accounts in credit) and to over 12 million customers who had incurred Relevant Charges in that year. The majority of these incurred more than one Relevant Charge. In the circumstances it was wrong, Mr Vos submitted, to say that they were isolated incidents. It was a misuse of language to describe unarranged borrowing as an exception to an exception. The Court concluded (para 104): We say at once that there is undoubted force in these submissions but we have nevertheless reached the conclusion that, when all the circumstances are taken into account, the Relevant Charges are not part of the core or essential bargain in the sense that that concept has been used in the sources to which we have referred. The appeal was therefore dismissed. The decision of the Court of Appeal was followed by Mann J. in Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch), 10 July 2009. We received written submissions on this decision. The submissions vary markedly in their perceptions of how easily and satisfactorily the judge applied the Court of Appeals test (which was of course binding on him). I do not think it necessary to go further into the decision, especially as the relevant term was in any event not in plain intelligible language. The meaning of Regulation 6(2) After considering the judgments of Andrew Smith J and the Court of Appeal at length I am impressed, as no doubt all of us are, by the great care with which both courts have considered all the arguments and materials put before them. But I must respectfully say that I see force in Mr Sumptions criticisms of their approach as over elaborate. The issue is a very important one, but it is essentially quite a short point, even when all the elements relevant to a purposive approach to construction are taken into account. I also respectfully think that the courts below, although cautioning themselves that core terms is a shorthand expression for the contents of paragraphs (a) and (b) of regulation 6(2), tended to slip into treating it as an autonomous expression which itself expressed the contents of both those paragraphs. I start with the language of Article 4(2) and Regulation 6(2) (I can see no significant difference between them, although for no obvious reason Article 4(2) refers to assessing the unfair nature of a term whereas Regulation 6(2) refers to assessment of fairness of a term). Paragraphs (a) and (b) are, as I have said, concerned with the two sides of the quid pro quo inherent in any consumer contract. The main subject matter may be goods or services. If it is goods, it may be a single item (a car or a dishwasher) or a multiplicity of items. If for instance a consumer orders a variety of goods from a mail order catalogue say clothing, blinds, kitchen utensils and toys there is no possible basis on which the court can decide that some items are more essential to the contract than others. The main subject matter is simply consumer goods ordered from a catalogue. I think that the Court of Appeal was wrong (para 55) to dismiss the difficulties raised by the banks on this point as something that the court could decide as a question of fact in the circumstances of the particular case. Similarly, a supply of services may be simple (an entertainer booked to perform for an hour at a childrens party) or composite (a weeks stay at a five star hotel offering a wide variety of services). Again, there is no principled basis on which the court could decide that some services are more essential to the contract than others and again the main subject matter must be described in general termshotel services. The services that banks offer to their current account customers are a comparable package of services. These include the collection and payment of cheques, other money transmission services, facilities for cash distribution (mainly by ATM machines either at manned branches or elsewhere) and the provision of statements in printed or electronic form. When one turns to the other part of the quid pro quo of a consumer contract, the price or remuneration, the difficulty of deciding which prices are essential is just the same, and Regulation 6(2)(b) contains no indication that only an essential price or remuneration is relevant. Any monetary price or remuneration payable under the contract would naturally fall within the language of paragraph (b) (I discount the absence of a reference to part of the price or remuneration for reasons already mentioned). In the case of banking services supplied to a current account customer under the free if in credit regime, the principal monetary consideration received by the bank consists of interest and charges on authorised and unauthorised overdrafts, and specific charges for particular non routine services (such as expedited or foreign money transmission services). The most important element of the consideration, however, consists of the interest forgone by customers whose current accounts are in credit, since whether their credit balance is large or small, they will be receiving a relatively low rate of interest on it (sometimes a very low rate or no interest at all). The scale of this benefit is indicated by the figure for 2006 already mentioned. Mr Sumption was wary about committing himself as to whether interest foregone constituted part of the banks price or remuneration for the purposes of Regulation 6(2)(b). Whatever view is taken as to that, it is clear that just as banking services to current account customers can aptly be described as a package, so can the consideration that moves from the customer to the bank. Interest forgone is an important part of that package for customers whose accounts are in credit, and overdraft interest and charges are the most important element for those customers who are not in credit. Lawyers are very used to speaking of a package (or bundle) of rights and obligations, and in that sense every obligation which a consumer undertakes by a consumer contract could be seen as part of the price or remuneration received by the supplier. But non monetary obligations undertaken by a consumer contract (for instance, to take proper care of goods on hire purchase, or to treat material supplied for a distance learning course as available only to the customer personally) are not part of the price or remuneration within the Regulation. That is the point of Lord Steyns observation in First National Bank, in para 34, that in a broad sense all terms of the contract are in some way related to the price or remuneration. This Houses decision in First National Bank shows that not every term that is in some way linked to monetary consideration falls within Regulation 6(2)(b). Paras (d), (e), (f) and (l) of the greylist in Schedule 2 to the 1999 Regulations are an illustration of that. But the relevant term in First National Bank was a default provision. Traders ought not to be able to outflank consumers by drafting themselves into a position where they can take advantage of a default provision. But Bairstow Eves London Central Ltd v Smith [2004] 2 EGLR 25 shows that the Court can and will be astute to prevent that. In First National Bank Lord Steyn indicated that what is now Regulation 6(2) should be construed restrictively, and Lord Bingham said that it should be limited to terms falling squarely within it. I respectfully agree. But in my opinion the Relevant Terms and the Relevant Charges do fall squarely within Regulation 6(2)(b). That conclusion is not to my mind at variance with the message to be derived from the travaux. It is a fairly complex message, reflecting not only a compromise between the opposing aims of consumer protection and freedom of contract, but also the contrast between consumer protection and consumer choice (the latter being more central, perhaps, to basic Community principles). This point was explored and explained in an article (not mentioned by the Court of Appeal) to which Mr Sumption referred, that is Good Faith in European Contract Law by Professor Hugh Collins, (1994) 14 OJLS 229. Mr Sumption placed particular emphasis on the following passage: The history of the EC Directive on Unfair Terms in Consumer Contracts reveals the struggle between these two interpretations of the economic interests of consumers. Even at a late stage in the negotiations, the draft Directive proposed by the Commission envisaged the introduction of a general principle against substantive unfairness in consumer contracts. It invalidated terms in standard form consumer contracts which caused the performance of the contract to be significantly different from what the consumer could legitimately expect, or which caused the performance of the contract to be unduly detrimental to the consumer. But in the battle between the advocates of consumer rights and the supporters of free competition, eventually the latter emerged victorious in the Council of Ministers. The fairness of the transaction in the sense of the price paid for the goods or services should not be subjected to review or control. This is the meaning of the obscure Article 4(2) [which is then set out]. The final reservation in this provision [plain intelligible language] is significant. The Directive does not require consumer contracts to be substantively fair, but it does require them to be clear. Clarity is essential for effective market competition between terms. What matters primarily for EC contract law is consumer choice, not consumer rights. The Court of Appeal took account of the travaux and of some academic writing. It recognised as an underlying value the notion that freedom of contract should prevail where there has been meaningful negotiation between supplier and consumer, so that the latter does consent to the terms of the contract. But I respectfully think the Court went too far in interpreting the language of the Directive and the 1999 Regulations in order to meet that perceived aim. The Directive and the 1999 Regulations apply only to terms which have not been individually negotiated, and the Court departed from the natural meaning of the text in order to achieve an unnecessary duplication of the exception for individually negotiated terms. I would add a postscript to this part of the discussion. A variety of expressions has been used, in the courts below and in argument (and to some extent by this House in First National Bank), to describe those contractual terms which are subject to review in point of fairness: ancillary, subordinate, incidental, non core, collateral. These may all be of some assistance but it is important, in considering provisions which apply across an extraordinarily wide range of consumer contracts, to treat them with caution. I venture to repeat a paragraph from an opinion of mine (in which the other members of the Appellate Committee concurred) in College of Estate Management v Customs & Excise Commissioners [2005] STC 1957, para 30, an appeal raising questions of Community law about whether there is a single or multiple supply, and whether it is of goods or services, for the purposes of value added tax: Ancillary means (as Ward LJ rightly observed ([2004] STC 1471 at [39]) subservient, subordinate and ministering to something else. It was an entirely apposite term in the discussion in British Telecommunications (where the delivery of the car was subordinate to its sale) and in Card Protection Plan itself (where some peripheral parts of a package of services, and some goods of trivial value such as labels, key tabs and a medical card, were subordinate to the main package of insurance services). But there are other cases (including Faaborg, Beynon and the present case) in which it is inappropriate to analyse the transaction in terms of what is principal and ancillary, and it is unhelpful to strain the natural meaning of ancillary in an attempt to do so. Food is not ancillary to restaurant services; it is of central and indispensable importance to them; nevertheless there is a single supply of services (Faaborg). Pharmaceuticals are not ancillary to medical care which requires the use of medication; again, they are of central and indispensable importance; nevertheless there is a single supply of services (Beynon). Conversely, delivery of goods or peripheral extras may be disregarded as ancillary for the purposes of para (a) of Regulation 6(2), but the charges for them, if payable under the same contract, are part of the price for the purposes of para (b). The application of Regulation 6(2) I can state my opinion much more briefly on the second main issue in the appeal, that is the application of Regulation 6(2), properly construed, to the facts. Charges for unauthorised overdrafts are monetary consideration for the package of banking services supplied to personal current account customers. They are an important part of the banks charging structure, amounting to over 30 per cent of their revenue stream from all personal current account customers. The facts that the charges are contingent, and that the majority of customers do not incur them, are irrelevant. On the view that I take of the construction of Regulation 6(2), the fairness of the charges would be exempt from review in point of appropriateness under Regulation 6(2)(b) even if fewer customers paid them, and they formed a smaller part of the banks revenue stream. Even if the Court of Appeals interpretation had been correct, I do not see how it could have come to the conclusion that charges amounting to over 30 per cent of the revenue stream were (para 111) not part of the core or essential bargain. Should there be a reference under Article 234? This Court, as the national court of last resort, is under an obligation to make a reference to the Court of Justice under Article 234 of the Treaty if a decision on the correct interpretation of the Directive is necessary to enable the Court to give judgment, and the point is not acte clair. Neither side showed any enthusiasm for a reference, because of the further delay that would be occasioned in a very large number of claims at present stayed. The Court is entitled to take the likely delay into account, although not as an overriding consideration, in deciding whether to make a reference. If (as I understand to be the case) the Court is unanimous that the appeal should be allowed, then in my opinion we should treat the point as acte clair, and decide against making a reference. It may seem paradoxical for a court of last resort to conclude that a point is clear when it is differing from the carefully considered judgments of the very experienced judges who have ruled on it in lower courts. But sometimes a court of last resort does conclude, without any disrespect, that the lower courts were clearly wrong, and in my respectful opinion this is such a case. Even if some or all of the Court feel that the point is not acte clair, I would still propose that we ought not to incur the delay involved in a reference under Article 234, since a decision on the correct construction of Article 4(2) of the Directive is not essential for the determination of this appeal. The correct construction of Article 4(2) is a question of Community law, but the application of the Article, properly construed, to the facts is a question for national law. Even if the Court of Appeal was not clearly wrong on the issue of construction, it was in my respectful opinion clearly wrong in applying its construction to the facts. In other circumstances it might be regarded as rather unprincipled to take that means of avoiding an important issue of Community law, but in the special circumstances of this case I would regard it as the lesser of two evils. There is a strong public interest in resolving the matter without further delay. Conclusion For these reasons I would allow the appeal. The declaration sought by the banks in their counterclaims is inappropriate for the reasons explained by Lord Phillips at the beginning of his judgment. I would declare that the bank charges levied on personal current account customers in respect of unauthorised overdrafts (including unpaid item charges and other related charges) constitute part of the price or remuneration for the banking services provided and, in so far as the terms giving rise to the charges are in plain intelligible language, no assessment under the Unfair Terms in Consumer Contracts Regulations 1999 of the fairness of those terms may relate to their adequacy as against the services supplied. If the Court allows this appeal the outcome may cause great disappointment and indeed dismay to a very large number of bank customers who feel that they have been subjected to unfairly high charges in respect of unauthorised overdrafts. But this decision is not the end of the matter, as Lord Phillips explains in his judgment. Moreover Ministers and Parliament may wish to consider the matter further. They decided, in an era of so called light touch regulation, to transpose the Directive as it stood rather than to confer the higher degree of consumer protection afforded by the national laws of some other member states. Parliament may wish to consider whether to revisit that decision. LORD PHILLIPS Introduction In common with most members of the public all members of the Court have a current account with one or other of the appellants (the Banks). The Banks and the Respondent (the OFT) have agreed that we should none the less hear this appeal. The operation of a current account by a Bank for its customer involves the provision of a number of different services. These include the collection of cheques drawn in favour of the customer, the honouring of cheques drawn by the customer, payments on behalf of the customer pursuant to the use by the customer of credit or debit cards and cash distribution facilities. The customer rewards his Bank for the provision of these services in different ways, in accordance with standard terms agreed between the customer and the Bank. The majority of customers, who always keep their accounts in credit, reward the Bank by allowing it to use the funds standing to their credit without paying interest at the market rate. Somewhat misleadingly, the services provided by Banks to such customers are said to be free of charge. The position is very different in the case of a customer who permits his current account to go into debit without having obtained, in advance, authority from his Bank to overdraw. When this occurs, the customer becomes liable to pay charges. In some instances the charge will be triggered by the performance of an individual identifiable service, such as honouring a cheque. In other instances a sum becomes payable if, during a specified period, an account is overdrawn. These charges have collectively been described in this litigation as the Relevant Charges and the terms under which they are imposed as the Relevant Terms. I shall adopt that terminology. Mr Sumption QC, who appeared for the Banks, preferred to call the charges Insufficient Fund Charges. Lord Walker has, in his judgment, explained the background to this litigation and set out the relevant provisions of the Unfair Terms in Consumer Contracts Regulations 1999 SI 1999/2083 (the 1999 Regulations) and Council Directive 93/13/EEC (the Directive), which the 1999 Regulations implemented. Subject to one exception I shall not repeat that exercise. The OFT is minded to attack the Relevant Terms under the 1999 Regulations on the ground that they are unfair. The Banks contend that any such attack will be circumscribed by the provisions of Regulation 6(2) of the 1999 Regulations, which provides: In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate to the definition of the main subject matter of the (a) contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange. It is common ground that the Relevant Terms that are the subject of this appeal are largely in plain intelligible language except (in the case of four banks) in certain specific and relatively minor respects. The issue The agreed Statement of Facts and Issue describes the issue raised by this appeal as follows: Whether an assessment of the fairness of the Relevant Terms (pursuant to which the Relevant Charges are levied) would relate to the adequacy of the price and remuneration, as against the services supplied in exchange, within the meaning of regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations 1999. This does not accurately describe the issue raised by this appeal, which is very much more narrow. That issue is whether the Relevant Charges constitute the price or remuneration, as against the services supplied in exchange within the meaning of the Regulation. If they do not, the attack on the fairness of the terms that is open to the OFT will not be circumscribed by Regulation 6(2)(b). If they do, they will still be open to attack by the OFT on the ground that they are unfair as defined by Regulation 5(1), but that attack cannot be founded on an allegation that the Relevant Charges are excessive by comparison with the services which they purchase, for that is forbidden by Regulation 6(2)(b). That this was indeed the issue was made clear by counsel on either side in their oral submissions. Towards the close of his reply, Mr Sumption QC said this: All that I can ask the courts to declare, and all that my clients have ever asked the courts to declare, is that the insufficient fund charges are included in the price within the meaning of the word price in [Regulation] 6 and that no assessment of the fairness of the terms imposing the IFCs may relate to their adequacy as against the service supplied. Mr Crow QC for his part submitted on behalf of the OFT that even if Article 4(2) of the Directive did apply, the Relevant Terms were still subject to assessment for fairness. In that event, while it would not be open to the OFT to assess the fairness of the price by reference to the adequacy of the goods or services supplied in exchange, it would be open to the OFT to assess the fairness of the price according to other criteria. This agreement between the parties reflects acceptance by the Banks in the Court of Appeal of a finding by Andrew Smith J that was contrary to one of their submissions. The Banks had submitted that a term of a contract that provided the price or remuneration for goods or services supplied was absolutely exempt from assessment for fairness by reason of Regulation 6(2). This was described as the excluded term construction of the Regulation. Andrew Smith J held that this was not correct. Regulation 6(2) precluded assessing a price term for fairness by reference to its adequacy as payment for the goods or services provided in exchange. It did not, however, preclude assessing a price term for fairness according to other criteria. This has been described as the excluded assessment construction of the Regulation. Mr Sumption submitted that the difference between the excluded term and the excluded assessment constructions was a distraction from the real issues. It is certainly a distraction from the narrow issue that the parties are now agreed is before the court. But it is only because the excluded assessment construction has prevailed that the issue has been narrowed from that in the Agreed Statement of Facts and Issue. Had the excluded term construction prevailed, a finding in favour of the Banks that the Relevant Terms were included within the meaning of the word price in Regulation 6(2) would have precluded any challenge to those terms on the ground of fairness. As it is, if the Banks succeed on the narrow issue, this will not close the door on the OFTs investigations and may well not resolve the myriad cases that are currently stayed in which customers have challenged Relevant Charges. There is a further general point to be made. It seems likely that many of the customers who have challenged Relevant Charges have done so on the basis that they are excessive for the individual services to which they relate. They have treated the Relevant Charges as being levied in exchange for those services. Equally, one of the provisional grounds of attack advanced by the OFT has been that the Relevant Charges are out of all proportion to the cost of providing the services to which they relate. The Banks primary case is that these attacks are founded on a misconception that the Relevant Charges are payment for the services that trigger them. According to the Banks the reality is that the Relevant Charges are simply part of the payment in exchange for a global package of services. If that is correct, it would seem to follow that the attack based on the disparity between the cost of providing the services that trigger the Relevant Charges and the amount of the Relevant Charges is based on a false premise and does not in fact involve an assessment of fairness that relates to the adequacy of the price or remuneration, as against the goods or services supplied in exchange. This was a point that was appreciated by Andrew Smith J. At paragraph 400 of his judgment he says: Moreover, the basis of the whole package argument is that the Relevant Charges are not the price or remuneration for services but part of the price or remuneration for services. An assessment of the fairness of the Relevant Charges does not involve an assessment of the level or adequacy or appropriateness of the overall price or remuneration for the package of services supplied by the Bank, and an assessment of the fairness of the Relevant Charges as against those services, apart from being entirely beside the point, would not intrude upon the essential bargain between the parties that the Directive and the 1999 Regulations intend should be protected from assessment. The whole package argument does not engage the policy of the Directive and the 1999 Regulations for exempting the fairness of the Relevant Terms from assessment. Indeed, I am far from convinced that an assessment of part of the price or remuneration (or at least for less than what is manifestly the predominant part of the price or remuneration) for goods or services would ever be covered by Regulation 6(2)(b), but since this is not an argument advanced by the OFT, I say no more about that. Mr Crow did not submit before us that if the Relevant Charges formed part of the price paid in exchange for the package of services, they could not be included within the meaning of the word price in Regulation 6(2). I consider that Regulation 6(2) could apply to a complaint that the Banks charges overall, of which the Relevant Charges are an important element, are unfair because those who pay them pay an excessive amount in exchange for the package of services in respect of which they constitute part of the payment. Thus the issue of whether or not the Relevant Charges form part of the price or remuneration, as against the goods or services supplied in exchange within Regulation 6(2) is not necessarily academic. No attack has yet been made, however, on the level of the Banks charges overall. The reasoning of the Courts below Both Andrew Smith J and the Court of Appeal concluded that the Relevant Terms did not qualify as price or remuneration within the meaning of those words in Regulation 6(2). At the heart of the reasoning of Andrew Smith J was the conclusion that the Relevant Charges were not covered by Regulation 6(2) because they were not the price or remuneration for services supplied in exchange. They were not charged in exchange for anything. While most of the charges were triggered by the provision of an individual service they were not imposed by way of payment for those services. They were charges levied because the services in question were supplied by the Banks in particular circumstances. One of the four types of Relevant Charges was not triggered by the provision of a service. Unpaid Item Charges were levied when a request to honour a cheque on an overdrawn account was refused. Refusing a request could not properly be described as a service at all. Andrew Smith J rejected the Banks case that the Relevant Charges were part payment for the entire package of services provided by the Banks to current account customers for the following reasons: I am unable to accept this argument, for two (linked) reasons. First, I do not consider that the payments are made in exchange for the whole package of services supplied by the Bank when it is operating a current account. It is not a natural use of language to say that the Relevant Charges are levied or paid in exchange for those services supplied when an account is in credit. Secondly, I do not consider that the payments are the price or remuneration for those services in any natural meaning of the phrase or within the meaning of Regulation 6(2). The payments would not be so recognised by the typical customer when he opens a current account with a Bank, and they are not generally so presented by the Banks in their terms or other documentation. The Court of Appeal reached the same conclusion as Andrew Smith J, but by a different process of reasoning. Lord Walker has set out that reasoning at length. Once again I shall restrict myself to the essence of the Courts conclusion. In relation to Unpaid Item Charges the Court held that giving consideration to a request to honour a cheque on an overdrawn account was a service, even if the request was turned down. Thus each of the events that triggered a liability to pay Relevant Charges involved the provision of a service. It was not, however, realistic to consider that each Relevant Charge was payment for the individual service that occasioned its imposition. Rather, the substance of the contract had to be analysed as a package. The Court then went on to divide the package into the core or essential bargain and provisions that were incidental or ancillary, holding that Regulation 6(2) only applied to the former. The core or essential bargain was comprised of those matters to which the typical consumer would have regard when deciding whether to enter into the agreement with the Bank. The latter would be those to which he would not attach importance when concluding the contract. The Court decided that charges which were contingent upon the customer overdrawing on his current account would not have been considered of significance by the typical customer at the time of establishing the account. The charges would only be imposed in contingent circumstances and were akin to default charges triggered by a breach of contract, although they were not in fact triggered by a breach of contract because of the manner in which the contractual relationship had been expressly framed. The customer would not consider the contingent liability to pay the Relevant Charges in the event of overdrawing on his account an essential part of the Banks agreement to provide these services without charge provided that he remained in credit. It followed that the liability to pay the Relevant Charges was not part of the core or essential bargain and did not fall within the ambit of Regulation 6(2). The approach to the issue Early in his argument Mr Sumption said: [T]here isroom for argument about whether the insufficient fund charges are part of the price for the package of services or just the particular service which occasions their being charged, but we will submit that it is unrealistic to say, as the judge did, that insufficient fund charges are not payable in exchange for any service at all and are, therefore, not a price at all. This raises the questions by what criteria do you decide whether the charges are payment for services, if so, whether individual charges are payments for individual services or part payment for a package of services, and from whose viewpoint do you decide those questions? So far as the latter question is concerned, the choice would appear to be between the viewpoint of the customer, having regard to the facts that he would reasonably be expected to know, the viewpoint of the Banks, having regard to the more extensive knowledge held by the Banks, or no viewpoint at all, on the basis that these questions have to be answered by application of an objective test to all the material facts. There is an allied question of whether the language used to describe the obligations imposed by the terms is relevant or whether one looks simply at the nature and effect of those obligations. The narrow issue raised by this appeal is only relevant as part of the wider issue that will arise if and when the Relevant Terms are challenged as being unfair. At that point the question may arise are the terms being challenged on the ground that the Relevant Charges are excessive having regard to the services that are provided in exchange for them? The court before which the challenge is made may then have to decide whether any, and if so what, services are provided in exchange for the Relevant Charges as a stepping stone to deciding whether the challenge is one precluded by Regulation 6(2). To answer that question the court will, in my view, properly have to consider the role played by the Relevant Charges having regard to all the facts that are relevant to the operation of the contractual adventure and not just to those that are, or reasonably should be, within the knowledge of the customer. Conclusions I wish to express my admiration for the detailed and perceptive analysis of Andrew Smith J, although I do not share all the conclusions that he reached. He examined each of the Relevant Charges and the circumstances in which they fell to be paid. He concluded that it was impossible to say that each charge was given in exchange for the event that triggered it. I agree with that conclusion. It accords, of course, with the primary way in which the Banks put their case. The same conclusion would, I think, have been reached by a reasonably informed customer who applied his mind to the question. In each instance the Judge identified aspects of the provisions for payment of the Relevant Charges that would be anomalous if they were intended to be paid in exchange for the service to which they related. I will take one of the charges made by Barclays to illustrate such anomalies. A Paid Referral Fee is charged when the Bank honours a cheque, standing order or direct debit in circumstances where the account is overdrawn without prior arrangement. The fee is not charged per transaction but at 30 per day. But the fee is only charged on a maximum of three days per month. A customer would not conclude that the fee was charged in exchange for the transaction or transactions concluded on the days when the charges were made but that any other similar transactions in the course of the month were provided free. I agree with Andrew Smith J that a careful analysis of the transactions giving rise to the obligation to pay the Relevant Charges leads to the conclusion that they are not the prices paid in exchange for the transactions in question. I shall revert to the Judges rejection of the Banks case that the Relevant Charges were part of the remuneration paid for the package of services provided to holders of current accounts. First I wish to address the reason why the Court of Appeal rejected that case. The Court of Appeal accepted that the contract between the Bank and its customer had to be treated as a package. They did not exclude from the package services that were supplied at a time when the current account was overdrawn. They accepted that the Relevant Terms were terms that provided for payment of price or remuneration. They held, however, that they were not core payment terms but ancillary or incidental price, remuneration or payment terms (paragraph 69(iii)) which did not constitute price or remuneration that fell within Regulation 6(2). I can see no justification for excluding from the application of Regulation 6(2) price or remuneration on the ground that it is ancillary or incidental price or remuneration. If it is possible to identify such price or remuneration as being paid in exchange for services, even if the services are fringe or optional extras, Regulation 6(2) will preclude an attack on the price or remuneration in question if it is based on the contention that it was excessive by comparison with the services for which it was exchanged. If, on analysis, the charges are not given in exchange for individual services but are part of a package of different ways of charging for a package of varied services, this does not mean that they are not price or remuneration for the purpose of Regulation 6(2). As I observed earlier, an assessment of the fairness of the charges will be precluded if the basis of the attack is that, by reason of their inclusion in the pricing package, those who pay them are being charged an excessive amount in exchange for the overall package. The Court of Appeal accepted the following argument advanced by the OFT. The object of Regulation 6(2) is to exclude from assessment for fairness that part of the bargain that will be the focus of a customers attention when entering into a contract, that is to say the goods or services that he wishes to acquire and the price he will have to pay for doing so. Market forces could and should be relied upon to control the fairness of this part of the bargain. Contingencies that the customer does not expect to involve him will not be of concern to him. He will not focus on these when entering into the bargain. The Relevant Charges fall into this category. Free if in credit current accounts are opened by customers who expect to be in credit. Customers who go into debit without making a prior agreement for an overdraft normally do so because of an unforeseen contingency. Customers do not have regard to the consequences of such a contingency when opening a current account. Accordingly, the Relevant Charges that are then levied do not fall within Regulation 6(2). It seems to me that this reasoning is relevant not to the question of whether the Relevant Charges form part of the price or remuneration for the package of services provided but to whether the method of pricing is fair. It may be open to question whether it is fair to subsidise some customers by levies on others who experience contingencies that they did not foresee when entering into their contracts. If it is not it may then be open to question whether the Relevant Terms fall within Regulation 5(1). These questions do not, however, bear on the question of whether the Relevant Charges form part of the price or remuneration that is paid in exchange for the services provided to the holder of a current account. In agreement with Lord Walker, and for the additional reasons that he gives, I am not persuaded by the Court of Appeals reasons for excluding the Relevant Charges from the price or remuneration in Regulation 6(2). I now turn to the reasons given by Andrew Smith J for rejecting the Banks case that the Relevant Charges are part of a package of prices or remuneration paid for a package of services see paragraph 67 above. First he says that it is not a natural use of language to say that the Relevant Charges are levied or paid in exchange for those services supplied when an account is in credit. It does not seem to me that this does full credit to the package approach. I do not imagine that there are many customers who run a current account that is permanently overdrawn in circumstances where they have not specifically agreed an overdraft facility. Most customers who incur Relevant Charges run current accounts that are in credit most of the time. I do not think that it is an unnatural use of language to say that the Relevant Charges that they pay are paid as part of the price or remuneration provided in exchange for the package of services that they receive. If the Relevant Charges are not part of the price or remuneration for the services provided, the question arises of how the charges should be classified. The answer suggested on behalf of the OFT is that they are in the nature of default payments, imposed not as a hefty element in the price that the Banks hope that customers will pay for their services but by way of sanctions to discourage them from overdrawing on their current accounts. At paragraph 107 the Court of Appeal held: [The Relevant Charges] areakin to default charges which are triggered by a breach of contract. Although they are not in fact triggered by a breach of contract because of the manner in which the contractual relationship has been expressly framed, this does not mean that they are not contingent charges Andrew Smith J considered at paragraphs 295 to 324 whether the Relevant Charges were penalties at common law so as to be unenforceable for that reason. He held that they were not because a penalty at common law is a payment that becomes payable upon a breach of contract. Liability to pay Relevant Charges is not contingent upon breaches by the customers of their contracts. It is not a breach of any of the standard form contracts under consideration to overdraw, or attempt to overdraw, on a current account. Mr Sumption rightly conceded, however, that the Banks could not convert what were in effect penalties into price simply by wording their contracts so as to ensure that the contingencies that triggered liability to pay the charges did not constitute breaches of contract. Mr Crow argued that the Court of Appeal was correct to describe the Relevant Charges as akin to default charges. They were only payable in what he described as aberrant circumstances. He pointed out that many of the terms that give the impression that the charges are the cost of exercising contractual options are of recent origin. Contracts that preceded them had terms which indicated that customers were not to go into overdraft without prior arrangement, even if doing so was not technically a breach of contract. He pointed out that this is still true of the following current term of the Nationwide Building Societys terms: Your FlexAccount is a share of Nationwide Building Society. It will give membership rights to the account holder(s).Your membership may be withdrawn if you overdraw without agreement or exceed an agreed overdraft. Mr Sumption challenged that submission. He submitted that, at a time when virtually the whole population had a personal current account, the ability to overdraw informally and at short notice and without elaborate negotiation was an important tool of personal finance management. It was an extremely valuable facility, not properly to be described as an aberration. Andrew Smith J rejected the OFTs submission that the Banks terms that treat an instruction that involves overdrawing as a request for an overdraft were misleading. He held: 75. Thus, apart from Nationwide, the Banks terms and conditions are couched in terms of the customer making a request of the Bank and the Bank responding to it, and in some cases they refer to the Bank considering the request. The OFT criticises this terminology as an artificial device recently introduced which disguises the true nature of the parties dealings when a customer gives his bank an instruction which would, if paid, take the account into debit. Similarly, the OFT suggests that the use of the term overdraft to describe the debit balance created in these circumstances has misleading connotations, and emphasises the differences between the debit balance resulting from such a payment and an overdraft facility that a bank and a customer might agree should be available on an account. 76. Certainly, this terminology has been introduced by the Banks into their documentation relatively recently. However, I am unable to accept that the references to the customer making a request for an overdraft when he gives a Relevant Instruction are inappropriate or create a fiction. On the contrary, they spell out what is, as a matter of legal analysis, implicitly done when a customer gives a Relevant Instruction. Of course, there are differences between any resulting overdraft and a facility arranged by a specific agreement between a customer and his bank. A facility for an overdraft typically, and as provided by the Banks under their current terms (to which I refer below), commits the bank to allow the customer to overdraw on his account for as long as the facility is in place and within its limits, and, while of course it is possible for a facility to be confined to use for a stipulated purpose, it does not typically cover only a specific payment by the customer. If a fee is charged, it is generally for the facility itself, regardless of whether it is in fact used by the customer to borrow or how much it is so used. (None of the Banks charges a customer for requesting a facility in advance if the request is refused.) However, none of this means that it is misleading to use the expression overdraft to refer either to a facility or to borrowing under a facility or to unarranged borrowing. To my mind the expression is flexible enough naturally to encompass all these usages. As Mr Sumption observed there has been no appeal against this finding. In support of his submissions Mr Sumption relied upon the fact that a very significant number of customers incur Relevant Charges and upon the overall contribution that these charges make to the revenue earned by the Banks from operating current accounts. In the region of 20% of customers incur Relevant Charges but these account for over 30% of the revenue received by the Banks from current account customers. This compares with about 50% that represents the benefit of the use by the Banks of the funds in the accounts of customers who are in credit. When the relevant facts are viewed as a whole, it seems clear that the Relevant Charges are not concealed default charges designed to discourage customers from overdrawing on their accounts without prior arrangement. Whatever may have been the position in the past, the Banks now rely on the Relevant Charges as an important part of the revenue that they generate from the current account services. If they did not receive the Relevant Charges they would not be able profitably to provide current account services to their customers in credit without making a charge to augment the value of the use of their funds. For these reasons I have formed the conclusion that the Relevant Charges are, as the Banks submit, charges that they require their customers to agree to pay as part of the price or remuneration for the package of services that they agree to supply in exchange. My conclusions accord with those of Lord Walker and, for the reasons that he gives as well as my own, I would allow this appeal. I have not found this an easy case and I do not find the resolution of the narrow issue before the court to be acte clair. I agree, however, that it would not be appropriate to refer the issue to the European Court under Article 234. I do not believe any challenge to the fairness of the Relevant Terms has been made on the basis that they cause the overall package of remuneration paid by those in debit to be excessive having regard to the package of services received in exchange. In these circumstances the basis on which I have answered the narrow issue would seem to render that issue academic. It may be that, if and when the OFT challenges the fairness of the Relevant Terms, issues will be raised that ought to be referred to Luxembourg. That stage has not yet been reached. LADY HALE For the reasons given by Lord Walker and Lord Mance, I too would allow this appeal and make the declaration proposed by Lord Walker. I would only add that, should this or any other Parliament be minded to take up the invitation given in the last paragraph of Lord Walkers judgment, it may not be easy to find a satisfactory solution. The banks may not be the most popular institutions in the country at present, but that does not mean that their methods of charging for retail banking services are necessarily unfair when viewed as a whole. As a very general proposition, consumer law in this country aims to give the consumer an informed choice rather than to protect the consumer from making an unwise choice. We buy all sorts of products which a sensible person might not buy and some of which are not good value for the money. We do so with our eyes open because we want the product in question more than we want the money. Should financial services be treated differently from other goods and services? Or is the real problem that we do not have a real choice because the suppliers all offer much the same product and do not compete on some of their terms? This is the situation here. But it is not clear to me whether the proper solution is to find some way of forcing the suppliers to compete with one another in the terms they offer or whether the solution is to condemn one particular model of charging for those services. Fortunately, however, that is for Parliament and not for this Court. LORD MANCE Council Directive 93/13/EEC of 5 April 1993 and The Unfair Terms in Consumer Contracts Regulations 1999 (S.I. no. 2083), which implement the Directive domestically, both relate to unfair terms in contracts concluded between a seller or [a] supplier and a consumer. They make the validity of a contractual term which has not been individually negotiated subject generally to the criterion of fairness (defined by reference to whether contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer). This appeal concerns the exception to this rule, provided in Article 4(2) of the Directive and Regulation 6(2). It is not suggested that there is any material difference between these two provisions. As Regulation 6(2) puts it: In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate: to the definition of the main subject matter of the (a) contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange. Adequacy (the word also used in the Directive) means appropriateness or reasonableness (in amount). This appeal is concerned with Relevant Charges in the form of unpaid item charges, paid item charges, overdraft excess charges and guaranteed paid item charges levied when a customer gives instructions or undertakes a transaction without having sufficient funds to back it. The Office of Fair Trading (OFT) has written to various banks expressing concerns about the fairness of the terms agreed by the banks with their customers so far as they provide for payment of Relevant Charges. The question for decision is whether the OFT would be entitled to challenge the fairness of such terms under regulation 12. It is now accepted that such terms are not individually negotiated within regulation 5(1). But it is also common ground (except in the case of four banks in certain specific and minor respects) that they are in plain intelligible language within regulation 6(2). The issue is whether the Relevant Charges or the agreement to pay them constitute price or remuneration in exchange for the supply of services within regulation 6(2). If they do, then any challenge to their fairness based on their appropriateness in relation to such services is excluded under regulation 6(2). Any assessment based on matters not relating to the appropriateness in amount of the price or remuneration is not excluded by regulation 6(2)(b). This regulation is clearer than its predecessor (regulation 3(2) of the 1994 Regulations) which suggested grammatically that it was only a term which . concerns the appropriateness of the price or remuneration that was immune from challenge (language reflected in some of the reasoning in Director General of Fair Trading v First National Bank plc [2002] 1 AC 481, below). The parties have in their written cases and oral submissions identified two broad issues for determination. The first concerns the proper interpretation of regulation 6(2)(b), the second whether the Relevant Charges fall within the scope of that regulation, properly interpreted. The first issue is one of European law. As to the second, however, no question of European law is involved in the determination of the relevant circumstances. The parties also agree that no such question is in this case involved in applying the regulation, properly interpreted, to the circumstances including identifying the price or remuneration in exchange for which goods or services are to be supplied. European Court of Justice authority for this differentiation appears to be limited to the assessment of unfairness under articles 3 and 4(1) of the Directive (regulations 5 and 6(1) of the Regulations): Freiburger Kommunalbauten GmbH Baugesellschaft & Co. KG v Ludger Hofstetter and Ulrike Hofstetter (Case C 237/02); but I accept its correctness in principle. Since the Directive and Regulations are concerned with terms in contracts, it is first of all necessary to identify the relevant contracts. This is a matter about which the judge, Andrew Smith J, and the Court of Appeal took different views, although again it is not suggested that it raises on the facts of this case any particular issue of European law. The banks primary case is that the relevant contracts are the contracts for an overall package of banking facilities made by the banks with their customers. Andrew Smith J rejected this analysis as unnatural: payments by way of Relevant Charges could not be said to be paid in exchange for services supplied when an account is in credit; and the description free if in credit connoted that there was no price to be paid when an account was in credit (paras. 398 9). Furthermore, if the relevant contract was taken to be the overall package, the Relevant Charges would represent no more than part of the price or remuneration, and an assessment of the fairness of such charges as against the package of services would be beside the point and would not intrude upon the essential bargain intended to be protected from assessment (para. 400). There is in my opinion a flaw in this reasoning. It is not comparing like with like. Viewing the matter at the level of the banking contracts, the comparison is between, on the one hand, the package of services offered by the banks (some or all of which may or may not be used by any particular customer) and, on the other, the customers commitment to pay such charges as may arise from whatever facilities he does use. At this level, the banks case is that price or remuneration is or includes the customers potential liability for charges, rather than the payments which he or she has actually to make if and when such charges are incurred. In my opinion the Court of Appeal was right in para. 97 of its judgment to identify the relevant contract as being in the first instance the banking contract for an overall package of facilities. That is the contract in which the Relevant Charges appear and were agreed. Further, any challenge to the fairness of a term must be to its fairness in the context of the relevant contract in which it appears. It is beside the point if it is not. If, on a proper analysis, the customers potential liability for the Relevant Charges is the or part of the price or remuneration in exchange for which the overall package of banking services is supplied, and it is challenged on the ground that it makes such price or remuneration disproportionate overall, then regulation 6(2)(b) excludes the challenge. If there is no challenge to the overall proportionality of the overall price or remuneration of the package, then I fail to see how a challenge to the proportionality of the Relevant Charges in relation to the cost of providing particular services in isolation can be admissible or relevant. A term which is proportionate in context cannot become disproportionate viewed out of context. It is true that Relevant Charges are only incurred when a customer, either deliberately or inadvertently, gives an instruction or enters into a transaction, by which as a matter of law and contract he or she requests the bank to provide overdraft facilities. So, each time such a request is made and acted upon (even if only with the result that the request is declined), it is possible to identify a more developed contractual relationship as arising. Under that relationship, the Relevant Charges become payable in respect of the request (although not, the judge thought, in exchange for any services provided in consequence of the request). I do not however consider that this relationship can be the contract to which the Directive and Regulations refer. If the agreement to incur the Relevant Charges is part of an overall package contract, its vulnerability to challenge and, if permissible, any assessment of its fairness under the Directive and Regulations must, as I have said, depend upon an analysis of such agreement as part of the package contract. Otherwise, as Mr Sumption pointed out, a customer could challenge each separate part of a package in isolation, although as a whole the price or remuneration charged was unchallengeable. Issues arise under two heads: the first, the proper interpretation of Article 4(2) and Regulation 6(2) (I shall for convenience generally refer only to the latter); and the second, the application on the facts of whatever is that proper interpretation. As to the first, it is common ground that not every provision for payment contained in a contract for the supply of goods or services is rendered immune from scrutiny under Regulation 6(2). There can be payments which do not constitute either price or remuneration of goods or services supplied in exchange. Further, payments which do constitute price or remuneration in this sense can be challenged as unfair on grounds which do not relate to their appropriateness in amount as against the goods or services supplied in exchange. Heads (d), (e), (f) and (l) in the grey list of terms set out in Schedule 2 to the Regulations fall within one or both categories. Director General of Fair Trading v First National Bank plc [2002] 1 AC 481 provides another example. In the First National Bank case, the House was concerned with a provision in a regulated credit agreement for interest to continue at the credit agreement rate as against a borrower who had defaulted and against whom judgment had been entered for the principal and interest outstanding to judgment. The County Courts (Interest on Judgment Debts) Order 1991 (SI No 1991/1184) meant that there was no statutory claim for or right to post judgment interest. Hence, the rationale for including a continuing interest provision in the credit agreement. The case arose under Regulation 3(2) of the Unfair Terms in Consumer Contracts Regulations 1994, which provided that no assessment shall be made of the fairness of any term which . (b) concerns the adequacy of the price or remuneration, as against the goods or services sold or supplied. (This is slightly, though possibly materially, different wording to that of Regulation 6(2) of the 1999 Regulations which replaced it.) The House held that Regulation 3(2) did not apply, but went on to hold the term to have been fair. Passages from the speeches of Lord Bingham of Cornhill (para. 12) and Lord Steyn (para. 34) have been set out by Lord Walker. Both considered that clause 8 fell outside Regulation 3(2)(b), as a provision prescribing the consequences of default. Lord Bingham added in a sentence drawing on the particular wording of Regulation 3(2)(b) that It does not concern the adequacy of the interest earned by the bank as its remuneration but is designed to ensure that the bank's entitlement to interest does not come to an end on the entry of judgment. Lord Hope of Craigheads explanation is also relevant. He said (para. 43) that: Condition 8 is a default provision. The last sentence of it is designed to enable interest to be recovered on the whole of the amount due on default. That amount includes legal and other costs, charges and expenses, so it is not confined to the outstanding balance due by the borrower. I do not think that it can be said to be directly related to the price charged for the loan or to its adequacy. It is concerned instead with the consequences of the borrower's breach of contract. It sets out what is to happen if he fails to make the repayments to the bank as they fall due. I agree that regulation 3(2)(b) does not apply to it, and that its fairness as defined in regulation 4(1) of the 1994 Regulations must be assessed. This underlines the distinction between payments due in exchange for the original loan and the financial payments (including those relating to costs, charges and expenses) due on default under the clause. The decision of Gross J in Bairstow Eves London Central Ltd. vs Smith [2004] EWHC 263 (QB); [2004] 2 EGLR 25 provides another example of the same distinction. The contracts made by customers for an overall package of banking facilities have been described as on a free if in credit basis. The OFT submits that this indicates or suggests that the agreement to pay Relevant Charges cannot be regarded as the or a part of the price or remuneration in exchange for which banking facilities are supplied. The banks submit, on the contrary, that the clear corollary of free if in credit is that the services provided will not be free if the customer is not in credit. They ask rhetorically what other price or remuneration there is, if not the Relevant Charges. The OFTs response is that it is conceptually possible to have a contract for services without anything in exchange that counts in terms of regulation 6(2)(b) as either price or remuneration. That I would accept. The bank might (especially under a basic banking contract which did not allow any overdraft in any circumstances) be content to operate on the basis that its profit would come solely from its power to use money which customers deposited with or arranged to have transferred to it. That power follows from the banks ownership of money deposited with or transferred to it. (Further, since the deposit with or transfer to a bank of money is the main or part of the main subject matter of a banking contract, any assessment of the fairness of it or its legal consequences would appear to be excluded under regulation 6(2)(a), rather than (b).) Alternatively, the OFT suggests, without committing itself, that, if there is any price or remuneration under a free if in credit banking contract, it is more easily found in the customers agreement to pay overdraft interest. In accordance with general European legal principle, article 4(2) and regulation 6(2) are as exceptions to be construed narrowly. Nevertheless, the concepts of price or remuneration must, I think, be capable in principle of covering, under a banking contract, an agreement to make a payment in a particular event. The language of regulation 6(2)(b) is on its face therefore capable of covering a customers commitment, under the package contracts put before the House, to pay the Relevant Charges in the specified events. There is no reason why a customer should not be given free services in some circumstances, but, as a quid pro quo, be expected to pay for them in others. At various points the submissions before the House addressed the policy underlying the free if in credit system of charging. It is clear from the description free if in credit itself that the system is likely to involve significant elements of cross subsidy. Some customers (those remaining always or largely in credit) pay no or few charges, while others pay charges more regularly. Overall, around 30% of the banks income from their customers is derived from the Relevant Charges. According to the OFTs own Market Study of July 2008, 77% of customers surveyed who had incurred a Relevant Charge in the past 12 months had heard of such charges before they incurred one. The Relevant Charges levied on any particular customer greatly exceed the actual net cost to the bank of complying with the request(s) impliedly made by the customer leading to the incurring of such charges. But it is obvious on reading the charging structure that charges cannot be directly related to the actual costs of providing any particular service triggering them. There are of course other obvious elements of cross subsidy, even between customers who remain in credit. Customers who maintain large current accounts and receive no or limited interest on them subsidise in a sense customers who manage consistently to keep just in credit. Mr Jonathan Crow QC for the OFT made clear that the OFT does not contend that the element of cross subsidy provided by the Relevant Charges affects the question whether regulation 6(2)(b) applies. Regulation 6(2)(b) would apply if the banks simply decided to charge more for particular services in order to pay their directors more or to earn more for their shareholders. It cannot make any difference to its application if the banks decide to adopt a business model which charges more for one type of transaction in order to subsidise another. The OFTs case, essentially accepted by the Court of Appeal, is that the agreement to pay the Relevant Charges is not price or remuneration, because regulation 6(2)(b) is confined in scope to payments in exchange for sales or supplies on which payments the consumer can be taken to have focused and to which he can be taken truly to have consented. The Court of Appeal encapsulated this conclusion as import[ing] the notion of essential bargain into the construction of article 4(2) and into both paragraphs (a) and (b) of regulation 6(2) (para. 86). It added that the concept of the essential bargain flows naturally from the structure and purpose of the Directive because not every payment that a consumer makes falls within regulation 6(2)(b), and such a construction prevents regulation 6(2)(b) being construed too widely. It considered that its conclusion reflected the reasoning both in the travaux prparatoires and in the First National Bank case, which it interpreted as indicating that ancillary or incidental payment terms were not intended to be exempt from assessment for their adequacy under regulation 6(2) (paras. 64, 69 and 86). The considerations which the Court of Appeal saw as relevant to the broad test which it thus identified were as follows (para. 90): terms the standard 90. The above analysis suggests that the following considerations are relevant to this broad question, together no doubt with many others, depending upon the facts of the particular case: i) The nature of the services provided as a whole and the manner and term in which documentation is provided to consumers. ii) The quantum of the particular payment, the goods or services to which it is said to relate and the other payments required under the contract. iii) In order to be 'price or remuneration' within the meaning of article 4(2) the payment provision must not be ancillary to the central bargain between the consumer and supplier. Along this sliding scale: a) if the payment obligations are directly negotiated between the consumer and supplier they will not be subject to assessment for fairness under the Directive; b) the more closely related the payment term is to the essential bargain between the parties, the more likely it is to fall within the exception in article 4(2); but c) the more ancillary the payment term is and the less likely it is to come to the direct attention of the consumer at the time the contract is entered into, the less likely it is to be within the concept of 'price or remuneration' within the meaning of the Directive. One difficulty about the Court of Appeals reasoning lies in its reliance on the concept of negotiation or indeed bargain, as in para. 90(iii)(a) and (b) above and elsewhere, repeatedly, in its judgment: see paras. 64, 87, 107 and 109 (negotiation) and 86, 90, 94 95 and 106 (bargain). The Court of Appeal suggested that the absence of any negotiation or bargain or of any ability to negotiate or bargain militated strongly against a conclusion that a particular charge constituted (part of) the price or remuneration. However, the Directive and Regulations are only concerned with contractual terms which have not been individually negotiated. Another difficulty is that the Court of Appeals broad test, and the sliding scale of relevant considerations introduced by para. 90, convert the apparently simple language of regulation 6(2)(b) (or article 4(2)) into a complex and uncertain value judgment. This is rendered even more complex by the Court of Appeals further conclusion that the judgment should be made by the court through the eyes of the typical consumer (para. 91). This led to considerable argument before the House as to who might be regarded as the typical consumer. Was it relevant to look at the whole body of customers, or at those who would or might be likely to incur Relevant Charges? Before the House Mr Crow for the OFT summarised three main considerations on which the OFT relied to determine whether a payment was part of the essential bargain, namely whether the payment was (a) ancillary, (b) readily recognisable or visible by a typical customer and (c) one arising in the normal performance of the contract. The Directive was the result of an iterative process between the Commission, European Parliament and Council of Ministers. The outcome was, as not uncommonly happens, significantly different from that originally proposed. The Commissions original proposal of 24 July 1990 (COM(90) 322 fin) and its Explanatory Memorandum of 3 September 1990 were drafted with a view to regulating by reference to the test of fairness every contract between a consumer and a party acting in the course of his trade, business or profession, whether the contract is a take or leave it contract, or is in standard form or is negotiated individually. The proposal was the subject of a critique by Hans Erich Brandner and Peter Ulmer (The Community Directive on Unfair Terms in Consumer Contracts: some critical remarks on the proposal submitted by the EC Commission, (1991) 28 CMLR 647); these authors argued that any control by the courts or administrative authorities of the reasonableness or equivalence of the relationship between the price and the goods or services provided was anathema to the fundamental tenets of a free market economy, and that the focus should be on improving transparency in this area, the requirement of transparency being directed against terms which may conceal the principal obligations or the price and thus make it difficult for the consumer to obtain an overview of the market and to make what would (relatively speaking) be the best choice in a given situation (p.656). The Committee on Legal Affairs and Citizens Rights of the European Parliament issued a report on 9 April 1991 (A3 0091/91), which suggested the amendment of the proposal to exclude individually negotiated contract terms. The Economic and Social Committee (consulted by the Council of Ministers) issued its opinion on 24 April 1991, suggesting both that individually negotiated contractual terms required different treatment and that an additional criterion of unfairness should be introduced, namely the non transparency of a contract term (OJ No C 159, 17.6.1991). The European Parliament repeated its stance that individually negotiated terms should fall outside the proposal, and proposed that terms containing clauses which are unreadable or likely to be misunderstood by consumers because they are not in plain language should be regarded as unfair (OJ No C 326, 16.12.1991). The Commission on 5 March 1992 responded with an amended proposal (COM(92) 66 fin). This distinguished between the treatment of non negotiated and negotiated terms, but would have continued to regulate the latter where imposed upon the consumer as a result of the seller/suppliers economic power or the consumers economic and/or intellectual weakness. The amended proposal also contained a requirement (in terms which become part of the final article 5) that all written terms offered to the consumer in writing must always be drafted in plain, intelligible language. On 22 September 1992 the Council of Ministers adopted its Common Position on the basis of article 100a of the Treaty (8406/92). This restricted the proposal to contractual terms which had not been individually negotiated. It introduced article 4(2) in its final form and accepted the requirement under article 5 that all written terms offered to the consumer in writing must always be drafted in plain, intelligible language. The accompanying reasons explained in relation to article 4 that the new wording . is intended to clarify the procedures for assessing the unfairness of terms and to specify their scope while excluding anything resulting directly from the contractual freedom of the parties (e.g. quality/price relationship). The Parliament accepted the Councils Common Position on 16 December 1992, and the Directive was finalised on this basis. The legislative history shows therefore an extensive process of development, during which the original proposal was replaced by an amended proposal which was itself very largely amended. The measure ultimately agreed was confined to non negotiated terms. It stressed the need for transparency (plain, intelligible language) in relation to all such terms. But, provided such transparency existed, any assessment of the fairness of such terms was excluded in relation to the definition of the main subject matter of the contract and the adequacy of the price and remuneration . as against the services or goods supplied in exchange . The general approach and the rationale as explained in the Councils Reasons match those of Brandner and Ulmer in their article cited above. It would re write the legislation to read article 4(2) of the Directive or regulation 6(2) as if they introduced as the test a complex enquiry as to whether or how far consumers had actually exercised contractual freedom when agreeing upon a price or remuneration stated in plain and intelligible language in a contract into which they entered. Article 4(2) and regulation 6(2) can loosely be described as being concerned with the assessment of core terms (see e.g. First National Bank). But that is on the basis that price and remuneration always fall within them. The Court of Appeal erred in introducing a yet further restriction, whereby it would be only essential core terms which could attract immunity. In my opinion, the identification of the price or remuneration for the purposes of article 4(2) and regulation 6(2) is a matter of objective interpretation for the court. The court should no doubt read and interpret the contract in the usual manner, that is having regard to the view which the hypothetical reasonable person would take of its nature and terms. But there is no basis for requiring it to do so by attempting to identify a typical consumer or by confining the focus to matters on which it might conjecture that he or she would be likely to focus. The consumers protection under the Directive and Regulations is the requirement of transparency on which both insist. That being present, the consumer is to be assumed to be capable of reading the relevant terms and identifying whatever is objectively the price and remuneration under the contract into which he or she enters. A contract may of course require ancillary payments to be made which are not part of the price or remuneration for goods or services to be supplied under its terms. The First National Bank and Bairstow Eves cases illustrate the distinction by reference to default terms. Andrew Smith J considered and rejected a submission that the Relevant Charges constituted in reality no more than penalties, disguised (at least in the case of all the terms save those of Nationwide Building Society) by drafting which expressed the charges as arising in respect of services to be provided by the banks. He held that, far from being inappropriate or artificial, the language of request reflected the true legal analysis of a situation where the customer gives an instruction or enters into a transaction for which insufficient funds exist in his or her account (paras. 75 76). There has been no appeal against that conclusion, and the fact that the relevant contractual arrangement is an overall package contract made between a bank and each customer tends in my view to confirm the conclusion. A customer making such a contract accepts that the free if in credit system involves substantial charges if instructions are given or transactions entered into which involve putting the account into debit. While the incurring of Relevant Charges is no doubt something that customers would like to avoid, it is a clearly explained and, objectively viewed, very important feature of the overall package. The OFTs case that such charges are not readily visible or recognisable as the price is in my view untenable. In so far as it relies on the consideration that the charges are out of proportion to the actual cost of rendering any services in respect of an instruction or transaction which would involve an (or an increase in an) unauthorised overdraft, it also presents the paradox, that the higher the Relevant Charges, the less visible or recognisable they are said to be as the price of the overall package. Taking the view that I do of the meaning of both the Directive and the Regulations, the question arises whether it is nevertheless incumbent on us to refer the interpretation of the Directive to the Court of Justice. Under CILFIT v Ministry of Health (Case 283/81; [1982] ECR 3415) and in the absence of any prior Court of Justice authority, this depends upon (a) whether the question is relevant to the outcome of the case and (b) whether the correct application of Community law is so obvious as to leave no scope for reasonable doubt. In the latter connection we have to ask ourselves whether the answer we consider correct would be equally obvious to the courts of other Member States and to the Court of Justice itself; and in this regard we have to bear in mind the fact that Community legislation is drafted in different languages which may convey different meanings to different readers, that the Community concepts it uses (here price and remuneration) are autonomous concepts and that every provision of Community law must be placed in the context of Community law as a whole. In the present case, we are concerned with a relatively simple sentence, using simple and basic concepts, and the scope for different readings of different language texts seems very limited. The complex and unpredictable value judgment involved in the Court of Appeals approach was based in large measure upon a clear error, in treating the existence or absence of negotiation as significant in a context dealing by definition only with non negotiated terms. The suggested test of what is not . ancillary to the main bargain involves a restatement of the language of the Directive and Regulations; that language treats the price or remuneration as axiomatically part of the core bargain and so immune from scrutiny for reasonableness. Bearing in mind the general Community aim of legal certainty, the likelihood of the Court of Justice (or any other Member States courts) accepting the Court of Appeals approach to the interpretation of article 4(2) seems to me remote indeed. I would regard the position as acte clair and not as requiring a reference. However, if one takes a different view on whether the position is acte clair, there remains the question of relevance. Eliminating the Court of Appeals clear error in introducing as part of the test whether the relevant term had been directly negotiated, and assuming that the Court of Appeal was generally right in adopting as a test whether the term was not . ancillary to the main bargain, the question would be whether the Court was right to treat the terms of the package contracts relating to the Relevant Charges as ancillary terms, rather than as part of the agreed price or remuneration in exchange for which the banks undertook to provide their whole package of services. That question would involve the application of the Directive and Regulations, which is, as I have said, a matter for domestic, not European, law. The starting point would be that the banks customers committed themselves, under plain, intelligible language, to pay the Relevant Charges in respect of instructions given or transactions entered into without sufficient funds and in return for the package of services offered by the banks. The Court of Appeal identified a series of considerations, relating to the nature of personal current accounts, the contingent circumstances in which such instructions or transactions could come about, the uneconomic nature (from the customers viewpoint) of the Relevant Charges and the absence of any marketing of the banks services by reference to such Charges (para. 99). It summarised the incurring of Relevant Charges as being simply outside (or outwith) the ordinary conduct of the contractual relationship (para. 99(xv)). Mr Crow repeated and expanded on these points in his case (para. 81) and in his oral submissions before the House; he suggested that, if any price or remuneration could be identified at all, then the bank interest charged on any unauthorised overdraft was more readily recognisable as the payment made in exchange for the overdraft (case, para. 81(r)). But there is no reason why the price or remuneration payable for a package of services should not consist of a contingent liability. The uneconomic nature of the Relevant Charges from the customers viewpoint constitutes the importance of the charges from the banks viewpoint, and the plain intelligible language of the banking contracts made evident that there must be a considerable element of cross subsidy in respect of customers while they remained in credit. Like Lord Walker, I would therefore disagree with the Court of Appeals application of its test, even had I considered that test to be correct so far as it focused on what was or was not ancillary to the main bargain. In these circumstances, it would be unnecessary to make a reference, even if the view were to be taken that the meaning of price and remuneration in article 4(2) of the Directive is not acte clair. I would therefore allow the appeal and grant the relief proposed by Lord Walker in paragraph 51. I would also endorse Lord Walkers final paragraph. LORD NEUBERGER I also would allow this appeal for the reasons given by Lord Walker and Lord Mance, and would grant the relief proposed by Lord Walker in paragraph 51. I also agree with Lord Phillips, whose reasons are, I think essentially the same as those of Lord Walker and Lord Mance. On the one issue on which there may be some disagreement, namely whether the resolution of the dispute as to the interpretation of article 4(2) is acte clair, I share Lord Mances scepticism as to whether the Court of Justice would adopt the meaning accepted by the Court of Appeal. However, like Lord Phillips, I consider that it is possible that the Court of Justice would adopt such an interpretation, and therefore, if the resolution of that issue were essential to the determination of this appeal, I would, very reluctantly, have concluded that a reference was required. However, as he says, it is unnecessary for the issue to be resolved for the purpose of this appeal as explained by Lord Walker in para 50, and by Lord Mance in paras 116 and 117. |
Modern litigation rarely raises truly fundamental issues in the law of contract. This appeal is exceptional. It raises two of them. The first is whether a contractual term prescribing that an agreement may not be amended save in writing signed on behalf of the parties (commonly called a No Oral Modification clause) is legally effective. The second is whether an agreement whose sole effect is to vary a contract to pay money by substituting an obligation to pay less money or the same money later, is supported by consideration. MWB Business Exchange Centres Ltd operates serviced offices in central London. On 12 August 2011, Rock Advertising Ltd entered into a contractual licence with MWB to occupy office space at Marble Arch Tower in Bryanston Street, London W1, for a fixed term of 12 months commencing on 1 November 2011. The licence fee was 3,500 per month for the first three months and 4,333.34 per month for the rest of the term. Clause 7.6 of the agreement provided: This Licence sets out all of the terms as agreed between MWB and Licensee. No other representations or terms shall apply or form part of this Licence. All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect. On 27 February 2012, Rock Advertising had accumulated arrears of licence fees amounting to more than 12,000. Mr Idehen, the companys sole director, proposed a revised schedule of payments to Natasha Evans, a credit controller employed by MWB. The effect of the revised schedule was to defer part of the February and March payments, and to spread the accumulated arrears over the remainder of the licence term. Account being taken of the implicit interest cost of the deferral, Rocks covenant to pay would be worth slightly less to MWB under Mr Idehens proposal. There was then a discussion between them on the telephone, in the course of which Mr Idehen contended that Ms Evans had agreed to vary the licence agreement in accordance with the revised schedule. Ms Evans denied this. She proceeded to treat the revised schedule as a proposal in a continuing negotiation, and took it to her boss. He rejected it. On 30 March 2012, MWB locked Rock Advertising out of the premises on account of its failure to pay the arrears, and terminated the licence with effect from 4 May 2012. They then sued for the arrears. Rock Advertising counterclaimed damages for wrongful exclusion from the premises. The fate of the counterclaim, and therefore of the claim, turned on whether the variation agreement was effective in law. The case came before Judge Moloney QC, in the Central London County Court, who decided it in favour of MWB. He found that an oral agreement had been made with Ms Evans to vary the licence in accordance with the revised schedule, and that she had ostensible authority to make such an agreement. He held (i) that the variation agreement was supported by consideration, because it brought practical advantages to MWB, in that the prospect of being paid eventually was enhanced; but (ii) that the variation was ineffective because it was not recorded in writing signed on behalf of both parties, as required by clause 7.6. MWB were therefore entitled to claim the arrears without regard to it. The Court of Appeal (Arden, Kitchin and McCombe LJJ) overturned him: [2017] QB 604. They agreed that the variation was supported by consideration, but they considered that the oral agreement to revise the schedule of payments also amounted to an agreement to dispense with clause 7.6. It followed that MWB were bound by the variation and were not entitled to claim the arrears at the time when they did. disagreed, namely the legal effect of clause 7.6. At common law there are no formal requirements for the validity of a simple contract. The only exception was the rule that a corporation could bind itself only under seal, and what remained of that rule was abolished by the Corporate Bodies Contracts Act 1960. The other exceptions are all statutory, and none of them applies to the variation in issue here. The reasons which are almost invariably given for treating No Oral Modification clauses as ineffective are (i) that a variation of an existing contract is itself a contract; (ii) that precisely because the common law imposes no requirements of form on the making of contracts, the parties may agree informally to dispense with an existing clause which imposes requirements of form; and (iii) they must be taken to have intended to do this by the mere act of agreeing a variation informally when the principal agreement required writing. All of these points were made by Cardozo J in a well known passage from his judgment in the New York Court of Appeals in Beatty v Guggenheim Exploration Co (1919) 225 NY 380, 387 388: It is convenient to start with the question on which the courts below Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. The prohibition of oral waiver, may itself be waived. Every such agreement is ended by the new one which contradicts it (Westchester F Ins Co v Earle 33 Mich 143, 153). What is excluded by one act, is restored by another. You may put it out by the door; it is back through the window. Whenever two men contract, no limitation self imposed can destroy their power to contract again . Part 2 of the United States Uniform Commercial Code introduced a general requirement of writing for contracts of sale above a specified value, coupled with a conditional provision giving effect to No Oral Modification clauses: see sections 2 201, 2 209. But before that there was long standing authority in support of the rule stated by Cardozo J in New York and other jurisdictions of the United States. It has also been applied in Australia: Liebe v Molloy (1906) 4 CLR 347 (High Court); Commonwealth v Crothall Hospital Services (Aust) Ltd (1981) 54 FLR 439, 447 et seq; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1. And in Canada: Shelanu Inc v Print Three Franchising Corpn (2003) 226 DLR (4th) 577, para 54 per Weiler JA, citing Colautti Construction Ltd v City of Ottawa (1984) 9 DLR (4th) 265 (CA) per Cory JA. A corresponding principle is applied in Germany: A Mller, Protecting the Integrity of a Written Agreement (2013), 300 305. The English cases are more recent, and more equivocal. In United Bank Ltd v Asif (CA, unreported, 11 Feb 2000), Sedley LJ refused leave to appeal from a summary judgment on the ground that it was incontestably right that in the face of a No Oral Modification clause no oral variation of the written terms could have any legal effect. The Court of Appeal at an inter partes hearing cited his view and endorsed it. Two years later, in World Online Telecom Ltd v I Way Ltd [2002] EWCA Civ 413, Sedley LJs view had softened. He held (para 12) that it was a sufficient reason for refusing summary judgment that the law on the topic is not settled. In Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2013] EWHC 2118 (Comm), para 273 Gloster LJ declined to decide the point but incline[d] to the view that such clauses were ineffective. The same view was expressed, more firmly, but obiter, by Beatson LJ in Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] 1 CLC 712, paras 101 107, with the support of Moore Bick and Underhill LJJ. On the other side of this debate, there is a substantial body of recent academic writing in support of a rule which would give effect to No Oral Modification clauses according to their terms: see Jonathan Morgan, Contracting for self denial: on enforcing No oral modification clauses (2017) 76 CLJ 589; E McKendrick, The legal effect of an Anti oral Variation Clause, (2017) 32 Journal of International Banking Law and Regulation, 439; Janet OSullivan, Unconsidered Modifications (2017) 133 LQR 191. requiring specified formalities to be observed for a variation. In my opinion the law should and does give effect to a contractual provision The starting point is that the effect of the rule applied by the Court of Appeal in the present case is to override the parties intentions. They cannot validly bind themselves as to the manner in which future changes in their legal relations are to be achieved, however clearly they express their intention to do so. In the Court of Appeal, Kitchin LJ observed that the most powerful consideration in favour of this view is party autonomy: para 34. I think that this is a fallacy. Party autonomy operates up to the point when the contract is made, but thereafter only to the extent that the contract allows. Nearly all contracts bind the parties to some course of action, and to that extent restrict their autonomy. The real offence against party autonomy is the suggestion that they cannot bind themselves as to the form of any variation, even if that is what they have agreed. There are many cases in which a particular form of agreement is prescribed by statute: contracts for the sale of land, certain regulated consumer contracts, and so on. There is no principled reason why the parties should not adopt the same principle by agreement. The advantages of the common laws flexibility about formal validity are that it enables agreements to be made quickly, informally and without the intervention of lawyers or legally drafted documents. Nevertheless, No Oral Modification clauses like clause 7.6 are very commonly included in written agreements. This suggests that the common laws flexibility has been found a mixed blessing by businessmen and is not always welcome. There are at least three reasons for including such clauses. The first is that it prevents attempts to undermine written agreements by informal means, a possibility which is open to abuse, for example in raising defences to summary judgment. Secondly, in circumstances where oral discussions can easily give rise to misunderstandings and crossed purposes, it avoids disputes not just about whether a variation was intended but also about its exact terms. Thirdly, a measure of formality in recording variations makes it easier for corporations to police internal rules restricting the authority to agree them. These are all legitimate commercial reasons for agreeing a clause like clause 7.6. I make these points because the law of contract does not normally obstruct the legitimate intentions of businessmen, except for overriding reasons of public policy. Yet there is no mischief in No Oral Modification clauses, nor do they frustrate or contravene any policy of the law. The reasons advanced in the case law for disregarding them are entirely conceptual. The argument is that it is conceptually impossible for the parties to agree not to vary their contract by word of mouth because any such agreement would automatically be destroyed upon their doing so. The difficulty about this is that if it is conceptually impossible, then it cannot be done, short of an overriding rule of law (presumably statutory) requiring writing as a condition of formal validity. Yet it is plain that it can. There are legal systems which have squared this particular circle. They impose no formal requirements for the validity of a commercial contract, and yet give effect to No Oral Modification clauses. The Vienna Convention on Contracts for the International Sale of Goods (1980) has been ratified by 89 states, not including the United Kingdom. It provides by article 11 that a contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. Nonetheless, article 29(2) provides: A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct. Similarly, article 1.2 of the UNIDROIT Principles of International Commercial Contracts, 4th ed (2016), provides that nothing in these Principles requires a contract, statement or any other act to be made in or evidenced by a particular form. Yet article 2.1.18 provides that A contract in writing which contains a clause requiring any modification or termination by agreement to be in a particular form may not be otherwise modified or terminated. However, a party may be precluded by its conduct from asserting such a clause to the extent that the other party has reasonably acted in reliance on that conduct. These widely used codes suggest that there is no conceptual inconsistency between a general rule allowing contracts to be made informally and a specific rule that effect will be given to a contract requiring writing for a variation. The same point may be made in a purely English context by reference to the treatment of entire agreement clauses, which give rise to very similar issues. Entire agreement clauses generally provide that they set out the entire agreement between the parties and supersede all proposals and prior agreements, arrangements and understandings between the parties. An abbreviated form of the clause is contained in the first two sentences of clause 7.6 of the agreement in issue in this case. Such clauses are commonly coupled (as they are here) with No Oral Modification clauses addressing the position after the contract is made. Both are intended to achieve contractual certainty about the terms agreed, in the case of entire agreement clauses by nullifying prior collateral agreements relating to the same subject matter. As Lightman J put it in Inntrepreneur Pub Co (GL) v East Crown Ltd [2000] 2 Lloyds Rep 611, para 7: The purpose of an entire agreement clause is to preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty. The entire agreement clause obviates the occasion for any such search and the peril to the contracting parties posed by the need which may arise in its absence to conduct such a search. For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that accordingly any promises or assurances made in the course of the negotiations (which in the absence of such a clause might have effect as a collateral warranty) shall have no contractual force, save insofar as they are reflected and given effect in that document. The operation of the clause is not to render evidence of the collateral warranty inadmissible in evidence as is suggested in Chitty on Contract 28th ed Vol 1 para 12 102: it is to denude what would otherwise constitute a collateral warranty of legal effect. But what if the parties make a collateral agreement anyway, and it would otherwise have bound them? In Brikom Investments Ltd v Carr [1979] QB 467, 480, Lord Denning MR brushed aside an entire agreement clause, observing that the cases are legion in which such a clause is of no effect in the face of an express promise or representation on which the other side has relied. In fact there were at that time no cases in which the courts had declined to give effect to such clauses, and the one case which Lord Denning cited (J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078) was really a case of estoppel and concerned a different sort of clause altogether. In Ryanair Ltd v SR Technics Ireland Ltd [2007] EWHC 3089 (QB), at paras 137 143, Gray J treated Lord Dennings dictum as a general statement of the law. But in my view it cannot be supported save possibly in relation to estoppel. The true position is that if the collateral agreement is capable of operating as an independent agreement, and is supported by its own consideration, then most standard forms of entire agreement clause will not prevent its enforcement: see Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2007] L & TR 26 (CA), at para 43, and North Eastern Properties Ltd v Coleman [2010] 1 WLR 2715 at paras 57 (Briggs J), 82 83 (Longmore LJ). But if the clause is relied upon as modifying what would otherwise be the effect of the agreement which contains it, the courts will apply it according to its terms and decline to give effect to the collateral agreement. As Longmore LJ observed in the North Eastern Properties Ltd case, at para 82: if the parties agree that the written contract is to be the entire contract, it is no business of the courts to tell them that they do not mean what they have said. Thus in McGrath v Shah (1989) 57 P & CR 452, 459, John Chadwick QC (sitting as a Deputy Judge of the Chancery Division) applied an entire agreement clause in a contract for the sale of land, where the clause served the important function of ensuring that the contract was not avoided under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 on the ground that the terms were not all contained on one document. Outside the domain, in some ways rather special, of contracts for the sale of land, in Deepak Fertilisers and Petrochemical Corpn v ICI Chemicals & Polymers Ltd [1998] 2 Lloyds Rep 139, 168 (Rix J) and (1999) 1 Lloyds Rep 387, para 34 (CA), both Rix J and the Court of Appeal treated the question as one of construction and gave effect to the clause according to its terms. Lightman J did the same in the Inntrepreneur case. Since then, entire agreement clauses have been routinely applied: see Matchbet Ltd v Openbet Retail Ltd [2013] EWHC 3067 (Ch), para 112; Mileform Ltd v Interserve Security Ltd [2013] EWHC 3386 (QB), paras 93 101; Moran Yacht & Ship Inc v Pisarev [2016] 1 Lloyds Rep 625 (CA), para 18; First Tower Trustees Ltd v CDS (Superstores International) Ltd [2017] 4 WLR 73, paras 17, 26; Adibe v National Westminster Bank Plc [2017] EWHC 1655 (Ch), para 29; Triple Point Technology Inc v PTT Public Co Ltd [2017] EWHC 2178 (TCC), para 68; ZCCM Investments Holdings Plc v Konkola Copper Mines Plc [2017] EWHC 3288 (Comm), para 21. If, as I conclude, there is no conceptual inconsistency between a general rule allowing contracts to be made informally and a specific rule that effect will be given to a contract requiring writing for a variation, then what of the theory that parties who agree an oral variation in spite of a No Oral Modification clause must have intended to dispense with the clause? This does not seem to me to follow. What the parties to such a clause have agreed is not that oral variations are forbidden, but that they will be invalid. The mere fact of agreeing to an oral variation is not therefore a contravention of the clause. It is simply the situation to which the clause applies. It is not difficult to record a variation in writing, except perhaps in cases where the variation is so complex that no sensible businessman would do anything else. The natural inference from the parties failure to observe the formal requirements of a No Oral Modification clause is not that they intended to dispense with it but that they overlooked it. If, on the other hand, they had it in mind, then they were courting invalidity with their eyes open. The enforcement of No Oral Modification clauses carries with it the risk that a party may act on the contract as varied, for example by performing it, and then find itself unable to enforce it. It will be recalled that both the Vienna Convention and the UNIDROIT model code qualify the principle that effect is given to No Oral Modification clauses, by stating that a party may be precluded by his conduct from relying on such a provision to the extent that the other party has relied (or reasonably relied) on that conduct. In some legal systems this result would follow from the concepts of contractual good faith or abuse of rights. In England, the safeguard against injustice lies in the various doctrines of estoppel. This is not the place to explore the circumstances in which a person can be estopped from relying on a contractual provision laying down conditions for the formal validity of a variation. The courts below rightly held that the minimal steps taken by Rock Advertising were not enough to support any estoppel defences. I would merely point out that the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty for which the parties stipulated when they agreed upon terms including the No Oral Modification clause. At the very least, (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself: see Actionstrength Ltd v International Glass Engineering In Gl En SpA [2003] 2 AC 541, paras 9 (Lord Bingham), 51 (Lord Walker). I conclude that the oral variation which Judge Moloney found to have been agreed in the present case was invalid for the reason that he gave, namely want of the writing and signatures prescribed by clause 7.6 of the licence agreement. That makes it unnecessary to deal with consideration. It is also, I think, undesirable to do so. The issue is a difficult one. The only consideration which MWB can be said to have been given for accepting a less advantageous schedule of payments was (i) the prospect that the payments were more likely to be made if they were loaded onto the back end of the contract term, and (ii) the fact that MWB would be less likely to have the premises left vacant on its hands while it sought a new licensee. These were both expectations of practical value, but neither was a contractual entitlement. In Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, the Court of Appeal held that an expectation of commercial advantage was good consideration. The problem about this was that practical expectation of benefit was the very thing which the House of Lords held not to be adequate consideration in Foakes v Beer (1884) 9 App Cas 605: see in particular p 622 per Lord Blackburn. There are arguable points of distinction, although the arguments are somewhat forced. A differently constituted Court of Appeal made these points in In re Selectmove Ltd [1995] 1 WLR 474, and declined to follow Williams v Roffey. The reality is that any decision on this point is likely to involve a re examination of the decision in Foakes v Beer. It is probably ripe for re examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum. I would allow the present appeal and restore the order of Judge Moloney. LORD BRIGGS: I agree with Lord Sumption that this appeal should be allowed, on the ground that the No Oral Modification (NOM) provision in clause 7.6 of the Licence Agreement deprived the alleged oral agreement asserted by Rock Advertising of any binding force as a contractual variation. I also agree that, in those circumstances, it would not be desirable for this court to address the issue of consideration, for the reasons which he gives. I have however reached my conclusion about the NOM issue on different and rather narrower grounds than his, although I do not think that our differences in reasoning would have any significant consequences for the application of the common law, save perhaps on very unlikely facts. The starting point, as Lord Sumption says, is that NOM clauses are a frequently encountered, sensible provision in business agreements, which are recognised as effective in many legal codes around the world, such that the common law should give effect to them if it can. I need say nothing more than he does about their advantages. I also agree that the obstacle which has thus far stood in the way of their recognition in this and many other common law jurisdictions is mainly conceptual. Two (or more) persons may of course bind themselves contractually as to their future conduct, and that will prevail for as long as one of them desires that this regime should remain in place. But if they both (or all) agree, in some form recognised by the law, that they should no longer be bound, why should their previous agreement to the contrary stand in their way? While statute may, in the public interest, require certain formalities for the making of certain types of contract, the common law leaves the parties to choose their own, so long as the essential elements of offer, acceptance and consideration are observed. These matters are as applicable to the variation of an existing contract as they are to the making of a contract in the first place. This basic concept, that parties to a contract have complete freedom by further agreement to unbind themselves as to their future conduct, is in principle applicable not merely to their substantive mutual obligations, but also to any procedural restraints upon which they may agree, including restraints as to how they may vary their existing contractual relationship. It is therefore fully applicable to the constraint upon their future conduct imposed by a NOM clause. No one doubts that parties to a contract containing a NOM clause are at liberty thereafter to remove it from their bargain, temporarily or permanently, by a compliant written variation, following which it will not inhibit them from agreeing further variations purely orally. The critical questions for present purposes are, first: whether the parties can agree to remove a NOM clause from their bargain orally and, second: whether, if so, such an agreement will be implied where they agree orally upon a variation of the substance of their relationship (which the NOM clause would require to be in writing) without saying anything at all about the NOM clause. Must they be taken so to have agreed by the very fact that they have made the substantive variation orally? Lord Sumption would answer the first question in the negative, so that, for him, the second question would not arise. For the reasons which follow, I would answer the first question in the affirmative, but not (generally at least) the second. The outcome on the present facts is the same. In this case the alleged oral agreement to vary the Licence said nothing whatsoever about the NOM clause (of which both Mr Idehen and Ms Evans were probably entirely unaware), and I would not treat it as having been done away with by necessary implication. The result is that their alleged agreement as to the terms of a variation had no immediately binding force, any more than an agreement made subject to contract. This will probably be the outcome on any comparable or likely fact set since, leaving aside emergencies, once the parties focus on the obstacle presented by the NOM clause, they would almost certainly remove it by a simple written variation, or indeed make the whole of the substantive variation itself in writing. I must start by explaining why I have not been persuaded by Lord Sumptions analysis that I can surmount the conceptual problem that has thus far proved insuperable in most common law jurisdictions, as enunciated in the celebrated dictum of Cardozo J in Beatty v Guggenheim which Lord Sumption cites at para 7. His starting point is that to refuse to recognise the effect of a NOM clause is to override the parties intentions, so as to make it impossible for them validly to bind themselves as to the manner in which a change in their legal relations is to be achieved in the future. I respectfully disagree. For as long as either (or any) party to a contract containing a NOM clause wishes the NOM clause to remain in force, that party may so insist, and nothing less than a written variation of the substance will suffice to vary the rest of the contract (leaving aside estoppel). The NOM clause will remain in force until they both (or all) agree to do away with it. In particular it will deprive any oral terms for a variation of the substance of their obligations of any immediately binding force, unless and until they are reduced to writing, or the NOM clause is itself removed or suspended by agreement. That fully reflects the autonomy of parties to bind themselves as to their future conduct, while preserving their autonomy to agree to release themselves from that inhibition. There are of course statutes which require particular formalities for the making of certain types of contract, but they are binding because they are imposed by the legislature as part of the law of the land, and may only be released by the legislature. Of course private parties may agree upon a scheme of local law by which they (and even their successors in title) are in future to be bound, as in the case of certain types of covenants affecting the use of land, but that scheme of local law may be varied or abandoned by the same parties, by agreement. What is to my mind conceptually impossible is for the parties to a contract to impose upon themselves such a scheme, but not to be free, by unanimous further agreement, to vary or abandon it by any method, whether writing, spoken words or conduct, permitted by the general law. I recognise that there are a number of widely used codes of law, by which parties may be, or agree to be, bound, that do recognise NOM clauses as effective to deny any legal effect from subsequent oral variations of the contract incorporating such a code. If they form part of a national law, then they bind parties to a contract governed by that law in the same way as would an English statute. If they are simply part of a code chosen by the parties to govern their contractual relationship, they do not prevent the parties from expressly agreeing to depart from those codal restrictions, either generally or for a specific purpose. But such an agreed departure will not lightly be inferred, where the parties merely conduct themselves in a non compliant manner, for example by discussing and even reaching a consensus about a variation of the substance of their obligations purely orally, without express reference to the NOM clause. The effect of contracting in terms which incorporate such a code, where the code includes or recognises the effect of a NOM clause, is at least at the conceptual level no more or less effective than simply including a NOM clause in the contract. Nor have I found the entire agreement clause a useful analogy. It may well serve the same objective of promoting legal certainty as to what the agreement is but, as Lord Sumption explains, these clauses do not purport to bind the parties as to their future conduct. They leave the scope and the procedure for subsequent variation entirely unaffected. They therefore give rise to no conceptual difficulty of the type which affects a NOM clause. By contrast I fully agree with Lord Sumptions proposition that parties who orally agree the terms of a variation of the substance of their contractual relationship do not thereby (and without more) impliedly agree to dispense with the NOM clause. There is to my mind a powerful analogy with the way in which the law treats negotiations subject to contract. Where parties agree to negotiate (or declare that they are negotiating) under the subject to contract umbrella and, at the end of those negotiations, reach consensus ad idem supported by consideration sufficient (but for the umbrella) to give rise to a contract, no binding obligations thereby ensue unless or until they have made a formal written contract, or expressly agreed to dispense with that umbrella. Its abandonment will not be implied merely because they have reached full agreement, unless such an implication was necessary. Cumming Bruce LJ provides a concise summary of this principle in Cohen v Nessdale Ltd [1982] 2 All ER 97, 103 104 by reference (via a citation from Sherbrooke v Dipple (1980) 41 P & CR 173) to embedded dicta of Brightman J in Tevanon v Norman Brett (Builders) Ltd (1972) 223 EG 1945, 1947 in the following terms: Brightman J said that parties could get rid of the qualification of subject to contract only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied. [W]hen parties started their negotiations under the umbrella of the subject to contract formula, or some similar expression of intention, it was really hopeless for one side or the other to say that a contract came into existence because the parties became of one mind notwithstanding that no formal contracts had been exchanged. Where formal contracts were exchanged, it was true that the parties were inevitably of one mind at the moment before the exchange was made. But they were only of one mind on the footing that all the terms and conditions of the sale and purchase had been settled between them, and even then the original intention still remained intact that there should be no formal contract in existence until the written contracts had been exchanged. Cumming Bruce LJ then quoted Templeman LJ in Sherbrooke as saying: Brightman J thought parties could get rid of the qualification of subject to contract only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied. Necessity is in this context a strict test. It will, perhaps unfortunately, commonly be the case that the persons charged with the day to day performance of a business contract will, with full authority to do so, agree some variation in the manner in which it is to be performed, blissfully unaware that the governing contract has, buried away in the small print of standard terms, a NOM clause inserted by diligent lawyers anxious to minimise the risk of litigation about its terms. That will be arid ground for an implied term that the NOM clause, of which they were unaware, was agreed to be treated as done away with. Where however the orally agreed variation called for immediately different performance from that originally contracted for, before any written record of the variation could be made and signed, then necessity may lead to the implication of an agreed departure from the NOM clause, but the same facts would be equally likely to give rise to an estoppel, even if not. But that is far from the facts of this case, where there was no such urgency. In my view this more cautious recognition of the effect of a NOM clause, namely that it continues to bind until the parties have expressly (or by strictly necessary implication) agreed to do away with it, would give the parties most of the commercial benefits of certainty and the avoidance of abusive litigation about alleged oral variation for which its proponents contend. It would certainly do so in the present case. It would probably leave only those cases where the subject matter of the variation was to be, and was, immediately implemented, where estoppel and release of the NOM clause by necessary implication are likely to go hand in hand. While it might in theory also leave open the case where it is alleged that the parties did have the NOM clause in mind, and then agreed to do away with it orally, that seems to me to be so unlikely a story that a judge would usually have little difficulty in treating it as incredible (if denied), and therefore as presenting no obstacle to summary judgment on the contract in its unvaried form. In proposing this perhaps cautious solution to the problem thrown up by this case I am comforted by the perception that it represents an incremental development of the common law which accords more closely with the conceptual analysis adopted in most other common law jurisdictions, as Lord Sumption has described. By contrast the more radical solution which he proposes would involve a clean break with something approaching an international common law consensus, unsupported by any societal or other considerations peculiar to England and Wales. There may be cases where a pressing need to modernise the common law justifies such a break, perhaps in the expectation that other common law jurisdictions will in due course follow, but this case is not, in my opinion, one of them. |
This is a judgment in two appeals that this Court heard together. They raise issues as to the scope of the powers conferred by the Proceeds of Crime Act 2002 (POCA). They arise out of attempts by the respondent (SOCA), acting apparently on its own initiative, to deprive the first appellant (Mr Perry), together with members of his family or entities associated with them, of the fruits of serious criminal fraud for which Mr Perry has been convicted in Israel, wherever in the world those fruits may be found. SOCA intends to achieve this aim by invoking the powers of civil recovery conferred on the High Court by Part 5 of POCA. So far, however, it has not got beyond preliminary steps aimed at ensuring that the substantive relief which it seeks is effective. One of those steps has been obtaining a worldwide property freezing order in respect of property held by the appellants in appeal 0143. I shall call this the PFO appeal. The other step has been to obtain a disclosure order, under which notices have been given to the appellants in appeal 0182. I shall call this the DO appeal. It is logical to consider the PFO appeal first, for the result of this appeal will have some bearing on the DO appeal. THE PFO APPEAL Introduction and factual background Some of this introduction will be relevant to both appeals. The substantive relief that SOCA seeks consists of civil recovery orders in relation to property obtained through Mr Perrys unlawful conduct. In order to prevent the dissipation of that property SOCA has obtained a worldwide property freezing order pursuant to section 245A of POCA (in future all statutory references will be to POCA unless I state otherwise). Section 245A gives SOCA the power to seek a property freezing order where it is empowered to take proceedings for a civil recovery order. It is common ground that a property freezing order can only relate to property that can properly be made the subject of a civil recovery order. The appellants contend that, subject to a limited exception, a civil recovery order can only be made in respect of property that is within the territorial jurisdiction of the court making it. On this ground the appellants attack the validity of the property freezing order in so far as this extends to property outside that jurisdiction. Thus the important issue raised by the PFO appeal is the extent to which a recovery order can be made in respect of property outside the United Kingdom. Lea Perry is Mr Perrys wife and Tamar Greenspoon and Yael Perry are his daughters. Leadenhall Property Ltd is an Isle of Man company alleged to hold assets on behalf of Mr Perry. On 24 October 2007 Mr Perry was convicted in Israel of a number of offences in relation to a pension scheme that he had operated in Israel. On 19 February 2008 he was sentenced to 12 years imprisonment and fined the equivalent of approximately 3m. He has paid that fine. Two subsequent appeals had limited success inasmuch as they resulted in a reduction of his sentence to 10 years imprisonment and a reduction in the finding of the amount that he had stolen. In or about May 2008 Hoares Bank in London disclosed to SOCA that Mr Perry, Tamar and Yael had accounts there. Subsequently SOCA discovered that Mr Perry had accounts in London in the Bank J Safra (Gibraltar) Ltd. The total in these various accounts amounted to approximately 14m. On 8 August 2008 SOCA obtained a disclosure order from HH Judge Kay QC, sitting as a Deputy High Court Judge, on a paper application without notice. Notices under that order addressed to the DO appellants, all of whom were at all material times outside the jurisdiction, were communicated to them by letter addressed to a residence that Mr Perry maintains in Mayfair. On 28 October 2009 SOCA obtained a worldwide property freezing order from Cranston J on an application without notice against eight respondents, including the appellants in the PFO appeal. So far as Mrs Perry was concerned, the order froze certain identified assets, but it froze worldwide all the assets of the other defendants. The order also required all the defendants to disclose all their worldwide assets. The hearings below The PFO appellants sought an order from Mitting J varying the property freezing order so as, inter alia, to exclude from its ambit property that was located outside England and Wales and to limit the disclosure obligations under the order to assets located within England and Wales. In a judgment dated 28 June 2010 [2010] EWHC 1711 (Admin); [2010] 1 WLR 2761 Mitting J varied some of the disclosure obligations but otherwise rejected the application. Mitting Js judgment was admirably clear and concise. He started with a presumption against giving the relevant provisions of POCA extraterritorial effect, but concluded that, with the exception of section 286, which applied only to an order made in Scotland, the language of the relevant provisions so clearly applied to property outside the jurisdiction that it displaced this presumption. The appellants appeal to the Court of Appeal was heard on 8 and 9 December 2010 and judgment was delivered on 18 May 2011 [2011] EWCA Civ 578; [2011] 1 WLR 2817. The lengthy lead judgment of Hooper LJ was a reflection not only of the complexities of POCA but of the very detailed submissions advanced by Mr Philip Jones QC for the appellants, which were summarised at some length by the Lord Justice. Among many other arguments Mr Jones relied on the presumption against extraterritoriality. A civil recovery order vests property in a trustee for civil recovery. Mr Jones submitted that such an order took effect in rem. He submitted that it would be a breach of international law for the English Court to make an order in rem in respect of property in a foreign jurisdiction, the more so if that property was real property. Hooper LJ rejected this argument. He held that a civil recovery order operated in personam against the holder of the property. The effect, if any, of a civil recovery order in relation to property in a foreign jurisdiction would depend upon the law applied in that jurisdiction and, in those circumstances, there was nothing untoward in making such an order. Like Mitting J, Hooper LJ concluded that the clear meaning of the relevant provisions was that a civil recovery order could be made in respect of property wherever in the world the property was located, and there was no reason not to give effect to the natural meaning of the language. Like Mitting J, Hooper LJ concluded that section 286 made an exception in the case of an order made in Scotland. Hooper LJ derived support for his conclusions from analogies with the law of bankruptcy and from the practice of issuing worldwide freezing orders. In a shorter judgment Tomlinson LJ concurred both with the result reached by Hooper LJ and with his reasoning. Maurice Kay LJ agreed with both judgments. It is common ground that, on its face, section 286 makes provision in respect of the scope of a recovery order that distinguishes the position in Scotland from that in the rest of the United Kingdom. There is a dispute as to the nature of that distinction and, whatever its nature, no one has yet been able to suggest an explanation for it. A summary of my conclusions Because of the complexity of the subject matter of this appeal I propose to follow the example of Hooper LJ by summarising my conclusions at the outset. (i) The courts below placed undue weight on the definition of property in POCA. (ii) The appellants have placed undue weight on the presumption that a statute does not have extraterritorial effect. (iii) States have, by agreement, departed from the customary principles of international law in the case of confiscating the proceeds of crime. Of particular relevance is the 1990 Strasbourg Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (the Strasbourg Convention). POCA must be read in the light of that Convention. (iv) The Convention recognises that the courts of state A may make an order purporting to vest in the authorities of state A property that is situated in state B in circumstances where the property is the proceeds of the criminal conduct of a defendant subject to the criminal jurisdiction of state A. (v) The Convention provides that effect should be given to such an order by confiscation proceedings in state B at the request of state A. (vi) The answer to the issue raised by the PFO appeal depends upon an analysis of both the scheme and the language of POCA considered in the light of the Convention. (vii) Parts 2, 3 and 4 of POCA provide for (a) the imposition in personam of obligations in respect of property worldwide; (b) measures in rem to secure and realise property within the United Kingdom; and (c) requests to be made to other states to take such measures in respect of property within their territories. (viii) Part 5 of POCA makes provision for in rem proceedings in respect of property within the United Kingdom but not outside it. (ix) The scheme of POCA, as described above, accords with arrangements made by the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (SI 2005/3181) (the Order) for giving effect to requests from other states in relation to the confiscation of the proceeds of crime. (x) The scheme of POCA as described above also accords with the requirements of a coherent international scheme for confiscation of the proceeds of crime and with principles of public international law. The converse is the case if SOCAs submissions as to the extraterritorial effect of Part 5 are correct. (xi) Section 286 is an anomalous enigma and cannot justify giving the provisions of POCA that relate to the rest of the United Kingdom a meaning different from that which they would bear in the absence of section 286. (xii) For all these reasons the PFO appeal should be allowed. The definition Part 5 of POCA places on the High Court in England and Wales and Northern Ireland and the Court of Session in Scotland the obligation, in prescribed circumstances, to make a civil recovery order in respect of property which is, or represents, property obtained through unlawful conduct. Section 316(4) has a definition of property (the definition) that applies in Part 5: Property is all property wherever situated and includes (i) money, (ii) all forms of property, real or personal, heritable or moveable, (c) incorporeal property. things in action and other intangible or Mitting J and the Court of Appeal were impressed by the natural meaning of the words wherever situated and concluded that these words should be applied, without restriction, to property in respect of which a recovery order could be made. Thus a recovery order could be made in respect of any form of property, whether real, personal or a chose in action, and wherever in the world that property was situated. The words wherever situated do not describe the type of property to which Part 5 applies. Rather they indicate the location of the property to which the provisions of Part 5 can apply. The definition is repeated no less than eight times in POCA sections 84(1), 150(1), 232(1), 316(4), 326(9), 340(9), 414(1) and 447(4). POCA is peppered with references to property. All fall within the definition. But the definition cannot be applied so as to add to the words property, wherever it appears, the words wherever situated. As I shall demonstrate, most of the provisions of POCA apply only to property within England and Wales, Scotland or Northern Ireland. By way simply of example, I can refer to section 45(1) which confers on a constable the power to seize property to prevent its removal from England and Wales. Some provisions refer, however, to property worldwide. Whether or not the location of property to which a provision of POCA refers is subject to a territorial restriction depends upon the context. I so held, when giving the only reasoned speech, in King v Director of the Serious Fraud Office [2008] UKHL 17; [2009] 1 WLR 718, para 37. For these reasons I do not attach to the words in the definition wherever situated the weight that they have carried with the courts below. In order to decide on the scope of the application of Part 5 of POCA it is necessary to consider both the structure and the language of the Act having regard to relevant principles of international law. The presumption against extraterritoriality and the Strasbourg Convention Mr Jones QC for the appellants submitted that it was a breach of international law for a United Kingdom statute even to purport to vest in a United Kingdom authority property situated in the territory of another state. Mitting J began his judgment by reference to the presumption of statutory interpretation that a statute will not have extraterritorial effect and to the statement of Lord Hoffmann in Socit Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260, para 54: it is a general principle of international law that one sovereign state should not trespass upon the authority of another, by attempting to seize assets situated within the jurisdiction of the foreign state or compelling its citizens to do acts within its boundaries. Hooper LJ himself cited the statement of Lord Diplock in R v Cuthbertson [1981] AC 470, 485: Under English rules of conflict of laws it is in my view well established that an English court has no jurisdiction either in a criminal or a civil matter to make orders purporting ipso jure to transfer moveable property situate abroad. Confiscation of the proceeds of crime is, however, an activity in respect of which States have departed from these principles. Of particular relevance is the Strasbourg Convention, to which the United Kingdom is a party. The question of whether the exorbitant effect of Part 5 of POCA for which SOCA contends would involve a breach of international law must be considered in the light of the Strasbourg Convention. Hooper LJ set out relevant provisions of the Strasbourg Convention in some detail and I must do the same. The Strasbourg Convention Chapter I contains definitions which include: (b) property includes property of any description, whether corporeal or incorporeal, movable or immovable, and legal documents or instruments evidencing title to, or interest in such property; (c) instrumentalities means any property used or intended to be used, in any manner, wholly or in part, to commit a criminal offence or criminal offences; (d) confiscation means a penalty or a measure, ordered by a court following proceedings in relation to a criminal offence or criminal offences resulting in the final deprivation of property; Chapter II deals with measures to be taken at national level to identify and trace properties subject to confiscation. Chapter III deals with international co operation. Section 1 sets out the relevant principles. Article 7 lays down general principles and measures for international co operation. It provides: 1. The Parties shall co operate with each other to the widest extent possible for the purposes of investigations and proceedings aiming at the confiscation of instrumentalities and proceeds. 2. Each Party shall adopt such legislative or other measures as may be necessary to enable it to comply, under the conditions provided for in this chapter, with requests: a. for confiscation of specific items of property representing proceeds or instrumentalities, as well as for confiscation of proceeds consisting in a requirement to pay a sum of money corresponding to the value of proceeds; b. for investigative assistance and provisional measures with a view to either form of confiscation referred to under a. above. The Explanatory Report submitted to the Committee of Ministers of the Council of Europe by the committee of experts who drew up the Convention, illuminates article 7: 10. Where the law enforcement agencies and judicial authorities have gathered information through investigations, there should also be efficient means available to ensure that the offender does not remove the instruments and proceeds of his criminal activities. Freezing of bank accounts, seizure of property or other measures of conservancy need to be taken to ensure this. Section 3 of Chapter III provides for international co operation in respect of provisional measures. In order to secure the confiscation of the instruments and proceeds from crime, the Convention provides in section 4 of Chapter III principally two forms of international co operation, namely the execution by the requested State of a confiscation order made abroad and, secondly, the institution, under its own law, of national proceedings leading to a confiscation by the requested State at the request of another State. In respect of the first alternative, the Convention follows the pattern of the European Convention on the International Validity of Criminal Judgments. The second method of international co operation could be compared to the one which is provided for in the European Convention on the Transfer of Proceedings in Criminal Matters. Section 2 deals with mutual assistance in identifying and tracing property liable to confiscation and requires a party to comply with a request for assistance from another party to the extent compatible with the law of the former. Section 3 deals with provisional measures. Where a party has instituted criminal proceedings or proceedings for the purpose of confiscation and so requests, another party must take provisional measures such as freezing or seizing to secure property which may become subject to confiscation, in so far as permitted by its domestic legislation. The same applies where a party receives a request for confiscation. Section 4 deals with confiscation. It provides: Article 13 Obligation to confiscate 1. A Party, which has received a request made by another Party for confiscation concerning instrumentalities or proceeds, situated in its territory, shall: a. enforce a confiscation order made by a court of a requesting Party in relation to such instrumentalities or proceeds; or b. submit the request to its competent authorities for the purpose of obtaining an order of confiscation and, if such order is granted, enforce it. 2. For the purposes of applying paragraph 1.b of this article, any Party shall whenever necessary have competence to institute confiscation proceedings under its own law. 3. The provisions of paragraph 1 of this article shall also apply to confiscation consisting in a requirement to pay a sum of money corresponding to the value of proceeds, if property on which the confiscation can be enforced is located in the requested Party. In such cases, when enforcing confiscation pursuant to paragraph 1, the requested Party shall, if payment is not obtained, realise the claim on any property available for that purpose. 4. If a request for confiscation concerns a specific item of property, the Parties may agree that the requested Party may enforce the confiscation in the form of a requirement to pay a sum of money corresponding to the value of the property. Article 14 Execution of confiscation 1. The procedures for obtaining and enforcing the confiscation under article 13 shall be governed by the law of the requested Party. 2. The requested Party shall be bound by the findings as to the facts in so far as they are stated in a conviction or judicial decision of the requesting Party or in so far as such conviction or judicial decision is implicitly based on them. 3. Each Party may, at the time of signature or when depositing its instrument of ratification, acceptance, approval or accession, by a declaration addressed to the Secretary General of the Council of Europe, declare that paragraph 2 of this article applies only subject to its constitutional principles and the basic concepts of its legal system. There was an issue in the Court of Appeal as to whether the Strasbourg Convention applied to Part 5 proceedings. Hooper LJ held at para 72 that it did. I agree with him. The Explanatory Report makes the following comment at para 15: The experts were also able to identify considerable differences in respect of the procedural organisation of the taking of decisions to confiscate (decisions taken by criminal courts, administrative courts, separate judicial authorities, in civil or criminal proceedings totally separate from those in which the guilt of the offender is determined (these proceedings are referred to in the text of the Convention as proceedings for the purpose of confiscation and in the explanatory report sometimes as in rem proceedings), etc). It was also possible to distinguish differences in respect of the procedural framework of such decisions (presumptions of licitly/illicitly acquired property, time limits, etc). The experts agreed that it would be impossible to devise an efficient instrument of international co operation without taking into account these basic differences in national legislation. On the other hand, effective co operation must recognise that the systems may not be alike but that they aim to achieve the same goals. This is why the committee agreed to put the two systems (value and property confiscation) of confiscation on an equal footing and to make the text unambiguous on this point. The Explanatory Report adds at para 43 in relation to article 13: Any type of proceedings, independently of their relationship with criminal proceedings and of applicable procedural rules, might qualify in so far as they may result in a confiscation order, provided that they are carried out by judicial authorities and that they are criminal in nature, that is, that they concern instrumentalities or proceeds. Such types of proceedings (which include, for instance, the so called in rem proceedings) are, as indicated under General considerations above, referred to in the text of the Convention as proceedings for the purpose of confiscation. The Explanatory Report adds this further comment at para 48: [According to para 3 of article 13], parties must, for purposes of international co operation in the confiscation of proceeds, be able to apply both the system of property confiscation and the system of value confiscation. This is made clear by article 7, paragraph 2.a. It may imply that Parties which have only a system of property confiscation in domestic cases have to introduce legislation providing for a system of value confiscation of proceeds, including the taking of provisional measures on any realisable property, in order to be able to comply with requests to that effect from value confiscation countries. On the other hand, Parties which have only a system of value confiscation of proceeds in domestic cases must introduce legislation providing for a system of property confiscation of proceeds in order to be able to comply with requests to that effect from property confiscation countries. Confiscation under the Strasbourg Convention has to be ordered by a court following proceedings in relation to a criminal offence or criminal offences see article 1(d). Thus it would seem that the Convention applies to (i) a confiscation order in rem made by party A after conviction of a defendant within its territory in respect of property owned by the defendant situated within the territory of party B; (ii) a confiscation order in rem made by party A in respect of property situated within its territory after conviction of the owner of that property in the territory of party B. One thing is plain beyond doubt. The Strasbourg Convention envisages the courts in one state making an order confiscating property situated in another state. There would thus appear to be established, in respect of the proceeds of crime, an exception to the principle stated by Lord Diplock in Cuthbertson to which I have referred at para 17 above. I believe, however, that the exorbitant in rem confiscation order that the Strasbourg Convention envisages is one where the jurisdiction to make the order is an in personam jurisdiction founded on the conviction of the owner of the property by the court of the state making the order. The much wider exorbitant jurisdiction that SOCA contends is conferred by Part 5 is, so far as I am aware, without precedent anywhere in the world. I can summarise the position as follows. The Strasbourg Convention envisages two types of confiscation proceedings: (i) value confiscation and (ii) confiscation of specific property. It requires parties to give effect, by proceedings within their own jurisdictions and in accordance with their own laws, to requests for assistance in respect of both types of confiscation proceedings that are taking place or have taken place in the jurisdictions of other parties. The scheme of confiscation under POCA Confiscation Parts 2, 3 and 4 of POCA make provision for value confiscation by the criminal court, by means of what is described as a confiscation order. Confiscation is a misnomer. The scheme of these Parts involves the imposition of the obligation to make a money payment, which is enforced in the same way as a fine, on a person who has been convicted in the relevant jurisdiction. Thus the order is in personam and it is made as part of the criminal process. The amount of the confiscation order is the amount of benefit that the defendant has obtained from his criminal conduct, calculated in accordance with complex provisions of POCA and subject to an upper limit, which is the amount of the defendants available assets. The provisions in Part 2 relate to England and Wales. Similar provision in relation to Scotland are set out in Part 3 and in relation to Northern Ireland in Part 4. I shall describe the effect of the provisions in Part 2. The confiscation order is made by the Crown Court after a defendant has been convicted by the court or committed to the court for sentencing or for the imposition of a confiscation order. Thus the order is in personam on a defendant who is within the jurisdiction of the Crown Court. To calculate the amount of the confiscation order, the court must (i) identify the property that the defendant initially obtained as a result of or in connection with his criminal conduct and value this; (ii) decide whether the defendant still holds that property, or property that represents it and value this; and (iii) identify all the realisable property that the defendant owns and value this. The confiscation order is made in the higher of the values arrived at under process (i) and process (ii) subject to an upper limit in the amount of the value arrived at under process (iii). Where POCA speaks of property in the context of these processes, the property is worldwide. It matters not where in the world the defendant obtained property through his criminal conduct or where in the world he owns property when his realisable assets fall to be assessed. Thus where property is referred to in sections 76 to 83, which deal with these matters, the property referred to is property wherever situated in the world. Many of the provisions in Parts 2, 3 and 4 are concerned with identifying and securing property in each of the three jurisdictions, either in anticipation of the possibility of the making of a confiscation order or by way of enforcing a confiscation order. The relevant powers are conferred on the Crown Court in England and Wales and in Northern Ireland and on the Court of Session or the sheriff in Scotland. The provisions of the three Parts begin to apply as soon as a criminal investigation has been started in circumstances where there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct. Although the terminology and the precise nature of the measures that can be ordered by the court differ in the case of Scotland from those in the other two jurisdictions, their effect is in substance the same. I shall refer to some of the more material provisions that relate to England and Wales. Section 41 permits the Crown Court to make a restraint order prohibiting any specified person from dealing with any realisable property held by him. The property need not be described in the order. Section 45 permits a constable, inter alios, to seize realisable property to which a restraint order relates to prevent it being taken out of England and Wales. Section 48 permits the Crown Court to appoint a receiver, described as a management receiver in respect of realisable property to which the restraint order applies. Section 50 permits the Crown Court to appoint a receiver, described as an enforcement receiver in relation to realisable property for the purpose of the enforcement of a confiscation order that has been made. While the restraint order takes effect in personam and is of worldwide effect, the provisions that relate to securing and realising property apply to such activities within England and Wales, for each of Parts 2, 3 and 4 deals with activities in the jurisdiction to which it relates. This is made plain by section 443 which provides, inter alia, for the making of Orders in Council (i) for an order made under Part 2 to be enforced in Scotland or Northern Ireland, for an order made under Part 3 to be enforced in England and Wales or Northern Ireland and for an order made under Part 4 to be enforced in England and Wales or Scotland; (ii) for a function of a receiver appointed pursuant to Part 2 to be exercisable in Scotland or Northern Ireland, for a function of an administrator appointed pursuant to Part 3 to be exercisable in England and Wales or Northern Ireland and for a function of a receiver appointed pursuant to Part 4 to be exercisable in England and Wales or Scotland. These provisions would seem to indicate, a fortiori, that the powers or functions conferred by Parts 2, 3 or 4 cannot be exercised outside the United Kingdom. Orders in Council pursuant to the above provisions have been made. The effect of these provisions is as I have summarised them at para 12(vii) above. Value confiscation is ordered in personam having regard to property worldwide, but no power is granted to authorities within the United Kingdom to secure or realise property that is situated outside the jurisdiction. This situation is dealt with by section 74. Section 74 relates to confiscation under Part 2 (sections 141 and 222 are analogous provisions in Parts 3 and 4). Section 74 deals with securing property abroad in anticipation of making a confiscation order and realising property in satisfaction of a confiscation order that has been made. It provides: Enforcement abroad (1) This section applies if (a) any of the conditions in section 40 is satisfied, (b) the prosecutor believes that realisable property is situated in a country or territory outside the United Kingdom (the receiving country), and (c) the prosecutor sends a request for assistance to the Secretary of State with a view to it being forwarded under this section. (2) In a case where no confiscation order has been made, a request for assistance is a request to the government of the receiving country to secure that any person is prohibited from dealing with realisable property. (3) In a case where a confiscation order has been made and has not been satisfied, discharged or quashed, a request for assistance is a request to the government of the receiving country to secure that (a) any person is prohibited from dealing with realisable property; (b) realisable property is realised and the proceeds are applied in accordance with the law of the receiving country. (4) No request for assistance may be made for the purposes of this section in a case where a confiscation order has been made and has been satisfied, discharged or quashed. (5) If the Secretary of State believes it is appropriate to do so he may forward the request for assistance to the government of the receiving country. (6) If property is realised in pursuance of a request under subsection (3) the amount ordered to be paid under the confiscation order must be taken to be reduced by an amount equal to the proceeds of realisation. These provisions are in accord with the scheme of the Strasbourg Convention. Civil Recovery As section 240, which introduces Part 5, explains, the purpose of that Part is to enable recovery in civil proceedings before the High Court or Court of Session of property which is, or represents, property obtained through unlawful conduct. Parts 2, 3 and 4 impose personal liability on defendants convicted of criminal conduct in each of the three jurisdictions. Part 5 is of very different effect. The focus is not on a particular defendant but upon property that is the product of criminal conduct, wherever in the world this is committed, as section 241 makes plain. It is not necessary that the person who holds or owns the property should be the person guilty of the criminal conduct. The claim form in the relevant proceedings has to be served on the holder of the property, wherever that person is domiciled, resident or present: see sections 243 and 244. Sections 245A to 255 provide for the measures that a court in England and Wales or Northern Ireland can take to preserve property in respect of which a recovery order may be sought. Sections 255A to 265 make similar provisions in respect of Scotland. Section 245A provides for a property freezing order. As this is the order under attack in this appeal I shall set out the material part of its provisions in full: (1) Where the enforcement authority may take proceedings for a recovery order in the High Court, the authority may apply to the court for a property freezing order (whether before or after starting the proceedings). (2) A property freezing order is an order that (a) specifies or describes the property to which it applies, and (b) subject to any exclusions (see section 245C(1)(b) and (2)), prohibits any person to whose property the order applies from in any way dealing with the property. (3) An application for a property freezing order may be made without notice if the circumstances are such that notice of the application would prejudice any right of the enforcement authority to obtain a recovery order in respect of any property. (4) The court may make a property freezing order on an application if it is satisfied that the condition in subsection (5) is met and, where applicable, that the condition in subsection (6) is met. (5) The first condition is that there is a good arguable case (a) that the property to which the application for the order relates is or includes recoverable property . Sections 245E to 245G make provision for the appointment by the High Court of a receiver in respect of property to which a property freezing order relates. Sections 246 to 247 make similar provision in relation to property that is not subject to such an order. In each case the order may require any person to whose property the order applies to bring the property to a place (in England and Wales or, as the case may be, Northern Ireland) specified by the receiver or to place it in the custody of the receiver (if, in either case, he is able to do so). Section 255A provides (1) Where the enforcement authority may take proceedings for a recovery order in the Court of Session, the authority may apply to the court for a prohibitory property order Section 266 sets out the circumstances in which the court must make a recovery order: (1) If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order. (2) The recovery order must vest the recoverable property in the trustee for civil recovery. (3) But the court may not make in a recovery order (a) any provision in respect of any recoverable property if each of the conditions in subsection (4) or (as the case may be) (5) is met and it would not be just and equitable to do so, or (b) any provision which is incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998 (c 42)). (4) In relation to a court in England and Wales or Northern Ireland, the conditions referred to in subsection (3)(a) are that (a) the respondent obtained the recoverable property in good faith, (b) he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it, (c) when he took the steps, he had no notice that the property was recoverable, (d) if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him. The provisions in (4) are repeated virtually verbatim in (5) in relation to a court in Scotland. The very fact that separate provision is made for making property recovery orders in England and Wales, Scotland and Northern Ireland indicates that these, and the ancillary steps in relation to securing and realising property, were, at least primarily, designed to apply to property within one of the three jurisdictions of the United Kingdom. Some of the provisions plainly relate exclusively to property within the United Kingdom, such as those in section 248, which deal with registration of property freezing orders and interim receiving orders in relation to land. The question raised by the PFO appeal is whether the totality of Part 5 relates exclusively to property within the United Kingdom. Provisions of Part 5 that relate to the recovery order itself Mr Jones drew attention to a number of provisions in relation to the recovery order itself, which he submitted could only apply in respect of property within the three jurisdictions of the United Kingdom. He relied upon the absence of any similar provisions that would apply in relation to property situated outside the United Kingdom as indicating that Part 5 did not apply to property outside the United Kingdom. Mr Eadie QC on behalf of SOCA did not accept that the provisions in question carried that significance. I shall refer to two exceptions. Section 269(1) provides that a recovery order is to have effect in relation to any property despite any provision (of whatever nature) which would otherwise prevent, penalise or restrict the vesting of the property. Section 269(2) then specifies a number of rights that are to be overridden by a recovery order. These include a right of return or other similar right, a right of return being defined as any right under a provision for the return or reversion of property in specified circumstances. Mr Eadie submitted that these provisions applied implicitly only to property within the jurisdiction. Mr Jones agreed with this submission, and argued that this was a further indication that recovery orders could only be made in respect of property within the jurisdiction. Hooper LJ dealt with section 269 in a different way. He held at para 155 that section 269(1) should be interpreted as applying only to provisions of English law as it could never have been intended to apply to provisions of the law of a foreign country in relation to property situated in that country. Mr Jones accepted the last part of this proposition, but on the basis that Part 5 as a whole did not apply to property situated in a foreign country. He did not, however, accept that section 269(1) only applied to provisions of English law. He pointed out that under the English rules of conflict of laws foreign law is sometimes determinative of title to property situated in this country. On the premise that Part 5 applies only to property within this jurisdiction there is no basis for restricting the ambit of section 269(1) to rules of English law. I found Mr Jones submissions compelling. Section 269 makes sense if Part 5 is concerned only with property within the United Kingdom. It does not make sense if the property is worldwide. Section 269 deals with provisions that are overridden by a recovery order. Sections 281 and 282 deal with exemptions from the effect of a recovery order. The first of these, under section 281, arises where the victim of the offence to which the recovery order relates demonstrates to the court that the property belongs to him. The implications of this I shall consider when I come, at paras 65 and 66, to deal with the coherence of the scheme laid down by POCA. Section 282 sets out a number of other exemptions, including property held by the Financial Services Authority, property held by a person in his capacity as an insolvency practitioner and property subject to any of a number of charges under United Kingdom statutes. Mr Jones submitted that if property subject to a recovery order were worldwide property, there would have to be equivalent provisions, even if only in general terms, to acknowledge exceptions that would be required in order to accommodate the laws of the countries in which the property was situated. Mr Eadies answer to this was that this was unnecessary as those laws would apply to defeat any claim based on the recovery order in any event. This is a fair response to Mr Jones point. None the less, these domestic provisions in relation to the reach of a recovery order add force to the submission that Part 5 is concerned only with property within the United Kingdom. In summary, apart from the definition of property in section 316(4), and the enigmatic section 286, there is nothing in Part 5, from first to last, that suggests that its application extends to property outside England and Wales, Scotland and Northern Ireland. Many of its provisions clearly relate to property within those jurisdictions. What then of the definition? If a recovery order can only be made in respect of property within England and Wales, Scotland and Northern Ireland, can the words in the definition wherever situated, which appear in the definition of property in Part 5, have any application in Part 5 at all? The answer to that question is that there are places in Part 5 where property means property wherever situated, even if a recovery order can only be made in respect of property within the United Kingdom. Section 240 provides in relation to Part 5: (1) This Part has effect for the purposes of (a) enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct, Even if property when first used means property within the United Kingdom Courts, the second time that the word is used it unquestionably means property wherever situated. Property within the United Kingdom that represents property obtained by criminal conduct, wherever the property was when obtained, is on any view, covered by Part 5. The same point can be made in relation to property in section 242, which deals with the initial obtaining of property through unlawful conduct, and to the original property in section 305, which deals with tracing property that represents the original property. Thus it is not right to postulate that the words wherever situated in the definition of property in section 316 make no sense if Part 5 does not permit the making of a recovery order in respect of property abroad. For these reasons, giving the words of Part 5 their natural meaning, and ignoring section 286, I would conclude that the provisions that they make in relation to an order for civil recovery apply only within the United Kingdom. Thus far I have been considering the provisions that appear in Part 5. Of perhaps greater significance are the provisions that do not appear in that Part. There are no provisions in relation to enforcement abroad to mirror those that appear at sections 74, 141 and 222 in relation to Parts 2, 3 and 4. Mr Jones submitted to the Court of Appeal that this indicated that Parliament did not intend that civil recovery orders could be made in respect of property situated abroad. Hooper LJ dismissed this submission out of hand at para 113 of his judgment. He held that, having taken the view that the Strasbourg Convention applied to enforcement orders made in civil proceedings, SOCA was entitled to seek to enforce both interim and final Part 5 orders abroad in those countries in which the Convention was in force or in which provisions similar to the Convention had been implemented. I find Hooper LJs conclusions surprising. They are at odds with the scheme of the Strasbourg Convention: see para 30 above. I do not understand how SOCA could seek to enforce abroad interim or final orders under Part 5. Part 5 makes no provisions for SOCA to take steps to secure property or enforce confiscation abroad. The relevant provisions in Part 5 in relation to securing property apply within the United Kingdom: see para 44 above. Realisation of confiscated property is exclusively a matter for the trustee for civil recovery in whom property vests under a recovery order. The suggestion that he would be able to recover property situated abroad is unrealistic: see para 71 below. Had Parliament, or those responsible for drafting POCA, intended Part 5 confiscation to extend to property outside the United Kingdom they would surely have included provisions parallel to section 74. The fact that they did not do so strongly suggests that there was no intention that Part 5 should have extraterritorial effect. Reciprocity I now turn to demonstrate that provisions for giving effect to requests for assistance from other states accord with an interpretation of Part 5 that restricts its application to property within the United Kingdom. One obvious explanation for the provisions of Part 5 is that they were intended to comply with the obligations of the United Kingdom in respect of incoming requests under the Strasbourg Convention, and to afford similar assistance to states not party to that convention. Section 444(1) provides for the making of an Order in Council to make provision for a prohibition on dealing with property which is the subject of an external request and for the realisation of property for the purpose of giving effect to an external order. Section 444(2) provides that such an Order may include provision which (subject to any specified modification) corresponds to any provision of Part 2, 3, 4 or 5, excluding Chapter 3, which deals with cash seizure. Section 447 defines an external request and an external order as follows: (1) An external request is a request by an overseas authority to prohibit dealing with relevant property which is identified in the request. (2) An external order is an order which (a) is made by an overseas court where property is found or believed to have been obtained as a result of or in connection with criminal conduct, and (b) is for the recovery of specified property or a specified sum of money. Thus, where a foreign court makes a finding that property has been, or is believed to have been, obtained as a result of or in connection with criminal conduct and orders the recovery of specified property or a specified sum of money, section 444 provides for an Order in Council that permits realisation of property to give effect to the order of the foreign court. Section 444 addresses both forms of confiscation order referred to in the Explanatory Report to the Strasbourg Convention: see para 28 above. Section 444 does not provide in terms that the property to be realised should be within the United Kingdom. The power conferred by section 444 was exercised by the making of the Order. The Order enables the powers conferred by Parts 2, 3, 4 and 5 of POCA to be exercised for the purpose of giving effect to external requests and external orders, so that the provisions of the Order mirror the provisions of POCA. Part 2 of the Order provides for the Secretary of State to refer an external request in connection with criminal investigation or proceedings, or an external order arising from a criminal conviction, to, among others in England and Wales, the Director of Public Prosecutions. He will then apply to the Crown Court for the exercise of the powers conferred by Part 2. Parts 3 and 4 of the Order make equivalent provisions in respect of Scotland and Northern Ireland. Parts 2, 3 and 4 provide for measures to secure and realise relevant property. Section 447(7) of POCA states that property is relevant property if there are reasonable grounds to believe that it may be needed to satisfy an external order which has been or may be made. Part 2 of the Order is headed Giving Effect in England and Wales to External Requests in Connection with Criminal Investigations or Proceedings and to External Orders Arising from Such Proceedings. Parts 3 and 4 have equivalent headings. Parts 2, 3 and 4 of the Order expressly provide that the external request or order must relate to property in, respectively, England and Wales, Scotland and Northern Ireland. In King v Director of the Serious Fraud Office [2009] UKHL 17; [2009] 1 WLR 718 the House of Lords held that the provisions of Part 2 of the Order only permitted a restraint order to be made in respect of property within England and Wales and that the same territorial restriction applied in respect of seizure and enforcement provisions. Why do Parts 2, 3 and 4 of the Order expressly limit the assistance that can be sought by the foreign state to assistance in respect of property within England and Wales, Scotland and Northern Ireland? The answer must be that which I gave in King v Director of the Serious Fraud Office at para 31: If a country wishes assistance from other countries in preserving or recovering property that is related to criminal activity, it makes sense for its request to each of those other countries to be restricted to the provision of assistance in relation to property located within its own jurisdiction. If each country were requested to take steps to procure the preservation or recovery of property on a worldwide basis, this would lead to a confusing, and possibly conflicting, overlap of international requests for assistance. Not only would such multiplication of activity be confusing, it would involve significant and unnecessary multiplication of effort and expense. This reasoning underlies the scheme for assistance laid down in the Strasbourg Convention. Part 5 of the Order provides for the Secretary of State to forward an external order to the enforcement authority in the United Kingdom for the purpose of enabling the enforcement authority to realise recoverable property in civil proceedings for the purpose of giving effect to the external order. The procedure for a civil recovery order in response to the external order is thus put in train. Part 5 of the Order is headed: Giving Effect in the United Kingdom to External Orders by Means of Civil Recovery (my emphasis). In contrast to Parts 2, 3 and 4, however, the body of Part 5 contains no express territorial limitation in relation to the property to which the Order relates. There would seem to be two possible explanations for this. One is that SOCA is correct in contending that Part 5 of POCA has extraterritorial effect and Part 5 of the Order is similarly intended to apply without territorial limitation. The other is that Part 5 of POCA applies only to property within the United Kingdom, so that there was no need to insert a territorial restriction in Part 5 of the Order. I believe that the latter is the correct explanation. In the first place that accords with the heading of Part 5 of the Order. In the second place, if Part 5 of POCA had extraterritorial effect, there would seem no reason to restrict Parts 2, 3 and 4 of the Order to property within the United Kingdom but to impose no such restriction in relation to Part 5. In summary, the terms of the Order accord with an interpretation of POCA that restricts the making of recovery orders under Part 5 to property that is situated within the United Kingdom. A coherent scheme that accords with international law The provisions of Part 5 of POCA comply with the requirements of reciprocity contained in the Strasbourg Convention. If a foreign court makes an order by way of value confiscation, the property of the defendant in England and Wales, Scotland or Northern Ireland can be seized and realised in satisfaction, or part satisfaction, of the order. If, after conviction, a foreign court makes an order for the confiscation of specific proceeds of crime which are in one of the three United Kingdom jurisdictions, they can be seized and realised. However Part 5 of POCA goes further than is necessary to meet the requirements of the Strasbourg Convention. Section 241 requires the court or sheriff to decide on a balance of probabilities whether the property is or represents property obtained through unlawful conduct, irrespective of whether such conduct occurred in the United Kingdom or abroad. If it is, or does, the Court must, subject to the provisions of Part 5, make a recovery order in respect of the property, whether or not any proceedings have been brought for an offence in connection with the property: see section 240(2). The claim form has to be served on the person holding the property and on any person holding associated property which the authority wishes to be subject to a recovery order, wherever domiciled, resident or present (section 243(2)). Part 5 makes complex provision for the protection of the rights of holders of associated property and of third parties who claim ownership of property that is subject to Part 5 proceedings. Those provisions require those persons to make their claims before the court in England and Wales, Scotland or Northern Ireland seised of the Part 5 proceedings. If the jurisdiction described above is founded on the presence of the property in question within the jurisdiction of the Court making the order, the action permitted by Part 5 is neither unreasonable nor contrary to international law. It is perfectly understandable that Parliament should wish to make provision for the confiscation of proceeds of crime held in the United Kingdom by someone outside the jurisdiction and proper that anyone holding that property, or associated property, should be served with the claim to confiscate it and that anyone claiming ownership of it or an interest in it should be expected to assert that claim before the court conducting the confiscation proceedings. Part 5 proceedings brought in respect of property held within the jurisdiction are also likely to be effective, thanks to the provisions in Part 5 for securing and realising the property in question. Thus the scheme of Part 5 is simple and rational. If property is identified in England and Wales, Scotland or Northern Ireland that is believed to be or to represent the proceeds of a crime committed outside the United Kingdom, recovery proceedings can be begun in the jurisdiction concerned. Steps can be taken to secure the property in question and subsequently to realise it within the jurisdiction in question. The proceeds of realisation of the property will be available to defray the cost of the proceedings. The holder of the property, and any holder of associated property or person claiming to own the property can reasonably be expected to take part in the proceedings to assert his right or otherwise to challenge the making of the recovery order. The picture is very different if SOCAs submissions as to the scope of Part 5 proceedings are correct. Part 5 proceedings in respect of property outside the jurisdiction would involve the assertion of an exorbitant jurisdiction in personam without any basis in international law. They would also be likely to prove ineffective. At para 14 of his judgment Hooper LJ cited the following description by the appellants of the effect of SOCAs submissions: Parliament has conferred authority on the enforcement authorities to bring proceedings to vest in a trustee for civil recovery property situated abroad which derives entirely from unlawful conduct abroad where neither the holder of the property, nor any intermediate holders of the property, or property from which the holder's property is derived, have ever been domiciled, resident or present within the jurisdiction; in other words, where there is no connection with the jurisdiction whatsoever. Hooper LJ accepted that this result was startling. He was right to do so. Asserting in personam jurisdiction over the holder of such property, or of associated property, has, as I have said, no precedent in international law. It would not be reasonable to expect the holder of the property, or any person holding associated property or claiming to own the property, to submit to the jurisdiction of a United Kingdom court when neither they nor the property had any connection with that jurisdiction. Any order made would be likely to be made unopposed. In these circumstances the exorbitant confiscation proceedings that had resulted in an unopposed recovery order would be unlikely to bear fruit. Hooper LJ stated on a number of occasions that the recovery order would operate in personam so as to give the trustee for civil recovery a right against the holder of the property. Such a right would, however, be likely to be nugatory, for there would be no basis upon which the trustee for civil recovery could found jurisdiction in the United Kingdom over the holder of the property or any associated property so long as they remained outside the jurisdiction. The fact that they had been served in the Part 5 proceedings would not confer jurisdiction in relation to a claim by the trustee. It was common ground that if in such circumstances the trustee sought to bring a civil claim in respect of the property in the state where it was located, his title would not be likely to be recognised. Hooper LJ advanced the following practical justification for according Part 5 extraterritorial effect. He held, at para 15, that if the appellants were correct: a court in this jurisdiction would be unable to make a civil recovery order in respect of land or other property in Spain bought with the proceeds of crimes committed here by a person resident here. Unable to obtain a civil recovery order, the enforcement authority could not take any steps here to require the person to hand over the property in Spain. Nor (so it appears) could the United Kingdom take enforcement action in Spain pursuant to [the Strasbourg Convention] (to which I return below) because there would be no order of the court to enforce: see paragraph 81 below. This reasoning is not compelling. The appropriate course in the circumstances envisaged by Hooper LJ would be to obtain a confiscation order under Part 2, 3 or 4 and to make a request for assistance via the Secretary of State in accordance with section 74. I can see no compelling reason why Parliament should have wished to confer on SOCA a right to seek a civil recovery order in respect of the proceeds of a crime that was not committed within the United Kingdom where those proceeds are not within the United Kingdom. There will, of course, be the possibility that SOCA will become aware of the existence of property in another jurisdiction that it has reason to believe is, or may be, the proceeds of crime. The natural course in those circumstances will be to pass on such information as it has about the property to the appropriate authorities in the country where the property is situated. For all these reasons, but for the effect of section 286, I would have reached the firm conclusion that the jurisdiction to make a civil recovery order conferred by Part 5 of POCA applied only in respect of property that is situated in England and Wales, Scotland or Northern Ireland. What is the effect of section 286? The enigma Section 286 provides: (1) Orders under this Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present. (2) Such an order may be made by the Court of Session in respect of moveable property wherever situated. (3) But such an order in respect of a persons moveable property may not be made by the Court of Session where (a) the person is not domiciled, resident or present in Scotland, and (b) the property is not situated in Scotland, unless the unlawful conduct took place in Scotland. It is implicit in this provision that, if POCA did not include it, the jurisdiction that it confers would not exist. Thus section 286(2) purports to confer on the Court of Session the jurisdiction to make an order in respect of moveable property outside Scotland provided either that the holder is domiciled, resident or present in Scotland or the unlawful conduct through which the property was obtained took place in Scotland. The only thing that is agreed about this provision is that it purports to create for Scotland a position that differs from that which the Act provides in relation to the rest of the United Kingdom. This is puzzling as, when moving the amendment that introduced it in the House of Lords, Lord Goldsmith stated on 25 June 2002 that the intention was to achieve the same effect in all the jurisdictions of the United Kingdom: see Hansard (HL Debates), 25 June 2002, vol 636, col 1291. Equally puzzling is section 399 in the Explanatory Notes to the Act, the second sentence of which echoes a comment that Lord Goldsmith made on the same occasion: 399. The section provides that the Court of Session may make an order in respect of a person whether or not he is domiciled, present or resident in the United Kingdom. No similar provision is required in respect of England, Wales and Northern Ireland, due to the jurisdiction of the civil courts and the general provisions on property in section 316. In relation to this note Hooper LJ understandably remarked at para 128 that he could not understand the reference to section 316 of the Act as this applied to all three jurisdictions. No one has been able to proffer a satisfactory explanation for section 286(2). Part 3 of POCA would be the normal and appropriate route for confiscation in relation to property outside Scotland that was or represented proceeds of unlawful conduct that had taken place in Scotland. Why, in the case of Scotland, should special provision be made to bring such property within the scope of Part 5? Section 286(2) remains an enigma. It does not lead me to alter the conclusion that I have expressed in para 74 above, at least in so far as it relates to the position in England and Wales and Northern Ireland. Conclusion The High Court of England and Wales has no jurisdiction under Part 5 to make a recovery order in relation to property outside England and Wales. It follows that the court had no jurisdiction to make the worldwide property freezing order that was made in this case. The PFO appeal should be allowed and the property freezing order redrawn so that it applies only to property within the jurisdiction of the Court. It may be necessary for the Court to hear further argument as to how this should be done, for a question remains, that has not yet been addressed, as to whether the form of the order made in this case is appropriate even if its ambit is restricted to property within the jurisdiction. The foundation of the jurisdiction conferred under Part 5 of POCA is the existence of property believed to be the proceeds of crime. The existence of such property enables SOCA, as the enforcement authority, to serve a claim form on the holder of the property and on any other person who SOCA thinks holds associated property, even if that person is outside the jurisdiction, if SOCA wishes the property to be the subject of a civil recovery order see section 243. Section 243(3) requires the property either to be specified or described in the form in general terms. Section 245A, which I have set out at para 40 above, sets out the requirements of a property freezing order. Subsection (2)(a) states that a property freezing order is one that specifies or describes the property to which it applies. The property freezing order obtained in this case set out schedules of property to which the order applied. But the order was not restricted to specific property. It provided that the prohibition on disposal of assets applies, but is not limited to, the following categories of assets: (1) all real property, including, but not limited to the properties listed at Schedule 1 to this Order; (2) the balances standing to the credit of any bank and/or building society accounts, including, but not limited to the accounts listed at Schedule 2 to this Order; (3) any Personal Equity Plan (PEP); (4) any endowment policy; (5) any securities, including any debentures or shares in any company (wheresoever incorporated); and (6) any chattels, motor vehicles, or other personal property valued in excess of 2000, including, but not limited to the property listed at Schedule 3 to this Order. wheresoever located (whether within England and Wales or otherwise). It is questionable whether these general descriptions specify or describe property as required by section 245A. The property freezing order also required all the PFO appellants, together with the other respondents to the property freezing order, to disclose all their worldwide assets. It is not clear to me how the court had jurisdiction to make such an order. Part 8 of POCA expressly deals with disclosure, which is the subject of the DO appeal. If this Court is invited to make a revised property freezing order in which property is described in terms as general and speculative as have been adopted in this case it will require to be satisfied that they fall within the scope of section 245A. If the Court is invited to include in the revised freezing order an order for disclosure of assets it will require to be satisfied that it has jurisdiction to do so. The DO appeal This appeal challenges the validity of information notices addressed to Mr Perry and his daughters by SOCA pursuant to the disclosure order issued by Judge Kay QC on 8 August 2008: see para 6 above. The disclosure order was issued under Part 8 of POCA, which deals with Investigations. Part 8 applies to both confiscation proceedings under Parts 2, 3 and 4 of POCA and civil recovery proceedings under Part 5. In relation to Part 5 a disclosure order can be made only if property specified in the application for the order is subject to a civil recovery investigation and the order is sought for the purposes of the investigation: see section 357(3)(b). A civil recovery investigation is defined by section 341(2): For the purposes of this Part a civil recovery investigation is an investigation into (a) whether property is recoverable property or associated property, (b) who holds the property, or (c) its extent or whereabouts. Section 357 defines a disclosure order as follows: (4) A disclosure order is an order authorising an appropriate officer to give to any person the appropriate officer considers has relevant information notice in writing requiring him to do, with respect to any matter relevant to the investigation for the purposes of which the order is sought, any or all of the following (a) answer questions, either at a time specified in the notice or at once, at a place so specified; (b) provide information specified in the notice, by a time and in a manner so specified; (c) produce documents, or documents of a description, specified in the notice, either at or by a time so specified or at once, and in a manner so specified. (5) Relevant information is information (whether or not contained in a document) which the appropriate officer concerned considers to be relevant to the investigation. Section 358 sets out the requirements for making a "disclosure order": (1) These are the requirements for the making of a disclosure order. (2) There must be reasonable grounds for suspecting that (b) in the case of a civil recovery investigation, the property specified in the application for the order is recoverable property or associated property. (3) There must be reasonable grounds for believing that information which may be provided in compliance with a requirement imposed under the order is likely to be of substantial value (whether or not by itself) to the investigation for the purposes of which the order is sought. (4) There must be reasonable grounds for believing that it is in the public interest for the information to be provided, having regard to the benefit likely to accrue to the investigation if the information is obtained. Section 359(1) provides that a person commits an offence if without reasonable excuse he fails to comply with a requirement imposed on him under a disclosure order. The offence carries a maximum sentence on summary conviction of imprisonment for six months. Section 359(3) provides for the more serious offence of knowingly or recklessly making a false statement in purported compliance with a requirement imposed under a disclosure order. This carries a maximum sentence of two years imprisonment in respect of a conviction after a trial on indictment. SOCAs application for a disclosure order was supported by a witness statement of Vanessa Ewing, a Financial Investigator on SOCAs staff. The application notice named as respondents Mr Perry, Mrs Lea Perry, Mrs Greenspoon, Miss Yael Perry and any other individual or entity specifically associated to the named respondents and property identified as relevant to the civil recovery investigation conducted by the Director General. In para 5.7 Miss Ewing described the property that was subject to the civil recovery investigation as any property held by or on behalf of Perry including, but not limited to, the following: (i) monies which have been credited to or have passed through the following: (a) accounts held by or on behalf of Israel Perry, including accounts held by his wife, Mrs Lea Lili Perry, and/or his two adult daughters, Mrs Tamar Greenspoon and Miss Yael Perry. In explaining why the order was sought in relation to Mr Perrys wife and daughters, Miss Ewing explained: I believe that it is common practice for criminals to use the proceeds of crime to acquire property held in the names of other family members or trusted associates. Persons involved in criminal activity often seek to reduce the amount of money and other property held in their own names in an attempt to minimise their exposure to the risk of confiscation or to avoid paying tax. It is therefore reasonable for the investigation to include property owned by Mrs Lea Lili Perry, Miss Yael Perry and Mrs Tamar Greenspoon in order to ascertain whether such property has a legitimate origin or whether it represents the proceeds of criminal conduct. The Order made by Judge Kay was addressed to all those named in the application notice, included, inappropriately, a penal notice, and conferred authority on SOCA in the general terms of section 357(4). The property referred to by Miss Ewing in her application was described in the most general terms. The purpose of the application, as explained by her, appears to have been to enable SOCA to carry out a roving commission aimed at identifying any property that might be the proceeds of Mr Perrys criminal conduct. A number of notices were issued by Miss Ewing pursuant to the disclosure order. Some sought information of funds in specific accounts. Some sought information in the following terms: (1) Provide the following information under section 357(4)(b) of the Act: (i) A statement of assets held by, or on behalf of, Israel PERRY in the United Kingdom including Crown Dependencies and British Overseas Territories; (ii) A statement of assets held by, or on behalf of, Israel PERRY in any other country other than the United Kingdom. The information sought includes, but is not limited to, the following: (a) Any assets held by a legal entity of which Mr PERRY is the beneficiary including worldwide companies, trusts and corporations; (b) Any precious metals and gems held by, or on behalf of, Israel PERRY; (c) Any valuable art, antiques and the like held by, or on behalf of, Israel PERRY; (d) Any loans made by, or on behalf of, Israel PERRY; (e) Any real estate held by, or on behalf of, Israel PERRY; (f) Any vehicles, pleasure craft etc held by, or on behalf of, Israel PERRY; (g) Any stocks, bonds, shares, bearer bonds, negotiable instruments, investment funds etc held by, or on behalf of, Israel PERRY; (h) Any bank accounts, in any currency, held by, or on behalf of, Israel PERRY; The exercise carried out by Miss Ewing seems to go beyond the purpose of a civil recovery investigation as defined in section 341(2). That investigation, as I understand the relevant provisions, relates to property whose existence has already been identified. Similar questions arise in relation to the scope of the disclosure order and some of the notices served under it as to those that I have raised in paras 79 to 83 above in relation to the scope of the property freezing order. Under section 357(4) the authority conferred by a disclosure order is restricted to enquiries with respect to any matter relevant to the investigation for the purposes of which the order is sought. It is questionable whether this authority extends beyond seeking information about property whose existence has already been identified. Mr Jones has not, however, sought to challenge the scope of the order or of the notices issued under it. He has made a more fundamental attack on SOCAs authority to issue the notices. Those notices were given to persons who were, and were known by SOCA to be, outside the jurisdiction of the United Kingdom. It was Mr Jones submission, advanced before the Court of Appeal, that the authority given by a disclosure order to give disclosure notices only applies to notices given to persons within the jurisdiction. In making this submission Mr Jones relied particularly on the presumption that, unless it clearly provides to the contrary, a statute will not have extraterritorial effect. The majority of the Court of Appeal, Ward and Carnwath LJJ, rejected the appellants attack on the validity of the notices; Richards LJ dissented [2010] EWCA Civ 907; [2011] 1 WLR 542. The gist of the reasoning of Carnwath LJ appears in the following short passage of his judgment: 50. is there any reason why persons who are reasonably considered to have an interest in property validly subject to a disclosure order, and who have a sufficient presence within the jurisdiction for a notice to be effectively given to them, should be treated as outside the legislative grasp of the statutory scheme? 51. As a matter of common sense, it is difficult to see why mere presence in or absence from the country at the time of sending or delivery of the notice is the critical factor. For example, a person normally resident at an address in this country could not sensibly seek to deny that the notice had been given to him at that address, merely because he happened to be out of the country at the time (for example, on a business or holiday trip). Ward LJ proceeded on the premise that a recovery order could be made in respect of property outside the jurisdiction. He commented at para 77 that the extraterritorial effect of Part 5 could not be denied and that he could not see why Part 8 should not act in the same way. For the reasons that I have given I consider that he proceeded on a false premise. The point is a very short one. No authority is required under English law for a person to request information from another person anywhere in the world. But section 357 authorises orders for requests for information with which the recipient is obliged to comply, subject to penal sanction. Subject to limited exceptions, it is contrary to international law for country A to purport to make criminal conduct in country B committed by persons who are not citizens of country A. Section 357, read with section 359, does not simply make proscribed conduct a criminal offence. It confers on a United Kingdom public authority the power to impose on persons positive obligations to provide information subject to criminal sanction in the event of non compliance. To confer such authority in respect of persons outside the jurisdiction would be a particularly startling breach of international law. For this reason alone I consider it implicit that the authority given under section 357 can only be exercised in respect of persons who are within the jurisdiction. Mr Jones referred to a number of other provisions of POCA which, so he submitted, indicated that notices under a disclosure order could only be given to persons within the jurisdiction. He pointed out that Part 8 applies to confiscation as well as to civil recovery. Section 376 as originally drafted included provision for the issue by the judge of a letter of request for the purpose of obtaining information relevant to a confiscation order. He submitted that this provision would have been superfluous if the authority conferred by section 357 extended to persons beyond the United Kingdom. Part 8 gives other investigatory powers, including the power to make a production order in relation to specified material, the power to issue search and seizure warrants and the power to make a customer information order. Mr Jones submitted that the provisions conferring these powers, either as a matter of language or because of the presumption against extraterritoriality, could only be exercised within the United Kingdom. These submissions have some merit and reinforce my view of the limited ambit of section 357. For these reasons I would also allow the DO appeal. I agree with Mr Jones suggestion that the appropriate relief is a declaration that the Disclosure Order made by Judge Kay does not authorise sending information notices to persons who are outside the United Kingdom. LORD REED I agree with Lord Phillips, for all the reasons that he gives, that these appeals must be allowed. In relation to the appeal concerning the property freezing order, however, I wish to consider further section 286 of POCA, in view of the extent to which the submissions of the parties, and the division of opinion in the court, have focused upon that provision. In expressing views about it, I am conscious that the provision is concerned with the jurisdiction of the Court of Session, that these are not Scottish appeals, and that this court has not had the benefit of consideration of the provision by the Scottish courts. In those circumstances, it would be undesirable to express any definite view about the effect of section 286 unless it is necessary to do so in order to determine the present appeal; and, in my view, it is not. Nevertheless, since the provision appears in a United Kingdom statute which must be read and understood as a whole, it is potentially relevant to the construction of the provisions with which the appeal is directly concerned. It was also the subject of much of the argument in the present appeal. Some consideration of its effect is therefore unavoidable. In recognition of that, both parties adduced expert evidence from Scottish counsel before the Court of Appeal. This court, on the other hand, as the final court of appeal in civil matters from all parts of the United Kingdom, has judicial knowledge of Scots, English and Northern Irish law, and may take cognisance of the law of one jurisdiction in an appeal originating in another (Elliot v Joicey [1935] AC 209; 1935 SC (HL) 57; Bank of East Asia Ltd v Scottish Enterprise 1997 SLT 1213). Both the appellants and the respondent were therefore represented by Scottish as well as English counsel. The international background In order to understand the relevant provisions of POCA, including section 286, it is necessary to begin by considering an important aspect of the background to the legislation. As Lord Phillips has explained, POCA is intended to fulfil certain international obligations of the United Kingdom. These include, in particular, the obligations arising under the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna, 20 December 1988), the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime (Strasbourg, 8 November 1990), and the Council Framework Decision of 26 June 2001 on Money Laundering, the Identification, Tracing, Freezing, Seizing and Confiscation of Instrumentalities and the Proceeds of Crime (OJ 5.7.2001, L182/1). The legislation must therefore be considered in the light of those instruments. For present purposes, the most significant of them are the Vienna Convention and the Strasbourg Convention. The Vienna Convention The Vienna Convention is concerned with drugs offences. Article 5 relates to confiscation, defined by article 1 as meaning the permanent deprivation of property by order of a court or other competent authority. Article 5(1) requires each party to adopt such measures as may be necessary to enable confiscation of proceeds derived from relevant offences. Proceeds are defined in article 1 as meaning any property derived from or obtained, directly or indirectly, through the commission of a relevant offence. Article 5(2) requires each party also to adopt such measures as may be necessary to enable its authorities to identify, trace, and freeze or seize proceeds for the purpose of eventual confiscation. Article 5(4) relates to international co operation. Put shortly, article 5(4)(a) envisages that a request may be made by a party having jurisdiction over an offence to another party in whose territory proceeds referred to in article 5(1) that is to say, proceeds derived from offences are situated. On receipt of such a request, the party requested must either submit the request to its competent authorities for the purpose of obtaining an order of confiscation and, if such order is granted, give effect to it, or it must submit to its competent authorities an order of confiscation issued by the requesting party, with a view to giving effect to it in so far as it relates to proceeds situated in its territory. Article 5(4)(b) in addition provides for effect to be given to requests for the taking of provisional measures for the purpose of eventual confiscation. In terms of article 5(5)(a), proceeds confiscated by a party pursuant to article 5(4) are to be disposed of by that party according to its domestic law. The Strasbourg Convention The Strasbourg Convention is wider in its subject matter than the Vienna Convention, in that it applies to criminal offences generally, but narrower in its geographical scope, in so far as it was made under the auspices of the Council of Europe rather than the United Nations, and fewer states are party to it. Chapter III is concerned with international co operation in relation to confiscation of the proceeds of crime. The relevant provisions have been set out by Lord Phillips. Confiscation is defined by article 1(d) as meaning a penalty or a measure, ordered by a court following proceedings in relation to a criminal offence or criminal offences resulting in the final deprivation of property. It is to be noted that, as in the Vienna Convention, the term confiscation has a wider scope than a confiscation order within the meaning of Parts 2, 3 and 4 of POCA, and is apt to include recovery orders of the kind for which Part 5 makes provision. Section 1 of Chapter III of the Convention, comprising article 7, sets out the general principles in relation to international co operation. In particular, article 7(2) imposes an obligation upon each party to the Convention to adopt such legislative and other measures as may be necessary to enable it to comply, under the conditions provided for in that chapter, with requests for confiscation, and with requests for investigative assistance and provisional measures with a view to confiscation. Section 2, comprising articles 8 to 10, is concerned with investigative assistance. In terms of article 8, in particular, parties undertake to afford each other, upon request, the widest possible measure of assistance in the identification and tracing of proceeds and other property liable to confiscation. Such assistance is to include any measure providing and securing evidence as to, amongst other matters, the existence and location of such property. Section 3, comprising articles 11 and 12, is concerned with provisional measures. In terms of article 11(1), in particular, parties are obliged, at the request of another party which has instituted criminal proceedings or proceedings for the purpose of confiscation, to take the necessary provisional measures, such as freezing or seizing, to prevent any dealing in, transfer or disposal of property which, at a later stage, may be the subject of a request for confiscation or which might be such as to satisfy the request. Section 4, comprising articles 13 to 17, is concerned with confiscation. Article 13, in particular, is concerned with the obligation to confiscate. Following the dual scheme created by article 5(4) of the Vienna Convention, article 13(1) of the Strasbourg Convention envisages alternative means by which a party may respond to a request made by another party for the confiscation of proceeds of crime which are situated in its territory. The first alternative, set out in article 13(1)(a), is that the requested party may enforce a confiscation order made by a court of the requesting party. The second alternative, set out in article 13(1)(b), is that the requesting party may submit a request to the competent authorities of the requested party so that the latter may obtain and enforce a confiscation order. Finally, in relation to the Strasbourg Convention, article 15 follows article 5(5)(a) of the Vienna Convention in providing that any property confiscated by the requested party shall be disposed of by that party in accordance with its domestic law, unless otherwise agreed by the parties concerned. As I shall explain, that provision is not reflected in the effect of a recovery order made under Part 5 of POCA. The contrast is relevant to the question whether such orders can be of the kind contemplated by article 13(1)(a) of the Convention, and therefore to the question whether such orders may fall within the scope of that exception to the ordinary principles of international law. The Framework Decision The Framework Decision seeks to ensure the effective implementation of the Strasbourg Convention within the EU. It does not however add anything of significance in relation to the issues with which the appeal is concerned. Parts 2, 3 and 4 of POCA Parts 2, 3 and 4 of POCA are concerned primarily with confiscation orders: orders, that is to say, made against a person convicted in criminal proceedings, for the payment of a sum of money equivalent to the value of any property or pecuniary advantage obtained as a result of or in connection with his criminal conduct (or such lesser amount as may be available). Such orders can be made in criminal proceedings in England and Wales, Scotland or Northern Ireland: see section 6 in relation to England and Wales, section 92 in relation to Scotland, and section 156 in relation to Northern Ireland. The order operates in personam, and the person against whom it is made is necessarily subject to the criminal jurisdiction of the court which makes the order. The courts are also empowered to order provisional measures. In particular, a restraint order can be made if, put shortly, a criminal investigation or criminal proceedings have been started in England and Wales, Scotland or Northern Ireland, and there is reasonable cause to believe that the alleged offender or defendant has benefited from his criminal conduct: see sections 41, 120 and 190. Such orders again operate in personam. The courts can also order enforcement measures, including measures authorising the securing and realisation of property. Such orders operate in rem. Parts 2, 3 and 4 each contain a provision concerned with overseas jurisdictions. If the conditions for the making of a restraint order are met, and the prosecutor believes that realisable property that is to say, property held by the defendant or by the recipient of a tainted gift is situated in a country outside the United Kingdom, then the prosecutor can send a request to the Secretary of State, with a view to its being forwarded to the government of the country where the property is situated: see sections 74, 141 and 222. In a case where no confiscation order has been made, the request is to secure that any person is prohibited from dealing with the property. If a confiscation order has been made and has not been satisfied, the request is also to secure that the property is realised and the proceeds are applied in accordance with the law of the requested country. These provisions fall within the ambit of articles 5(4) and (5) of the Vienna Convention and 11 and 13(3) of the Strasbourg Convention. It appears, therefore, that although property is defined by section 84(1), and by the corresponding provisions for Scotland and Northern Ireland, as all property wherever situated, and the powers to make restraint orders under sections 41, 120 and 190 can therefore be exercised in relation to property situated overseas, it is envisaged that the securing and realisation of such property will be dealt with by means of requests to foreign governments for assistance. That is as one would expect, since it is only the authorities of the jurisdiction where the property is situated which have the power to make effective orders of that nature in respect of such property. The wide definition of property is nevertheless essential in the context of Parts 2, 3 and 4, not only for the purposes of sections 74, 141 and 222 but more generally. In particular, as I have explained, a confiscation order is an order for the payment of a sum of money equal to the value of any property or pecuniary advantage obtained by the defendant from his criminal conduct. Although the court must have jurisdiction over the defendant in the criminal proceedings, there is no reason why the property obtained as a result of or in connection with the offence need also be situated within the United Kingdom, or within the part of the United Kingdom where the court is located. Part 5 of POCA As section 240(1) of POCA states, Part 5 has two purposes. The first, with which the present case is concerned, is to enable the enforcement authority to recover, in civil proceedings before the High Court or the Court of Session, property which is or represents property obtained through unlawful conduct. The Act thus creates an entirely new form of remedy. Section 240(2) makes it clear that such proceedings may be brought whether or not any criminal proceedings have been brought for an offence in connection with the property. Section 241 explains what is meant by unlawful conduct, and in particular that such conduct may occur in the United Kingdom or elsewhere. Accordingly, in distinction to Parts 2, 3 and 4, proceedings can be brought under Part 5 in circumstances where the court has no jurisdiction in respect of the offence in question. Chapter 2 of Part 5 is concerned with civil recovery. In particular, sections 243 and 244 are concerned with proceedings for recovery orders in England and Wales or Northern Ireland, and in Scotland, respectively. Each provision permits proceedings for a recovery order to be taken against any person who the enforcement authority thinks holds recoverable property, and requires the enforcement authority to serve the claim form or application upon the respondent wherever domiciled, resident or present. Accordingly, proceedings for a recovery order can be brought in circumstances where not only the court has no jurisdiction in respect of the offence in question, but the defendant is not domiciled, resident or present within the jurisdiction of the court. Having read only this far into the legislation, if one were to ask what connecting factor is required in order for the Court of Session to have jurisdiction in proceedings under Part 5, if the respondent is not domiciled, resident or present in Scotland, and if the Scottish courts do not have criminal jurisdiction over him, the answer which one would naturally expect is that the necessary connecting factor is the situation within Scotland of the property which is sought to be recovered. It is difficult to see what else it might be. It is however necessary to read further to find out whether that expectation is well founded. This is perhaps an appropriate point at which to note SOCAs submission that there need not be any connecting factor: POCA, it is argued, enables the enforcement authorities to bring proceedings in the High Court or the Court of Session to vest property situated abroad in a trustee for civil recovery, even where there is no connection with the United Kingdom whatsoever. As it is put in SOCAs written case, Parliament has decided that a Chinese thief, living in China, who has stolen property in China from a Chinese citizen may be the subject of civil recovery action. It is however inherently unlikely that such a result could have been intended by Parliament: in such circumstances, there would be no reason for the holder of the property to submit to the jurisdiction of the courts of this country, and no likelihood that any order granted by those courts without appearance would be given effect overseas. Again, however, it is necessary to examine the legislation further in order to determine what Parliament has done. A recovery order must vest the recoverable property in the trustee for civil recovery: section 266(2). The order may sever any property: section 266(7). Furthermore, the order may impose conditions as to the manner in which the trustee for civil recovery may deal with any property vested by the order for the purpose of realising it: section 266(8). The trustee for civil recovery is a person appointed by the court to give effect to a recovery order: section 267(1). His functions include securing the detention, custody or preservation of any property vested in him by the recovery order and realising the value of the property, other than money: section 267(3). By virtue of section 267(6), he has the powers mentioned in Schedule 7. The first of these is power to sell the property: paragraph 1. There is no equivalent of these provisions in Parts 2, 3 or 4. These provisions suggest strongly, if not conclusively, that a recovery order operates in rem to transfer title to the property to the trustee. That is the usual, although not invariable, sense in which the concept of vesting is employed, and that sense is consistent with the power to sever the property, and with the power of the trustee to sell the property and his function of realising its value. This interpretation of section 266 derives further support from section 269, which is concerned with rights, such as rights of pre emption or irritancy, which might otherwise be triggered by the vesting of the property in the trustee. Section 269 provides, so far as material: (1) A recovery order is to have effect in relation to any property despite any provision (of whatever nature) which would otherwise prevent, penalise or restrict the vesting of the property. (2) A right of pre emption, right of irritancy, right of return or other similar right does not operate or become exercisable as a result of the vesting of any property under a recovery order. A right of return means any right under a provision for the return or reversion of property in specified circumstances. (3) Where property is vested under a recovery order, any such right is to have effect as if the person in whom the property is vested were the same person in law as the person who held the property and as if no transfer of the property had taken place. The most significant of these provisions for present purposes is section 269(3), since that provision implies that the vesting of property under a recovery order involves the transfer of the property, so that it is held by the trustee rather than by the person who formerly held it. It was also accepted on behalf of SOCA that section 269(2) is one of a number of provisions in Part 5 which can only apply to property if POCA forms part of the lex situs: in other words, if the property is situated in one of the parts of the United Kingdom. One would ordinarily expect an order having the effect of transferring a real right of ownership to apply only in relation to property situated in the territory of the state where the order is made. As Lord Mance, delivering the judgment of the Board, said in Pattni v Ali [2006] UKPC 51; [2007] 2 AC 85 (para 24): Their Lordships also note the existence of a more general principle. The actual transfer or disposition of property is, in principle, a matter for the legislature and courts of the jurisdiction where the property is situate (state A), and will be recognised accordingly by courts in any other state (state B) It follows from it, conversely, that in the unlikely event that the courts of state A were to purport actually to transfer or dispose of property in state B, the purported transfer or disposal should not be recognised as effective in courts outside state A. That principle would apply with particular force if the order were made for the purpose of seizure or confiscation: Socit Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260, para 54 per Lord Hoffmann; Government of the Republic of Spain v National Bank of Scotland 1939 SC 413. Lord Justice Clerk Aitchison said in the latter case (at pp 433 434): such decrees of a foreign country as purport to have extra territorial effect, and to attach property in a subject situated, and at a time when it is situated, within this country or its territorial waters, will not be recognised by our laws and courts. As I have previously explained, however, article 5(4) of the Vienna Convention and article 13(1)(a) of the Strasbourg Convention allow for the possibility that a party may make an order confiscating property situated in the territory of another party, to which the latter party may choose to give effect, but is not obliged to do so. It therefore cannot be taken for granted that POCA does not allow for that possibility. It is necessary to examine the legislation further in order to decide whether POCA does so or not. Other provisions in Chapter 2 concern provisional measures. The available measures in England and Wales, and in Northern Ireland, are property freezing orders and interim receiving orders. The corresponding measures in Scotland are prohibitory property orders and interim administration orders. A property freezing order and a prohibitory property order are orders that prohibit any person to whose property the order applies from dealing with the property: sections 245A(2)(b) and 255A(2)(b). The court can make such an order only if it is satisfied that there is a good arguable case that the property to which the application for the order relates is or includes recoverable property, and that, if any of it is not recoverable property, it is associated property: sections 245A(4) and (5), and 255A(4) and (5). One consequence of that requirement is that such orders can be made only in respect of property which is, in principle, capable of being made the subject of a recovery order, or is mixed with such property in such a way as to be associated property as defined in section 245. If a recovery order operates in rem, as one might infer for the reasons I have explained at paragraphs 123 to 125, it follows that the scope of property freezing orders and prohibitory property orders is more limited than the nature of the orders themselves might otherwise have led one to expect. Part 5 contains no provision concerned with overseas jurisdictions. There is, in particular, no equivalent of sections 74, 141 and 222. This contrast with Parts 2, 3 and 4 (and also with Part 8, as originally enacted: see section 376) provides further support for the view that recovery orders are concerned solely with property situated within the part of the United Kingdom where the order was made. If such orders had extraterritorial scope, the absence of any provision corresponding to sections 74, 141 and 222 would be difficult to understand. In that connection, it is also relevant to note that Part 5 requires that the realised proceeds of property vested in the trustee must be applied in accordance with section 280. That section requires that the net proceeds, after payment of the remuneration and expenses of the trustee, must be paid to the enforcement authority. No provision is made for the possibility that the proceeds of realization of property situated in another jurisdiction might be applied in accordance with the law of that jurisdiction, as envisaged by article 5(5)(a) of the Vienna Convention and article 15 of the Strasbourg Convention. In that respect, recovery orders again differ from confiscation orders made under Parts 2, 3 and 4: in the case of those orders, sections 74(3), 141(3) and 222(3) provide, in relation to enforcement abroad, that the request is to be that realisable property is realised and the proceeds are applied in accordance with the law of the receiving country. I shall return to section 286, which is concerned with the power of the Court of Session to make orders under Chapter 2 of Part 5, and to section 316(4), which defines property for the purposes of Part 5. Part 11 of POCA It is also relevant to note one of the provisions in Part 11 of POCA, which is concerned with co operation. Section 444 deals with external requests and orders. It allows provision to be made by Order in Council for a prohibition on dealing with property which is the subject of an external request, or for the realisation of property for the purpose of giving effect to an external order. An external request is a request by an overseas authority to prohibit dealing with property which may be needed to satisfy an external order which has been or may be made: section 447(1) and (7). An external order is an order made by an overseas court where property is found or believed to have been obtained as a result of or in connection with criminal conduct, and is for the recovery of specified property or a specified sum of money. Such an Order in Council may include provision which (subject to any specified modifications) corresponds to any provision of Part 2, 3 or 4 or Part 5, except Chapter 3, which concerns the recovery of cash in summary proceedings. Section 444 thus enables articles 11 and 13(1) of the Strasbourg Convention, and the corresponding provisions of the Vienna Convention, to be implemented by the United Kingdom. The Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (SI 2005/3181) was made under sections 444 and 459(2) of POCA. Part 5 of the Order concerns recovery orders, and contains articles corresponding to sections 286 and 316(4) of POCA: see articles 197 and 213(4) respectively. The Order was construed by the House of Lords in King v Director of the Serious Fraud Office [2009] UKHL 17; [2009] 1 WLR 718 as conferring jurisdiction upon the Crown Court to make a restraint order in response to an external request only where the request concerned property in England and Wales. The same territorial requirement was also held to apply to the seizure and enforcement provisions of Part 2 of the Order. Although the terms of the Order differ in some significant respects from the terms of POCA, the speech of Lord Phillips, with which the other members of the committee agreed, contains observations which are equally germane to the present case. In particular, Lord Phillips rejected the contention that an Order made under section 444 might have been intended to enable foreign countries to obtain worldwide orders from the British courts (para 37). His Lordship also observed that, although property was defined by section 447(4) of POCA as meaning property wherever situated, whether the word bore that meaning depended on the context in which the word was used. Thus, where the Order expressly or by implication referred to property in England and Wales, it necessarily referred only to property there situated (para 37). Section 316(4) It is necessary next to consider section 316(4), which defines property for the purposes of Part 5 as all property wherever situated. At first sight, that might be thought to entail that the power to make a recovery order extended to property anywhere in the world, provided that it had been obtained through unlawful conduct occurring anywhere in the world and was therefore recoverable property as defined in section 304(1). As I have explained, however, there are a number of factors which point away from that conclusion. To recap: (1) Part 5, unlike Parts 2, 3 and 4, makes no provision in respect of overseas jurisdictions; (2) Part 5, unlike Parts 2, 3 and 4, makes no provision for the proceeds of realisation of recoverable property to be applied in accordance with foreign law, as contemplated by article 5(5)(a) of the Vienna Convention and article 15 of the Strasbourg Convention; (3) recovery orders under Part 5, unlike confiscation and restraint orders under Parts 2, 3 and 4, appear on the face of the provisions (notably sections 266, 267, 269 and Schedule 7) to operate in rem; (4) orders taking effect in rem ordinarily apply only to property situated within the territorial jurisdiction of the court; (5) there is a presumption that Parliament does not intend to legislate in respect of property outside the United Kingdom, and in particular that legislation is not intended to authorise the seizure or confiscation of property situated outside the United Kingdom; (6) courts in the United Kingdom have no power to make effective orders purporting to transfer real rights of ownership of property situated outside the jurisdiction of the court; and (7) it is accepted that references to property in a number of other provisions of POCA, including provisions of Part 5, can refer only to property situated in the United Kingdom. Some of these points have greater force than others. Cumulatively, however, they provide compelling support for the conclusion that the ambit of recovery orders is intended to be confined to property located within the part of the United Kingdom where the court in question exercises jurisdiction. Subject to section 286, it appears therefore that, although property is defined so widely by section 316(4) that the power to make recovery orders under section 266 might be understood as extending to property located overseas, such an interpretation of section 266 would be mistaken: in the context of the section, the word property has to be understood as referring only to property situated within the territorial jurisdiction of the High Court or the Court of Session, as the case may be. The wide definition of property is nevertheless essential in the context of other provisions of Part 5. In particular, the tracing provisions in Part 5 have the consequence that a recovery order may be appropriate in respect of property located within the jurisdiction of the court which represents property unlawfully obtained elsewhere: see, for example, section 305. Civil jurisdiction in the Scottish courts Before coming finally to section 286, it is necessary to explain in outline the relevant aspects of Scots law in relation to jurisdiction, apart from POCA. I should emphasise that my purpose here is merely to explain matters in the most general terms, so as to provide some background against which to attempt to understand the effect of section 286. In most ordinary civil proceedings before the Scottish courts, jurisdiction is regulated by the rules contained in Schedule 8 to the Civil Jurisdiction and Judgments Act 1982, as amended. In the present context, it is convenient to begin with rule 5(1)(a), which confers upon the courts for the place where immovable property is situated exclusive jurisdiction in proceedings which have as their object rights in rem in immovable property (sic: the terms movable and immovable are derived from the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters rather than the Scots law of property, which distinguishes between heritable and moveable property. It is the latter terminology which is employed in section 316(4) of POCA). The exclusive jurisdiction of the forum rei is reinforced by rule 5(2), which precludes a Scottish court from exercising jurisdiction in a case where immovable property is situated outside Scotland and the court would have exclusive jurisdiction if the property were situated in Scotland. A similar rule applies to the allocation of jurisdiction within the United Kingdom: Schedule 4, rule 11(a)(i). Even before the enactment of the 1982 Act, that approach had long been established under the common law. For example, in Cathcart v Cathcart (1902) 12 SLT 182 Lord Low declined to grant a declarator that the pursuer was entitled to a liferent of land situated in England. He observed, at p 185: Real estate in England is beyond the jurisdiction of the Scotch courts Further, if decree of declarator in terms of the second conclusion was pronounced, this court would have no power to give practical effect to the right thereby declared. The pursuer would require to go to England to obtain his remedy. Would the English courts, according to the principles of international law, be bound to recognise and act upon the declarator of this court? I am of opinion that they would not I think that the answer would be that it was for the court of the country where the real estate was situated to say what was the result, as regards the rights of the parties [of the relevant events]. I am therefore of opinion that the question is one with which this court is not competent to deal. In relation to proceedings concerned with moveable property, Schedule 8 contains a number of relevant rules. Under rule 1, the general rule is that persons can be sued in Scotland if they are domiciled there. The concept of domicile is defined for this purpose on the basis of residence: section 41. Under rule 2, there are also a number of special grounds on which the Scottish courts may have jurisdiction. In particular, under rule 2(i) a person may be sued in Scotland in proceedings which are brought to assert, declare or determine proprietary or possessory interests, or rights of security, in or over movable property, or to obtain authority to dispose of movable property, if the property is situated in Scotland. There are in addition other rules which may be relevant to confer jurisdiction in particular circumstances. Broadly similar rules apply to the allocation of jurisdiction within the United Kingdom, under Schedule 4, rules 1 and 3(h)(ii). The Scottish courts may therefore have jurisdiction in proceedings concerned with the ownership of moveable property situated outside Scotland. In practice, however, as I have explained, the courts in Scotland, as in the other parts of the United Kingdom, would be unlikely to make an order in rem purporting to transfer or dispose of property in another state. Accordingly, summarising the matter broadly, proceedings concerned with rights in rem can ordinarily be brought in the Scottish courts in relation to heritable property only if the property is situated in Scotland. They can ordinarily be brought in relation to moveable property if the property is situated in Scotland or if the defender is domiciled in Scotland. They cannot otherwise ordinarily be brought, in the absence of particular circumstances in which other grounds of jurisdiction may arise (for example, under rule 2(h) of Schedule 8). There are a number of circumstances where jurisdiction is not governed by Schedules 4 or 8. In particular, those schedules do not affect the operation of any enactment which confers jurisdiction on a Scottish court in respect of a specific subject matter on specific grounds: sections 17(1) and 21(1)(a) of the 1982 Act. Section 286 of POCA is an example of such an enactment. Section 286 I can now turn at last to section 286 itself. It is headed Scope of powers (Scotland), and provides: (1) Orders under this Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present. (2) Such an order may be made by the Court of Session in respect of moveable property wherever situated. (3) But such an order in respect of a person's moveable property may not be made by the Court of Session where (a) the person is not domiciled, resident or present in Scotland, and (b) the property is not situated in Scotland, unless the unlawful conduct took place in Scotland. The words this Chapter refer to Chapter 2 of Part 5 of POCA, which as I have explained is concerned with civil recovery. The orders which may be made by the Court of Session under Chapter 2 are recovery orders, prohibitory property orders, interim administration orders and consent orders (made under section 276). Since these orders can only be made in respect of property which is at least arguably recoverable (or associated property), it is the extent of the courts jurisdiction in relation to the power to make recovery orders which is of critical importance. Section 286 provides further support for the conclusion that the definition of property in section 316(4) does not have the effect of enabling a recovery order to be made under section 266 in respect of property anywhere in the world. If section 266, read with section 316(4), had that effect, the provision made by section 286(2) in respect of moveable property would be redundant, and the distinction implicitly drawn between heritable and moveable property would be inexplicable. Section 286(3) is also difficult to reconcile with such an interpretation, since it qualifies the jurisdiction conferred by section 286(2) in relation to moveable property. This supports the view that section 266 does not itself define the courts jurisdiction to make a recovery order, but confers a power which can be exercised in circumstances in which the court possesses jurisdiction, based upon some independent foundation. A distinction has to be drawn, that is to say, between the nature of the power conferred by section 266, on the one hand, and the jurisdiction of the court: a jurisdiction arising, in relation to the Court of Session, from section 286 and from the background rules of civil jurisdiction, so far as they are not implicitly displaced. If recovery orders operate in rem, and the jurisdiction of the Scottish courts to make orders of that character is not ordinarily conditional upon the holder of the property being domiciled, resident or present in Scotland, section 286(1) is as one would expect. It also enables the jurisdiction of the court to meet the requirements of article 5(4) of the Vienna Convention and article 13 of the Strasbourg Convention. The absence from section 286 of any provision in respect of heritable property is also as one would expect. As I have explained, one would not expect the court to have jurisdiction to make orders in rem in respect of heritable property outside Scotland. Since the court would not possess such a jurisdiction under the 1982 Act or under the common law, there is no necessity for POCA to alter that position. In relation to moveable property, on the other hand, the position is different. As I have explained, the ordinary rules of civil jurisdiction in Scotland enable the courts to exercise jurisdiction in relation to moveable property outside Scotland (including questions concerning proprietary rights in respect of such property), provided the defender is domiciled in Scotland or other requirements specified in the 1982 Act are met. At the same time, one would not expect the court to exercise a power to transfer or dispose of moveable property situated outside Scotland, in accordance with the principle explained in Pattni v Ali [2006] UKPC 51; [2007] 2 AC 85, or to purport to confiscate moveable property situated in another sovereign state, in accordance with the principles discussed in Socit Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30; [2004] 1 AC 260 and in Government of the Republic of Spain v National Bank of Scotland 1939 SC 413. The width of the courts formal jurisdiction does not therefore entail that the court will exercise its powers to the limits of its jurisdiction, where for example such an exercise would be ineffective or would contravene recognized principles of international law. The jurisdiction conferred by section 286(2) and (3) in relation to moveable property differs in a number of respects from the courts ordinary jurisdiction: instead of the possible grounds of jurisdiction set out, in particular, in rules 1 and 2 of Schedule 8 to the 1982 Act, the apparent effect of section 286(2) and (3) is to confer jurisdiction upon the court, for the purposes of chapter 2 of Part 5 of POCA, where moveable property is situated in Scotland, and also where it is situated elsewhere and either (a) the holder of the property is domiciled, resident or present in Scotland, or (b) the unlawful conduct took place in Scotland. The rationale of such a wide jurisdiction is not obvious, given that the power conferred by section 266 to make a recovery order (and therefore the powers to make other orders in respect of property which is at least arguably recoverable) is more limited in scope, as I have explained. In the circumstances, counsel referred the court to the legislative history of the provision, and in particular to statements made in Parliament during the passage of the Bill. These statements, even if admissible as an aid to interpretation, do not however provide any clear explanation of the intention of section 286(2) and (3). They confirm that section 286 was intended to regulate the question of jurisdiction, and indicate that its effect was intended to be the same as was achieved for England and Wales and Northern Ireland by a combination of the provisions on property in section 316 and the general rules on the jurisdiction of the civil courts. One matter on which all parties to these proceedings are agreed, however, is that that is not the case: on any view, the position in England and Wales and Northern Ireland is not the same as that set out in section 286(2) and (3). It appears therefore to be possible that the drafting of section 286(2) and (3) may have reflected a misunderstanding. Since POCA deals with matters falling partly within the competence of the Scottish Parliament, proceedings also took place in that Parliament in accordance with the arrangements known colloquially as the Sewel convention: see Hansard (HL Debates), 21 July 1998, col 791. Section 286 was not however specifically considered, and neither the discussion in the Parliament nor the Sewel memorandum prepared by the Scottish Executive appears to shed any light on its intended effect. As Sir Winston Churchill once said in another context, it is a riddle, wrapped in a mystery, inside an enigma. The effect of section 286 is however not of critical importance in the present context. If section 266 is to be understood as referring to property within the territorial jurisdiction of the relevant court, for the reasons I have explained, then it follows that the power conferred by section 266 is consequently restricted to such property. The fact that the jurisdiction of the Court of Session, as regulated by section 286 for the purposes of chapter 2 of Part 5, may be wider than that of the High Court does not alter the meaning and effect of section 266 in relation to the High Court, which is the issue at the heart of the present appeal. If section 266 confers the same power upon courts in all parts of the United Kingdom, as it appears to do, then it may be that section 286 has equally little practical effect upon the ambit of recovery orders made by the Court of Session. That is not however an issue which need be, or ought to be, decided in the present case. SIR ANTHONY HUGHES I respectfully agree with Lord Phillips that both appeals must be allowed, and for the reasons which he gives. I add only some very brief words about the PFO appeal. For my part, if it were possible to construe the complex provisions of POCA in such a way as to admit of limited extraterritorial effect for Part 5, but only where there is a sufficient jurisdictional connection between a part of the UK and the criminal proceeds, I should have wished to do so. I am, however, reluctantly persuaded that this cannot be achieved by construction and would involve illegitimately re writing the statute. For the reasons explained by Hooper LJ, cited by Lord Phillips at para 72 above, it would make excellent sense for the English court to have jurisdiction to make a civil recovery order in relation to real or personal property in Spain bought with the profits of crime by an English criminal, or by someone who committed his offence in England and Wales. It will not always be possible to achieve removal of such proceeds by means of a post conviction confiscation order under Part 2; there may, for a number of reasons, be no conviction for example the criminal may be dead, or untriable because resident in a country from which no extradition is possible. It seems to me that the kind of jurisdictional links contemplated by section 286 for the limited case of moveable property in the case of Scottish courts could sensibly serve as a model for all property and for all UK courts: that is to say links (1) because the crime was committed here, (2) because the offender or holder of the property is domiciled, resident or present here, or (3) because the relevant property is here. Such jurisdiction would not, as it seems to me at least, be exorbitant, nor would it offend the sovereignty of other States. That, however, is not what the statute can be made to say. What cannot, as it seems to me, be the correct construction is that, as SOCA was obliged to submit, it has jurisdiction to seek a (mandatory) civil recovery order over property in China which is the product of a crime committed in China by an offender who has never left that country. LORD JUDGE AND LORD CLARKE We will explain briefly why we are unable to agree with the conclusions of the majority of the Court that the appeal in relation to the worldwide property freezing order (PFO) should be allowed. We agree that the Proceeds of Crime Act 2002 (the Act) is poorly drafted. Nevertheless its objective is clear and can be explained in uncomplicated terms. Those who engage in criminal or unlawful conduct, whether here or abroad, should be deprived of the property which is or which represents the proceeds of their crimes or unlawful conduct. Part 2 of the Act addresses confiscation orders which may be made following convictions recorded in England and Wales. For these purposes section 84(1) provides: Property is all property wherever situated and includes (a) money; (b) all forms of real or personal property; (c) things in action and other intangible or incorporeal property. For present purposes, there are two crucial features. First, the property extends to all property including all forms of real or personal property and it applies to all such property wherever in the world it is situated. It was not suggested in the course of argument that, where these words appear in Part 2, they should be given a limited meaning. They mean what they say, that is, wherever in the world the property (whatever form it may take) is situated. Given the ease with which professional criminals in particular can move their assets around the world, by section 74 the Act unsurprisingly makes provision for the enforcement of confiscation orders abroad. It is an elementary principle of statutory construction that legislation in this country which purports to have effect abroad requires to be expressed in unequivocal language. Sovereign states are sovereign. We do not interfere in the affairs of a sovereign country in order to enforce orders made here which impact on people living and property located abroad. Accordingly, the provisions relating to the enforcement abroad of a confiscation order made here are structured so as to give full recognition to these principles, and the structures created for these purposes have not been called into question. Part 5 of the Act is concerned with the recovery of the proceeds of unlawful conduct when there is no criminal conviction in this jurisdiction. It applies to conduct which is unlawful within the United Kingdom or conduct which would be criminal abroad and which would be recognised as criminal here. Among its other wide ranging effects, it provides the statutory process by which those convicted of crimes abroad (including citizens of the relevant country) may be deprived of the proceeds or profits which have found their way into this country. Where the statutory conditions are satisfied the court is required to make a civil recovery order: by contrast, the effect of the order is that the enforcement authority is enabled to take the appropriate steps to enforce it. For the purposes of a civil recovery order under Part 5, property is identified in identical terms to the property which may be made the subject of the confiscation processes in Part 2 of the Act. An almost identical definition of property to that in section 84(1) is contained in Parts 3, 4, 5, 6, 7, 8 and 11 of the Act. Section 316 is the general interpretation section for the purposes of Part 5. Section 316(2) provides that the following provisions apply for the purposes of Part 5. Those provisions include section 316(4), which provides: Property is all property wherever situated and includes (a) money, (b) all forms of property, real or personal, heritable or moveable, (c) things in action and other intangible or incorporeal property. It can be seen that the language is the same as that in section 84, save that it expressly includes language referable to Scottish property. In our judgment the expression all property wherever situated must have the same meaning in each of the sections in which it appears, including section 316(4). With respect to those who take a contrary view, it seems to us that the language unequivocally describes not only the whereabouts of the property encompassed within Part 5, but also the nature and type of property covered by it. This does not mean that absolutely every provision in the Act which refers to property must be taken as a reference to property wherever situated because it might be clear from the particular provision that it must be more limited. A good example is section 45(1) which is referred to in paras 14 and 35 above. It confers on a constable the power to seize property to prevent its removal from England and Wales. Since the power only arises in the case of property in England and Wales, it cannot refer to property wherever situated. Subject to such cases, the definition sections are of general effect. Until Mr James Eadie QC addressed the problems to which this appeal has given rise, we suspect that the extent of the control mechanisms built into the statutory processes had not been fully appreciated. However, as it seems to us, a civil recovery order in relation to property situated outside the jurisdiction of the United Kingdom is not designed to have extra territorial effect in the sense that it should operate so as to oblige a court or authority in a foreign country, or for that matter anyone living in that country, to obey the order. That would contravene the sovereignty principle. Indeed, if the enforcement authorities or the trustee for civil recovery were to barge into a foreign country demanding the return of property situated there on the basis of a civil recovery order made here, the response would almost certainly be decidedly cold, and ultimately ineffective. On the other hand, when properly informed that a court in this jurisdiction has made such an order, the authorities abroad would be likely to appreciate that there is or may be property within its jurisdiction which represents the proceeds of unlawful conduct and that, in accordance with their own procedures, this might, with advantage, be removed from the criminal, and dealt with in accordance with domestic principles within its own jurisdiction. In this way the criminal would be deprived of the proceeds and profits of crime or unlawful conduct. Notwithstanding the requirement on the court here to make a recovery order if satisfied that the necessary conditions are satisfied, we believe that control mechanisms have been created within Part 5 to ensure that the order may be made subject to appropriate conditions which would avoid any improper extra territorial effect or infringement of the principle of sovereignty. In the language of section 266(8) the order may address the manner in which the trustee for civil recovery may deal with any property vested by the order for the purpose of realising it. Section 267(5) acknowledges that the obligation on the trustee to maximise the amount payable to the enforcement authority must be realised only so far as practicable. The powers of the trustee under Schedule 7 extend to starting or continuing legal proceedings in relation to property, that is, property wherever situated. In our judgment this provides the trustee with the power to do so where the property is situated abroad. If so, any such proceedings would be governed by the legal structures which obtain in the relevant foreign country. Mr Eadie accepted in argument that the exercise of the functions of the trustee for civil recovery specified in section 267 of and Schedule 7 to the Act are subject to the powers of our court to impose conditions in relation to the recovery process which acknowledge the sovereignty principle and give effect to it. We agree. Some reliance was placed on section 269. However, in our opinion section 269 is directed only to the courts of England and Wales, Scotland or Northern Ireland as the case might be. It tells those courts which legal rights must take priority over a recovery order. These may include rights under provisions of foreign law, where those provisions of foreign law are applicable under English conflicts rules. However section 269 does not purport to tell foreign courts what rules they may or may not apply. It therefore respects the principle of sovereignty. Section 243 provides that the enforcement authority must serve the claim form on the respondent wherever domiciled, resident or present. The parties agreed that it was not necessary to obtain permission to serve the claim form out of the jurisdiction on the basis that this is a claim which the court has power to determine within CPR 6.33(3). We assume for present purposes (without deciding) that that is correct. The claim form must then be served in accordance with CPR 6.40, which includes safeguards and, at any rate in many cases, requires service in accordance with the local law. In short, in relation to property situated abroad, to which Part 5 applies, we believe that it is open to the court making a civil recovery order to direct that any attempt to enforce the order abroad should not be made, save and except through the legal processes which obtain in the country where the property is situated, or in accordance with the procedures which apply to the enforcement of a confiscation order abroad, or subject to any other appropriate conditions. Viewed in this way, Part 5 of the Act is not inconsistent with and does not contravene the sovereignty principle. We recognise that the Strasbourg Convention does not expressly authorise proceedings of this kind but there is nothing in it which prohibits them. There is in our opinion nothing in the scheme or language of the Act which supports the conclusion that Part 5 is limited to property within the jurisdiction. Indeed section 286 shows that it was not so restricted. Section 286 is part of a series of sections entitled Miscellaneous and is itself entitled Scope of powers (Scotland). It provides: (1) Orders under this Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present. (2) Such an order may be made by the Court of Session in respect of moveable property wherever situated. (3) But such an order in respect of a persons moveable property may not be made by the Court of Session where (a) the person is not domiciled, resident or present in Scotland, and (b) the property is not situated in Scotland, unless the unlawful conduct took place in Scotland. The section thus provides for the making of a recovery order where the relevant person is not domiciled, resident or present in Scotland and where the property is not situated in Scotland. The view expressed by the majority is inconsistent with that section, which (whether or not it is an enigma) is part of the Act. It is true that the section does require that in such circumstances a recovery order can only be made where the unlawful conduct took place in Scotland but that is not relevant to the question which divides the court, which is whether Part 5 applies to property outside the jurisdiction. Section 286 also provides assistance on the true construction of section 316(4). The expression wherever domiciled, resident or present in section 286(1) plainly means wherever situated in the world and the expression in respect of moveable property wherever situated in section 286(2) equally plainly means wherever the moveable property is situated in the world. The contrary is not suggested. In our judgment, there is no escape from the conclusion that wherever situated in section 316(4) means the same. It follows that, if, as the majority say at para 44, the question raised by the PFO appeal is whether the totality of Part 5 relates exclusively to property within the United Kingdom, the question must be answered in the negative. That conclusion seems to us to be supported by the scheme of Part 5. The general purpose of Part 5 is set out in section 240, which is defined in section 240(1) as for the purposes of enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct. The majority recognise that the second reference to property in that subsection must be to property wherever situated because section 241(2) makes it clear that unlawful conduct includes conduct which takes place outside the United Kingdom provided that it is unlawful in the place where it occurs and would be unlawful if it took place in the United Kingdom. There is nothing in section 240(1) which supports the conclusion that property where it is first used is to have a different meaning from property in the same section. Indeed, read naturally, it has the same meaning. The section provides for a recovery order to recover property which is property obtained through unlawful conduct. Given that it is agreed that property obtained through unlawful conduct can be property outside the jurisdiction, it must follow that property which is such property can be property outside the jurisdiction. The plain effect of section 240(1) read together with the definition section in section 316(4), which by section 316(2) applies for the purposes of Part 5, is that both references to property are references to property wherever situated. So too, as is accepted, are the references to obtaining property by unlawful conduct in section 242. This conclusion does not depend upon section 286 but is supported by it because it provides a particular example of a case where a recovery order may be made in respect of property outside the jurisdiction. So far as moveable property is concerned, the position in Scotland is clear. Section 286 shows that it includes moveable property anywhere in the world. It does not however apply in England. The provisions which apply in England are not limited in any relevant respect. As already stated, the definitions of property as being wherever situated in sections 84(1) in Part 2 and section 316(4) in Part 5 are part of the central provisions of those Parts. Moreover, section 240(2) provides that the powers conferred by Part 5 are exercisable in relation to any property regardless of whether any proceedings have been brought for an offence in connection with the property. Section 266(1) provides that If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order. By section 304(1) property obtained through unlawful conduct is recoverable property. It follows that (subject to the exceptions in section 308), recoverable property is a very wide term. It thus appears to us that property in section 266(1) is the property defined in section 316(4), which is all property wherever situated in the world. It was submitted that, by reason of the principles of international sovereignty, property situated abroad must be excluded because of section 266(2), which provides that the recovery order must vest the recoverable property in the trustee for civil recovery. We have already expressed our view that those principles are not infringed merely by including foreign property in the order because the order would be subject to the local law or lex situs. The problem is said to arise from the use of the word vest in section 266(2). There are two reasons why in our view there is no such problem. The first is that the majority accept that the expression moveable property wherever situated in section 286(2) means wherever situated in the world. In cases falling outside the restriction imposed by section 286(3), the majority therefore accept that moveable property situated anywhere in the world may be made the subject of a recovery order. Indeed, it must be made the subject of a recovery order under section 266(1) if the other criteria are satisfied. It follows that the majority see no problem with the making of an order in Scottish proceedings which vests moveable property which is outside the jurisdiction in the trustee for civil recovery. This is no doubt because, as explained above, any such order must be subject to the provisions of the local law and may be subject to appropriate conditions under section 266(8). Moreover, under section 267(5) the trustees obligation to sell the property is expressly limited by what is practicable. If there are no problems with applying section 266(1) and (2) to moveable property in the case of orders made by the Scottish courts, it follows that there are no problems in applying them to moveable property in the case of orders made by the English courts. The only difference between the jurisdiction of the two courts, so far as moveable property is concerned, is that the Scottish courts cannot make an order if the restriction imposed by section 286(3) is satisfied, whereas the jurisdiction of the English courts is not limited in the same way. The second reason why the use of the word vest does not gives rise to a difficulty is that it is capable of operating in personam. Mr Eadie relies upon the similar use of the verb vests in section 306(1) of the Insolvency Act 1986, which provides that a bankrupts estate shall vest in the trustee immediately upon his appointment taking effect. He relies upon the decision of the Court of Appeal in Ashurst v Pollard [2001] Ch 595, which related to real property in Portugal which was owned by the bankrupt and his wife. Jonathan Parker LJ (with whom Kennedy and Potter LJJ agreed) said at para 11 that the vesting provisions of section 306 cannot effect a change in the Portuguese register of title, which continues to record Mr and Mrs Pollard as the joint owners of the property. Thus in those circumstances, as here, the mere making of a vesting order does not have the inevitable consequence of transferring the legal interest in (or legal title to) real property to the trustee in bankruptcy or (here) the trustee for civil recovery. We would accept Mr Eadies submission that the consequences of a vesting order in relation to property situate abroad depend upon the local law or lex situs. We recognise that there are differences between the Insolvency Act and the Act but in our opinion the Insolvency Act provides a valuable pointer to the correct conclusion under Part 5 of the Act, namely that, as Tomlinson LJ concisely put it in the Court of Appeal at para 168, vest is simply an ordinary English word which takes its meaning from its context and is not here used as a term of art which carries with it inevitable consequences as to the effective transfer of title. In these circumstances, given the fact that section 266 must be construed so that it does not offend against the principles of sovereignty in international law, we see no difficulty in applying it to orders relating to moveable property made by the English courts. What then of immoveable property? Again, we see no reason in either the language of the Act or the principles of international law to prohibit a recovery order in such a case. The effectiveness of such an order would simply be subject to the rules of the lex situs. The definition of property in sections 84(1) and 316(4) expressly applies to all forms of property including real property wherever situated. It thus applies on its face to real property outside the United Kingdom and, whatever the position in Scotland in the light of section 286(2), the Act gives the English courts jurisdiction to make a recovery order in respect of such real property. The provisions of Part 5 of the Act, at any rate in relation to proceedings in England and Wales, are in our view unequivocal. They plainly apply to all property, whether real or personal and wherever situated in the world. Moreover they reflect the purpose behind the Act, namely to deprive criminals of their ill gotten gains. We recognise that how effective the approach we favour will be depends upon the co operation of courts elsewhere. However, for the reasons we have given, we are firmly of the view that nothing we have said infringes or would infringe the sovereignty of other states or the principles of international law. We prefer the views of Mitting J at first instance and of Maurice Kay, Hooper and Tomlinson LJJ in the Court of Appeal to those of the majority. For these reasons we would dismiss the PFO appeal. As to the disclosure order (DO) appeal, we agree that the appeal should be allowed for the reasons given by Lord Phillips in para 94 above. There is nothing in section 357 or 358 to indicate that it was intended that a notice under a disclosure order could be given to a person outside the jurisdiction. The position under section 357 is not inconsistent with our analysis of Part 5. A core feature of our analysis of Part 5 is that recovery orders take effect in personam subject to the local law, or lex situs. In other words, they have no legal consequences outside the United Kingdom except those positively prescribed by local law. For this reason, recovery orders do not impinge upon the sovereignty of foreign states. By contrast, an information notice given to someone outside the United Kingdom has the potential to criminalise acts and omissions committed abroad by foreign citizens who are outside the jurisdiction of the United Kingdom courts. There is no scope for reading the relevant provisions of Part 8 as taking effect subject to the local law or lex situs. The statutory language is clear and unequivocal unless the recipient of an information notice has a reasonable excuse he is guilty of an offence if he fails to comply with an information notice. Further, Part 5 clearly contemplates service on persons anywhere in the world. Section 243(2) states that the claim form must be served on the respondent wherever domiciled, resident or present. If Parliament intended SOCA to have authority to give information notices anywhere in the world, one would expect to see an equivalent provision in Part 8. However Part 8 contains no such provision. Section 357(4) defines a disclosure order as an order authorising SOCA to give information notices to any person the appropriate officer considers has relevant information. There is nothing in this language to suggest that SOCAs power may be exercised extra territorially. In addition, paragraph 15 of Practice Direction Civil Recovery Proceedings states: Disclosure order 15.1 The application notice should normally name as respondents the persons on whom the appropriate officer intends to serve notices under the disclosure order sought. 15.2 A disclosure order must (1) give an indication of the nature of the investigation for the purposes of which the order is made; (2) set out the action which the order authorises the appropriate officer to take in accordance with section 357(4) of the Act; (3) contain a statement of (a) the offences relating to disclosure orders under section 359 of the Act; and (b) the right of any person affected by the order to apply to discharge or vary the order. 15.3 Where, pursuant to a disclosure order, the appropriate officer gives to any person a notice under section 357(4) of the Act, he must also at the same time serve on that person a copy of the disclosure order. Paragraph 15.3 suggests that the recipient of an information notice is not obliged to comply with the notice unless and until SOCA serves a copy of the disclosure order on him. Presumably, that service must take place in accordance with the CPR. However it is not at all clear by what mechanism under the CPR SOCA could serve a copy of a disclosure order on a person outside the United Kingdom. This reinforces the view that information notices can only be served on persons who are physically present within the United Kingdom. We agree that the appropriate relief is a declaration that the DO does not authorise sending information notices to persons who are outside the United Kingdom. |
This appeal is concerned with legislation under which planning authorities have the duty of reviewing what are commonly referred to as old planning permissions for mineral working. The process of review is sometimes referred to by the acronym ROMP (Review [of] Old Mineral [planning] Permissions). The statutory provisions were introduced by the Environment Act 1995 and then reenacted in substantially the same form in the Town and Country Planning (Scotland) Act 1997 (the 1997 Act). The principal legislative purpose of these provisions is to ensure that old mineral permissions are made subject to conditions meeting modern environmental standards. Some of the old permissions were granted many years ago subject to conditions less stringent and less precise than are appropriate today. Where more stringent conditions are imposed compensation is payable in certain cases, but only where the mineral site in question is classified as active rather than dormant. A subsidiary purpose of the legislation is to achieve better and more reliable records of old planning permissions for mineral working. The evolution of the legislation has been described in detail by the Lord President (Lord Cullen) in Lafarge Aggregates Ltd v Scottish Ministers 2004 SC 524, paras 2 and 3. The relevant provisions of the 1997 Act are section 74 and Schedule 9 (Review of Old Mineral Planning Permissions). Schedule 9 contains several special definitions and some interlocking provisions which call for careful examination, but on examination (and with the background history as explained by the Lord President) its general scheme becomes clear. It distinguishes between three categories of mineral sites, and lays down how the process of review is to affect each category. The three categories are Phase I active sites, Phase II active sites and dormant sites. The difference in treatment as between the first and second of these categories is a simple matter of administrative prioritisation: Phase I active sites include sites of particular environmental sensitivity (para 2(4)) and those which are the oldest sites dealt with by Schedule 9, and so most likely to have inadequate conditions (para 2(6); it should be added, for the sake of completeness, that an even older category of permissions, those granted before 1 July 1948, had been covered by earlier legislation). Phase I active sites are therefore to be reviewed first. By contrast the difference in treatment between all active sites (on the one hand) and dormant sites (on the other hand) is more substantial. Dormant sites (which may be either Phase I or Phase II) are defined (para 1(1)) as sites on which no substantial minerals development was carried out in the period beginning 22 February 1982 and ending with 6 June 1995. Although a planning permission cannot be lost by abandonment, Parliament thought it right to deal with dormant sites in a rather more robust way, by freezing any further mineral working until new conditions had been applied for and approved (para 12(3)). This appeal relates to a dormant site. As the Lord Justice Clerk (Lord Gill) said in his opinion in the Inner House (para 8) there are two stages in the Schedule 9 procedure. Stage 1 involves the preparation of two lists, termed the first list (para 3) and the second list (para 4). The first list has three main functions: (i) to list all mineral sites in the authoritys area (para 3(1) and (2)); (ii) to sort them into the three categories already mentioned (para 3(3)); and (iii) for active Phase I sites only, to specify a date by which a para 9 application is to be made (para 3(4) and (5)). In that way active Phase I sites are given priority. The second list is simpler. It relates only to active Phase II sites and performs function (iii) above for them (para 4(3), (4) and (5)). Paragraphs 5, 6, 7 and 8 contain further administrative provisions relevant to what the Lord Justice Clerk called stage 1. Counsel for the appellant placed particular emphasis on the provisions of para 6 (Applications for inclusion in the first list of sites not included in that list as originally prepared and appeals from decisions upon such applications) but it is better to defer consideration of that point. Paragraphs 9 to 16 of Schedule 9 deal with Stage 2. Some of these provisions (including those as to compensation) do not apply to dormant sites. In relation to dormant sites the key provisions are para 9(1) and (5), para 11 and para 12(3) and (4). Para 9(1) is as follows: Any person who is the owner of any land, or who is entitled to an interest in a mineral, may, if that land or mineral is or forms part of a dormant site or an active Phase I or II site, apply to the planning authority to determine the conditions to which the relevant planning permissions relating to that site are to be subject. Para 9(5) is as follows: Where the planning authority receive an application under this paragraph in relation to a dormant site or an active Phase I or II site they shall determine the conditions to which each relevant planning permission relating to the site is to be subject; and any such permission shall, from the date when the conditions to which it is to be subject are finally determined, have effect subject to the conditions which are determined under this Schedule as being the conditions to which it is to be subject. Para 11 gives a right of appeal (now to Scottish Ministers) as to the terms of any new conditions to be imposed. Para 12(3) is as follows: Subject to sub paragraph (4), no relevant planning permission which relates to a dormant site shall have effect to authorise the carrying out of minerals development unless (a) an application has been made under paragraph 9 in respect of that site, and (b) that permission has effect in accordance with paragraph 9(5). Para 12(4) provides for the termination of mineral permissions which are not included in the first list (either initially or on an application under para 6) except so far as concerns conditions for restoration or aftercare. The facts Some of the documentary evidence has to be addressed in detail. The relevant documents are not in chronological order in the appendix. The references are to pages in the hard copy of the appendix. The mineral site with which this appeal is concerned is in a sparsely populated area on the edge of Strathspey. It is on the A938 road between Carrbridge and Dulnain Bridge, near Grantown on Spey. The appellant company, G. Hamilton (Tullochgribban Mains) Ltd (Tullochgribban Mains) is the heritable proprietor of tenanted farmland in the vicinity. The first respondent, the Highland Council (the Council) is the planning authority for the area, having taken over that responsibility from the Inverness County Council. The second respondent, Breedon Aggregates Scotland Ltd, formerly Ennstone Thistle Ltd (Breedon) is the proprietor of the minerals on the site and has the right to work them. Both Tullochgribban Mains and Breedon derive title from the same landowner, Lord Reidhaven. By a disposition [66] signed on 21 April 1967 and registered on 6 July 1967 Lord Reidhaven disponed to Breedons predecessor in title, George MacWilliam and Son (Contractors) Ltd (MacWilliam) all the deposits of sand and gravel and associated substances (except coal) in, on or under the land delineated in red on an annexed plan [74]. This land (the red land) is adjacent to and on the north of the Carrbridge road. It is roughly rectangular except that it does not include a small loch, Loch Mor, which juts into the land on the east side. The disposition provided for entry on 1 August 1965. The property disponed included a number of express rights and privileges, including full right and power . to search for work and carry away the minerals included in the disposition. Counsel did not find it necessary to make any submissions about the detailed terms of the disposition. The pleadings show that at the time when the proceedings were commenced in 2008, Tullochgribban Mains was in the course of registering its title under a disposition made by Lord Reidhaven. Possibly for that reason, its title has not been formally admitted. But nothing turns on that. The argument has proceeded at every level on the basis that Tullochgribban Mains has a sufficient interest to give it locus standi in the proceedings, and that its rights are subject to the mineral rights in the red land disponed to Breedons predecessor in title. The dispute is about planning law, not property law. The original planning permission [75] was granted to MacWilliam by Inverness County Council on 12 February 1965. It was expressed in general terms as permission for the working of minerals on land at Tullochgorum, Carrbridge, in accordance with the plan(s) submitted and docquetted. The permission set out eleven conditions in numbered paragraphs, stated to be in the interests of health, safety and amenity. It is common ground that the names Tullochgribban and Tullochgorum are variants of the same name. The docquetted plan is not extant. It is common ground that it has been lost, possibly at the time when responsibility as planning authority passed to the Council. It would be surprising if it had shown an area materially different from the red land shown on the plan annexed to Lord Reidhavens disposition and Breedon and its predecessors in title appear to have acted consistently with the supposition that they were the same. MacWilliams immediate successor was Tilcon (Scotland) Ltd (Tilcon), and Breedon is Tilcons immediate successor. The mineral site was worked for some years, but it is common ground that no work has taken place for at least 20 years. The direction of working, when it took place, was towards the north, away from the road. The worked area (which has come to be called the green land) was relatively small. Counsel for the appellant put it at about one sixth or one seventh of the whole area of the red land. In March 1997 the Council issued its first list of mineral sites [76]. It was then acting under Schedule 13 of the Environment Act 1995, but it is agreed that the procedure was just the same as under the 1997 Act. The Tullochgribban site was not included in the first list, and in May 1997 Tilcon (which had by then acquired the mineral rights from MacWilliam) applied for it to be included as a Phase I active site. It did so by an undated letter, received on 7 May 1997 [77], with enclosures of (i) a copy of the planning permission dated 12 February 1965 [78]; (ii) a plan [79] (apparently copied from the plan on Lord Reidhavens 1967 disposition) showing the red land; and (iii) a reserve schedule [80] intended to serve as evidence that the site was an active site (that is, one on which some extraction took place after 22 February 1982). The Council (acting by Mr Andrew Brown, who has made an affidavit in the proceedings) replied on 26 June 1997 [107] pointing out that the reserve schedule was inadequate as evidence of working since 1982, and stating that the site would be registered as dormant. Tilcon accepted this by a letter dated 7 July 1997 [108] without further argument and it is not an issue in the appeal. Of more direct relevance, the Councils letter of 26 June 1997 stated: From the information provided, the Council has been able to trace this old planning permission (Reference number ICC/1964/798, approved on 12 February 1965) and has been able to locate a working on the ground as shown by the enclosed map. It would therefore seem appropriate to include Tullochgribban in the first list of sites. The Council then sent Tilcon a letter dated 15 July 1997 [81] framed (as counsel for the appellant pointed out) in the formal language of a decision letter. The substance of the decision was in the first two paragraphs: I refer to your letter of 7 July 1997 in relation to previous correspondence, and hereby give notice that the above mineral site [identified as Tullochgribban Quarry, Carrbridge] has been added to the first list of sites prepared by the Council as a Dormant site. The appropriate reference sheet and site plan relating to this additional entry are enclosed. As this site has been classified as Dormant, no development consisting of the winning and working of minerals or involving the depositing of mineral waste may lawfully be carried out until new planning conditions have been submitted to, and approved by, the Council. The letter was signed by Mr Bob Shannon, who was the Councils Head of Strategic Plans, and Mr Browns superior. The first of the enclosures, the reference sheet [82], was clear and uncontroversial. It set out particulars, correct in every respect, of the original planning permission. It noted at the foot, Original definitive site plan not available. The second enclosure [83] is at the heart of the controversy. It was a plan which identified the green land, a roughly kidney shaped area forming an island within the southern part of the red land. Counsel for the appellant did not accept that the site plan enclosed with the Councils letter of 15 July 1997 was the same as the enclosure with the Councils letter of 26 June 1997 (which referred to the Council being able to locate a working on the ground as shown by the enclosed map), and Mr Browns affidavit (para 4) indicates that the earlier enclosure was probably an extract from the Councils visual record plan [110, which is Appendix 4 of Mr Browns affidavit, with a better copy at 119]. The site plan [83] enclosed with the letter of 15 July 1997 was headed Review of Old Mineral Workings and there is discernible on it, at two places just within the boundary of the green land, the word spreads (apparently indicating some sort of land slippage). The site was therefore classified, by a revision of the first list, as a dormant site [109]. Tilcon did not make any comment on the letter of 15 July 1997 and its enclosures. There is no indication that it occurred to any of Tilcons management that the letter and enclosures were intended to reduce dramatically the extent of the original planning permission, or that it had that effect. Mr Browns affidavit (para 8) indicates that it was not intended to have that effect: It was not the intention of this site plan to seek to restrict the original planning permission to the area indicated. To have done so would not have been reasonable since the site would have been restricted in extent to its prior workings, thereby excluding any possible reserves, without evidence that this reflected the 1965 permission. The intention as explained in paragraph 5 was that the mineral operator when submitting an application for updated conditions could indicate a larger or more definitive area over which the application should relate, with due justification. The Council would then consider this along with the proposed new conditions in the light of the information to hand. Nothing else material occurred until October 2006, by which time Breedon had acquired the mineral rights. As the site had been classified as a dormant site, there was no time limit for the making of a paragraph 9 application, but in the meantime no further working could take place. On 17 October 2006 Breedons agents sent to the Council a copy of the plan annexed to Lord Reidhavens 1967 disposition. On behalf of the Council Mr Brown (then a senior planner engaged on development control) sent a reply dated 24 October 2006 [88] acknowledging the copy of the plan and stating: On this basis, and given that no more definitive information appears to be available concerning the site boundary for Inverness County Council Permission No 1964/798, it is agreed that an application under Section 74 of the Town and Country Planning (Scotland) Act 1997 should be on the basis of this boundary, with the following exception that the south eastern boundary should be revised to exclude Loch Mor as it presently extends. The shape of Loch Mors shoreline had undergone some change since 1967. On 20 April 2007 Breedon made its paragraph 9 application for approval of a schedule of conditions. After discussion with the Council a final draft of new conditions was prepared [93] which the Council was minded to approve. The first numbered condition was as follows: For the avoidance of doubt, in the absence of a definitive docquetted site plan, the boundary of the site to which these conditions relate under planning permission ICC/1964/798, issued by the County Council of Inverness on 12 February 1965, shall be as outlined in red on the approved plans EG 320/RMP/F/01&2. But after the application was advertised in May 2007, Tullochgribban Mains contended that it would be ultra vires for the Council to approve conditions in relation to the red land. It contended that the Council had, when it revised the first list so as to include Tullochgribban Quarry, definitively determined its extent as being limited to the green land. Tullochgribban Mains commenced these proceedings seeking declarator, reduction of the Councils purported decision, and interdict ad interim. The decisions in the courts below In her reserved judgment the Lord Ordinary (Lady Clark of Calton) carefully analysed the provisions of Schedule 9 to the 1997 Act. She stated (para 27): when a planning authority in accordance with paragraph 3 prepares a list of mineral sites within their area (the first list) what they are preparing is a list of the land to which a relevant planning permission relates. I consider that the intention of the legislation in relation to review of old mineral planning permissions in Schedule 9, is not to permit the planning authority to change the boundaries of land by reducing or increasing an area of land to which a relevant planning permission has been granted at an earlier date. The listing procedure envisages a listing of something which pre exists ie the planning permission granted at an earlier date in respect of mineral sites. The last sentence was criticised by counsel for the appellant as suggesting that the first list was to be a list of planning permissions. But it is clear from the passage as a whole, and indeed from the Lord Ordinarys judgment as a whole, that she well understood that it was to be a list of sites to which a relevant planning permission related (the wording used in Schedule 9, para 1(2)(b)). Normally the boundaries of the site would be identifiable from a plan referred to in the planning permission, but fixing the exact boundaries was not necessary at the listing stage. What was required was identification of the site. The Lord Ordinary considered that the submissions made on behalf of Tullochgribban Mains were not well founded. By an interlocutor of 10 March 2009 she repelled Tullochgribban Mainss first and second pleas in law and dismissed the petition. On 7 January 2011 the Inner House of the Court of Session refused Tullochgribban Mains reclaiming motion for review of the Lord Ordinarys interlocutor. The Lord Justice Clerk gave an opinion in which Lord Carloway and Lady Smith concurred. The Lord Justice Clerk defined the two issues in the appeal: (i) whether the Council was entitled or obliged to define the extent of the mineral site in the first list; (ii) whether, if it had power to define the extent of the site at that stage, the Council defined it as the green land. On the first issue counsel for the appellant argued (as he has before this Court) that the boundaries of a mineral site fell to be determined by the planning authority in the first list, at what the Lord Justice Clerk called Stage 1 (para 30 of his judgment, summarising counsels argument): that is to say, an entry in the first list is not merely site specific but boundary specific too. It follows, on this submission, that at Stage 2, when it comes to consider the question of conditions, it is too late for the planning authority to define the boundaries of the site. The Lord Justice Clerk did not accept that argument. He considered the Lord Ordinarys decision to be correct (paras 33 34, with two case references rearranged): Looking at the overall scheme of Schedule 9, I think that the procedure of listing (paras 3 to 6) is administrative in nature (Dorset CC v Secretary of State [1999] JPL 633, at pp 642 643). Listing is the qualification that entitles the interested party to apply to the planning authority to determine the conditions that should govern the existing planning permission (cf R v Oldham MBC and Anr, ex p Foster [2000] Env LR 395; and R (Payne) v Caerphilly CBC [2002 PLCR 496, [2003] Env LR 679 (Court of Appeal). Listing is about preserving an extant planning permission, not about restricting or rescinding it. The first list is a census of the mineral sites in the planning authoritys area (para 3(1); R v Oldham MBC and Anr, ex p Foster, supra at p 402; R (Payne) v Caerphilly CBC, supra; Lafarge Aggregates Ltd v Scottish Ministers 2004 SC 524, at para 37). It is not a list of defined areas of land. It is drawn up to identify where the mineral sites are and to classify each of them in order to determine the procedures that are to be followed at Stage 2. The existence of a relevant planning permission relating to it is the condition precedent to the inclusion of the site in the list. Therefore the planning authority is bound to satisfy itself that a relevant planning permission exists; but it need not identify the planning permission in the list itself (R v Oldham MPC, ex p Foster, supra) and a fortiori, in my view, it need not define its boundaries. Since the site is by definition land to which a relevant planning permission relates, the extent of it will be defined by the planning permission itself. If the site is then listed, the extant planning permission will remain alive in its entirety. It is only when the site is listed that the extent of the existing development rights over it becomes important. That question will be determined at Stage 2 by reference to the relevant planning permission itself. It is at that stage that planning judgments have to be made on the merits of each case. The Lord Justice Clerk considered that Tullochgribban Mains case was based on a misinterpretation of Schedule 9, para 6(3). A planning authority could grant an application for listing in part (giving rise to a right of appeal) only if satisfied, on clear evidence, that part of the land sought to be listed did not enjoy a relevant planning permission at all. That was quite different from a case where the plan on the original planning permission had been lost. On the second issue, the Lord Justice Clerk concluded that the Council did not purport to exercise its power under para 6(3)(b) to list part only of a site for which an application for listing was made. He accepted that on the uncontradicted evidence of Mr Brown, the green land was no more than an indication of the area which had been worked by then. The Council was not at that stage intending to make a definitive statement about boundaries. Conclusions In my judgment the Lord Ordinary and the Inner House were plainly correct. Counsel for the appellant criticised their reasoning as inadequate. But once the general scheme of Schedule 9 of the 1997 Act is understood the first point is really quite a short one. The procedure at what the Lord Justice Clerk called Stage 1 is administrative and preliminary in nature. It involves the identification of sites and the setting of an order of priority for Stage 2 (with activity on a dormant site being frozen in the meantime). By contrast Stage 2, which is initiated in every case by a paragraph 9 application, requires decisions calling for planning judgment. Counsel for the appellant concentrated in his submissions on para 6 of Schedule 9, and on the right of appeal conferred by it. But the Lord Justice Clerk was correct in his analysis of paragraph 6. It is possible to imagine some circumstances (such as overlapping applications) in which a planning authority might at Stage 1 find it necessary to form a provisional view as to the boundaries of a site. But such cases would be unusual and a provisional determination at Stage 1 could not have the effect of cutting down a valid existing planning permission. The second issue identified by the Lord Justice Clerk does not therefore strictly arise for decision. But the Lord Ordinary and the Inner House were also plainly correct in their observations on this point. Even without Mr Browns affidavit, the correspondence as a whole, considered objectively, gives no indication that the Council was purporting to exercise a power to cut down an existing planning permission. I would therefore dismiss this appeal. It is not an appeal for which permission would have been given by this Court, had permission been necessary. It does not raise any point of law of general importance, and the judgments below set out the position clearly and correctly. |
If a group of people come on to my land without my permission, I shall want the law to provide a speedy way of dealing with the situation. If they leave but come back repeatedly, depending on the evidence, I shall be able to obtain an interlocutory and final injunction against them returning. But they may come on to my land and set up camp there. Again, depending on the evidence, I shall be able to obtain an injunction (interlocutory and final) against them remaining and also against them coming back again once they leave as required by the injunction. Similarly, if the evidence shows that, once they leave, they are likely to move and set up camp on other land which I own, the court can grant an injunction (interlocutory and final) against them doing that. If authority is needed for all this, it can be found in the judgment of Lord Diplock in the Court of Appeal in Manchester Corporation v Connolly [1970] Ch 420. Of course, it is quite likely that I wont know the identities of at least some of the trespassers. If so, Wilson J regarded an injunction as useless since it would be wholly impracticable for the claimant to seek the committal to prison of a probably changing group of not easily identifiable travellers, including establishing service of the injunction and of the application: Secretary of State for the Environment v Drury [2004] 1 WLR 1906, 1912, para 19. That may well have been an unduly pessimistic assessment. Certainly, claimants have used injunctions against unnamed defendants. And Sir Andrew Morritt V C was satisfied that the procedural problems could be overcome. Admittedly, the circumstances in the first of his cases, Bloomsbury Publishing Group Ltd and J K Rowling v News Group Newspapers Ltd and a Person or Persons Unknown [2003] EWHC 1205 (Ch), were very different from a situation involving trespassers. But trespassing protesters were the target of the interlocutory injunction which he granted in Hampshire Waste Services Ltd v Persons Intending to Trespass and/or Trespassing upon Incinerator Sites [2003] EWHC 1738 (Ch). Similarly, in South Cambridgeshire DC v Persons Unknown [2004] EWCA Civ 1280 the Court of Appeal (Brooke and Clarke LJJ) granted an injunction against persons unknown causing or permitting hardcore to be deposited, caravans, mobile homes or other forms of residential accommodation to be stationed, or existing caravans or other mobile homes to be occupied on land adjacent to a gypsy encampment in rural Cambridgeshire. Brooke LJ commented, at para 8: There was some difficulty in times gone by against obtaining relief against persons unknown, but over the years that problem has been remedied either by statute or by rule. See the discussion of such injunctions in Jillaine Seymour, Injunctions Enjoining Non Parties: Distinction without Difference (2007) 66 CLJ 605 624. The present case concerns travellers who set up camp on the Forestry Commissions land at Hethfelton. Lord Neuberger has explained the circumstances. The identities of some, but not all, of those involved were known to the Commission. So the defendants included persons unknown. Despite this, the Commission sought an injunction against all the defendants, including those described as All persons currently living on or occupying the claimants land at Hethfelton. The recorder declined to grant an injunction on the view that it would be disproportionate. But the Court of Appeal, by a majority, reversed the recorder on this point and granted an order that The respondents, and each of them, be restrained from entering upon, trespassing upon, living on, or occupying the parcels of land set out in the Schedule hereto, and, for the avoidance of doubt, the 4th respondent shall mean those people trespassing on, living on, or occupying the land known as Hethfelton Wood on any date between 13th February 2007 and 3rd August 2007 save for those specifically identified as 1st, 2nd, 3rd, 5th and 6th respondents. In my view, for the reasons given by Lord Neuberger, the majority were right to grant the injunction. In any event, Mr Drabble QC, who appeared for the travellers, did not suggest that this injunction had been incompetent or defective for lack of service or in some other respect. Even Wilson LJ, who dissented on the injunction point in the Court of Appeal, did not go so far as to suggest that it was inherently useless: he simply took the view that it added nothing of value to the order for possession and, therefore, the recorder would have been entitled to exercise his discretion to refuse it on that basis: [2008] EWCA Civ 903, para 76. This brings me to the order for possession which lies at the heart of the appeal. people not only come on to my land but oust me from it, I can bring an action for recovery of the land. That is what the Commission did in the present case: they raised an action in Poole county court for recovery of land at Hethfelton nr Wool and all that land described on the attached schedule all in the County of Dorset. In effect, the Commission were asking for two things: to be put back into possession of the land on which the defendants were camped at Hethfelton, and to be put into possession of the other specified areas of land which they owned, but on which, they anticipated, the defendants might well set up camp once they left Hethfelton. The Court of Appeal granted an order for possession in respect both of the land at Hethfelton and of the other parcels of land situated some distance away. As regards the competency of granting an extended order of this kind, the court was bound by the decision in Secretary of State for the Environment v Drury [2004] 1 WLR 1906. The central issue in the present appeal is whether that case was rightly decided. In my view it was not. Most basically, an action for recovery of land presupposes that the claimant is not in possession of the relevant land: the defendant is in possession without the claimants permission. This remains the position even if, as the Court of Appeal held in Manchester Airport v Dutton [2000] QB 133, the claimant no longer needs to have an estate in the land. See Megarry & Wade, The Law of Real Property (7th edition, 2008), para 4 026. To use the old terminology, the defendant has ejected the claimant from the land; the claimant says that he has a better right to possess it, and he wants to recover possession. That is reflected in the form of the order which the court grants: that the claimant do forthwith recover the land or, more fully, that the said AB do recover against the said CD possession of the land. See Cole, The Law and Practice in Ejectment (1857), p 786, Form 262. The fuller version has the advantage of showing that the courts order is not in rem; it is in personam, directed against, and binding only, the defendant. Of course, if the defendant refuses to leave and the court grants a writ of possession requiring the bailiff to put the claimant into possession, in principle, the bailiff will remove all those who are on the relevant land, irrespective of whether or not they were parties to the action: R v Wandsworth County Court ex parte Wandsworth LBC [1975] 1 WLR 1314. So, in that way, non parties are affected. But, if anyone on the land has a better right than the claimant to possession, he can apply to the court for leave to defend. If he proves his case, then he will be put into possession in preference to the claimant. But the original order for possession will continue to bind the original defendant. See Stamp Js lucid account of the law in In re Wykeham Terrace [1971] Ch 204, 209D 210B. In re Wykeham Terrace and Manchester Corporation v Connolly [1970] Ch 420 showed the need for some reform of the procedures used in actions for recovery of land. The twin problems of unidentifiable defendants and the lack of any facility for granting an interim order for possession were tackled by a new Order 113 the provisions of which, with some alteration of the details, have been incorporated into the current Rule 55 of the CPR. In the present case no issue arises about the wording of Rule 55. But I would certainly not interpret occupied in Rule 55.1(b) as preventing the use of the special procedure in a case like University of Essex v Djemal [1980] 1 WLR 1301 where some protesters were excluding the university from one part of its campus, but many students and members of staff were legitimately occupying other parts. The intention behind the relevant provisions of Rule 55 remains the same as with Order 113: to provide a special fast procedure in cases which only involve trespassers and to allow the use of that procedure even when some or all of the trespassers cannot be identified. These important, but limited, changes in the rules cannot have been intended, however, to go further and alter the essential nature of the action itself: it remains an action for recovery of possession of land from people who are in wrongful possession of it. I should add that in the present case the defendants do not dispute that they are or, at least, were at the relevant time in possession, rather than mere occupation, of the Commissions land at Hethfelton. Wonnacott, Possession of Land (2006), p 27, points out that defendants rarely dispute this. But here, in any event, the defendants possession is borne out by their offer to co operate to allow the Commissions ordinary activities on the land not to be disrupted. This is inconsistent with the Commission being in possession. So the preconditions for an action for recovery of land are satisfied. By contrast, the Forestry Commission were at all relevant times in undisturbed possession of the parcels of land listed in the schedule to the Court of Appeals order. That being so, an action for the recovery of possession of those parcels of land is quite inappropriate. The only authority cited by the Court of Appeal in Secretary of State for the Environment v Drury [2004] 1 WLR 1906 for granting such an order was the decision of Saville J in Ministry of Agriculture, Fisheries and Food v Heyman (1990) 59 P & CR 48. But in that case the defendant trespassers were not represented and so the point was not fully argued. Saville J referred to the decision of the Court of Appeal in University of Essex v Djemal [1980] 1 WLR 1301, which I have just mentioned. That decision is clearly distinguishable, however. The defendant students, who had previously taken over, and been removed from, certain administrative offices of the University of Essex, had been occupying another part of the university buildings known as Level 6. The Court of Appeal made an order for possession extending to the whole property of the university in effect, the whole campus. This was justified because the universitys right to possession of its campus was indivisible: If it is violated by adverse occupation of any part of the premises, that violation affects the right of possession of the whole of the premises: [1980] 1 WLR 1301, 1305C D, per Shaw LJ. In the Heyman case, by contrast, the Ministrys right to possession of its land at Grovely Woods was not violated in any way by the trespassers adverse possession of its other land two or three miles away at Hare Wood. In my view, Heyman was wrongly decided and did not form a legitimate basis for the Court of Appeals decision in Drury. Mummery LJ described Wilson Js approach in Drury as pragmatic: [2004] 1 WLR 1906, 1916, para 35. And, of course, the common law does evolve by making pragmatic incremental developments. But, if they are to work, they must be consistent with basic principle and they must make sense. I would not put undue emphasis on the supposed practical difficulties in providing for adequate service by attaching notices to stakes etc on these remoter areas of land. Doubtless, adequate arrangements could be worked out, if extended orders were otherwise desirable. The real objection is that the Court of Appeals extended order that the [Commission] do recover the parcels of land set out in the Schedule hereto is inconsistent with the fundamental nature of an action for recovering land because there is nothing to recover: the Commission were in undisturbed possession of those parcels of land. And the law is harmed rather than improved if a court grants orders which lay defendants, knowing the facts, would rightly find incomprehensible. How, the defendants could well ask, can the Commission recover parcels of land which they already possess? How, too, are the defendants supposed to comply with the order? Only a lawyer could understand and explain that the order really means that they are not to enter and take over possession of the other parcels of Commission land. This is, of course, what the injunction already says in somewhat old fashioned, but tolerably clear, language. Doubtless, the wording could in theory be altered, but this would really be to change the nature of the action and turn the order into an injunction, so creating parallel injunctions, one leading to the possible intervention of the bailiff and the other not. The claimed justification for granting an extended order for possession of this kind is indeed that it is the only effective remedy against travellers, such as the present defendants, since it can ultimately lead to them being removed by a bailiff under a warrant for possession. Moreover, unless the Commission can obtain an extended order, they will be forced to come back to court for a new order each time the defendants move to another of their properties. An injunction is said to be a much weaker remedy in a case like the present since, if the defendants fail to comply with it, all that can be done is to seek an order for their sequestration or committal to prison. Sequestration is an empty threat, the argument continues, against people who have few assets, while committal to prison might well be inappropriate in the case of defendants who are women with young children. Plainly, the idea of the Commission having to return to court time and again to obtain a fresh order for possession in respect of a series of new sites is unattractive. But the scenario presupposes that the defendants would, with impunity, disobey the injunction restraining them from entering the other parcels of land. So this point is linked to the contention that the injunction would not work. I note in passing that there is actually no evidence that these defendants would fail to comply with the injunction in respect of the other parcels of land. So there is no particular reason to suppose that the Court of Appeals injunction will prove an ineffective remedy in this case. On the more general point about the alleged ineffectiveness of injunctions in cases of this kind, South Buckinghamshire DC v Porter [2003] 2 AC 558 is of some interest. There the council wanted to obtain an injunction against gypsies living in caravans in breach of planning controls because an injunction was thought to be a potentially more effective weapon than the various enforcement procedures under the planning legislation. This is in line with the thinking behind the application for an injunction in South Cambridgeshire DC v Persons Unknown [2004] EWCA Civ 1280 which I mentioned in para 2. Admittedly, if the present defendants did fail to comply with the injunction, sequestration would not be a real option since they are unlikely to have any substantial assets. And, of course, there are potential difficulties in a court trying to ensure compliance with an injunction by committing to prison defendants who are women with young children. Nevertheless, as Lord Bingham of Cornhill observed in South Buckinghamshire DC v Porter [2003] 2 AC 558, 580, para 32, in connexion with a possible injunction against gypsies living in caravans in breach of planning controls: When granting an injunction the court does not contemplate that it will be disobeyed. Apprehension that a party may disobey an order should not deter the court from making an order otherwise appropriate: there is not one law for the law abiding and another for the lawless and truculent. Taking that approach, we should, in my view, be slow to assume that an injunction is a worthless remedy in a case like the present and that only the intervention of a bailiff is likely to be effective. If that is indeed the considered consensus of those with experience in the field, then consideration may have to be given to changing the procedures for enforcing injunctions of this kind. But any such reform would raise far reaching issues which are not for this court. In particular, travellers are by no means the only people without means whose unlawful activities the courts seek to restrain by injunction and where the assistance of a bailiff might be attractive to claimants. Especially when Parliament has intervened from time to time to regulate the way that the courts should treat travellers, the need for caution in creating new remedies is obvious. At the very least, the matter is one for the Master of the Rolls and the Rules Council who have the leisure and facilities to consider the issues. For these reasons I would allow the defendants appeal to the extent proposed by Lord Neuberger. LORD WALKER I agree with all the other members of the Court that this appeal should be allowed to the extent of setting aside the wider possession order. In Secretary of State for the Environment, Food and Rural Affairs v Drury [2004] 1 WLR 1906 the Court of Appeal went too far in trying to achieve a practical solution. The decision cannot be seen as simply an extension of University of Essex v Djemal [1980] 1 WLR 1301, in which the facts were very different. I respectfully agree with the observations on injunctive relief made by Lord Rodger at the end of his judgment. LADY HALE Two questions are before us. First, can the court grant a possession order in respect of land, no part of which is yet occupied by the defendant, because of the fear that she will do so if ejected from land which she currently does occupy? Second, should the court grant an injunction against that feared trespass? The Court of Appeal unanimously answered the first question in the affirmative, following the reasoning of that Court in Secretary of State for the Environment, Food and Rural Affairs v Drury [2004] EWCA Civ 200, [2004] 1 WLR 1906, CA, and the decision of Saville J in Ministry of Agriculture, Fisheries and Food v Heyman (1989) 59 P & CR 48. The majority also answered the second question in the affirmative; Wilson LJ dissented but only because he thought the wider possession order a sufficient remedy in the circumstances. The approach in Drury and Heyman was rightly described by Mummery LJ in Drury as pragmatic (para 35), depending as it did upon the comparative efficacy of possession orders and injunctions. A possession order gives the claimant the right to call upon the bailiffs or the sheriff physically to remove the trespassers from his land, which is what he wants. An injunction can only be enforced by imposing penalties upon those who disobey. Mummery LJ considered it a legitimate, incremental development of the ruling of the Court of Appeal in University of Essex v Djemal [1980] 1 WLR 1301, that a possession order can cover a greater area of the claimants land than that actually occupied by the trespassers. The situation in Djemal was very like the situation in this and no doubt many other cases. The University of Essex consists (mainly) of some less than beautiful buildings erected in the 1960s upon a beautiful campus at Wivenhoe Park near Colchester. The students had occupied a small part of the University buildings. The University wanted an order covering the whole of the University premises. The judge had given them an order covering only the part actually occupied by the students. The Court of Appeal made the wider order sought by the University, holding that there was jurisdiction to cover the whole of the owners property in respect of which his right of occupation has been interfered with (per Buckley LJ at p 1304E, emphasis supplied). Shaw LJ reasoned that the right of the University to possession of the site and buildings was indivisible. If it is violated by adverse occupation of any part of the premises, that violation affects the right of possession of the whole of the premises (p 1305D, emphasis supplied). These were extempore judgments in a case where the students had already decided to call off their direct action, but it will noted that Buckley LJ spoke of interference with a right of occupation, while Shaw LJ spoke of violation of a right of possession. The defendants in this case are occupying only part of Hethfelton Wood. We can, I think, assume that the Forestry Commission are occupying the rest. They are carrying on their forestry work as best they can indeed, one of their problems is that they are impeded from doing it because of the risk of harm to the vehicles and their occupants. Yet Mr Drabble, for the defendant appellants, has never resisted an order covering the whole of Hethfelton Wood, nor does he invite us to disagree with Djemal. Being a sensible man, he recognises that we would be disinclined to hold that if trespassers set up camp in a large garden the householder can obtain an order enabling them to be physically removed only from that part of the garden which they have occupied, even if it is clear that they will then simply move their tents to another part of the garden. The questions raised by this case and Djemal should be seen as questions of principle rather than pragmatism or procedure. Still less should they be answered by reference to the forms of action which were supposedly abolished in 1876. The underlying principle is ubi ius, ibi remedium: where there is a right, there should be a remedy to fit the right. The fact that this has never been done before is no deterrent to the principled development of the remedy to fit the right, provided that there is proper procedural protection for those against whom the remedy may be granted. So the questions are: what is the right to be protected? And what is the appropriate remedy to fit it? If we were approaching this case afresh, without the benefit and burden of history, we might think that the right to be protected is the right to the physical occupation of tangible land. A remedy should be available against anyone who does not have that right and is interfering with it by occupying the land. That remedy should provide for the physical removal of the interlopers if need be. The scope of the remedy actually granted in any individual case should depend upon the scope of the right, the extent of the actual and threatened interference with it, and the adequacy of the procedural safeguards available to those at risk of physical removal. In considering the nature and scope of any judicial remedy, the parallel existence of a right of self help against trespassers must not be forgotten, because the rights protected by self help should mirror the rights that can be protected by judicial order, even if the scope of self help has been curtailed by statute. No civil wrong is done by turning out a trespasser using no more force than is reasonably necessary: see Hemmings v Stoke Poges Golf Club [1920] 1 KB 720. In Cole on Ejectment (London, Sweet, 1857), a comprehensive textbook written after the Common Law Procedure Act 1852, there is considerable discussion (in ch VII) of the comparative merits of self help and ejectment. Any person with a right to enter and take possession of the land might choose simply to do that rather than to sue in ejectment. But this was not advised where the right of entry was not clear and beyond doubt, or where resistance was to be expected. The effect of the criminal statutes against forcible entry was by no means clear: whether no force at all, or only reasonable force, might be used against the trespasser. Cole was not as sanguine as was Lord Denning MR in McPhail v Persons, Names Unknown [1973] Ch 447, 456. Lord Denning took the view that the statutes against forcible entry did not apply to the use of reasonable force against trespassers. Those statutes have now been replaced by section 6 of the Criminal Law Act 1977. This prohibits the use or threat of violence against person or property for the purpose of securing entry to any premises without lawful excuse. But it also provides that a right to possession or occupation of the premises is no excuse, although there is now an exception for a displaced residential occupier or protected intending occupier. This does not include the Forestry Commission, although it is not impossible that they would be able to evict the travellers without offending against the criminal law. But in any event, the use of self help, even if it can be lawfully achieved, is not encouraged because of the risk of disorder that it may entail. Lord Denning considered that the statutes of forcible entry did not apply because the trespassing squatters in McPhail were not in possession of the land at all. He quoted Pollock on Torts (15th ed 1951, p 292): A trespasser may in any case be turned off land before he has gained possession, and he does not gain possession until there has been something like acquiescence in the physical fact of his occupation on the part of the rightful owner. A trespasser who merely interferes with the right to possession or occupation of the property may also be ejected with the use of reasonable force: one does not need to go to court, or even call the police, to eject a burglar or a poacher from ones property. Although Cole contemplated that self help might be used against a tenant who had wrongfully continued in occupation after the end of his tenancy, tenants are clearly now in a different position from squatters. Lord Denning thought that the statutes of forcible entry did apply to protect them (although Cole says that the authorities on which he relied had later been overruled). Most, but not all, residential tenants are now protected by statute against eviction otherwise than by court order. This is a complicated area which need not concern us now as we are dealing with people who have never been granted any right to be where they are. However, Lord Dennings basic point is important here. In a civilised society, the courts should themselves provide a remedy which is speedy and effective: and thus make self help unnecessary (McPhail, p 457C). It seems clear that the right of self help has never been limited to those who have actually been dispossessed of their land: in fact on one view it is limited to those who have not been so dispossessed. There is no reason in principle why the remedy of physical removal from the land should only be available to those who have been completely dispossessed. It should not depend upon the niceties of whether the person wrongfully present on the land was or was not in possession in whatever legal sense the word is being used. Were the students in Djemal in possession of the Universitys premises at all? Lord Denning, supported by Sir Frederick Pollock, would not think so: see McPhail at 456F. Were these new travellers in possession of Hethfelton Wood at all? Again, Lord Denning would not think so. They had parked their vehicles there, but the work of the Forestry Commission was going on around them as best it could. If we accept that the remedy should be available to a person whose possession or occupation has been interfered with by the trespassers, as well as to a person who has been totally dispossessed, a case like Djemal becomes completely understandable, as does the order for possession of the whole of Hethfelton Wood in this case. Nor need we be troubled by the form of the order, that the claimant recover the land. His occupation of the whole has been interfered with and he may recover his full control of the whole from those who are interfering with it. As is obvious from the above, a great deal of confusion is caused by the different meanings of the word possession and its overlap with occupation. As Mark Wonnacott points out in his interesting monograph, Possession of Land (Cambridge University Press, 2006), the term possession is used in three quite distinct senses in English land law: first, in its proper, technical sense, as a description of the relationship between a person and an estate in land; secondly, in its vulgar sense of physical occupation of tangible land (the third sense need not concern us here). Possession, in its first sense, he divides into a relationship of right, the right to the legal estate in question, and a relationship of fact, the actual enjoyment of the legal estate in question; a person might have the one without the other. Possession of a legal estate in fact may often overlap with actual occupation of tangible land, but they are conceptually distinct: a person may be in possession of the head lease if he collects rents from the sub tenants, but he will not be in physical occupation of tangible land. The modern action for the possession of land is the successor to the common law action of ejectment (and some statutory remedies developed for use in the county and magistrates courts in the 19th century). The ejectment in question was not the ejectment sought by the action but the wrongful ejectment of the right holder. Its origins lay in the writ of trespass, an action for compensatory damages rather than recovery of the estate. But the common law action to recover the estate was only available to freeholders and not to term holders (tenants). So the judges decided that this form of trespass could be used by tenants to recover their terms. Trespass was a more efficient form of action than the medieval real actions, such as novel disseisin, so this put tenants in a better position than freeholders. As is well known, the device of involving real people as notional lessees and ejectors was used to enable freeholders to sue the real ejectors. These were then replaced by the fictional characters John Doe and Richard Roe. Eventually the medieval remedies were (mostly) abolished by the Real Property Limitation Act of 1833; the fictional characters of John Doe and Richard Roe by the Common Law Procedure Act 1852; and the forms of action themselves by the Judicature Acts 1873 75 (see AWB Simpson, A History of the Land Law, Oxford, Clarendon Press, 2nd edition 1986, ch VII). The question for us is whether the remedy of a possession action should be limited to deciding disputes about possession in the technical sense described by Wonnacott. The discussion in Cole on Ejectment concentrates on disputes between two persons, both claiming the right to possession of the land, one in occupation and the other not. Often these are between landlords and tenants who have remained in possession when the landlord thinks that their time is up. But it is clear that in reality what was being protected by the action was the right to physical occupation of the land, not the right to possession of a legal estate in land. The head lessee who was merely collecting the rents would not be able to bring an action which would result in his gaining physical occupation of the land unless he was entitled to it. It seems clear that the modern possession action is there to protect the right to physical occupation of the land against those who are wrongfully interfering with it. The right protected, to the physical occupation of the land, and the remedy available, the removal of those who are wrongfully there, should match one another. The action for possession of land has evolved out of ejectment which itself evolved out of the action for trespass. There is nothing in CPR Part 55 which is inconsistent with this view, far from it. The distinction is drawn between a possession claim which is a claim for the recovery of possession of land (r 55.1.(a)) and a possession claim against trespassers which is a claim for the recovery of land which the claimant alleges is occupied only by a person or persons who entered or remained on the land without the consent of a person entitled to possession of that land . The object is to distinguish between the procedures to be used where a tenant remains in occupation after the end of his tenancy and the procedures to be used where there are squatters or others who have never been given permission to enter or remain on the land. That, to my mind, is the reason for inserting only: not to exclude the possibility that the person taking action to enforce his right to occupy is also in occupation of it. There is then provision for taking action against persons unknown. But the remedy in each case is the same: an order for physical removal from the land. It was held in R v Wandsworth County Court, ex parte Wandsworth London Borough Council [1975] 1 WLR 1314, that a bailiff executing a possession warrant is entitled to evict anyone found on the premises whether they were party to the judgment or not. However, there is nothing to prevent the order distinguishing between those who are and those who are not lawfully there, provided that some means is specified of identifying them. No one would suggest that an order for possession of Hethfelton Wood would allow the removal of Forestry Commission workers or picnickers who happened to be there when the bailiffs went in. In principle, court orders should be tailored to fit the facts and the rights they are enforcing rather than the other way around. This does not, however, solve the principal question before us. What is the extent of the premises to which the order may relate? As Mummery LJ suggested in Drury, at para 31, the origin was in an action to recover a term of years. The land covered by the term would be defined in the grant. It would not extend to all the land anywhere in the lawful possession of the claimant. Equally, however, as discussed earlier, the remedy can be granted in respect of land to which the claimant is entitled even though the trespasser is not technically in possession of it. This suggests that the scope may be wider than the actual physical space occupied by the trespasser, who may well move about from time to time. In any event, the usual rule is that possession of part is possession of the whole, thus begging the question of how far the whole may extend. It was suggested during argument that it might extend to all the land in the same title at the Land Registry. This could be seen as the modern equivalent of the estate from which the claimant had been unlawfully ousted. But this is artificial when a single parcel of land may well be a combination of several different registered titles. The main objection to extending the order to land some distance away from the parcel which has actually been intruded upon is one of natural justice. Before any coercive order is made, the person against whom it is made must have an opportunity of contesting it, unless there is an emergency. In the case of named defendants, such as the appellants here, this need not be an obstacle. They have the opportunity of coming to court to contest the order both in principle and in scope. The difficulty lies with persons unknown. They are brought into the action by the process of serving notice not on individuals but on the land. If it were to be possible to enforce the physical removal of persons unknown from land on which they had not yet trespassed when the order was made, notice would also have to be given on that land too. That might be thought an evolution too far. Whatever else a possession order may be or have been, it has always been a remedy for a present wrongful interference with the right to occupy. There is an intrusion and the person intruded upon has the right to throw the intruder out. Thus, while I would translate the modern remedy into modern terms designed to match the remedy to the rights protected, and would certainly not put too much weight on the word recover, I would hesitate to apply it to quite separate land which has not yet been intruded upon. The more natural remedy would be an injunction against that intrusion, and I would not be unduly hesitant in granting that. We should assume that people will obey the law, and in particular the targeted orders of the court, rather than that they will not. We should not be too ready to speculate about the enforcement measures which might or might not be appropriate if it is broken. But the main purpose of an injunction would be to support a very speedy possession order, with severely abridged time limits, if it is broken. However, I would not see these procedural obstacles as necessarily precluding the incremental development which was sanctioned in Drury. Provided that an order can be specifically tailored against known individuals who have already intruded upon the claimants land, are threatening to do so again, and have been given a proper opportunity to contest the order, I see no reason in principle why it should not be so developed. It would be helpful if the Rules provided for it, so that the procedures could be properly thought through and the forms of order properly tailored to the facts of the case. The main problem at the moment is the scatter gun form of the usual order (though it is not one prescribed by the Rules). It is for that reason, and that reason alone, that I would allow this appeal to the extent of setting aside the wider possession order made in the Court of Appeal. LORD NEUBERGER There is an acute shortage of sites in this country to satisfy the needs of travellers, people who prefer a nomadic way of life. Thus, in the county in which the travellers in this case pitched their camp, Dorset, it has been estimated that over 400 additional pitches are required. The inevitable consequence is that travellers establish their camps on land which they are not entitled to occupy, normally as trespassers, and almost always in breach of planning control. Proceedings seeking to prevent their occupation have led to human rights issues being raised before domestic courts (for instance, in the House of Lords, Doherty v Birmingham City Council [2008] UKHL 57), and before the European Court of Human Rights (for instance, Connors v United Kingdom (2005) 40 EHRR 9). The present appeal, however, raises issues of purely domestic law, namely the permissible physical ambit of any possession order made against trespassing travellers, and the appropriateness of granting an injunction against them. The facts and procedural history Travellers often set up their camps in wooded areas. Many woods and forests in this country are managed by the Forestry Commission (the Commission) and owned by the Secretary of State for the Environment, Food and Rural Affairs. The functions of the Commission are promoting the interests of forestry, the development of afforestation and the production and supply of timber and other forest products section 1 of the Forestry Act 1967. The Commission runs its woods and forests commercially, although it affords members of the public relatively free and unrestricted access to such areas. All undeveloped land in the United Kingdom is susceptible to unauthorised occupation by travellers, and much of such land is vested in public bodies. But land managed by the Commission is particularly vulnerable to incursion by travellers. As the Recorder who heard this case at first instance said, [g]iven the public access that it affords to its land and its needs for access for forestry vehicles, it is not protected and barricaded in the same way as much of the other land in private and local authority ownership in Dorset is now protected. In 2004, the Office of the Deputy Prime Minister issued Guidance on Managing Unauthorised Camping (the 2004 Guidance). This suggests that local authorities and other public bodies distinguish between unauthorised encampment locations which are unacceptable (for instance, because they involve traffic hazard or public health risks) and those which are acceptable. It further recommends that the management of unauthorised camping must be integrated, and states that each encampment location must be considered on its merits. The 2004 Guidance also indicates that specified welfare enquiries should be undertaken in relation to the travellers and their families in any unauthorised encampment before any decision is made as to whether to bring proceedings to evict them. The Secretary of State has accepted throughout these proceedings that the Commission should comply with the terms of the 2004 Guidelines before possession proceedings are brought against any travellers on land it manages, and that failure to do so may invalidate such proceedings. One of the woods managed by the Commission is Hethfelton Wood (Hethfelton), near Wool, where, at the end of January 2007, a number of new travellers established an unauthorised camp. After the Commission had carried out the enquiries recommended by the 2004 Guidance, the Secretary of State issued the current proceedings, a possession claim against trespassers within CPR 55.1(b), and an application for an injunction, in the Poole County Court, on 13 February 2007. The original defendants were Natalie Meier, Robert and Georgie Laidlaw, Sharon Horie and Persons Names Unknown. Ms Meier travels and lives in a vehicle with her two children, having done so since 2002. Mr Laidlaw sadly died before the hearing, and, unsurprisingly in the circumstances, Mrs Laidlaw appears to have played no part in the proceedings. Ms Horie has pursued a nomadic way of life since about 1982, and lives in vehicles together with her three children. Lesley Rand (who has been a traveller since about 1996, and lives together with her severely disabled nine year old daughter in a specially adapted vehicle) and Kirsty Salter (who was pregnant at the time, and has been a traveller for ten years) were subsequently added as defendants. Two of the defendants had previously been encamped on another area of woodland, some five miles from Hethfelton, called Moreton Plantation (Moreton), which was also managed by the Commission. Following the issue of possession proceedings in relation to Moreton, a compromise was agreed on 9 January 2007, which provided that the Secretary of State should recover possession on 29 January 2007. It was on that day that a number of the defendants moved from Moreton to Hethfelton. Some of the other defendants had previously occupied another wood managed by the Commission, Morden Heath (Morden), which had also been subject to proceedings brought by the Secretary of State, which had resulted in a possession order which was due to be executed on 5 February 2007. In anticipation of the execution of that order, those other defendants moved from Morden to Hethfelton. In the claim form in the instant proceedings, the Secretary of State sought possession not only of Hethfelton, but also of all that land described on the attached schedule all in the county of Dorset. That schedule set out more than fifty separate woods, which were owned by the Secretary of State and managed by the Commission, and which were marked on an attached plan. The number of woods of which possession was sought in addition to Hethfelton was subsequently reduced to thirteen, and the plan showed that those thirteen woods (the other woods) were spread over an area of Dorset around twenty five miles east to west and ten miles north to south. In the injunction application, the Secretary of State sought an order against the same defendants (including Persons Names Unknown) restraining them from re entering [Hethfelton] or from entering [the other woods]. Copies of the claim form seeking possession were served on the named defendants and at Hethfelton in accordance with the provisions of CPR 55.6, together with copies of the injunction application. The evidence established that all the occupiers of the camp at Hethfelton were new travellers, living and travelling in motor vehicles, mostly with children and often with animals. The evidence also indicated that the camp was relatively tidy, and did not involve any antisocial conduct on the part of any of the occupants. However, the presence of children and animals caused the Commission to avoid the use of heavy plant or the carrying out of substantial work, which might otherwise have occurred, in the surrounding area. The Commissions evidence showed that other areas in Dorset managed by the Commission, in addition to Hethfelton, including Moreton, and Morden, had been occupied by travellers as unauthorised camps, sometimes by one or more of the named defendants. The claim came before Mr Recorder Norman, who gave a full and careful judgment on 3 August 2007. He had to resolve three issues. The first was whether to grant an order for possession against the defendants in respect of Hethfelton. The second issue was whether to grant an order for possession in respect of any or all of the other woods. The third issue was whether to grant an injunction restraining the defendants from entering on to all or any of the other woods. The Recorder decided to grant an order for possession against the defendants in respect of Hethfelton. However, he refused to make any wider order for possession, or to grant the injunction sought by the Secretary of State. Although he accepted that he had jurisdiction to make such orders, he considered it inappropriate to do so primarily because the Commission had failed to consider the matters suggested by the 2004 Guidance before the current proceedings were begun, and because the Commission was not prepared to assure the Recorder that consideration would be given to that guidance before any wider order for possession or any injunction was enforced. Paragraph 1 of the order drawn up to reflect this decision provided that [t]he claimant do forthwith recover the land known as Hethfelton Wood. The defendants did not appeal against this order for possession. However, the Secretary of State appealed against the Recorders refusal to grant an order for possession in relation to the other woods (which I will refer to as a wider order for possession) and the injunction, and the Court of Appeal allowed the appeal [2008] EWCA Civ 903, [2009] 1 WLR 828. The order made by the Court of Appeal ordered that the Secretary of State do recover the other woods, and that each of the defendants be restrained from entering upon, trespassing upon, living on, or occupying any of the other woods. In her judgment, Arden LJ followed and applied the reasoning of the Court of Appeal in the earlier decision of Secretary of State v Drury [2004] EWCA Civ 200, [2004] 1 WLR 1906, under which it had been held that an order for possession, at least when made pursuant to a possession claim against trespassers, could, in appropriate cases, extend to land not forming part of, or contiguous with, or even near, the land actually occupied by the trespassers. She concluded that the evidence demonstrated that at least some of the defendants had set up unauthorised encampments on woods managed by the Commission in Dorset, and that there was a substantial risk that at least some of the defendants would move onto other such woods once an order for possession was made in relation to Hethfelton. Arden LJ also said, in disagreement with the Recorder, that any failure on the part of the Commission to consider the matters recommended by the 2004 Guidance before issuing the proceedings for possession of the other woods did not justify refusing to make such a wider order. This was essentially on the basis that, if there was any such failure, it could be considered at the time the wider order for possession was sought to be enforced. Pill and Wilson LJJ agreed. Arden LJ also considered that, for the same reasons, the Recorder had been wrong to refuse the injunction sought by the Secretary of State, and again Pill LJ agreed. However, Wilson LJ dissented on this point, on the ground that the Recorder had been entitled to refuse an injunction on the additional ground which he had mentioned, namely that, if he had made a wider order for possession, it would have been disproportionate to grant an injunction as well. The instant appeal is brought by Ms Horie and Ms Rand, and it raises two principal issues. The first is the extent to which an order for possession can be made in favour of a claimant in respect of land not actually occupied by a defendant. The second issue concerns the circumstances in which an injunction restraining future trespass can and should be granted; this raises two points: (a) whether an injunction against travellers is generally appropriate, and (b) the point on which the Court of Appeal differed from the Recorder, namely the effect of the 2004 Guidance. I shall consider these two issues in turn and then briefly review the implications of my conclusions. An order for possession of land not occupied by the defendants In Drury [2004] 1 WLR 1906, the facts were similar to those here, except the Court of Appeal held that there was no evidence establishing that the travellers in that case had occupied, or threatened to occupy, other property managed by the Commission. Accordingly, the order for possession was in the normal form, limited, like the order made by the Recorder in this case, to the wood occupied by the travellers. However, the Court of Appeal decided that an order for possession could be granted, not merely in respect of land which the defendant occupied, but also in respect of other land which was owned by the claimant, and which the defendant threatened to occupy. The essence of the Court of Appeals reasoning was that (a) the law recognises that an anticipated trespass can give rise to a right of action, (b) an injunction would be of limited, if any, real use, (c) in those circumstances, the law should provide another remedy, (d) a wider order for possession would be of much more practical value than an injunction, (e) such an order for possession was justified by previous authority and in the light of the courts jurisdiction to grant quia timet injunctions; and (f) accordingly, such an order could be made; but (g) it should only be made in relatively exceptional circumstances see at [2004] 1 WLR 1906, paras 20 24, 34 36, and 42 46, per Wilson J, Mummery LJ and Ward LJ respectively. Particularly with the advent of the Civil Procedure Rules, it is clear that judges should strive to ensure that court procedures are efficacious, and that, where there is a threatened or actual wrong, there should be an effective remedy to prevent it or to remedy it. Further, as Lady Hale points out, so long as landowners are entitled to evict trespassers physically, judges should ensure that the more attractive and civilised option of court proceedings is as quick and efficacious as legally possible. Accordingly, the Court of Appeal was plainly right to seek to identify an effective remedy for the problem faced by the Commission as a result of unauthorised encampments, namely that, when a possession order is made in respect of one wood, the travellers simply move on to another wood, requiring the Commission to incur the cost, effort and delay of bringing a series or potentially endless series of possession proceedings against the same people. Nonetheless, however desirable it is to fashion or develop a remedy to meet a particular problem, courts have to act within the law, and their ability to control procedure and achieve justice is not unlimited. Judges are not legislators, and there comes a point where, in order to deal with a particular problem, court rules and practice cannot be developed by the courts, but have to be changed by primary or secondary legislation or, in so far as they can be invoked for that purpose, by Practice Directions. In my view, it is simply not possible to make the sort of enlarged or wider order for possession which the Court of Appeal made in this case, following (as it was, I think, bound to do) the reasoning in Drury [2004] 1 WLR 1906. The power of the County Court for present purposes derives from section 21(1) of the County Courts Act 1984, which gives it jurisdiction to hear and determine any action for the recovery of land. The concept of recovery of land was the essence of a possession order both before and after the procedure was recast by sections 168ff of the Common Law Procedure Act 1852, although, until the Supreme Court of Judicature Act 1875, the action lay in ejectment rather than in recovery of land see per Lord Denning MR in McPhail v Persons, Names Unknown [1973] Ch 447, 457 8. Nonetheless, the change of name did not involve a change of substance, and the essence of an order for possession, whether framed in ejectment or recovery, is that the claimant is getting back the property from the defendant, whether by recovering the property from the defendant or because the claimant had been wrongly ejected by the defendant. As stated by Wonnacott, in Possession of Land (2006), page 22, an action for recovery of land (ejectment) is an action to be put into possession of an estate of land. The complaint is that the claimant is not currently in possession of it, and wants to be put in possession of it. See also Simpson, A History of the Land Law (2nd edition), pages 144 5 and Gledhill v Hunter (1880) 14 Ch D 492, 496 per Sir George Jessel MR. As Sir George Jessel explained, an action for ejectment and its successor, recovery of land, was normally issued to recover possession from a tenant or former tenant. An action against a trespasser, who did not actually dispossess the person entitled to possession, was based on trespass quare clausum fregit, physical intrusion onto the land. Nonetheless, where a trespasser exclusively occupies land, so as to oust the person entitled to possession, the cause of action must be for recovery of possession. (Hence, if such an action is not brought within twelve years the ousting trespasser will often have acquired title by adverse possession.) Accordingly, in cases where a trespasser is actually in possession of land, an action for recovery of land, i.e. for possession, is appropriate, as Lord Denning implicitly accepted in McPhail [1973] Ch 447, 457 8. This analysis is substantially reflected in the provisions of the CPR and in the currently prescribed form of order for possession. CPR 55 is concerned with possession claims, and CPR 55.1 provides: (a) a possession claim means a claim for the recovery of possession of land (including buildings or parts of buildings); (b) a possession claim against trespassers means a claim for the recovery of land which the claimant alleges is occupied only by a person or persons who entered or remained on the land without the consent of a person entitled to possession of that land but does not include a claim against a tenant or sub tenant whether his tenancy has been terminated or not; The special features of a possession claim against trespassers are that the defendants to the claim may include persons unknown, such proceedings should be served on the land as well as on the named defendants, and the minimum period between service and hearing is 2 days (or 5 days for residential property) rather than the 28 days for other possession claims see CPR 55.3(4), 55.6, and 55.5(2) and (3). The drafting of CPR 55(1) is rather peculiar in that, unlike that in CPR 55(1)(a), the definition in CPR 55(1)(b) does not include the word possession. Given that, since 1875, the cause of action has been for recovery of land, the oddity, as Lord Rodger has pointed out, is the inclusion of the word possession in the former paragraph, rather than its exclusion in the latter. However, in so far as the point has any significance, the definition of a possession claim, like the definition of land, in CPR 55(1)(a) may well be carried into CPR 55(1)(b). In any event, the important point, to my mind, is that a possession claim against trespassers involves the person entitled to possession seeking recovery of the land. Form N26 is the prescribed form of order in both a simple possession claim and a possession claim against trespassers (see CPR Part 4 PD Table 1). That form orders the defendant to give the claimant possession of the land in question. Although the orders at first instance (as drafted by counsel), and in the Court of Appeal, direct that the claimant do recover the land in question from the defendants, that is the mirror image of ordering that the defendants give the claimant possession. The notion that an order for possession may be sought by a claimant and made against defendants in respect of land which is wholly detached and separated, possibly by many miles, from that occupied by the defendants, accordingly seems to me to be difficult, indeed impossible, to justify. The defendants do not occupy or possess such land in any conceivable way, and the claimant enjoys uninterrupted possession of it. Equally, the defendants have not ejected the claimant from such land. For the same reasons, it does not make sense to talk about the claimant recovering possession of such land, or to order the defendant to deliver up possession of such land. This does not mean that, where trespassers are encamped in part of a wood, an order for possession cannot be made against them in respect of the whole of the wood (at least if there are no other occupants of the wood), just as much as an order for possession may extend to a whole house where the defendant is only trespassing in one room (at least if the rest of the house is empty). However, the fact that an order for possession may be made in respect of the whole of a piece of property, when the defendant is only in occupation of part and the remainder is empty, does not appear to me to assist the argument in favour of a wider possession order as made by the Court of Appeal in this case. Self help is a remedy still available, in principle, to a landowner against trespassers (other than former residential tenants). Where only part of his property is occupied by trespassers, a landowner, exercising that remedy through privately instructed bailiffs, would, no doubt, be entitled to evict the trespassers from the whole of his property. Similarly, it seems to me, bailiffs (or sheriffs), who are required by a warrant (or writ) of possession to evict defendants from part of a property owned by the claimant, would be entitled to remove the defendants from the whole of that property. But that does not mean that the bailiffs, whether privately instructed or acting pursuant to a warrant, could restrain the trespassers from moving onto another property, perhaps miles away, owned by the claimant. Further, the concept of occupying part of property (the remainder of which is vacant) effectively in the name of the whole is well established see for example, albeit in a landlord and tenant context, Henderson v Squire (1868 69) LR 4 QB 170, 172. However, that concept cannot be extended to apply to land wholly distinct, even miles away, from the occupied land. So, too, the fact that one can treat land as a single entity if it is divided by a road or river (in different ownership from the land) seems to me to be an irrelevance: as a matter of law and fact, the two divisions can sensibly be regarded as a single piece of land. Accordingly, I have no difficulty with the fact that the possession order made at first instance in this case extended to the whole of Hethfelton, even though the defendants occupied only a part of it. The position is more problematical where a defendant trespasses on part of land, the rest of which is physically occupied by a third party, or even by the landowner. Particular difficulties in this connection are, to my mind, raised in relation to a wide order for possession in a claim within CPR 55.1(b). Such a claim may be brought for the recovery of land which the claimant alleges is occupied only by a person or persons who entered or remained on the land without consent . Given that such a claim is limited to land occupied only by trespassers, it is not immediately easy to see how it could be brought, even in part, in relation to land occupied by persons who are not trespassers. And it is fundamental that the court cannot accord a claimant more relief than he seeks (although it is, of course, possible, in appropriate circumstances, for a claimant to amend to increase the extent of his claim, but that is not relevant here). The Court of Appeal in University of Essex v Djemal [1980] 1 WLR 1301 nonetheless decided that a University could be granted a possession order under RSC Order 113 rule 1, which was (in relation to the issue in this case) in similar terms to CPR 55(1)(b), in respect of its whole campus, against trespassers who were squatting in a relatively small part, even though the remainder of the campus was lawfully occupied by academics, other employees, and indeed students. This was a thoroughly practical decision arrived at to deal with a fairly widespread problem at the time, namely student sit ins. There was an obvious fear that, if an order for possession was limited to the rooms occupied by the student trepassers, they would simply move to another part of the campus. As already mentioned, given that there is the alternative remedy of self help, the court should ensure that its procedures are as effective as lawfully possible. Nonetheless, there is obviously great force in the argument that the fact that areas of the campus in that case was lawfully and exclusively occupied by academic staff, employees and students should have precluded a claim and an order for possession in respect of those areas, both in principle and in the light of the wording of RSC Order 113 rule 1. However, this is not the occasion formally to consider the correctness of the decision in Djemal [1980] 1 WLR 1301, which was not put in issue by either of the parties, as the Secretary of State (like the Court of Appeal in Drury [2004] 1 WLR 1906) relied on it, and the appellants were content to distinguish it. Accordingly, the implications of overruling or explaining the decision, which may be far reaching in terms of principle and practice, have not been debated or canvassed. The Court of Appeals conclusion in Drury [2004] 1 WLR 1906, that the court could make a wider order for possession such as that in the instant case, rested very much on the reasoning in Djemal [1980] 1 WLR 1306, and in the subsequent first instance decision of Ministry of Agriculture, Fisheries and Food v Heyman 59 P&CR 48, which represented an incremental development of the ruling in [Djemal [1980] 1 WLR 1306], as Mummery LJ put it at [2004] 1 WLR 1906, para 35. However, it seems to me that the decision in Drury [2004] 1 WLR 1906 was an illegitimate extension of the reasoning and decision in Djemal [1980] 1 WLR 1306. The fact that an order for possession can be made in respect of a single piece of land, only part of which is occupied by trespassers, does not justify the conclusion that an order for possession can be made in respect of two entirely separate pieces of land, only one of which is occupied by trespassers, just because both pieces of land happen to be in common ownership. As already mentioned, bailiffs, whether acting on instructions from a landowner exercising the right of self help to evict a trespasser or acting pursuant to a warrant of possession, can remove the trespasser on part of a piece of property from the whole of that property, but they cannot prevent him from entering a different property, possibly many miles away. Similarly, while it is acceptable, at least in some circumstances, to treat occupation of part of property as amounting to occupation of the whole of that property, one cannot treat occupation of one property as amounting to occupation of another, entirely separate, property, possibly miles away, simply because the two properties are in the same ownership. Having said all that, I accept that the notion of a wider, effectively precautionary, order for possession as made in Drury [2004] 1 WLR 1906 has obvious attraction in practice. As the Court of Appeal explained in that case, the alternative to a wider possession order, namely an injunction restraining the defendant from camping in other woods in the area, would be of limited efficacy. An order for possession is normally enforced in the County Court by applying for a warrant of possession under CCR Order 26, which involves the occupiers being removed from the land by the bailiffs. (The equivalent in the High Court is a writ of possession executed by the Sheriff under RSC Order 45 rule 3). This is a procedurally direct and simple method of enforcement. An injunction, however, may be enforced, and that was treated by the court in Drury [2004] 1 WLR 1906 as meaning may only be enforced, by sequestration or committal see RSC Order 45 rule 5(1), and, in relation to the County Court, CCR 29 and section 38 of the County Courts Act 1984. Given that the claimants aim is to evict the travellers, those are unsatisfactory remedies compared with applying for a warrant of possession. They are not only indirect, but they are normally procedurally unwieldy and time consuming, and, in any event, they are of questionable value in cases against travellers, as explained in the next section of this opinion. There is also some apparent force as a matter of principle in the notion that the Courts should be able to grant a precautionary wider order for possession. If judges have developed the concept of an injunction which restrains a defendant from doing something he has not yet done, but is threatening to do, why, it might be asked, should they now not develop an order for possession which requires a defendant to deliver up possession of land that he has not yet occupied, but is threatening to occupy? The short answer is that a wider or precautionary order for possession, whether in the form granted in this case or in the prescribed Form N26, requires a defendant to do something he cannot do, namely to deliver up possession of land he does not occupy, and purports to return to the claimant something he has not lost, namely possession of land of which already he has possession. What the claimant is really seeking in the present case is an order that, if the defendant goes onto the other woods, the claimant should be entitled to possession. That is really in the nature of declaratory or injunctive relief: it is not an order for possession. A declaration identifies the parties rights and obligations. A quia timet injunction involves the court forbidding the defendant from doing something which he may do and which he would not entitled to do. Both those types of relief are different from what the Court of Appeal intended to grant here, namely a contingent order requiring the defendant to do something (to deliver up possession) if he does something else (trespassing) which he may do and which he would not be entitled to do. I describe the Court of Appeal as intending to grant such an order, because, as just explained, the actual order is in the form of an immediate order for possession of the other woods, which, as I have mentioned, is also hard to justify, given that the defendants were not in occupation of any part of them. Further, while it would be beneficial to be able to make a wider possession order because of the relative ease with which it could be enforced in the event of the defendants trespassing on other woods, such an order would not be without its disadvantages and limitations. An order for possession only binds those persons who are parties to the proceedings (and their privies), although the bailiffs (and sheriffs) are obliged to execute a warrant (or writ) of possession against all those in occupation see In re Wykeham Terrace, Brighton, Sussex [1971] Ch 204, 209 10, R v Wandsworth County Court ex p Wandsworth London Borough Council [1975] 1 WLR 1314, 1317 9, Thompson v Elmbridge Borough Council [1987] 1 WLR 1425, 1431 2, and the full discussion in Wonnacott op cit at pages 146 52. It would therefore be wrong in principle for the court to make a wider order for possession against trespassers (whether named or not) in one wood with a view to its being executed against other trespassers in other woods. Nonetheless, because the warrant must be executed against anyone on the land, there is either a risk of one or more of the occupiers of another wood being evicted without having the benefit of due process, or room for delay while such an occupier applies to the court and is heard before a warrant is executed against him. Quite apart from this, a warrant of possession to execute an order for possession made in the County Court in a claim for possession against trespassers can only be issued without leave within three months of the order CCR Order 24 rule 6(2). So, after the expiry of three months, a wider possession order does not obviate the need for the claimant applying to the court before he can obtain possession of any land the subject of the order. Further, as pointed out by Wilson J in Drury [2004] 1 WLR 1906, para 22, it seems rather arbitrary that only a person who owns land which is being unlawfully occupied can obtain a wider order for possession protecting all his land in a particular area. In conclusion on this issue, while there is considerable practical attraction in the notion that the court should be able to make the wide type of possession order which the Court of Appeal made in this case, following Drury [2004] 1 WLR 1906, I do not consider that the court has such power. It is inconsistent with the nature of a possession order, and with the relevant provisions governing the powers of the court. The reasoning in the case on which it is primarily based, Djemal [1980] 1 WLR 1301, cannot sensibly be extended to justify the making of a wider possession order, and there are aspects of such an order which would be unsatisfactory. I should add that I have read what Lord Rodger has to say on this, the main, issue, and I agree with him. Should an injunction be refused as it will probably not be enforced? That brings me to the question whether an injunction restraining travellers from trespassing on other land should be granted in circumstances such as the present. Obviously, the decision whether or not to grant an order restraining a person from trespassing will turn very much on the precise facts of the case. Nonetheless, where a trespass to the claimants property is threatened, and particularly where a trespass is being committed, and has been committed in the past, by the defendant, an injunction to restrain the threatened trespass would, in the absence of good reasons to the contrary, appear to be appropriate. However, as Lord Walker said during argument, the court should not normally make orders which it does not intend, or will be unable, to enforce. In a case such as the present, if the defendants had disobeyed an injunction not to trespass on any of the other woods, it seems highly unlikely that the two methods of enforcement prescribed by CCR 29 and section 38 of the County Courts Act 1984 (RSC Order 45 rule 5(1) in the High Court) would be invoked. The defendants presumably have no significant assets apart from their means of transport, which are also their homes, so sequestration would be pointless or oppressive. And many of the defendants are vulnerable, and most of them have young children, so imprisonment may very well be disproportionate. In South Bucks District Council v Porter [2003] UKHL 26, [2003] 2 AC 558, local planning authorities were seeking injunctions to restrain gypsies from remaining on land in breach of planning law, and at para 32, Lord Bingham of Cornhill said that [t]he court should ordinarily be slow to make an order which it would not be willing, if need be, to enforce by imprisonment. On the other hand, in the same paragraph of his opinion, Lord Bingham also said that [a]pprehension that a party may disobey an order should not deter the court from making an order otherwise appropriate. A court may consider it unlikely that it would make an order for sequestration or imprisonment, if an injunction it was being invited to grant were to be breached, but it may nonetheless properly decide to grant the injunction. Thus, the court may take the view that the defendants are more likely not to trespass on the claimants land if an injunction is granted, because of their respect for a court order, or because of their fear of the repercussions of breaching such an order. Or the court may think that an order of imprisonment for breach, while unlikely, would nonetheless be a real possibility, or it may think that a suspended order of imprisonment, in the event of breach, may well be a deterrent (although a suspended order should not be made if the court does not anticipate activating the order if the terms of suspension are breached). It was suggested in argument that, if a defendant established an unauthorised camp in a wood which, in earlier proceedings, he had been enjoined from occupying, the court would be likely to be sympathetic to an application by the Commission to abridge even the short time limits in CPR 55.5.2. However, as Lord Rodger observed, if the court were satisfied that a defendant was moving from unauthorised site to unauthorised site on woods managed by the Commission, an abridgement of time limits might be thought to be appropriate anyway. Quite apart from this, if the only reason for granting an injunction restraining a defendant from trespassing in other woods was to assist the Commission in obtaining possession of any of those other woods should the defendant camp in them, it seems to me that this could be catered for by declaratory relief. For instance, the court could grant a declaration that the Commission is in possession of those other woods and the defendant has no right to dispossess it. In some cases, it may be inappropriate to grant an injunction to restrain a trespassing on land unless the court considers not only that there is a real risk of the defendants so trespassing, but also that there is at least a real prospect of enforcing the injunction if it is breached. However, even where there appears to be little prospect of enforcing the injunction by imprisonment or sequestration, it may be appropriate to grant it because the judge considers that the grant of an injunction could have a real deterrent effect on the particular defendants. If the judge considers that some relief would be appropriate only because it could well assist the claimant in obtaining possession of such land if the defendants commit the threatened trespass, then a declaration would appear to me to be more appropriate than an injunction. In the present case, neither the Recorder nor the Court of Appeal appears to have concluded that an injunction should be refused on the ground that it would not be enforced by imprisonment or because it would have no real value. Although it may well be that a case could have been (and may well have been) developed along those lines, it was not adopted by the Recorder, and clearly did not impress the Court of Appeal. In those circumstances, it seems to me that it is not appropriate for this Court to set aside the injunction unless satisfied that it was plainly wrong to grant it, or that there was an error of principle in the reasoning which led to its grant. It does not appear to me that either of those points has been established in this case. The effect of the 2004 Guidance on the grant of an injunction The Recorder considered that it was inappropriate to grant an injunction in favour of the Secretary of State because the Commission had not complied with the 2004 Guidance in relation to the other woods before issuing the proceedings, and would not give an assurance that it would comply with the 2004 Guidance before it enforced the injunction. The Court of Appeal considered that the injunction could nonetheless be granted, as the issue of the Commissions compliance with the 2004 Guidance could be considered before the injunction was enforced. As I have already mentioned, it has been conceded by the Secretary of State throughout these proceedings that the Commission is obliged to comply with the 2004 Guidance, and that failure to do so may vitiate its right to possession against travellers trespassing on land it manages. On that basis, there is some initial attraction in the appellants argument that, if the 2004 Guidance ought to be complied with before the injunction is enforced, it would be inappropriate to grant the injunction before the Guidance was complied with. After all, now the injunction has been granted, the defendants would be in contempt of court and prone to imprisonment (once the appropriate procedures had been complied with) if they encamped on any of the other woods. However, I am of the opinion that the Court of Appeal was right to conclude that, even in the light of the Secretary of States concession, the 2004 Guidance did not present an obstacle to the granting of an injunction in this case. The Guidance is concerned with steps to be taken in relation to existing unauthorised encampments: it is not concerned with preventing such encampments from being established in the first place. The recommended procedures in the 2004 Guidance were relevant to the question of whether an order for possession should be made against the defendants in respect of their existing encampment on Hethfelton. However, quite apart from the fact that they are merely aspects of a non statutory code of guidance, those recommendations are not directly relevant to the issue of whether the defendants should be barred from setting up a camp on other land managed by the Commission. Accordingly, I do not see how it could have justified an attack on the lawfulness of the Secretary of State seeking an injunction to restrain the defendants from setting up such unauthorised camps. At least on the basis of the concession to which I have referred, I incline to the view that the existence and provisions of the 2004 Guidance could be taken into account by the Court when considering whether to grant an injunction and when fashioning the terms of any injunction. However, I prefer to leave the point open, as it was, understandably, not much discussed in argument before us. Even if the 2004 Guidance was of relevance to the issue of whether the injunction should be granted, it seems to me that it could not be decisive. Otherwise, it would mean that such an injunction could never be granted, because it would not be possible to carry out up to date welfare enquiries in relation to defendants who might not move onto a wood which they were enjoined from occupying for several months, or, conceivably, even several years, after the order was made. As Arden LJ held, particularly bearing in mind that it purports to be no more than guidance, the effect and purpose of the 2004 Guidance is simply not strong enough to displace the Secretary of States right to seek the assistance of the court to prevent a legal right being infringed. Further, the fact that welfare enquiries were made in relation to the defendants occupation of Hethfelton by social services means that the more significant investigations required by the 2004 Guidance had been carried out anyway. Following questions from Lady Hale, it transpired for the first time in these proceedings that, at the time of the issue of the claim, the Commission had (and has) a detailed procedural code which is intended to apply when there are travellers unlawfully on its land, and that this code substantially followed the 2004 Guidance. It therefore appears that the Commission has considered the 2004 Guidance and promulgated a code which takes its contents into account. On that basis, unless it could be shown in a particular case that the code had been ignored, it appears to me that the Commissions decision to evict travellers could not be unlawful on the ground relied on by the appellants in this case. However, it appears to me that failure to comply with non statutory guidance would be unlikely to render a decision unlawful, although failure to have regard to the guidance could do so. If the defendants were to trespass onto land covered by the injunction, the Commission would presumably comply with its code before seeking to enforce the injunction. If it did not do so, then, if justified on the facts of a particular case, there may (at least if the Commissions concession is correct) be room for argument that, in seeking to enforce the injunction against travellers who have set up a camp in breach of an injunction, the Secretary of State was acting unlawfully. It is true that this means that, in a case such as this, a defendant who trespasses in breach of an injunction may be at risk of imprisonment before the Commission has complied with the 2004 Guidance. However, where imprisonment is sought and where it would otherwise be a realistic prospect, the defendant could argue at the committal hearing that the injunction should not be enforced, even that it should be discharged, on the ground that the recommendations in the 2004 Guidance have not been followed. Accordingly, on this point, I conclude that, even assuming (in accordance with the Secretary of States concession) that the Commissions failure to comply with the 2004 Guidance may deter the court from making an order for possession against travellers, it should not preclude the granting of an injunction to restrain travellers from trespassing on other land. However, at least in a case where it could be shown that the claimant should have considered the 2004 Guidance, but did not do so, the Guidance could conceivably be relevant to the question whether an injunction should be granted (and if so on what terms), and, if the injunction is breached, to the question of whether or not it should be enforced (and, if so, how). In the event, therefore, the grant of an injunction was appropriate as Arden and Pill LJ concluded (and the only reason Wilson LJ thought otherwise, namely the existence of the wider possession order, no longer applies). The implications of this analysis As I have explained, the thinking of the Court of Appeal in Drury [2004] 1 WLR 1906 proceeded on the basis that an injunction restraining trespass to land could only be enforced by sequestration or imprisonment. In the light of the terms of RSC Order 45 rule 5(1), this may very well be right. Certainly, in the light of the contrast between the terms of that rule and the terms of RSC Order 45 rule 3(1) and CCR 26 rule 16(1) (which respectively provide for writs and warrants of possession only to enforce orders for possession), it is hard to see how a warrant of possession in the County Court or a writ of possession in the High Court could be sought by a claimant, where such an injunction was breached. However, where, after the grant of such an injunction (or, indeed, a declaration), a defendant entered onto the land in question, it is, I think, conceivable that, at least in the High Court, the claimant could apply for a writ of restitution, ordering the sheriff or bailiffs to recover possession of the land for the benefit of the claimant. Such a writ is often described as one of the writs in aid of other writs, such as a writ of possession or a writ of delivery see for instance RSC Order 46 rule 1. Restitution is normally the means of obtaining possession against a defendant (or his privy) who has gone back into possession after having been evicted pursuant to a court order. It appears that it can also be invoked against a claimant who has obtained possession pursuant to a court order which is subsequently set aside (normally on appeal) see sc46.3.3 in Civil Procedure, Vol 1, 2009. Historically at any rate, a writ of restitution could also be sought against a person who had gone into possession by force: see Cole on Ejectment (1857) pp 692 4. So there may be an argument that such a writ may be sought by a claimant against a defendant who has entered onto the land after an injunction has been granted restraining him from doing so, or even after a declaration has been made that the claimant is, and the defendant is not, entitled to possession. It may also be the case that it is open to the County Court to issue a warrant of restitution in such circumstances. Whether a writ or warrant of restitution would be available to support such an injunction or declaration, and whether the present procedural rules governing the enforcement of injunctions against trespass on facts such as those in the present case are satisfactory, seem to me to be questions which are ripe for consideration by the Civil Procedure Rules Committee. The precise ambit of the circumstances in which a writ or warrant of restitution may be sought is somewhat obscure, and could usefully be clarified. Further, if, as I have concluded, it is not open to the court to grant a wider order for possession, as was granted by the Court of Appeal in Drury [2004] 1 WLR 1906 and in this case, then it appears likely that there may very well be defects in the procedural powers of the courts of England and Wales. Where a person threatens to trespass on land, an injunction may well be of rather little, if any, real practical value if the person is someone against whom an order for sequestration or imprisonment is unlikely to be made, and an order for possession is not one which is open to the court. In addition, it seems to me that it may be worth considering whether the current court rules satisfactorily deal with circumstances such as those which were considered in Djemal [1980] 1WLR 1306. Disposal of this appeal Accordingly, it follows that, for my part, I would allow the defendants appeal to the extent of setting aside the wider possession order made by the Court of Appeal, but dismiss their appeal to the extent of upholding the injunction granted by the Court of Appeal. LORD COLLINS At the end of the argument my inclination was to the conclusion that in Secretary of State for the Environment, Food and Rural Affairs v Drury [2004] EWCA Civ 200, [2004] 1 WLR 1906 the Court of Appeal had legitimately extended University of Essex v Djemal [1980] 1 WLR 1301 to fashion an exceptional remedy to deal with cases of the present kind. I was particularly impressed by the point that an injunction might be a remedy which was not capable of being employed effectively in cases such as this. But I am now convinced that there is no legitimate basis for making an order for possession in an action for the recovery of wholly distinct land of which the defendant is not in possession. But in my opinion University of Essex v Djemal [1980] 1 WLR 1301 represented a sensible and practical solution to the problem faced by the University, and was correctly decided. I agree, in particular, that it can be justified on the basis that the Universitys right to possession of its campus was indivisible, as Lord Rodger says, or that the remedy is available to a person whose possession or occupation has been interfered with, as Lady Hale puts it. Where the defendant is occupying part of the claimants premises, the order for possession may extend to the whole of the premises. First, it has been pointed out, rightly, that the courts have used the concept of possession in differing contexts as a functional and relative concept in order to do justice and to effectuate the social purpose of the legal rules in which possession (or, I would add, deprivation of possession) is a necessary element: Harris, The Concept of Possession in English Law, in Oxford Essays in Jurisprudence (ed Guest, 1961) 69 at 72. Secondly, the procedural powers of the court are subject to incremental change in order to adapt to the new circumstances: see, e.g. in relation to the power to grant injunctions, Fourie v Le Roux [2007] UKHK 1 [2007] 1 WLR 320, at [30]; Masri v Consolidated Contractors International (UK) Ltd (No.2) [2008] EWCA Civ 303, [2009] 2 WLR 621, at [182]. I would therefore allow the appeal to the extent of setting aside the wider possession order. |
A is a former senior member of the Security Service, B its Director of Establishments. A wants to publish a book about his work in the Security Service. For this he needs Bs consent: unsurprisingly, A is bound by strict contractual obligations as well as duties of confidentiality and statutory obligations under the Official Secrets Act 1989. On 14 August 2007, after lengthy top secret correspondence (and following final consideration by the Director General), B refused to authorise publication of parts of the manuscript. The correspondence (and annexures) described in detail the Security Servicess national security objections to disclosure. On 13 November 2007 A commenced judicial review proceedings to challenge Bs decision. He claims that it was unreasonable, vitiated by bias and contrary to article 10 of the European Convention on Human Rights, the right to freedom of expression. Is such a challenge, however, one that A can bring in the courts or can it be brought only in the Investigatory Powers Tribunal (the IPT)? That is the issue now before the Court and it is one which depends principally upon the true construction of section 65(2)(a) of the Regulation of Investigatory Powers Act 2000 (RIPA): (a) they are proceedings against any of the intelligence services; (2) The jurisdiction of the Tribunal shall be (a) to be the only appropriate tribunal for the purposes of section 7 of the Human Rights Act 1998 in relation to any proceedings under subsection (1)(a) of that section (proceedings for actions incompatible with Convention rights) which fall within subsection (3) of this section; Subsection (3) provides that proceedings fall within this section if Collins J decided that the Administrative Court had jurisdiction to hear As challenge: [2008] 4 All ER 511 (4 July 2008). The Court of Appeal (Laws and Dyson LJJ, Rix LJ dissenting) reversed that decision, holding that exclusive jurisdiction lies with the IPT: [2009] 3 WLR 717 (18 February 2009). Before turning to the rival contentions it is convenient to set out the legislative provisions most central to the arguments advanced. The Human Rights Act 1998 (HRA) by section 7 provides: (1) A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may (a) bring proceedings against the authority under this Act in the appropriate court or tribunal, or (b) rely on the Convention right or rights concerned in any legal proceedings, but only if he is (or would be) a victim of the unlawful act. (2) In subsection (1) (a) appropriate court or tribunal means such court or tribunal as may be determined in accordance with rules; and proceedings against an authority include a counterclaim or similar proceeding. (9) In this section rules means (a) in relation to proceedings before a court or tribunal outside Scotland, rules made by . the Lord Chancellor or the Secretary of State for the purposes of this section or rules of court. Pursuant to section 7(9), CPR 7.11 (introduced, like HRA, with effect from 2 October 2000) provides: (1) A claim under section 7(1)(a) of the Human Rights Act 1998 in respect of a judicial act may be brought only in the High Court. (2) Any other claim under section 7(1)(a) of that Act may be brought in any court. The only tribunals upon whom section 7(1)(a) HRA jurisdiction has been conferred by rules made under section 7(9) are the Special Immigration Appeals Commission (SIAC) and the Proscribed Organisations Appeal Commission (POAC) not, contrary to the Court of Appeals understanding (see paras 20, 33 and 56 of the judgments below), the Employment Tribunal. I have already set out section 65(2)(a) of RIPA. Section 65(1) made provision for the establishment of the IPT and schedule 3 to the Act provides for its membership. Currently its President is Mummery LJ and its Vice President, Burton J. Section 67(2) provides: Where the tribunal hear any proceedings by virtue of section 65(2)(a), they shall apply the same principles for making their determination in those proceedings as would be applied by a court on an application for judicial review. Section 67(7) empowers the Tribunal to make any such award of compensation or other order as they think fit. Section 67(8) provides: Except to such extent as the Secretary of State may by order otherwise provide, determinations, awards, orders and other decisions of the Tribunal (including decisions as to whether they have jurisdiction) shall not be subject to appeal or be liable to be questioned in any court. Subject to any rules made under section 69, the Tribunal shall be entitled to determine their own procedure in relation to any proceedings, complaint or reference brought before or made to them. Section 68(1) provides: Section 68(4) provides: Where the Tribunal determine any proceedings, complaint or reference brought before or made to them, they shall give notice to the complainant which (subject to any rules made by virtue of section 69(2)(i)) shall be confined, as the case may be, to either (a) a statement that they have made a determination in his favour; or (b) a statement that no determination has been made in his favour. Section 69 confers on the Secretary of State the rule making power pursuant to which were made the Investigatory Powers Tribunal Rules 2000 (SI No 2000/2665) (the Rules). Section 69(6) provides: In making rules under this section the Secretary of State shall have regard, in particular, to the need to secure that matters which are the subject of (a) proceedings, complaints or references brought before or made to the Tribunal are properly heard and considered; and (b) the need to secure that information is not disclosed to an extent, or in a manner, that is contrary to the public interest or prejudicial to national security, the prevention or detection of serious crime, the economic well being of the United Kingdom or the continued discharge of the functions of any of the intelligence services. Rule 13(2) provides that where the Tribunal make a determination in favour of the complainant they shall provide him with a summary of that determination including any findings of fact (to this extent qualifying section 68(4)(a) of the Act). Rule 6(1) gives effect to section 69(6)(b) by providing that the Tribunal shall carry out their functions in such a way as to meet the stipulated need with regard to the non disclosure of information. The effect of rules 6(2) and (3) is that, save with the consent of those concerned, the Tribunal may not disclose to the complainant or any other person any information or document disclosed or provided to them in the course of any hearing or the identity of any witness at that hearing. Rule 9 provides that the Tribunal are under no duty to hold oral hearings and may hold separate oral hearings for the complainant and the public authority against which the proceedings are brought. Rule 9(6) provides that: The Tribunals proceedings, including any oral hearings, shall be conducted in private. In Applications Nos. IPT/01/62 and IPT/01/77 (23 January 2003) the IPT ruled on various preliminary issues of law regarding the legality of a number of the rules. They held that rule 9(6) was ultra vires section 69 of RIPA as being incompatible with article 6 of the Convention but that in all other respects the Rules are valid and binding on the Tribunal and are compatible with articles 6, 8 and 10 of the Convention (para 12 of the IPTs 83 page ruling which is itself the subject of a pending application before the European Court of Human Rights (ECtHR)). Consequent on their ruling on rule 9(b) the IPT published the transcript of the hearing in that case and now hear argument on points of law in open court. A accepts that the legal challenge he is making to Bs decision is properly to be characterised as proceedings under section 7(1)(a) of HRA within the meaning of section 65(2)(a) of RIPA (and not, as he had argued before the judge at first instance, that he should be regarded merely as relying on his article 10 rights pursuant to section 7(1)(b) HRA), and that these are proceedings against one of the Intelligence Services within the meaning of section 65(3)(a) (and not, as he had argued before the Court of Appeal, against the Crown). He nevertheless submits that he is not required by section 65(2)(a) to proceed before the IPT. His first and main argument the argument which prevailed before Collins J and was accepted also by Rix LJ is that he is entitled to proceed either by way of judicial review or before the IPT, entirely at his own choice. Section 65(2)(a), he submits, excludes the section 7(1)(a) jurisdiction of any other tribunal but not that of the courts. His second and alternative argument (not advanced in either court below) is that, even if section 65(2)(a) is to be construed as conferring exclusive section 7(1)(a) jurisdiction on the IPT, it does so only in respect of proceedings against the intelligence services arising out of the exercise of one of the investigatory powers regulated by RIPA. This, of course, would involve narrowing the apparent width of the expression proceedings against any of the intelligence services in section 65(3)(a) and, if correct, means that A here could not proceed before the IPT even if he wished to do so. Justice have intervened in the appeal in support of As submissions. Like A, they urge us to adopt as narrow a construction of section 65 as possible, first, so as not to exclude the jurisdiction of the ordinary courts and, secondly, to avoid a construction which they submit will inevitably give rise to breaches of other Convention rights, most notably the article 6 right to a fair hearing. Argument 1 Section 65(2)(a) excludes only the jurisdiction of other tribunals This argument focuses principally upon the use of the word tribunal in the expression only appropriate tribunal in section 65(2)(a). A says it that it means tribunals only and not courts; B says that it encompasses both. A says that if it was intended to exclude courts as well as tribunals it would have used the same expression, the appropriate forum, as was used in section 65(2)(b), 65(4) and 65(4A) of RIPA. B points out that those three provisions all deal with complaints, for which provision had originally been made in the Security Service Act 1989 and the Intelligence Services Act 1994 and which are not the same as legal claims, forum being, therefore, a more appropriate term to describe the venue for their resolution. Plainly the word tribunal, depending on the context, can apply either to tribunals in contradistinction to courts or to both tribunals and courts. As B points out, section 195(1) of the Extradition Act 2003 describes the appropriate judge (a designated District Judge) as the only appropriate tribunal in relation to section 7(1)(a) HRA proceedings. So too section 11 of the Prevention of Terrorism Act 2005 describes the court (as thereafter defined) as the appropriate tribunal for the purposes of section 7 of the Human Rights Act. Section 7(2) of HRA itself appears to require that a court or tribunal is designated as the appropriate court or tribunal, not that both are designated. Couple with that the use of the word only before the phrase appropriate tribunal in section 65 and it seems to me distinctly unlikely that Parliament was intending to leave it to the complainant to choose for himself whether to bring his proceedings in court or before the IPT. There are, moreover, powerful other pointers in the same direction. Principal amongst these is the self evident need to safeguard the secrecy and security of sensitive intelligence material, not least with regard to the working of the intelligence services. It is to this end, and to protect the neither confirm nor deny policy (equally obviously essential to the effective working of the services), that the Rules are as restrictive as they are regarding the closed nature of the IPTs hearings and the limited disclosure of information to the complainant (both before and after the IPTs determination). There are, however, a number of counterbalancing provisions both in RIPA and the Rules to ensure that proceedings before the IPT are (in the words of section 69(6)(a)) properly heard and considered. Section 68(6) imposes on all who hold office under the Crown and many others too the widest possible duties to provide information and documents to the IPT as they may require. Public interest immunity could never be invoked against such a requirement. So too sections 57(3) and 59(3) impose respectively upon the Interception of Communications Commissioner and the Intelligence Services Commissioner duties to give the IPT all such assistance as it may require. Section 18(1)(c) disapplies the otherwise highly restrictive effect of section 17 (regarding the existence and use of intercept material) in the case of IPT proceedings. And rule 11(1) allows the IPT to receive evidence in any form, and [to] receive evidence that would not be admissible in a court of law. All these provisions in their various ways are designed to ensure that, even in the most sensitive of intelligence cases, disputes can be properly determined. None of them are available in the courts. This was the point that so strongly attracted Dyson LJ in favour of Bs case in the court below. As he pithily put it at [2009] 3 WLR 717, para 48: It seems to me to be inherently unlikely that Parliament intended to create an elaborate set of rules to govern proceedings against an intelligence service under section 7 of the 1998 Act in the IPT and yet contemplated that such proceedings might be brought before the courts without any rules. A further telling consideration against the contention that section 65(2)(a) is intended only to exclude other tribunals with jurisdiction to consider section 7(1)(a) HRA claims is that there are in fact none such with section 7(1)(a) jurisdiction over the categories of claim listed in section 65(3). As stated (at para 4 above), only SIAC and POAC have section 7(1)(a) jurisdiction and in each instance that is with regard to matters outside the scope of section 65. The Court of Appeal were under the misapprehension that the Employment Tribunal too had section 7(1)(a) jurisdiction and were accordingly mistaken in supposing, as Rix LJ put it at para 33, that [t]herefore, section 65(2)(a) of the 2000 Act has content as referring to the IPT as the only appropriate tribunal. In the light of these various considerations it is hardly surprising that A himself recognises that this construction produces a slightly unsatisfactory legislative outcome, although he submits that this is a small price to pay for protecting the article 6 rights of claimants and respecting the principle that access to the courts should not be denied save by clear words, a submission to which I shall come after considering As alternative contended for construction. Argument 2 Section 65(2)(a) confers exclusive jurisdiction on the IPT but only in respect of proceedings arising out of the exercise of one of the RIPA regulated investigatory powers Although this was not an argument advanced at any stage below, I confess to having been attracted to it for a while. After all, in enacting RIPA, Parliament must have had principally in mind the use and abuse of the particular investigatory powers regulated by the Act and there would not appear to be the same need for secrecy, the withholding of information and the neither confirm nor deny policy in the case of an ex officer as in the case of someone outside the intelligence community. The difficulties of such a construction, however, are obvious and in the end, to my mind, insurmountable. As already observed, it would involve reading into section 65(3)(a) limiting words which are simply not there. This would be difficult enough at the best of times. Given, however, that other paragraphs of section 65(3) are in fact more obviously directed to complaints of abuse of the intelligence services regulatory powers (see particularly section 65(3)(d) read with sections 65(5)(a) and 65(7), none of which I have thought it necessary to set out), it seems to me quite impossible to construe the section as this argument invites us to do. Nor, indeed, on reflection, does it seem right to regard proceedings of the kind intended here as immune from much the same requirement for non disclosure of information as other proceedings against the intelligence services. As B points out, it is perfectly possible that the security service will ask the tribunal hearing this dispute to consider additional material of which A may be unaware (and of which the security service is properly concerned that he should remain unaware) which leads it to believe that the publication of As manuscript would be harmful to national security. On any view, moreover, the proceedings by which any tribunal comes to determine whether the disputed parts of the manuscript can safely be published would have to be heard in secret. Again, therefore, the existence of the IPT Rules designed to provide for just such proceedings and the lack of any equivalent rules available to the courts points strongly against this alternative construction also. Are there, however, sufficiently strong arguments available to A (and Justice) to compel the court, with or without resort to section 3 of HRA, to adopt a contrary construction of section 65? It is convenient to consider these arguments under three broad heads. i. Ouster A and Justice argue that to construe section 65 as conferring exclusive jurisdiction on the IPT constitutes an ouster of the ordinary jurisdiction of the courts and is constitutionally objectionable on that ground. They pray in aid two decisions of high authority: Pyx Granite Co Ltd v Ministry of Housing and Local Government [1960] AC 260 and Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147. To my mind, however, the argument is unsustainable. In the first place, it is evident, as the majority of the Court of Appeal pointed out, that the relevant provisions of RIPA, HRA and the CPR all came into force at the same time as part of a single legislative scheme. With effect from 2 October 2000 section 7(1)(a) HRA jurisdiction came into existence (i) in respect of section 65(3) proceedings in the IPT pursuant to section 65(2)(a), and (ii) in respect of any other section 7(1)(a) HRA proceedings in the courts pursuant to section 7(9) and CPR 7.11. True it is, as Rix LJ observed, that CPR 7.11(2) does not explicitly recognise the exception to its apparent width represented by section 65(2)(a). But that is not to say that section 65(2)(a) ousts some pre existing right. This case, in short, falls within the principle recognised by the House of Lords in Barraclough v Brown [1897] AC 615 where, as Lord Watson said at p 622: The right and the remedy are given uno flatu, and the one cannot be dissociated from the other. rather than the principle for which Pyx Granite stands (p 286): It is a principle not by any means to be whittled down that the subjects recourse to Her Majestys courts for the determination of his rights is not to be excluded except by clear words. Distinguishing Barraclough v Brown, Viscount Simonds pointed out that the statute there in question could be construed as merely providing an alternative means of determining whether or not the company had a pre existing common law right to develop their land; it did not take away the inalienable remedy . to seek redress in [the courts]. Before 2 October 2000 there was, of course, no pre existing common law or statutory right to bring a claim based on an asserted breach of the Convention. Section 65(2)(a) takes away no inalienable remedy. Nor does Anisminic assist A. The ouster clause there under consideration purported to remove any judicial supervision of a determination by an inferior tribunal as to its own jurisdiction. Section 65(2)(a) does no such thing. Parliament has not ousted judicial scrutiny of the acts of the intelligence services; it has simply allocated that scrutiny (as to section 7(1)(a) HRA proceedings) to the IPT. Furthermore, as Laws LJ observed at para 22: [S]tatutory measures which confide the jurisdiction to a judicial body of like standing and authority to that of the High Court, but which operates subject to special procedures apt for the subject matter in hand, may well be constitutionally inoffensive. The IPT . offers . no cause for concern on this score. True it is that section 67(8) of RIPA constitutes an ouster (and, indeed, unlike that in Anisminic, an unambiguous ouster) of any jurisdiction of the courts over the IPT. But that is not the provision in question here and in any event, as A recognises, there is no constitutional (or article 6) requirement for any right of appeal from an appropriate tribunal. The position here is analogous to that in Farley v Secretary of State for Work and Pensions (no. 2) [2006] 1 WLR 1817 where the statutory provision in question provided that, on an application by the Secretary of State for a liability order in respect of a person liable to pay child support, the court . shall not question the maintenance assesment under which the payments of child support maintenance fall to be made. Lord Nicholls, with whom the other members of the Committee agreed, observed, at para 18: The need for a strict approach to the interpretation of an ouster provision . was famously confirmed in the leading case of Anisminic . This strict approach, however, is not appropriate if an effective means of challenging the validity of a maintenance assessment is provided elsewhere. Then section 33(4) is not an ouster provision. Rather, it is part of a statutory scheme which allocates jurisdiction to determine the validity of an assessment and decide whether the defendant is a liable person to a court other than the magistrates court. Convention rights A and Justice submit that to force this article 10 challenge into the IPT would inevitably result in breaches of article 6. In support of this submission they rely principally upon the following features of the IPTs procedures: first, that the entire hearing (save for purely legal argument) will be not only private but secret, indeed claimants may not even be told whether a hearing has been or will be held; secondly, that the submissions and evidence relied on respectively by the claimant and the respondent may be considered at separate hearings; thirdly, that only with the respondents consent will the claimant be informed of the opposing case or given access to any of the respondents evidence; fourthly, that no reasons will be given for any adverse determination. All of this, runs the argument, is flatly contrary to the basic principles of open justice: that there should be a public hearing at which the parties have a proper opportunity to challenge the opposing case and after which they will learn the reasons for an adverse determination. As, however, already explained (at para 14), claims against the intelligence services inevitably raise special problems and simply cannot be dealt with in the same way as other claims. This, indeed, has long since been recognised both domestically and in Strasbourg. It is sufficient for present purposes to cite a single paragraph from the speech of Lord Bingham of Cornhill in R v Shayler [2003] 1 AC 247, para 26 (another case raising article 10 considerations): The need to preserve the secrecy of information relating to intelligence and military operations in order to counter terrorism, criminal activity, hostile activity and subversion has been recognised by the European Commission and the Court in relation to complaints made under article 10 and other articles under the Convention: see Engel v The Netherlands (No 1) (1976) 1 EHRR 647, paras 100 103; Klass v Federal Republic of Germany (1978) 2 EHRR 214, para 48; Leander v Sweden (1987) 9 EHRR 433, para 59; Hadjianastassiou v Greece (1992) 16 EHRR 219, paras 45 47; Esbester v United Kingdom (1993) 18 EHRR CD 72, 74; Brind v United Kingdom (1994) 18 EHRR CD 76, 83 84; Murray v United Kingdom (1994) 19 EHRR 193, para 58; Vereniging Weekblad Bluf! v The Netherlands (1995) 20 EHRR 189, paras 35, 40. The thrust of these decisions and judgments has not been to discount or disparage the need for strict and enforceable rules but to insist on adequate safeguards to ensure that the restriction does not exceed what is necessary to achieve the end in question. The acid test is whether, in all the circumstances, the interference with the individuals Convention right prescribed by national law is greater than is required to meet the legitimate object which the state seeks to achieve. The OSA 1989, as it applies to the appellant, must be considered in that context. In one of the Strasbourg cases there referred to, Esbester v United Kingdom, and indeed in a series of other cases brought against the UK at about the same time, the Strasbourg Commission rejected complaints as to the form of proceedings adopted by the Security Service Tribunal and the Interception of Communications Tribunal, not least as to the absence of a reasoned determination. I acknowledge that later in his opinion in Shayler (at para 31) Lord Bingham, contemplating the possibility that authority to publish might have been refused without adequate justification (or at any rate where the former member firmly believed that no adequate justification existed), said: In this situation the former member is entitled to seek judicial review of the decision to refuse, a course which the OSA 1989 does not seek to inhibit. In that case, however, the disclosures had been made before the enactment of RIPA and the creation of the IPT and it is plain that the House had not been referred to section 65(2)(a), still less had had occasion to consider its scope. It cannot sensibly be supposed that the case would have been decided any differently had it been recognised that after 2 October 2000 such a challenge would have had to be brought before the IPT. Admittedly the Esbester line of cases were decided in the context of article 8 (rather than article 10) and, understandably, Strasbourg attaches particular weight to the right to freedom of expression. Neither A nor Justice, however, were able to show us any successful article 10 cases involving national security considerations save only for Sunday Times v UK (no. 2) (1991) 14 EHRR 229 (Spycatcher) where, of course, the disputed material was already in the public domain. For my part I am wholly unpersuaded that the hearing of As complaint in the IPT will necessarily involve a breach of article 6. There is some measure of flexibility in the IPTs rules such as allows it to adapt its procedures to provide as much information to the complainant as possible consistently with national security interests. In any event, of course, through his lengthy exchanges with B, A has learned in some detail why objections to publication remain. Article 6 complaints fall to be judged in the light of all the circumstances of the case. We would, it seems to me, be going further than the Strasbourg jurisprudence has yet gone were we to hold in the abstract that the IPT procedures are necessarily incompatible with article 6(1). Consistently with the well known rulings of the House of Lords in R (Ullah) v Special Adjudicator [2004] 2 AC 323 para 20 and R (Al Skeini) v Secretary of State for Defence [2008] 1 AC 153 paras 105, 106, I would decline to do so, particularly since, as already mentioned, the IPTs own decision on its rules is shortly to be considered by the ECtHR. Over and above all this is the further and fundamental consideration, that even if the IPTs Rules and procedures are in any way incompatible with article 6, the remedy for that lies rather in their modification than in some artificially limited construction of the IPTs jurisdiction. It is, indeed, difficult to understand which of the appellants contended for constructions is said to be advanced by this submission. On any view the IPT has some jurisdiction. Yet the argument involves a root and branch challenge to its procedures in all cases. Anomalies The Court of Appeals construction of section 65(2)(a) is said to give rise to a number of anomalies. Under this head I shall touch too upon certain other points advanced variously by A and Justice. The first anomaly is said to be that while section 7(1)(a) HRA proceedings have to be brought before the IPT, other causes of action or public law grounds for judicial review need not. This point troubled Rix LJ who asked ([2009] 3WLR 717, para 39): what is so special about section 7 proceedings under the 1998 Act against the intelligence services . ? The answer surely is that such claims are the most likely to require a penetrating examination of the justification for the intelligence services actions and, therefore, close scrutiny of sensitive material and operational judgment. But it may well be (as, indeed, Rix LJ foresaw) that section 65(2)(d) of RIPA will be brought into force so that the Secretary of State can allocate other proceedings too exclusively to the IPT. Meantime, subject always to the courts abuse of process jurisdiction and the exercise of its discretion in public law cases, proceedings outside section 7(1)(a) can still be brought in the courts so that full effect is given to the preservation of such rights by section 11 of HRA. It is similarly said to be anomalous that whereas A, responsibly seeking prior clearance for the publication of his manuscript, is driven into the IPT, someone in a similar position, although perhaps facing injunctive proceedings for having sought to publish without permission, would be entitled pursuant to section 7(1)(b) HRA to rely in those ordinary court proceedings on their article 10 rights. Whilst I readily see the force of this, the answer to it may be that defences were not sufficiently thought through at the time of this legislation and that more, rather than fewer, proceedings involving the intelligence services should be allocated exclusively to the IPT. A further anomaly is said to be that Special Branch police officers and Ministry of Defence special forces may well carry out work of comparable sensitivity to that undertaken by the intelligence services and yet section 7(1)(a) HRA claims brought against them would proceed in the ordinary courts and not in the IPT. Part of the answer to this is to be found in the special position of those employed in the security and intelligence services, and the special nature of the work they carry out (Lord Binghams opinion in Shayler at para 36); the rest in the same response as to the earlier points: perhaps the IPTs exclusive jurisdiction should be widened. Sitting a little uneasily alongside the last suggested anomaly is the contention that section 65(2)(a) vests in the IPT exclusive jurisdiction over various kinds of proceedings against people quite other than the intelligence services which may involve little if anything in the way of sensitive material for example, pursuant to section 65(3)(c), proceedings under section 55(4) of RIPA with regard to accessing encrypted data. Whatever view one takes about this, however, it is impossible to see how it supports either of the alternative constructions of section 65 for which A contends. In short, none of the suggested anomalies resulting from the Court of Appeals construction seems to me to cast the least doubt on its correctness let alone to compel some strained alternative construction of the section. I see no reason to doubt that the IPT is well able to give full consideration to this dispute about the publication of As manuscript and, adjusting the procedures as necessary, to resolve it justly. Quite why A appears more concerned than B about the lack of any subsequent right of appeal is difficult to understand. Either way, Parliament has dictated that the IPT has exclusive and final jurisdiction in the matter. I would dismiss the appeal. I agree with Lord Browns opinion. I wish only to add a few brief footnotes. LORD HOPE The Rules As Lord Brown has explained (see para 14, above), among the factors that reinforce the conclusion that is to be drawn from the terms of the statute that Parliament did not intend to leave it to the complainant to choose for himself whether to bring his proceedings in a court or before the IPT are the provisions that RIPA contains about the rules that may be made under it. In Hanlon v The Law Society [1981] AC 124, 193 194 Lord Lowry set out the circumstances in which a regulation made under a statutory power was admissible for the purpose of construing the statute under which it was made. The use of the rules themselves as an aid to construction, in addition to what RIPA itself says about them, needs however to be treated with some care. In Deposit Protection Board v Dalia [1994] 2 AC 367 the issue was as to the meaning of the word depositor, and the regulations that were prayed in aid were made four years after the date of the enactment. At p 397 Lord Browne Wilkinson said that regulations could only be used an aid to construction where the regulations are roughly contemporaneous with the Act being construed. In Dimond v Lovell [2000] QB 216, para 48 Sir Richard Scott VC said that he did not think that the content of regulations which postdated the Consumer Credit Act 1974 by some nine years could be taken to be a guide to what Parliament intended by the language used in the Act. One must also bear in mind, as Lord Lowry said in Hanlon at p 193 194, that regulations cannot be said to control the meaning of the Act, as that would be to disregard the role of the court as interpreter. In this case the statute received the Royal Assent on 28 July 2000. The Investigatory Powers Tribunal Rules 2000 (SI 2000/2665) were made on 28 September 2000 and laid before Parliament the next day. The interval was so short that, taken together, they can be regarded as all part of same legislative exercise. But, as Mr Crow QC for B submitted, it is not the content of the rules as such that matters here. Rather it is the fact that the Act itself put a specialist regime in place to ensure that the IPT was properly equipped to deal with sensitive intelligence material. Section 68(4) of RIPA limits the information that the Tribunal may give to a complainant where they determine any complaint brought before them to a statement that a determination either has been or has not been made in the complainants favour. Section 69(4) states that the Secretary of States power to make rules under that section includes power to make rules that limit the information that is given to the complainant and the extent of his participation in the proceedings. Section 69(6)(b) states that in making rules under that section the Secretary of State shall have regard in particular to the need to secure that information is not disclosed to an extent that is contrary to the public interest or prejudicial to national security. The fact that this regime was so carefully designed to protect the public interest by the scheme that is set out in the statute is in itself a strong pointer to the conclusion that Parliament did not intend by section 65(2)(a) that the jurisdiction of the IPT in relation to claims of the kind that A seeks to bring in this case was to be optional. I do not think that it is necessary to go further and look at the Rules themselves, as the indication that the statute itself gives is so clear on this point. Anomalies Although he adopted a different stance before Collins J, as the judge recorded in para 20 of his opinion [2008] EWHC 1512 (Admin), A now accepts that the legal challenge that he is making to Bs decision is properly to be characterised as proceedings under section 7(1)(a) of the Human Rights Act 1998 and not under section 7(1)(b) of that Act. Section 7(1)(a) of the 1998 Act provides that a person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may bring proceedings against the authority under this Act in the appropriate court of tribunal. Section 7(1)(b) provides, in the alternative, that he may rely on the Convention right or rights concerned in any legal proceedings. As Clayton & Tomlinson, The Law of Human Rights, 2nd ed (2009), para 22.03, puts it: This section contemplates two ways in which a person may advance a contention that a public authority has acted in a way which is incompatible with his Convention rights: either by making a free standing claim based on a Convention right in accordance with section 7(1)(a) or by relying on a Convention right in proceedings in accordance with section 7(1)(b). In R v Kansal (No 2) [2002] 2 AC 69, 105 106 I said that section 7(1)(a) and section 7(1)(b) are designed to provide two quite different remedies. Section 7(1)(a) enables the victim of the unlawful act to bring proceedings under the Act against the authority. It is intended to cater for free standing claims made under the Act where there are no other proceedings in which the claim can be made. It does not apply where the victim wishes to rely on his Convention rights in existing proceedings which have been brought against him by a public authority. His remedy in those proceedings is that provided by section 7(1)(b), which is not subject to the time limit on proceedings under section 7(1)(a) prescribed by section 7(5); see also Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816, para 90. The purpose of section 7(1)(b) is to enable persons against whom proceedings have been brought by a public authority to rely on the Convention rights for their protection. The fact that section 65(2)(a) requires proceedings under section 7(1)(a) to be brought before the IPT, while relying on section 7(1)(b) was not subject to this requirement, was said by Mr Millar QC to be anomalous. Why, he said, should a claim be so restricted when a defence relying on Convention rights to injunctive proceedings by a public authority, or a counterclaim, was not? I am reluctant to conclude that the omission of a reference to section 7(1)(b) was due to an oversight, and I do not think that when regard is had to the purpose of these provisions there is any anomaly. I would reject the suggestion that a counterclaim against a public authority on the ground that it has acted (or proposes to act) in a way that is made unlawful under section 6(1) of the 1998 Act should be regarded as having been made under section 7(1)(b). This issue is not to be resolved by reference to the procedural route by which the claim is made but by reference to the substance of the claim. A counterclaim against a public authority for a breach of Convention rights is to be treated as a claim for the purposes of section 7(1)(a): see section 7(2) which states that proceedings against an authority include a counterclaim or similar proceedings. It will be subject to the time limit on proceedings under that provision in section 7(5). As for defences, the scheme of the 1998 Act is that a person who is (or would be) a victim of an act that it is made unlawful by section 6(1) because the public authority has acted (or proposes to act) in that way is entitled to raise that issue as a defence in any legal proceedings that may be brought against him. Section 7(1)(b) contemplates proceedings in which it would be open to the court or tribunal to grant relief against the public authority on grounds relating to a breach of the persons Convention rights, such as those guaranteed by article 6. The scope for inquiry is relatively limited in comparison with that which may be opened up by a claim made under section 7(1)(a). It is possible, however, to envisage a situation in which a defence to an application for injunctive relief by the intelligence services would open up for inquiry issues of the kind that section 65(2)(a) of RIPA reserves for determination by the IPT if they were to be subject of a claim under section 7(1)(a), the disclosure of which would be contrary to the public interest or prejudicial to national security. It is true that the legislation does not address this problem, perhaps because it was thought inappropriate to reserve to the IPT proceedings that were initiated by and in the control of the intelligence services or any other person in respect of conduct on their behalf. But the situation that this reveals is, I think, properly to be regarded as a product of the way the legislative scheme itself was framed. It does not provide a sound reason for thinking that Parliament intended to leave it to the complainant to choose whether to bring his proceedings in a court rather than before the IPT. Like Lord Brown, I can find nothing in this alleged anomaly, or in any of the others that have been suggested, that supports the construction of section 65(2)(a) for which A contends. |
The appellant and his brother, Daniel Mansell, were convicted of murder and two robberies at Leeds Crown Court on 27 February 1998. The appellants tariff in respect of his life sentence for murder was set at 18 years. On 1 December 2009, the Court of Appeal (Criminal Division) (Hooper LJ, Cooke and Swift JJ) quashed the convictions following a reference on 25 November 2008 by the Criminal Cases Review Commission (CCRC) on the ground that the convictions had been procured by gross prosecutorial misconduct on the part of the police. The Court of Appeal then had to decide whether to order a retrial. Section 7(1) of the Criminal Appeal Act 1968 as amended by the Criminal Justice Act 1988 provides: Where the Court of Appeal allow an appeal against conviction and it appears to the Court that the interests of justice so require, they may order the appellant to be retried After balancing the public interest in convicting those guilty of murder against the public interest in maintaining the integrity of the criminal justice system, the court decided to order a retrial. The question that arises on this appeal is whether they were right to do so. Outline of the facts What follows is the barest outline of the facts. A fuller account appears at paras 65 to 90 of the judgment of Lord Brown. The main prosecution witness at the trial was Karl Chapman. He is a professional criminal and a supergrass. In late 1995 and early 1996, Chapman and the appellant were together in prison. The appellant was serving an 8 year sentence for a series of robberies and Chapman was awaiting sentence, having pleaded guilty to more than 200 offences of robbery. On 3 June 1996, the appellant was released from prison. On 11 June 1996, a robbery took place at the home of two elderly brothers, Bert Smales aged 67 and Joe Smales aged 85. The incident was not reported to the police, but it was later established that the robbers were masked, used violence to extract money from the Smales brothers and stole more than 1,000. On 13 October 1996, the Smales brothers were the victims of a second robbery committed in similar circumstances to the first. Both brothers were subjected to physical violence. Joe Smales sustained injuries to the head which resulted in a fractured jaw, internal bleeding and a fracture of the cervical spine. He died in hospital on 7 November 1996 from pneumonia and deep vein thrombosis which were the direct consequence of the attack. Between December 1996 and April 1997, Chapman provided the police with information and witness statements implicating the appellant and Mansell. The appellant and Mansell were charged with the robberies of both of the Smales brothers and the murder of Joe Smales. At the trial, Chapmans evidence (which occupied one week) was central to the prosecution case. The defence sought to discredit him by suggesting that he was expecting benefits of some kind from the police and that he therefore had an interest in securing the convictions of the appellant and Mansell. Chapman vigorously denied these suggestions. Following the convictions, there were allegations in the local press that the police were planning to pay Chapman a large sum of money upon his release from prison. On the basis of these allegations, the appellant and Mansell applied for leave to appeal their convictions. Leave was refused by a single judge on 30 July 1998. The applications for leave to appeal were renewed in early February 1999 and adjourned on two occasions to allow the CPS to supply further information. On 5 November 1999, an ex parte hearing was held on a public interest immunity application by the prosecution. In the course of the hearing, senior police officers gave evidence to the effect that a reward of 10,000 had been set aside for Chapman, but that he was not aware of it. The Court of Appeal accepted this evidence and on 13 December 1999 dismissed the renewed applications for leave to appeal. The next significant event was the decision by the CCRC to investigate the case. The North Yorkshire Police carried out detailed investigations into the activities of the police. Their report formed the basis of the CCRC report in November 2008. The findings of the report, which have not been challenged, reveal that the police systematically misled the court, the CPS and counsel by concealing and lying about a variety of benefits received by Chapman and his family. These included not only financial reward, but, inter alia, visits to brothels and permission to consume drugs in police company. Furthermore, allegations of violent attacks by Chapman were not investigated, still less the subject of prosecutions. The clear conclusion of the investigation by North Yorkshire Police was that a number of senior police officers involved in the Smales investigation had conspired to pervert the course of justice. They had deliberately concealed information from the court; they had colluded in Chapmans perjury at trial; they had lied in response to enquiries following conviction; and they had perjured themselves in the ex parte leave hearing in the Court of Appeal. It was in the light of its findings that on 25 November 2008 the CCRC referred the case back to the Court of Appeal. The appellant had meanwhile made a series of important admissions of guilt to different persons between October 1998 and September 2004. These are summarised by Lord Brown at paras 85 to 90 of his judgment. The Court of Appeal said that these admissions provided clear and compelling evidence of the appellants guilt of the murder and the robberies. That assessment has not been challenged in the present appeal. As I have said, the Court of Appeal allowed the appellants appeal against conviction. They concluded that, if during the trial it had become clear that the trial court had been deliberately deceived about the circumstances relating to Chapman, the trial judge might well have stayed the prosecution as an abuse of process. Alternatively, the judge might have applied section 78 of the Police and Criminal Evidence Act 1984, and excluded the evidence of Chapman altogether, in which case the appellant and Mansell would have been acquitted. In these circumstances, the decision to quash the convictions was inevitable. More difficult was the question whether or not to order a retrial. The question for the Court of Appeal was whether, in the light of the unchallenged findings of the CCRC and the clear and compelling evidence of the appellants guilt of a shocking murder, the interests of justice required a retrial. In particular, the Court of Appeal had to decide whether the police misconduct so tainted the criminal process that it would on that account not be in the interests of justice to order a retrial. The arguments before us proceeded on the basis that, in substance, the issue for the Court of Appeal was whether a retrial would be an abuse of process analogous to the question whether a trial at first instance should be stayed on the grounds of abuse of process. Retrials following prosecutorial misconduct It is well established that the court has the power to stay proceedings in two categories of case, namely (i) where it will be impossible to give the accused a fair trial, and (ii) where it offends the courts sense of justice and propriety to be asked to try the accused in the particular circumstances of the case. In the first category of case, if the court concludes that an accused cannot receive a fair trial, it will stay the proceedings without more. No question of the balancing of competing interests arises. In the second category of case, the court is concerned to protect the integrity of the criminal justice system. Here a stay will be granted where the court concludes that in all the circumstances a trial will offend the courts sense of justice and propriety (per Lord Lowry in R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42, 74G) or will undermine public confidence in the criminal justice system and bring it into disrepute (per Lord Steyn in R v Latif and Shahzad [1996] 1 WLR 104, 112F). category of case was settled. As he put it: In Latif at page 112H, Lord Steyn said that the law in relation to the second The law is settled. Weighing countervailing considerations of policy and justice, it is for the judge in the exercise of his discretion to decide whether there has been an abuse of process, which amounts to an affront to the public conscience and requires the criminal proceedings to be stayed: Reg. vs Horseferry Road Magistrates Court, Ex parte Bennett [1994] 1 A.C. 42 Ex parte Bennett was a case where a stay was appropriate because a defendant had been forcibly abducted and brought to this country to face trial in disregard of extradition laws. The speeches in Ex parte Bennett conclusively establish that proceedings may be stayed in the exercise of the judges discretion not only where a fair trial is impossible but also where it would be contrary to the public interest in the integrity of the criminal justice system that a trial should take place. An infinite variety of cases could arise. General guidance as to how the discretion should be exercised in particular circumstances will not be useful. But it is possible to say that in a case such as the present the judge must weigh in the balance the public interest in ensuring that those that are charged with grave crimes should be tried and the competing public interest in not conveying the impression that the court will adopt the approach that the end justifies any means. The same principles have also been applied by the Court of Appeal when quashing a conviction on the grounds that it considers the conviction to have been unlawful by reason of an abuse of process. An example of such a case is R v Mullen [2000] QB 520 where the defendant was tried and convicted following his illegal deportation to England. There has been some debate in academic literature about the scope and true rationale for the second category of abuse of process. I refer, for example, to the writings of distinguished commentators such as Professor Ashworth (Exploring the Integrity Principle in Evidence and Procedure in Essays for Colin Tapper, 2003) and Professor L T Choo (Abuse of Process and Judicial Stays of Proceedings, 2nd edition, 2008). Moreover, Mr Perry QC urged the court to adopt the approach taken by the majority of the Canadian Supreme Court to abuse of process applications in R v Regan [2002] 1 SCR 297. Like Lord Brown, I see no reason to depart from the settled law as expounded by Lord Steyn in Latif. The present case is not, however, an appeal against a refusal to stay criminal proceedings for abuse of process nor is it an appeal against the dismissal by the Court of Appeal of an appeal against conviction on the grounds that the conviction was unlawful by reason of an abuse of process. The Court of Appeal quite rightly allowed the appellants appeal. The appeal to this court is against the decision to order a retrial. The use of the words may order in section 7 of the 1968 Act shows that the Court of Appeal has a discretion to order a retrial following the quashing of a conviction on appeal if it appears to the court that the interests of justice so require. It is noteworthy that Parliament has not specified any of the factors that the Court of Appeal may (or indeed may not) take into account when deciding whether or not to order a retrial. Instead, Parliament has propounded a broad and uncomplicated test and has entrusted to the good sense of the Court of Appeal the task of deciding whether the interests of justice require a retrial, having regard to all the circumstances of the particular case. That is hardly surprising since the Criminal Division of the Court of Appeal is a specialist criminal court whose judges have considerable experience and expertise in criminal procedural and substantive law. All of them have had experience of conducting criminal trials and of making rulings in accordance with the law, fairness and justice. The interests of justice is not a hard edged concept. A decision as to what the interests of justice requires calls for an exercise of judgment in which a number of relevant factors have to be taken into account and weighed in the balance. In difficult borderline cases, there may be scope for legitimate differences of opinion. I do not believe it to be controversial that a decision under section 7 of the 1968 Act as to whether the interests of justice require a retrial calls for an exercise of judgment which should only be upset on appeal if it was plainly wrong in the sense that it is one which no reasonable court could have made or if the court took into account immaterial factors or failed to take into account material factors. It seems very likely that the reason why there has been no other appeal to the House of Lords or Supreme Court from a decision under section 7 is because of the expertise that the Court of Appeal has in deciding questions such as whether the interests of justice require a retrial and the difficulty of challenging such decisions on appeal. Most appeals to the Court of Appeal where the court has to decide whether the interests of justice require a retrial do not raise any issue of prosecutorial misconduct. Typically, the court considers questions which include (but are not limited to) whether the alleged offence is sufficiently serious to justify a retrial; whether, if re convicted, the appellant would be likely to serve a significant period or further period in custody; the appellants age and health; and the wishes of the victim of the alleged offence. I do not believe it to be controversial that the gravity of the alleged offence is an important relevant factor for the court to take into account when deciding whether to order a retrial in a case which is not complicated by prosecutorial misconduct. In a case where the issue of prosecutorial misconduct is raised by an appellant as a reason for refusing a retrial, the Court of Appeal may treat the case as to some extent analogous to a second category application to stay a case. But the analogy should not be pressed too far. The question whether the interests of justice require a retrial is broader than the question whether it is an abuse of process to allow a prosecution to proceed (whether or not by retrial). I do not, therefore, agree with Lord Brown (para 98) that in each case the question is the same: what do the interests of justice require? The gravity of the alleged offence is plainly a factor of considerable weight for the court to weigh in the balance when deciding whether to stay proceedings on the grounds of abuse of process. At page 534D in Mullen, giving the judgment of the court Rose LJ said: As a primary consideration, it is necessary for the court to take into account the gravity of the offence in question. It is unnecessary to engage with the academic criticism of this approach: see, for example, Professor Ashworths article already cited at page 120. That is because, whatever the position may be in relation to an application to stay proceedings for abuse of process, it seems to me beyond argument that, when the court is deciding whether the interests of justice require a retrial, the gravity of the alleged offence must be a relevant factor. Society has a greater interest in having an accused retried for a grave offence than for a relatively minor one. No case has been cited to us where the court has had to consider the relevance of prosecutorial misconduct in the original proceedings to the question whether the interests of justice require a retrial. It goes without saying that, when allowing the appeal in the present case essentially on the grounds of prosecutorial misconduct, the Court of Appeal could not rationally have concluded that the interests of justice required a retrial if the retrial would be substantially based on evidence which was the product of that very misconduct. But the prosecution say that their case at the retrial would not be based on that evidence at all. They rely on the admissions made on various occasions by the appellant and contend that this evidence is not tainted by the prosecutorial misconduct. It is helpful to start by asking whether the interests of justice would require a retrial in circumstances where the prosecution evidence at the new trial would be incontestably free of taint. Let us suppose DNA evidence comes to light after the appellant has been convicted which strongly points to his guilt; or an apparently credible independent witness comes forward and makes a statement implicating the appellant. Let us further suppose that the prosecution say that, if there were a retrial, they would only rely on the fresh evidence and would not adduce the tainted evidence. In deciding whether or not the interests of justice require a retrial, it is surely clear that the Court of Appeal would be entitled to disregard the earlier misconduct since it would have no effect at the retrial. The only justification for refusing a retrial on the grounds of the misconduct in such a case would be to mark the courts disapproval of that historical misconduct and to discipline the police. But that is not the function of the criminal courts. Thus, for example, in relation to a stay on the grounds of abuse of process where there has been prosecutorial misconduct, in Bennett at page 74H Lord Lowry said: The discretion to stay is not a disciplinary jurisdiction and ought not to be exercised in order to express the courts disapproval of official conduct. Accordingly, if the prosecuting authorities have been guilty of culpable delay but the prospect of a fair trial has not been prejudiced, the court ought not to stay the proceedings merely pour encourager les autres. The same approach was recommended by the majority of ten (of twelve) members of the Royal Commission on Criminal Justice chaired by Viscount Runciman (July 1993). At paras 47 to 50 of chapter 10, there is a section headed Appeals based on pre trial malpractice or procedural irregularity. They said: 48. We are not unanimous on what should happen in cases of malpractice, ranging from serious breaches of PACE to fabricating a confession, where there is nevertheless other strong evidence of the defendants guilt. Two of us think that if the pre trial irregularity or defect is sufficiently serious materially to affect the trial but not to render the conviction unsafe, the Court of Appeal should retain the power to order a retrial or to quash the conviction depending on its view of the gravity of the defect. The rest of us believe that the Court of Appeal should not quash convictions on the grounds of pre trial malpractice unless the court thinks that the conviction is or may be unsafe. 49. In the view of the majority, even if they believed that quashing the convictions of criminals was an appropriate way of punishing police malpractice, it would be nave to suppose that this would have any practical effect on police behaviour. In any case it cannot in their view be morally right that a person who has been convicted on abundant other evidence and may be a danger to the public should walk free because of what may be a criminal offence by someone else. Such an offence should be separately prosecuted within the system. It is also essential, if confidence in the criminal justice system is to be maintained, that police officers involved in malpractice should be disciplined. Does it make a material difference that (as in the present case) the evidence without which there would be no order for a retrial consists of admissions which the appellant would not have made but for the original misconduct which led to his conviction and failed appeal? The Court of Appeal considered that the fact that the admissions would not have been made but for the conviction which had been obtained by prosecutorial misconduct was a factor militating against a retrial; but it was no more than one of a number of relevant factors to be taken into account in the overall decision of whether the interests of justice required a retrial. In my view, the court was right to consider that the but for factor was no more than a relevant factor and that it was not determinative of the question whether a retrial was required in the interests of justice. It should not be overlooked that the appellant made the admissions entirely voluntarily, no doubt because he considered that it was in his interests to do so. As the court said, there were several relevant factors which had to be weighed in the balance before a final decision could be reached on the question of whether or not the interests of justice required a retrial. The weighing of the balance is fact sensitive and ultimately calls for an exercise of judgement. Appellants criticisms of the Court of Appeals decision I now turn to the criticisms that Mr OConnor makes of the approach of the Court of Appeal. I accept that a criticism can properly be made of para 62 where the court said: 62. Grant is not a case in which, to use Lord Browns words in Basdeo Panday, but for an abuse of executive power, he would never have been before the court at all. Putting the misconduct to one side, the appellant could have a fair trial (and probably did). Whilst helpful to the appellants, it should be remembered that Grant involved, as Laws LJ said a deliberate violation of a fundamental condition on which the administration of justice as a whole rests. The statement in para 62 in relation to R v Grant [2006] QB 60, [2005] 2 Cr App R 28 that it involved a deliberate violation of a fundamental condition on which the administration of justice as a whole rests (ie legal professional privilege) suggests that the Court of Appeal considered that the present case involved no deliberate violation of such a fundamental condition. If that is what the Court of Appeal meant, they were wrong. The conduct of the police in the present case was a gross violation of the appellants right to a fair trial and a far worse case than Grant (like Lord Brown, I have considerable reservations as to whether that case was correctly decided). But the real complaint in this case is that the court failed to take properly into account the fact that the proposed retrial evidence was the product of the misconduct. As Mr OConnor QC he puts it in his written case, the court would therefore be acting upon the fruit of the very misconduct at the heart of the case, which would be unconscionable and incompatible with the integrity of the court process. He also submits that the decision reached by the Court of Appeal was plainly wrong and should therefore be set aside by this court. As one would expect, this experienced court carried out the balancing exercise precisely and with great care. At para 66, they identified the reasons why a retrial should not be ordered in the following terms: There a good reasons why a retrial should not be ordered. They are: (i) the nature and scale of the prosecutorial misconduct; (ii) the fact that the misconduct infected both the trial and the first (iii) (iv) appeal; the fact that the prosecution case was based more or less entirely on the evidence of Chapman and the appellants would not have been charged or tried in its absence; the strong possibility that the trial would not have proceeded (being either aborted by the prosecution or stayed by the judge) if the circumstances of Chapmans treatment by the police had been made known to the prosecuting team; (v) the circumstances in which Maxwells admissions were made, namely: the first admission (to his solicitor) would not have been made had it not been for the conviction obtained by prosecutorial (a) (b) (vi) misconduct. Having been made, it would never have come to light had it not been for the fact that, due to prosecutorial misconduct, the appeal failed and a subsequent investigation by the CCRC was necessary, in the course of which Maxwell waived privilege; the admissions made subsequently would not have been made had it not been for the unsuccessful appeal and (in the case of admissions to the North Yorkshire Police) the CCRC investigation necessitated by the prosecutorial misconduct; both appellants have served 12.5 years in prison, a longer term than they would receive if they were found guilty of manslaughter, the offence which Maxwell is admitting. At para 67, they said that they accepted the strength of these reasons. In other words, they were not merely reasons militating against a retrial, but they were strong reasons. But in carrying out the balancing exercise that they were required to carry out, they concluded that the public interest in convicting those guilty of murder outweighed the public interest in maintaining the integrity of the criminal justice system on the facts of this case. They acknowledged that the balancing exercise was difficult. That was because on the one hand, as Lord Brown has described in graphic detail, there had been appalling misconduct by the police. Had it been known at the time of the trial, it is almost certain that the appellant would not have been convicted. On the other hand, the court said, (i) the alleged offence, involving as it did the beating to death of an innocent and defenceless 85 year old man at his home in the course of a planned robbery, was particularly shocking and fully merited the minimum term of 18 years that was imposed by the trial judge and (ii) there was new and compelling evidence untainted by the prosecutorial misconduct. It is (rightly) accepted by Mr OConnor that the proposed retrial evidence, if accepted, amounts to clear prima facie evidence of the appellants guilt of the murder. He also accepts that the evidence is untainted by the misconduct except in the sense that the admissions would probably not have been made but for the misconduct. Mr OConnor suggests that (ii) indicates that the court lost sight of the fact that the new and compelling evidence would not have come into being but for the misconduct of the police. But I cannot accept this. In the immediately preceding paragraph, the court had carefully set out in para 66(v) the circumstances in which the admissions had come into being. In using the phrase untainted by the prosecutorial misconduct in para 67, what the court meant was that the evidence was not the product of the misconduct and it was not the intended result of that conduct. It is obvious that it could not have been in the contemplation of the police that the appellant would make the admissions that he made. He made the admissions of his own free will for his own purposes. It is in that sense that the evidence was untainted. It is important to note the limited scope of the criticisms that Mr OConnor makes of the courts approach. He accepts that the court was right to carry out a balancing exercise and that all of the factors set out in para 66 of the judgment of the court were relevant factors to be set in the scale against ordering a retrial. He does not contend that there were other relevant factors which the court left out of account. He also accepts that the public interest in convicting those guilty of grave crimes such as murder was an important factor in favour of a retrial. Apart from the point which I have dealt with at para 32 above, his sole criticisms are that the case against a retrial was so strong that no reasonable court could have ordered a retrial and that the court did not properly take into account that the admissions to be relied on at the retrial were the product of the misconduct. I do not accept that the conclusion that was reached by the Court of Appeal was plainly wrong. They were faced with a difficult balancing exercise. In deciding what the interests of justice required, the Court of Appeal were right to respect the strength of the public interest in seeing that that those against whom there is prima facie admissible evidence that they are guilty of crimes, especially very serious crimes, are tried. This public interest is all the greater where, as in the present case, there is compelling evidence of guilt. As regards the criticism that the court did not properly take into account the fact that the admissions were the product of the misconduct, in substance this is a complaint that the court did not place sufficient weight on this fact. But the court did identify it as a separate factor at para 66(v) of the judgment. This court, like any appellate court, is always slow to allow an appeal on the ground that the decision maker failed to place sufficient weight on a relevant fact which it rightly took into account. It must be a rare case where this court would interfere with the exercise by the Court of Appeal of its power to order a retrial. It is possible that a differently constituted Court of Appeal would have arrived at a different conclusion from that reached by the court in the present case. Different courts can legitimately differ as to the weight they accord to relevant factors. But this court should not interfere with the Court of Appeals decision to order a retrial in this case on the grounds that they failed to accord sufficient weight to the but for factor unless we are satisfied that their decision was plainly wrong. This was a difficult case because on the one hand the police misconduct was so egregious and on the other hand the alleged offence was so shocking. I am in no doubt that this court should not interfere with the way the balance was struck by the court in this case. The decision was not plainly wrong. There was a strong case for concluding that the interests of justice would be served on the facts of this case by requiring the appellant to face trial for the most serious of crimes and requiring the offending police officers to face disciplinary and possibly criminal proceedings. On the face of it, there is a strong case of conspiracy to pervert the course of justice and forgery. No explanation has been provided to the court as to why there have been no such disciplinary or criminal proceedings. I cannot help but think that, if the offending police officers had been disciplined and indeed prosecuted, the argument that a retrial based on the appellants admissions would have been offensive to the courts sense of justice and propriety would have lost much of its force. In that way, the interests of justice would have been served. Society would have signalled its intense disapproval of the behaviour of the police. But the interests of society in having a fair trial of those against whom there is new and compelling evidence untainted by the misconduct would have been served by a retrial. To put it at its lowest, this was a tenable view to hold as to what the interests of justice required on the facts of this case. I do not consider that the question of whether the interests of justice required a retrial of this appellant should depend on the fortuity of whether the offending police officers were disciplined and/or prosecuted for their appalling misconduct. In my view, the Court of Appeal were right to say that the balancing exercise in this case was difficult. But for the reasons that I have given, there was a strong case for ordering a retrial. More importantly, however, it has not been shown that that they erred in law in deciding to order a retrial. I would dismiss this appeal. LORD RODGER At the end of the hearing I inclined to the view that the appeal should be allowed. Having considered the matter further, I now agree with Lord Dyson that, for the reasons he gives, the appeal should be dismissed. I put the matter briefly in my own words only because the Court is divided. Lord Brown and Lord Dyson have outlined the appalling history of misconduct by officers of West Yorkshire Police when the witness Karl Chapman was a resident informant of that force and right up until Mr Maxwells first appeal to the Court of Appeal. That misconduct can be described as prosecutorial misconduct, but it is important to notice that the Crown Prosecution Service and prosecuting counsel were lied to and duped just as much as the defence, the trial court and the Court of Appeal at the hearing of Mr Maxwells first appeal. So this is not a case where the Crown Prosecution Service or prosecuting counsel abused their power, or indeed were in any way at fault in conducting the prosecution. Given the catalogue of events, it is at first sight surprising that none of the police officers involved has been prosecuted or disciplined for his or her part in these events. The true position was uncovered only as a result of an investigation which was set in motion by the CCRC acting under section 19 of the Criminal Appeal Act 1995. The investigating officer carried out a parallel criminal and disciplinary investigation, the results of which were submitted to the Crown Prosecution Service and to the relevant police disciplinary authority. No proceedings of either kind were taken. The Court does not know the reasons for this, but it would be quite wrong to assume that they were anything other than entirely proper. The investigating officer had to penetrate a closed world where police officers had been prepared to conceal the true position from the prosecuting authorities and the courts and where they had every incentive to conceal it from the CCRC investigation. Not surprisingly, therefore, at various points the Statement of Reasons indicates that evidence was obtained only in exchange for a waiver of any potential disciplinary action based on what the witness told the investigating officer. Waivers of disciplinary and prosecution proceedings as a result of statements made to the inquiry are a familiar feature of public inquiries into disasters of various kinds. They are the price that has to be paid for finding out what happened and learning the lessons for the future. Here such waivers may well have been necessary if the investigating officer was to achieve the purpose for which he had been appointed, viz, to discover whether there had been misconduct on the part of the police which would be a basis for referring Mr Maxwells conviction to the Court of Appeal. In other words, Mr Maxwells appeal may well have been made possible only because the investigating officer gave those waivers. So it would not be surprising if, as a result of the investigation, there were grounds for the Commission making the reference to the Court of Appeal, but there was no proper basis for the prosecuting or disciplinary authorities taking action against individual police officers. Assuming as the Court surely must that the prosecuting and disciplinary authorities have acted properly, I am satisfied that the lack of action against the police officers concerned was not a relevant factor for the Court of Appeal to take into account in deciding whether to direct that Mr Maxwell should be retried. As Lord Dyson emphasises, this appeal is only against the decision of the Court of Appeal to order a retrial. Lord Brown quotes the language of section 7(1) of the Criminal Appeal Act 1968 at para 62 of his judgment. Comparable language is to be found in section 6(1) of the Criminal Appeal (Northern Ireland) Act 1980 but nowhere else. The language has been very carefully chosen to make it clear that the whole matter is one for the determination of the Court of Appeal. For my part, I would not gloss the crucial words of the test (and the interests of justice so require): the Court of Appeal is to ask itself whether it appears that the interests of justice require it to order a retrial. As Lord Dyson observes, the assumption must be that Parliament left the question of a retrial to be decided on this broad basis by members of the Court of Appeal who could be expected to have knowledge and experience in these matters and who, moreover, could be expected to be familiar with the relevant facts of the particular case from the proceedings which had led them to allow the appeal. Of course, if the Court of Appeal reached a decision on retrial which no reasonable Court of Appeal could have reached, then doubtless this Court could intervene to put matters right. But that is not the position in this case. The Court of Appeal admitted that it had found the decision difficult. In para 66 it set out the factors against ordering a retrial and then went on, in paras 67 to 83, to describe what it saw as the new and compelling evidence against Mr Maxwell. Having done so, the Court of Appeal did not explicitly weigh the competing considerations. Initially, I was inclined to think that this was a flaw in the courts approach. But, on reflection, I am satisfied that it would be quite unfair to impute such a failure to the experienced members of the court when they have carefully alluded to the rival considerations. In the absence of any indication to the contrary, it must be assumed that the Court of Appeal duly weighed them and so reached the view that it should order that Mr Maxwell should be retried, even though no retrial was to be ordered in Mr Mansells case. Of course, if differently constituted, the Court of Appeal might have come to a different conclusion. And, clearly, Lord Brown would have done so on the narrow ground that the present case falls within what he describes as the but for category of cases: but for executive misconduct, the defendant would not have been brought to this country and placed before the court; but for executive misconduct, the defendant would not have committed the crime for which he was to stand trial. Here, but for the misconduct of the police officers, the chances are that Chapman would not have given evidence against Mr Maxwell or that, if he had, he would have been discredited. So, but for their misconduct, Mr Maxwell would not have been convicted and so would not have made the statements on which the prosecution intends to rely in any retrial. In my view, however, that would be to take this line of reasoning too far. The statements were made by Mr Maxwell voluntarily and for his own purposes. Indeed, one of them was made for the purposes of the very investigation by the CCRC which led to his appeal being allowed. The use of those statements by the prosecution would involve no abuse of the trial court. The fact that the statements would not have been made but for the antecedent misconduct of the police is not enough to taint them any more than it would taint, say, DNA evidence which was now available only by reason of advances made in research since Mr Maxwell was charged, or evidence of a witness who had come forward as a result of reading reports of the investigation into the misconduct of the West Yorkshire Police. The fact that the statements would not have been made but for the police misconduct was a factor to be taken into account by the Court of Appeal in deciding whether the interests of justice required that it should order a retrial. That is precisely how the Court of Appeal treated it in para 66. Having taken that factor into account, it still appeared to the Court that the interests of justice required it to order a retrial. That was a decision which the Court of Appeal was entitled to reach and with which, accordingly, this Court is not entitled to interfere. LORD MANCE There was in this case the gravest police misconduct both before and at trial, and it was persisted in during the first set of appellate proceedings. Once revealed, it was inevitable that the appellants conviction should be set aside on a further reference to the Court of Appeal. That does not resolve the question whether, having allowed the appeal, the Court of Appeal was justified in ordering a retrial. Under Criminal Appeal Act 1968, section 7, it was for the Court of Appeal to decide as a matter of discretion whether there should be a retrial. The Court of Appeal, when allowing a conviction, has the power to order a trial, if it appears to the Court that the interests of justice so require. It is common ground that the exercise of discretion involved a balancing exercise. It is also common ground that the Court in its full and clear judgment on the point identified all relevant factors. Lord Dyson sets out the courts reasoning in paras 30 to 35. Like him, I consider that it is clear (in particular from the language of para 67 of the courts judgment) that the court weighed all of these factors in reaching its decision. Essentially, the criticisms made of the Courts decision focus on (a) the seriousness of the police misconduct, (b) the fact that, but for such misconduct, there would have been no original trial and so the context in which the appellant made the admissions on which reliance is now placed would never have existed and (c) the submission that the Crown in proceeding against the appellant on the basis of those admissions is and would be, or be seen as, condoning or taking advantage of the polices misconduct. On behalf of the appellant, it is argued that the Court of Appeal must either have failed to take such considerations sufficiently into account when performing the relevant balancing exercise or for some other reason simply reached a decision not open to it in their light. The latter (and as I see it probably also the former) submission amounts to saying that the courts exercise of its discretion was one which no reasonable court could reach in the circumstances. This is not an easy case. The egregious and persistent nature of the police misconduct involved invites a forceful response. But it is common ground that it is not the courts role to refuse a retrial under section 7 of the 1968 Act in order to discipline the Crown for the polices misconduct, and the fact that the police misconduct has not received the sanction it deserved is not a reason to depart from this stance. The court is however entitled to take into account the effects of ordering a re trial, including any perception that might be created that the Crown condoned misconduct and any general discouragement of future misconduct that might be achieved. It is not suggested that the admissions on which the Crown wishes to rely were made other than freely and voluntarily; and I do not myself see any basis for regarding the Crown, or for thinking that right minded people would regard the Crown, in relying on them as condoning misconduct or as adopting the approach that the end justifies any means (see R v Latif [1996] 1 WLR 104, 113, per Lord Steyn). I also find unconvincing any suggestion that refusal to order a retrial in the present case would have any real incentive effect on police behaviour. Further, the court is entitled to bear in mind the effect on public confidence in the administration of justice if persons who have on their face of it admitted to very serious crimes (and who, if their admissions are true, perjured themselves at the original trial) are not retried (as they in fact said they wished when making the admissions) in order to establish the truth. I have had the benefit of reading in draft all four of the judgments which my colleagues have prepared. Lord Brown in para 105 concludes that Given, however, the but for character of this case and the enormity of the unpunished police misconduct involved, it seems to me quite simply inappropriate that it should now be retried on fresh evidence and that Unless one is to say that in relation to serious crimes the but for approach is to apply only in the context of wrongful extradition, it is difficult to think of any case where the stay principle would properly be invoked if not here. However, I consider the present case to be significantly different from those involving extradition and entrapment to which Lord Brown refers. In R v Horseferry Road Magistrates Court Ex p Bennett [1994] 1 AC 42 and again R v Mullen [2000] QB 520, the governments wrongful act in bringing the relevant defendant within the jurisdiction was the very direct cause of his standing in the dock. In an entrapment case, the police act is one which leads directly to the commission of the alleged crime itself. In the present case, the alleged crime was independent of any police act, and the admissions were made voluntarily of the appellants own choice and for his own purposes. It is true that the context in which the admissions were made would not have existed but for the police misconduct. But the voluntary element is important; it breaks the directness of the chain of causation and it relegates the police misconduct to the status of background. Indeed, in respect of one of the admissions, if the prior trial was part of the background at all, it appears to have been very remote background. The appellants letter to Detective Inspector Steele of West Yorkshire Police dated 9 February 2000 making the admission describes how it came about: Dear Mr Steele, We met some time ago at armley prison when you came to eliminate me from enquiries into the death of isabel grey. As you are no doubt aware I am currently serving a life sentence for the murder of Joe Smales and the robbery of Joes brother Bert. I initially denied these offences, however I now fully admit my guilt. I watched you on television last night and decided to write and offer any help that I can give you, in your Quest to protect the old and vulnerable I have no ulterior motives for doing this and want nothing in return. If you could compile a detailed Questionaire I will willingly supply you with detailed answers. Best wishes Paul Maxwell I am not sure that I share Lord Browns difficulty in conceiving of cases other than the wrongful extradition cases in which a but for link with a proposed trial might require the court to refuse a fresh trial. Suppose in the present case that the police or prison authorities had improperly recorded conversations between the appellant and his solicitors after his original conviction, and had as a result discovered independent evidence (e.g. DNA evidence or another third party witness) linking the appellant to the crime. In those circumstances, a re trial could well be refused. I would also reject any suggestion that the Supreme Court should treat the Court of Appeal as having reached a decision not reasonably open to any court on the present facts. On this aspect, as on others, I find compelling the judgment and conclusions of Lord Dyson. I also agree with Lord Rodgers supplementary observations. For these reasons, I am unable to accept that the Court of Appeal erred in any way entitling the Supreme Court to interfere with its decision to order a re trial. LORD BROWN Few of those urging upon the court a vindication of the rule of law could be less deserving of its benefits than this appellant. A professional criminal with a history of violent crime, he is almost certainly guilty of the murder and the two robberies of which he was convicted (together with his brother, Daniel Mansell) by the Crown Court at Leeds on 27 February 1998. These were shocking offences indeed, callous attacks upon elderly reclusive brothers in their own home, the second involving injuries of such severity as to occasion the elder brothers death within the month. The appellants tariff (in respect of his life sentence for murder, imposed concurrently with twelve year terms for the robberies) was set at eighteen years. It was not a day too long. The 1998 convictions were, however, as later investigations by the North Yorkshire Police and the Criminal Cases Review Commission (CCRC) were all too clearly to demonstrate, procured by tainted evidence and prosecutorial misconduct of the gravest kind. Following a reference by the CCRC, the Court of Appeal (Criminal Division) (Hooper LJ, Cooke and Swift JJ) accordingly had no alternative but to quash them: [2009] EWCA Crim 2552, judgment of 1 December 2009. So much was by then undisputed. What was in dispute, however, and remains the central issue upon this further appeal, was whether or not the appellant should be retried pursuant to section 7(1) of the Criminal Appeal Act 1968. Section 7(1) provides: Where the Court of Appeal allow an appeal against conviction and it appears to the Court that the interests of justice so require, they may order the appellant to be retried. In the course of a thoughtful and thorough reserved judgment given by Hooper LJ the Court of Appeal: reached the conclusion (not without difficulty) that the public interest in convicting those guilty of murder outweighs the public interest in maintaining the integrity of the criminal justice system. This was a shocking case and if there is new and compelling evidence untainted by the prosecutorial misconduct revealed by the findings of the North Yorkshire Police and the CCRC, we should order a new trial. In particular we bear in mind that the new and compelling evidence relied upon by the respondent as against Maxwell consists of admissions made to the North Yorkshire Police by Maxwell with the benefit of legal advice during the course of an investigation into the safety of his convictions and that Maxwell said to the police that he would like a retrial and that he would plead guilty to the robberies and manslaughter. (para 67) The Court of Appeal accordingly ordered that the appellant be retried and meantime remain in custody. No such order was made in respect of Mansell (who had made no post conviction admissions of guilt and against whom, therefore, there was no new and compelling evidence) and he was accordingly set free. The point of law of general public importance subsequently certified by the Court of Appeal was this: May the Court of Appeal order a retrial having quashed a conviction on the grounds of serious executive or prosecutorial misconduct, and, if so, in what circumstances? In reality what the Court must now decide is whether, having regard to all the circumstances of this case, the Court of Appeal could properly reach their conclusion that the interests of justice require this appellants retrial based substantially upon his post conviction admissions of guilt. As the Court of Appeal recognised, plainly there is a public interest in convicting those guilty of murder. Plainly too there is a public interest in maintaining the integrity of the criminal justice system. No less plainly, each interest is of a high order. Where, as here, these interests appear to conflict, how should that conflict be resolved? This is by no means an easy area of the law. Obviously, however, it is an important one. With that brief introduction let me at once turn to the facts, critical as ultimately these must be to the determination of this appeal. The two robberies The robberies took place respectively on 11 June 1996 and 13 October 1996, on each occasion at the Yorkshire home of two vulnerable and reclusive brothers, Bert Smales aged 67 and Joe Smales aged 85. They were known to keep substantial sums of money in the house and had more than once been burgled in the past although this had never been reported to the police (as similarly the June 1996 robbery went unreported). On both occasions the robbers were masked; on both they used violence in demanding to know where they brothers kept their money; on both they stole a few thousand pounds. It appears, however, that substantially greater violence was used in the October robbery. On that occasion Bert Smales suffered a fractured nose and forehead, his injuries leaving him with little recollection of the robbery beyond opening the door to his attackers. Joe Smales was punched in the face so severely that he suffered not only a fractured jaw and internal bleeding to the head but in addition a fracture of the cervical spine (broken neck); from his resultant prolonged immobility in hospital he developed pneumonia and a deep vein thrombosis from which on 7 November 1996 he died. Although it is unclear which of the robbers attacked which victim, the level of violence used in the October robbery and, indeed, the admissions that the appellant came to make in his post conviction statements clearly supported a conviction for murder on the basis of joint enterprise and it is unsurprising that Mr OConnor QC has never submitted on his behalf that any retrial should only be on a charge of manslaughter. Karl Chapman Chapman is a central figure in this case and it will be necessary to say more about him later. It is convenient, however, to introduce him briefly at this stage, he having been the main prosecution witness at the appellants trial, without whose information and evidence, indeed, the appellant (and Mansell) would never have been indicted, tried or convicted at all. Chapman (like the appellant) is a professional criminal. In late 1995 and early 1996 both men were together in prison. The appellant was serving an eight year sentence (from which he was finally released on 3 June 1996) for a series of robberies; Chapman was a remand prisoner having pleaded guilty on 31 July 1995 to no fewer than 267 offences (including 256 similar offences taken into consideration), mostly bogus official robberies targeting frail and elderly victims. Chapman eventually came to be sentenced on 23 December 1997 to a term of 9 years imprisonment, a sentence to be contrasted with the 25 year term imposed for comparable offences committed by an erstwhile associate of his named Ford against whom Chapman had earlier (in November 1996) given evidence, as indeed he was to give evidence (in February 1998) against the appellant and Mansell. As already stated, the appellant was released from prison on 3 June 1996, just eight days before the first Smales robbery. It now seems clear that it was from Chapman that the appellant learned of the address and vulnerability of, amongst others, the Smales brothers and it is clear too that during the period when these robberies were committed the appellant and Chapman remained in touch. In December 1996 Chapman began to provide the police with information pointing to the appellants involvement in these robberies, a process leading in April 1997 to him making a series of witness statements, on the basis of which the appellant and Mansell were on 28 April 1997 arrested, charged and ultimately, on 27 February, 1998, convicted. As stated in the agreed statement of facts and issues: without Chapmans evidence, there could have been no prosecution at all. The February 1998 trial and conviction The trial lasted three weeks, Chapmans evidence occupying five days: 5, 6, 9, 10 and 11 February 1998. Not surprisingly, his evidence was fiercely challenged by both defendants. As the judge later put it in his summing up, it was the defence case that Chapman was bent as a fourteen pound note. More particularly the defendants were alleging that by giving incriminating evidence against them, Chapman, notwithstanding that he had already been sentenced the previous December, was still expecting benefits of one sort or another, whether by way of earlier release on parole or otherwise. All this Chapman resolutely and persistently denied as appears from a number of passages in the summing up, for example: Now, he knows what date he is due to be released and that that will happen whether or not he gives evidence in this case. He has got his date in the year 2000. That cannot be delayed beyond that time. He says he has nothing to gain by giving false evidence against the defendants. (Chapman was, in fact, released in August 1999.) The whats in it for him line was pursued and I will remind you again of it briefly . He says, Theres nothing. I am putting myself at risk for the rest of my life. He was then taken through the privileges that he had enjoyed as a supergrass, and what the wing was like. Well, there is no suggestion that he was accorded privileges that were any greater than those accorded to other supergrasses. Chapmans evidence was, there can be no doubt, damning against both defendants. It did not, however, stand entirely alone. Rather, as the (263 page) CCRC report was later to say, it was supported by a jigsaw of other pieces of evidence. In particular there was evidence (i) of telephone calls between Chapman and the appellant on key dates, (ii) of Mansells arrest for a driving offence on his way back to Lancashire from Yorkshire on the day of the June robbery, (iii) of the appellant having reconnoitred the home of another of Chapmans previous victims, Miss Bell, (iv) of the appellant being in Leeds and attempting to contact Chapman on the day of the October robbery, (v) of an A Z map given to the police by Chapman bearing the appellants fingerprints and containing various markings seemingly connecting the appellant to the addresses of other Chapman victims in the Yorkshire area, (vi) of a letter from the appellant to Chapman in July 1996 referring to coming over to Leeds for a days work, apparently alluding to the burglary of another of Chapmans previous victims, (vii) of Mansells identification by a neighbour of the Smale brothers as one of two men she had observed hurrying by on the afternoon of the October robbery, (viii) of a footwear mark found at the scene of the October robbery consistent with the size and brand of Mansells boots, (ix) of lies told by the appellant and Mansell about their movements on the days of the robberies in the course of police interviews, and (x) of the appellants creation of a false alibi for the time of the October robbery (as he was later to admit). some 9 hours and 40 minutes after the jury first retired. The 1999 appeal Within days of the appellants conviction press reports in the Yorkshire Evening Post suggested that 100,000 had been set aside to provide Chapman with assistance on his release from prison. Those then acting for the appellant and Mansell immediately sought clarification of this from the CPS but made little headway, their initial application for leave to appeal against conviction being refused by the single judge on 30 July 1998. In February 1999, however, fresh solicitors and counsel were instructed and extensive further enquiries were then made of the CPS both as to any payment promised to Chapman and more generally as to his treatment by the police. The appellants and Mansells renewed leave applications to the Court of Appeal were adjourned on account of these enquiries first from 30 April 1999 and then again from 8 July 1999, on each occasion for the CPS to supply the further information being sought. In the event both defendants were convicted by majority verdicts of 10:2 Finally, following a detailed series of questions from Birnberg Peirce & Partners dated 15 October 1999 and letters in response dated 3 November 1999 respectively from Detective Superintendent Rennison (Director of Intelligence responsible for the management and use of informants in West Yorkshire) and Detective Chief Superintendent Taylor (Senior Investigating Officer on the Chapman operation), the Court of Appeal (Otton LJ, Potts J and the Recorder of Liverpool) on 5 November 1999 held first an ex parte hearing on a PII application by the prosecution and then an inter partes hearing on other grounds of appeal unrelated to the handling of Chapman. During the ex parte hearing evidence was given by Detective Sergeant Grey (an officer of the Major Crime Unit attached to the Chapman operation) and Chief Superintendent Holt (the Senior Investigating Officer on the appellants case), in particular with regard to a statement in Mr Rennisons letter of 3 November that: a reward of 10,000 was agreed by the West Yorkshire Police Command Team without discussion with Chapman, to be paid after completion of his sentence. In the course of his evidence D S Grey said that the agreement was reached possibly three or four months before the end of [Chapmans] sentence [August 1999] and that when Chapman had given his evidence he [was not] told at all that he was to receive any form of reward. Chief Superintendent Holt similarly confirmed that before Chapman gave his evidence there was no discussion or agreement with him whatever in relation to any reward or any benefit for his involvement in this particular case. The Court of Appeal thereupon expressed themselves satisfied that when the informant, Chapman, came to give evidence nothing had been done or said to give him any expectation of reward for his evidence in this murder trial. any arrangements for reward or change of identity to Chapman were made a long time after the [appellants] conviction was recorded. In the result, in a judgment given on 13 December 1999 dismissing the appellants and Mansells renewed leave application, the Court of Appeal noted in respect of Ground 1 The financial reward of the supergrass: At the outset of the hearing before us we considered the public interest immunity application by the Crown. As a result of our ruling this ground was not pursued on behalf of the applicants. There matters lay until, some nine years later, on 25 November 2008, the CCRC referred the case back to the Court of Appeal following an investigation by the North Yorkshire Police under section 19 of the Criminal Appeal Act 1995, an investigation which had painstakingly examined the integrity of Chapmans treatment as a prosecution witness. The CCRC Report The unchallenged findings of this report are not just disturbing but quite frankly astonishing. They reveal that, as a result of his cooperation with the police, Chapman and other members of his family received a variety of benefits which were not merely undisclosed to the CPS or counsel but were from first to last carefully concealed from them. They were benefits which both contravened the controls designed to preserve the integrity of Chapmans evidence and were in addition inherently improper. Amongst the more surprising were that whilst in police custody Chapman was at various times permitted to visit a brothel, to engage in sexual relations with a woman police constable, to visit public houses, to consume not merely alcohol but also cannabis and even heroin, to socialise at police officers homes, to enjoy unsupervised periods of freedom, and indeed, throughout the actual period of the appellants trial, whilst threatening not to give evidence after all, he was permitted long periods of leisure (hours at a time) in places of his choice, ostensibly as exercise, and in addition phone calls and visits from his own solicitor. Without suggesting that it typifies Chapmans relations with every police officer involved in this operation, some colour is lent to all this by a letter written to him in prison by DC Dunham (one of Chapmans regular escorting officers) on 18 December 1996, shortly after Chapman had given evidence at the Ford trial and on the very day he made his first statement implicating the appellant and Mansell, an event celebrated by a visit to a brothel (shown in the custody record as an outing to assist in the locations of crime). DC Dunham wrote: . really glad you enjoyed the night. Truth to tell I quite enjoyed it myself. Little bit of this, little bit of that. Variety, they say, is the spice of life. What a spicey night! Lets hope there is a second leg in March. I am demob happy now and disinclined to dip out on any good times that may be up for grabs. BT [another officer] told me to tell you that if you were serious about a literary venture at some time in the future he can put you in touch with some top class author types who can assist in ghost writing. Sometime later, Dunham having mentioned the brothel outing to the female police officer with whom Chapman was enjoying sexual relations, Chapman wrote to her apologising: I was drunk and stoned on weed, they paraded a dozen beautiful women in front of me and said take your pick. As for financial benefits, the report states blandly: North Yorkshire Police found that the information provided to the court at trial and appeal did not accurately reflect the financial benefits and rewards given to Mr Chapman by the police or his expectations when he gave evidence at the trial of Mr Maxwell and Mr Mansell. The fact is that large sums had been expended on Chapman, far exceeding his entitlement under the rules governing the treatment of informants and prisoner witnesses. Luxury items had been purchased for him and substantial sums from time to time handed to him in cash (for example 475 on the occasion of the December 1996 brothel visit with DC Dunham, less than 7 remaining on Chapmans return to the police station at 1 a.m. the following morning). This expenditure, totalling several thousand pounds, was financed by claims on a variety of police funds, with no proper records, accounting, supervision or control and various steps taken to conceal the level of payments made. None of this was disclosed either at trial or on appeal. With regard to the 10,000 reward itself, the report concluded, flatly contrary to the senior officers evidence to the Court of Appeal, that the polices intention to reward Chapman had long since been communicated to him so that his as yet unfulfilled expectation of reward may have been a factor affecting [his] cooperation and evidence at the appellants trial. Nor were these favours and financial benefits the only advantages secured by Chapman as the price of his cooperation. He was not proceeded against in respect of a number of violent incidents which in the ordinary way would have been expected to result in prosecution: a vicious attack on a fellow prisoner called Jennings in March 1994, repeatedly stabbing him with a piece of broken glass bound with twine; an alleged rape of his cellmate (buggery whilst holding a razor to the victims throat) in August 1994, reported sometime later; an assault in November 1999 on the WPC with whom by then Chapman had split up. Nor was action taken against him for various drug offences. Similarly a caution received by Chapmans mother in July 1995 for handling stolen property was not properly recorded, nor were steps taken against her for attempting to supply heroin both to Chapman in prison in September 1996 and to Chapmans girlfriend (also a prisoner) in October 1996. Chapmans brother too was not arrested when he should have been. All these various benefits and indulgences were conferred on Chapman to ensure his continuing cooperation with the police and not least to persuade him to give evidence as he did at the February 1998 trial of the appellant and Mansell. To quote just four short passages from the CCRC report: In the Commissions view those benefits may have acted as an inducement and their non disclosure denied the defence the opportunity to explore their possible impact on the credibility of Mr Chapman and also on the fairness of the trial. The omission of [certain of these benefits] from Mr Chapmans custody records ensured that those records offered no hint of the reality of his treatment whilst in police custody. The circumstances in which Mr Chapman provided information to the police in the murder investigation were therefore obscured. The failure to reveal what could reasonably have been considered inducements surrounding Mr Chapmans evidence left the prosecution unable to assess his reliability as a witness and precluded appropriate disclosure to the court and the defence. It also caused the trials involving Mr Chapman as a prosecution witness to proceed on the incorrect basis that he had not been the recipient of favours or privileges. In contrast to the appearance of legitimacy in his treatment, the undisclosed information would have supported an argument that Mr Chapmans evidence against Mr Maxwell and Mr Mansell was tainted by a sustained catalogue of improper inducements and an ongoing expectation that he would be favourably treated in every aspect of his relationship with the police. Those representing Mr Maxwell and Mr Mansell were denied the opportunity to deploy this material in support of a tenable argument that the proceedings against them were an abuse of process and to have this issue determined by the court. In the light of these various findings it is now possible to summarise the position really quite shortly. A large number of police officers involved in the investigation and prosecution of the Smales robbery and murder case, including several of very high rank, engaged in a prolonged, persistent and pervasive conspiracy to pervert the course of justice. They colluded in conferring on Chapman a variety of wholly inappropriate benefits to secure his continuing cooperation in the appellants prosecution and trial. They then colluded in Chapmans perjury at that trial, intending him throughout his evidence to lie as to how he had been treated and as to what promises he had received. They ensured that Chapmans police custody records and various other official documents presented a false picture of the facts, on one occasion actually forging a custody record when its enforced disclosure to the defence would otherwise have revealed the truth. They lied in their responses to enquiries made of the CPS after the appellants conviction and, in the case of the two senior officers who gave evidence to the Court of Appeal, perjured themselves so as to ensure that the appellants application for leave to appeal against his conviction got nowhere. To describe police misconduct on this scale merely as shocking and disgraceful is to understate the gravity of its impact upon the integrity of the prosecution process. It is hard to imagine a worse case of sustained prosecutorial dishonesty designed to secure and hold a conviction at all costs. Scarcely less remarkable and deplorable than this catalogue of misconduct, moreover, is the fact that, notwithstanding its emergence through the subsequent investigation, not a single one of the many police officers involved has since been disciplined or prosecuted for what he did. The appellants post conviction admissions For my part I have no doubt that the series of admissions which the appellant came to make to various bodies following his conviction constitutes compelling evidence upon which, certainly when taken together with the supporting evidence already summarised (para 70 above), a jury would be highly likely to find him guilty both of the two robberies and of Joe Smaless murder (although just possibly the verdict on that count could be one of manslaughter). I must nevertheless briefly summarise this evidence to indicate the circumstances in which these admissions came to be made. An altogether fuller account of all this can be found at paragraphs 68 81 of the Court of Appeals judgment below. The appellants first recorded admission was made on 12 October 1998 to his then solicitor, retained to advise him on the appeal against conviction. The solicitors file note records: To my great surprise Paul confessed that he and his brother did do the murder . He explained that at no stage did he ever anticipate any injury would be caused to Mr Smales. At the time of the murder, he was in fact inside the house, whilst his brother carried it out in the garden. I told Paul that on the basis of what he had told me, I felt that he could have a possible appeal on the authority of R v English and R v Powell. Told by his solicitor that he would have to prepare a detailed and persuasive confession for there to be any chance of a successful appeal, the appellant wrote a lengthy statement on 21 February 1999 detailing his involvement in both robberies and asking that the statement be placed on his prison file. A Local Prison Assessment (Life Sentence Plan) Report noted on 24 February 1999 that the appellant: accepts the guilty part he played but states the deceased did not die at his hands and indeed admits that he used as much violence on the victim who survived as his brother did on the victim who died. In February and March 2000 the Home Office sponsored a research project into offences committed against the old and vulnerable by offenders pretending to be officials. In the course of this research, whilst Detective Chief Superintendent Steele of West Yorkshire Police was interviewing a number of convicted offenders, the appellant wrote to him on 9 February 2000 offering to assist the project and stating: As you are no doubt aware I am currently serving a life sentence for the murder of Joe Smales and the robbery of Joes brother Bert. I initially denied these offences, however I now fully admit my guilt. When the appellant was interviewed by Mr Steele and other officers on 2 March 2000, he admitted his involvement and explained how in relation to the October robbery he had used violence against Bert Smales whilst his brother had used violence against Joe. An Initial Sentence Plan Summary prepared by the prison on 1 August 2000 included a note from the Sentence Management Unit stating: Maxwell admitted, for the first time outside confidential counselling, that he admitted the offence openly and despite finding it difficult to talk about, accepted culpability for the death of the victim. He claims that he did not attack the victim who died, but in no way tried to minimise his role in the offence saying that he planned the robbery and was co perpetrator, so that made him just as guilty of the murder as his co accused. This was a violent attack and Maxwell finally admits he attacked the surviving victim, probably more viciously than his co defendant attacked the murder victim. A prison report dated 23 May 2001 noted that the appellant continued to accept responsibility for his crimes. A prison probation officer reported on 11 January 2002: Mr Maxwell told me he is ashamed of what he did and although he claims not to have assaulted Joe Smales he admits to assaulting his brother. He does not deny that his actions were instrumental in the death of Mr Smales and admits to planning the burglary and involving his brother in the crime. Mr Maxwell told me he is appealing the conviction, not because he does not accept responsibility for the death of Mr Smales but because he does not think he and his brother were given a fair trial. It is his hope he will be able to enter a guilty plea to manslaughter at a re trial. In the course of the investigation by the North Yorkshire Police the appellant was interviewed on a number of occasions in relation to his admissions, several times maintaining that he had made false admissions of guilt out of expediency. However, in a statement dated 14 September 2004 he said this: I now admit the robberies of the Smales brothers in June and October of 1996. My brother was with me on both occasions. No one else was present. I was not involved in the death of Joe Smales and had no intention to cause serious injury to either of the brothers. In a statement dated 23 September 2004 the appellant said: I would like a retrial and I would plead guilty to robbery and manslaughter. The Law The power of a criminal court to stay proceedings as an abuse of process in order to safeguard an accused person from injustice and oppression has long been recognised see, for example, Connelly v Director of Public Prosecutions [1964] AC 1254 and R v Humphrys [1977] AC1. The more recent decision of the House of Lords in R v Horseferry Road Magistrates Court Ex p Bennett [1994] 1 AC 42, however, can be seen as the foundation of much of the modern law regarding the Courts approach to abuse of process applications, more particularly in cases where, as here, no question arises of the defendant being unable to receive a fair trial were the case against him to proceed. Bennett concerned an appellant unlawfully brought to this country as a result of collusion between the South African and British police and on arrival here arrested and brought before magistrates to be committed for trial. The House held by a majority of four to one that in those circumstances the English court should refuse to try the defendant. For present purposes the following brief citations from the speeches will suffice: In the present case there is no suggestion that the appellant cannot have a fair trial, nor could it be suggested that it would have been unfair to try him if he had been returned to this country through extradition procedures. If the court is to have the power to interfere with the prosecution in the present circumstances it must be because the judiciary accept a responsibility for the maintenance of the rule of law that embraces a willingness to oversee executive action and to refuse to countenance behaviour that threatens either basic human rights or the rule of law. (Lord Griffiths at pp 61 62) [T]he court, in order to protect its own process from being degraded and misused, must have the power to stay proceedings which have come before it and have only been made possible by acts which offend the courts conscience as being contrary to the rule of law. Those acts by providing a morally unacceptable foundation for the exercise of jurisdiction over the suspect taint the proposed trial and, if tolerated, will mean that the courts process has been abused. (Lord Lowry at p76 C D) It may be said that a guilty accused finding himself in the circumstances predicated is not deserving of much sympathy, but the principle involved goes beyond the scope of such a pragmatic observation and even beyond the rights of those victims who are or may be innocent. It affects the proper administration of justice according to the rule of law and with respect to international law. (Lord Lowry at p76 G) Bennett was directly applied by the Court of Appeal (Criminal Division) in R v Mullen [2000] QB 520 where it was held that the British authorities, in securing Mullens deportation from Zimbabwe, had been guilty of a blatant and extremely serious failure to adhere to the rule of law with regard to the production of a defendant for prosecution in the English courts (p.535H) so that when, some eight years later, this came to light, his conviction fell to be quashed. This was so, moreover, notwithstanding Mullens concession that he had been properly convicted by the jury and that, as Rose LJ giving the Courts judgment observed, The sentence of 30 years imprisonment reflects the gravity of the offence (involvement in an IRA conspiracy to cause explosions). The principle which the court there derived from Bennett was that certainty of guilt cannot displace the essential feature of this kind of abuse of process, namely the degradation of the lawful administration of justice. (p534 C). The Bennett principle was similarly applied in the context of entrapment in R v Latif [1996] 1 WLR 104 where, at pp112 113, Lord Steyn put it thus: The law is settled. Weighing countervailing considerations of policy and justice, it is for the judge in the exercise of his discretion to decide whether there has been an abuse of process, which amounts to an affront to the public conscience and requires the criminal proceedings to be stayed . The speeches in ex parte Bennett conclusively establish that proceedings may be stayed in the exercise of the judges discretion not only where a fair trial is impossible but also where it would be contrary to the public interest in the integrity of the criminal justice system that a trial should take place. in a case such as the present the judge must weigh in the balance the public interest in ensuring that those that are charged with grave crimes should be tried and the competing public interest in not conveying the impression that the court will adopt the approach that the end justifies any means. Just how that approach should apply in any particular entrapment case was further considered by the House of Lords in R v Looseley [2001] 1 WLR 2060 which decided that to lure, incite or pressurise a defendant into committing a crime which he would not otherwise have committed would be unfair and an abuse of process but not so if the law enforcement officer, behaving as an ordinary member of the public would behave, had merely given the defendant an unexceptional opportunity to commit a crime of which he had freely taken advantage. Although sometimes in such circumstances a stay is said to be on abuse of process grounds, Lord Hoffmann thought with Lord Griffiths in Bennett that the jurisdiction was more broadly and accurately described as a jurisdiction to prevent abuse of executive power. (p2073E) This line of authority has since been followed in two much publicised Court of Appeal decisions: R v Early [2003] 1 Crim App. R.288 (judgment of Rose LJ) and R v Grant [2006] QB 60 (judgment of Laws LJ). Although both cases were cited and discussed at some length by the court below, I propose to consider them comparatively briefly. Early concerned a number of appellants charged with fraud offences arising out of the improper diversion to the UK market of large quantities of duty suspended alcohol from bonded warehouses, some of 30 or 40 separate such scams involving the Inland Revenue in an overall loss of some 300m. The defendants case was essentially that they had been encouraged and facilitated in their offending by customs officers working in collusion with the warehouse manager (one Allington, a registered informant), a defence therefore somewhat akin to entrapment. Put very shortly, having failed in abuse of process applications following voir dire evidence from various customs officers and from Allington and others during lengthy PII and disclosure hearings, the defendants on advice pleaded guilty. Subsequently Allington admitted having lied, lies which he said had been approved by Customs and for which he had received benefits. Allowing the appeals, Rose LJ said (para 18): It is a matter of crucial importance to the administration of justice that prosecution authorities make full relevant disclosure prior to trial and that prosecuting authorities should not be encouraged to make inadequate disclosure with a view to defendants pleading guilty. When inadequate disclosure is sought to be supported by dishonest prosecution evidence to a trial judge, this Court is unlikely to be slow to set aside pleas of guilty following such events, however strong the prosecution case might appear to be. He then added, however, in the very next paragraph: In the ordinary way we would have ordered a retrial so that a trial judge, on the basis of honest evidence, could have had the opportunity of deciding about disclosure and about whether or not a stay should be granted. However, as the appellant has already served his sentence and it is nearly six years since the offence is alleged to have taken place, we make no such order, as it would not be in the interests of justice to do so. Those passages in the judgment related specifically to Earlys appeal; the other appellants appeals, however, were similarly disposed of. In short, despite the courts understandably harsh condemnation of the misconduct there, but for the passage of time it would nevertheless have ordered a re trial to see whether in truth the case was one of entrapment. In Grant [2006] QB 60, the appellant had been convicted of conspiracy to murder, his wifes lover having been shot dead whilst answering a knock at the door. The appellants case on appeal was that the trial judge should have allowed his abuse of process application and stayed the prosecution because of police misconduct: following the appellants arrest the police had deliberately eavesdropped upon and tape recorded privileged conversations between him and his solicitor in the police station exercise yard. Notwithstanding that this eavesdropping had in no way prejudiced the appellants trial, his appeal was allowed and his conviction quashed. The Court of Appeal said this: True it is that nothing gained from the interception of solicitors communications was used as or (however indirectly) gave rise to evidence relied on by the Crown at the trial. Nor, as we understand it, did the intercepts yield any material which the Crown might deploy to undermine the defence case. But we are in no doubt but that in general unlawful acts of the kind done in this case, amounting to a deliberate violation of a suspected persons right to legal professional privilege, are so great an affront to the integrity of the justice system, and therefore the rule of law, that the associated prosecution is rendered abusive and ought not to be countenanced by the court. (para 54) Where the court is faced with illegal conduct by police or State prosecutors which is so grave as to threaten or undermine the rule of law itself, the court may readily conclude that it will not tolerate, far less endorse, such a state of affairs and so hold that its duty is to stop the case. (para 56) We are quite clear that the deliberate interference with a detained suspects right to the confidence of privileged communications with his solicitor, such as we have found was done here, seriously undermines the rule of law and justifies a stay on grounds of abuse of process, notwithstanding the absence of prejudice consisting in evidence gathered by the Crown as the fruit of police officers unlawful conduct. (para 57) It may be noted that the Court of Appeal later certified the following point of law of general public importance in the case: Where an accused person has been properly arrested and brought before the court but during the course of the investigation there is significant impropriety by some or all of the investigating officers in relation to the accused person, but the evidence that will be presented to the court is untainted by such impropriety so that the accused person can have a fair trial, when considering the interests of all parties, including the victim of the crime, is the greater public interest in having the accused person tried, it therefore being fair to try him, or in staying the indictment which is therefore a method of disciplining the investigating authority thereby overriding the rights of the victim? Whether the House of Lords then refused leave to appeal or the Crown chose not to pursue an appeal we have not been told. But I have to say that for my part I have the gravest doubts as to the correctness of the courts decision in Grant. True it is that Lord Taylor of Gosforth CJ had described legal professional privilege in R v Derby Magistrates Court, Ex p B [1996] AC 487, 507 as much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests. But that is not to say that its every violation must result in a quashed conviction. The law against perjury may equally be described as fundamental to the whole administration of justice but no one has ever suggested that perjury by a prosecution witness (even a police officer) must in all circumstances, irrespective of whether it prejudices the defendant, necessarily preclude a defendants conviction or, if discovered later, result in its quashing. Deeply regrettable though police perjury must always be, the law reports are replete with examples of convictions nonetheless being upheld on appeal on the basis that, the perjured evidence (sometimes in relation to purported confessions statements) aside, ample evidence remains to sustain the convictions safety. The Court of Appeal in the present case distinguished Grant on the basis that, [w]hilst helpful to the appellants, it should be remembered that Grant involved, as Laws LJ said, a deliberate violation of a fundamental condition on which the administration of justice as a whole rests: para 62. I too would distinguish Grant from the present case but on the very different basis that the police misconduct there constituted an altogether lesser, rather than a materially greater, threat to the administration of justice than the prolonged prosecutorial misconduct here misconduct without which this appellant would never have been prosecuted or convicted in the first place. All the cases I have been considering are cases where, whatever executive or prosecutorial misconduct may have occurred in the past, there is no impediment to a fair trial of the defendant in future. The central question for the Court in all these cases is as to where the balance lies between the competing public interests in play: the public interest in identifying criminal responsibility and convicting and punishing the guilty on the one hand and the public interest in the rule of law and the integrity of the criminal justice system on the other. Which of these interests is to prevail? It is, of course, as the cases show, a question which may arise in a number of different circumstances. It may arise before trial or in the course of trial, where the question for the court is whether or not to grant a stay and so halt the process short of verdict. Or it may arise on appeal against conviction when the question for the court is, first, should the conviction be quashed, and, if so, secondly, as in the present case, should a re trial be ordered. In each case, as it seems to me, the question is the same: what do the interests of justice require (the interests of justice, of course, clearly encompassing both the conflicting public interests in play)? As the court below noted, not long ago the Privy Council in Panday v Virgil [2008] 1 AC 1386 had occasion to consider this area of the law, including in particular what may be called the wrongful extradition and entrapment cases, in the context of a disputed order for a fresh trial following the quashing of the appellants conviction by the Trinidad and Tobago Court of Appeal the conviction there having been quashed for apparent (although, for the purposes of the further appeal to the Board, assumed actual) bias. In the course of giving the Boards judgment dismissing the appeal I said this (at para 28): It will readily be seen that the factor common to all these cases, indeed the central consideration underlying the entire principle, is that the various situations in question all involved the defendant standing trial when, but for an abuse of executive power, he would never have been before the court at all. In the wrongful extradition cases the defendant ought properly not to have been within the jurisdiction; only a violation of the rule of law had brought him here. Similarly, in the entrapment cases, the defendant only committed the offence because the enforcement officer wrongly incited him to do so. True, in both situations, a fair trial could take place, but, given that there should have been no trial at all, the imperative consideration became the vindication of the rule of law. In that case, however, there was no question of the appellant not having been properly before the court at all. As we said: the quashing of his conviction restores the defendant to the position he was in before the unfair trial. Why should his success gain him immunity from what is conceded to be the position he now faces under the Court of Appeals order: a fair trial upon charges properly brought? We therefore upheld the order for a retrial. In the great majority of cases apart, of course, from those like the wrongful extradition and entrapment cases where the defendant would not have stood trial at all but for the violation of the rule of law which had brought him before the court in the first place that would seem to me the appropriate outcome. The balance will ordinarily fall in favour of the fair trial of those rightly charged with serious crimes rather than in favour of the suspects absolute discharge from the criminal justice system supposedly in the wider interests of the integrity of that system as a whole. All that said, however, I have come to the conclusion that on the particular facts of the present case the balance falls the other way. In a real sense, indeed, this case can be seen to come within the same category of but for situations as the wrongful extradition and entrapment cases: but for the prosecutorial misconduct which initially secured the appellants conviction and then ensured the failure of his appeal, he would never have made the series of admissions upon the basis of which it is now sought to prosecute him afresh. There can be little doubt that these admission statements were made generally with a view to advancing the appellants interests following conviction. For the most part it seems that he made them in the hope that his murder conviction would be replaced by a conviction for manslaughter, but perhaps also in the hope of appearing contrite and securing his earlier release on parole. Either way, the likelihood is that were a trial now to take place and a conviction to be obtained on the basis of these admissions, those responsible for corrupting the original process would still be seen thereby to have achieved their ends and in the long term to have engineered the appellants conviction. That to my mind is the critical consideration in this case. The court should be astute to avoid giving the impression that it is prepared, even in this limited way, to condone such unforgivable executive misconduct as occurred here. It is essentially on this narrow basis that for my part I would allow the appeal here. Had, say, the appellant unambiguously confessed his guilt, not before but after successfully overturning his original conviction, I would see no objection whatever to an order for his retrial on the basis of new and compelling evidence pursuant to Part 10 of the Criminal Justice Act 2003. In such circumstances it would obviously not then be open to the defence to suggest that realistically the confession was the product of the executives misconduct. In this context I should perhaps say a word about the emphasis given by the court below to their view that the appellants post conviction admissions here did indeed constitute new and compelling evidence within the meaning of the 2003 Act. As Mr Perry QC for the Crown rightly points out, that concept is not to be found in section 7(1) of the Criminal Appeal Act 1968 itself the section specifically providing for the possibility of a retrial on the quashing of a conviction (see para 62 above). Indeed, it is plain that a retrial will often be appropriate without any of the evidence upon which it is proposed to base it being new and compelling. (In deciding whether a person should be retried, the so called double jeopardy principle clearly carries altogether less weight when the decision arises on the same occasion as the conviction is being quashed than when it arises subsequently i.e. following acquittal either by the jurys verdict or by an earlier successful appeal.) To my mind, however, where, as here, the question whether the interests of justice require a retrial arises in the context of a conviction quashed because of serious executive misconduct, it will always be relevant and may on occasion be decisive to consider whether indeed new and compelling evidence of guilt exists. This will be so in cases where, despite the but for test not being satisfied (as I judge it to be satisfied here), a balance nevertheless has to be struck between the competing interests in play. In cases of this sort the nature and extent of the executive misconduct will obviously be highly relevant. But so too will a number of other considerations including not least the seriousness of the defendants alleged criminality and the strength of the case against him and that will be so no less when an abuse of process application is being made before or during trial than when the question arises on appeal. It therefore seems to me understandable that in the present case, the extent of police misconduct notwithstanding, the Court of Appeal placed very considerable weight not only upon the gravity of the appellants offending but also upon the strength of the fresh evidence now available against him (although more countervailing importance might perhaps have been attached to the length of time he had already spent in prison as in Early (see para 94 above) and, indeed, to the disparity of outcome of the appeal as between the appellant and his brother). Certainly, had this not been what I regard as akin to a but for case, I would not myself have been inclined to overturn the judgment below merely by reference to the general question whether the appellants retrial can now properly be regarded to be in the public interest. Given, however, the but for character of this case and the enormity of the unpunished police misconduct involved, it seems to me quite simply inappropriate that it should now be retried on fresh evidence. Of course the crime was a grave one. But so too was Mullens crime. Unless one is to say that in relation to serious crimes the but for approach is to apply only in the context of wrongful extradition, it is difficult to think of any case where the stay principle would properly be invoked if not here. Exceptionally, therefore, I would in this case regard the Court of Appeal as having erred in law in their approach to the section 7 power. I should at this stage note that in the course of argument counsel introduced the Court to a good deal of international jurisprudence and academic commentary on the whole question of abuse of process applications. I shall not, however, dwell on this: none of it seemed to me especially helpful. Take the line of Canadian authority, culminating in the Supreme Courts judgments (five justices in the majority, four dissenting) in R v Regan [2002] 1 SCR 297, urged upon us by Mr Perry for the Crown. I confess to sharing the view about Regan expressed by H A Kaiser in a 2002 article (49 Crim Reps (5th) 74, 85 86) noted by Professor Andrew L T Choo in the second edition (2008) of his work, Abuse of Process and Judicial Stays of Criminal Proceedings, at p132 that: Neither [the majority nor the minority] judgment advances the comprehensibility and predictability of abuse of process and stays of proceedings, especially with regard to the residual category of cases where trial fairness is not implicated. (Though it was perhaps a little harsh of Mr Kaiser at the outset of his article, p74, to describe the judgments in Regan as the Courts recent meanderings.) So far as this countrys approach is concerned, Professor Choos conclusion (p132) is that: The courts would appear to have left the matter at a general level, requiring a determination to be made in particular cases of whether the continuation of the proceedings would compromise the moral integrity of the criminal justice system to an unacceptable degree. Implicitly at least, this determination involves performing a balancing test that takes into account such factors as the seriousness of any violation of the defendants (or even a third partys) rights; whether the police have acted in bad faith or maliciously, or with an improper motive; whether the misconduct was committed in circumstances of urgency, emergency or necessity; the availability or otherwise of a direct sanction against the person(s) responsible for the misconduct; and the seriousness of the offence with which the defendant is charged. It is difficult to disagree. It may however be possible and helpful to summarise the position a little more specifically as follows. (1) Whenever, executive misconduct notwithstanding, it remains possible to ensure that the defendant can be fairly tried (or, as the case may be, retried), this ordinarily is the result for which the court should aim, making whatever orders short of a permanent stay are necessary to achieve it (or as the case may be, by ordering a retrial). (2) In certain particular kinds of case, however, the but for cases as I have sought to describe and categorise them, even though it would be possible to try (or retry) the defendant fairly, it will usually be inappropriate to do so. It will be inappropriate essentially because, but for the executive misconduct, either there would never have been a trial at all (as in the wrongful extradition and entrapment cases) or (as in the present case) because the situation would never have arisen whereby the all important incriminating evidence came into existence (which is not, of course, to say that the fruit of the poison tree is invariably inadmissible). Obviously this is not an exhaustive definition of the but for category of cases and, as the word usually is intended to denote, whether in any particular case a trial (or retrial) has in fact become inappropriate may still depend in part on other considerations too. Essentially, however, it is the executive misconduct involved in this category of cases which, I suggest, most obviously threatens the integrity of the criminal justice system and where a trial (or retrial) would be most likely to represent an affront to the public conscience. (3) Exceptionally, even in cases of executive misconduct not within the but for category, it may be that the balance will tip in favour of a stay (or, as the case may be, a quashed conviction with no order for retrial), notwithstanding that a fair trial (retrial) remains possible. With regard to cases of this sort, and as to whether (in Professor Choos language) a trial (retrial) would unacceptably compromise the moral integrity of the criminal justice system, a whole host of considerations is likely to be relevant, including most obviously those which Professor Choo himself lists. I repeat, however, in my judgment only exceptionally will the court regard the system to be morally compromised by a fair trial (retrial) in a case which cannot be slotted into any but for categorisation. The risk of the court appearing to condone the misconduct (appearing to adopt the approach that the end justifies the means) prominent in the but for category of cases, is simply not present in the great majority of abuse cases. Rather, as the Board put it in Panday v Virgil [2008] 1 AC 1386, executive misconduct ought not generally to confer on a suspect immunity from a fair trial (or retrial). Beyond this general statement of what I believe to be the governing principles in play it is not, I think, possible to go. For the reasons given earlier in this judgment, however, for my part I would allow this appeal and quash the Court of Appeals order for the appellants retrial. LORD COLLINS I agree with Lord Brown that the appeal should be allowed. Public confidence that the police will act properly and lawfully is one of the cornerstones of democracy. Without proper police conduct and without public confidence in the honesty of the police, the rule of law and the integrity of the criminal justice system would be seriously undermined. The certified point of law is whether the Court of Appeal may order a re trial having quashed a conviction on the grounds of serious executive or prosecutorial misconduct, and, if so, in what circumstances. There is no doubt about the answer to the first part of the question since section 7(1) of the Criminal Appeal Act 1968 gives a discretion to the Court of Appeal to order a re trial if it appears to the Court that the interests of justice so require. It is not suggested that in the present case the Court of Appeal took into account any irrelevant or impermissible factors, or failed to take into account relevant factors. The only question is whether in the light of all the circumstances the misconduct is such that the Court of Appeal could have been justified in deciding that the interests of justice required a re trial. At trial DC Daniels and DC Dunham perjured themselves. Each of them told the court that all payments to Chapman had been disclosed. Each of them told the court that Chapman had been quarantined from the case officers. In 1999 the full Court of Appeal (Criminal Division) adjourned the applications for leave to appeal against conviction to enable the Crown to respond to the grounds of appeal alleging non disclosure, in particular that Chapman had been promised a substantial sum to establish a new identity as part of his reward for giving information and evidence against Maxwell and Mansell. On the day of the substantive hearing, after hearing evidence on an ex parte PII hearing, the court ruled that it was satisfied that when Chapman came to give evidence in the trial he had no expectation of reward, and consequently his evidence was not tainted in that regard. That ruling was procured by false evidence. Two letters were written to the Court of Appeal by senior police officers after consultation with the officers closely involved with the case. The first letter stated: No discussions were ever made [sic] concerning any monies to be paid to [Chapman] for giving evidence in the Maxwell/Mansell trial. The second letter stated: A reward of 10,000 was agreed by the West Yorkshire Police Command Team without discussion with Chapman, to be paid after completion of his sentence The Crowns skeleton argument for the Court of Appeal stated: Neither the Crown prosecution Service nor the Police Officers in the case were aware of any reward being paid to Mr Chapman for his evidence in this case. Detective Sergeant Gray gave evidence that the decision to pay the 10,000 reward to Chapman had been reached without consultation with Chapman and more than a year after he had last given evidence at the trial; and that when Chapman had given his evidence he was not aware of any factor which might have affected the content or quality of his evidence. Chief Superintendent Holt confirmed that before Chapman gave his evidence there was no discussion or agreement with him in relation to any reward or any benefit for his involvement in this case. He also gave evidence that he had no idea when the agreement for a reward had been arrived at. In fact the police had communicated to Chapman their intention to make a substantial payment to him for his co operation in the Yew II investigation (an operation in relation to his allegations against a man called Ford, Maxwell, Mansell, and others) once he had been released from prison. In addition, as a result of the investigation by the North Yorkshire Police, it turned out that: (1) As a result of his co operation with the police, Chapman and other members of his family received benefits which were concealed from the CPS and counsel. (2) Whilst in police custody Chapman was permitted to visit a brothel, to engage in sexual relations with a woman police constable, to visit public houses, to consume alcohol, cannabis and heroin, to socialise at police officers homes, to enjoy unsupervised periods of freedom, and long periods of leisure in places of his choice as exercise. (4) Luxury items were purchased for him and substantial sums handed to him in cash. (5) He was not proceeded against in respect of a number of violent incidents, including a vicious attack on a fellow prisoner; an alleged rape of his cellmate; an assault in November 1999 on the WPC from whom by then he had split up. (6) Police officers ensured that his police custody records presented a false picture of the facts, and forged a custody record when its enforced disclosure to the defence would otherwise have revealed the truth. (7) Police officers colluded in Chapmans perjury at that trial, intending him throughout his evidence to lie as to how he had been treated and as to what promises he had received, and they lied in their responses to enquiries made of the CPS after conviction. Of course, the power not to order a re trial should not be used as a form of discipline. But the interests of justice are not limited to the individual case. The police misconduct must be seen in the wider context of the preservation of the rule of law, and of public confidence in the criminal justice system. This is an extreme case. The murder was indeed a shocking crime. In my judgment, the level of misconduct is such that the interests of justice demand that, after a conviction procured by such misconduct, and after the accused has served a substantial sentence, and would not have made the admissions but for the conviction so procured, there be no retrial. I would find that the interests of justice demand the application of the integrity principle. In this case it means that there should be no re trial on evidence which would not have been available but for a conviction obtained (and upheld) as a result of conduct so fundamentally wrong that for the criminal process to act on that evidence would compromise its integrity. |
This is an application for directions in a pending appeal for which permission was granted by this court on 25 March 2014. The appeal arises out of a transaction by which Mr Richard Gabriel, the claimant in the proceedings below, lent 200,000 to a company called Whiteshore Associates Ltd. The courts below have found that his solicitors, BPE Solicitors, were negligent in their handling of the transaction. For present purposes, all that need be said about the issues is that they relate mainly to damages. The trial judge awarded the full amount that Mr Gabriel would have recovered under the facility agreement if Whiteshore had been good for the money. The Court of Appeal held that this loss was not within the scope of the solicitors duty. They accordingly reduced the award to a nominal 2. They also held, in the alternative, that even if substantive damages had been awarded, they would have been reduced by 75% on account of Mr Gabriels contributory negligence. The trial judge awarded the costs of the claim up to the conclusion of the trial to Mr Gabriel. The Court of Appeal set aside the judges costs order and ordered Mr Gabriel to pay BPEs costs of the proceedings up to and including the appeal. The costs claimed by BPE under this head amount to 469,170.60. The Court of Appeals order was pronounced on 22 November 2013. On 5 March 2014, Mr Gabriel was made bankrupt on his own petition by order of the Gloucester and Cheltenham County Court. On 25 March 2014, Mr Hughes Holland was appointed as his trustee in bankruptcy. As a result, the right to pursue the appeal vests in the trustee. Mr Hughes Holland has not yet decided whether to pursue it. The reason is the uncertainty, on the current state of the authorities, about the extent of his potential liability for costs if the appeal fails. The ordinary rule is that a trustee in bankruptcy is treated as party to any legal proceedings which he commences or adopts, and is personally liable for any costs which may be awarded to the other side, subject to a right of indemnity against the insolvent estate to the full extent of the assets. Accordingly, Mr Hughes Holland accepts that he is personally at risk for BPEs costs of the appeal to the Supreme Court. But he contends that he is not personally at risk by virtue of having adopted the appeal as trustee in bankruptcy for BPEs costs of the proceedings below in the event that the Court of Appeals order against Mr Gabriel should be affirmed. The italicised words are important. The present application is not concerned with costs that may be awarded against the trustee on any other ground. I shall return to this point below. The answer to this question has significant implications for the trustees decision whether to adopt the current appeal. The evidence is that if the appeal is not pursued, unsecured creditors are likely to receive a modest dividend of between about 3p and 5p in the pound. If it is pursued and succeeds, that figure is expected to rise to between 23p and 25p in the pound. But if it is pursued and fails, the impact on creditors will depend on whether in that event the trustee would be personally liable only for the costs of the appeal, or for the costs of the proceedings below as well. If the trustees liability for BPEs costs is limited to the costs of the appeal to this court, the dividend available to creditors will be reduced, subject to ATE insurance. But if the trustees liability for costs extends to the costs below as well, they will exceed the entire assets of the estate. The creditors will receive no dividend and the trustee will be personally exposed for the balance subject to any indemnity which he is able to obtain from the creditors. It is far from clear that such an indemnity will be forthcoming. The largest creditor, accounting for about 60% by value of claims, is the Nautilus Trust, a discretionary settlement in which Mr Gabriel has a life interest. The evidence is that it has few assets other than debts owed to it by Mr Gabriel. In these circumstances, we were not surprised to learn from Mr Chichester Clark, for the trustee, that if he is potentially liable for BPEs costs below, the appeal is unlikely to be pursued. Jurisdiction Mr Stewart QC, who appears for BPE, raises a preliminary issue about this courts jurisdiction to deal with this application. He submits that we have no jurisdiction to deal with the incidence of costs except (i) as a condition imposed at the time of granting permission to appeal, or (ii) as part of the ultimate disposition of the appeal. This point is in my view misconceived. Section 40(5) of the Constitutional Reform Act 2005 confers on this court the power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment. The Supreme Court Rules 2009 (SI 2009/1603 (L17)) provide: Orders for costs 46. (1) The court may make such orders as it considers just in respect of the costs of any appeal, application for permission to appeal, or other application to or proceeding before the court. (2) The courts powers to make orders for costs may be exercised either at the final determination of an appeal or application for permission to appeal or in the course of the proceedings. The question which the trustee wishes to have decided is not among the substantive issues on the appeal, but it is a question which will have to be decided at some stage of the proceedings if the court is to perform its duty to determine the incidence of costs. If an order for costs may be made at any stage of the proceedings, it is clear that a decision on a question of principle arising in relation to costs may be made at any stage. This court would not normally decide an issue going to costs before the hearing of the substantive appeal. But that is because it is not normally just or even practical to do so. In the present case there is every reason for ruling on the trustees potential liability now, and no reason for deferring it until after judgment. In the first place, the ruling which is presently sought is necessary in order to enable the trustee and the creditors to make an informed decision about whether to proceed with the appeal. A decision on the point after judgment will be of no use to them for that purpose. There is no interest of justice and no public interest which would be served by requiring the trustee and the creditors to make their decision in ignorance of the true position. Secondly, the trustees application is, as I have pointed out, limited to the question whether a liability for BPEs costs below would follow as a matter of law from his adoption of the appeal. There are no discretionary considerations involved. In particular, nothing that we decide now (or indeed after judgment) will affect any issue which may arise about the propriety of any decision of the trustee to pursue the appeal, which is a matter for the High Court. This court is therefore in as good a position to deal with the matter now as it would be at any other time. The question of principle A trustee in bankruptcy, unlike the liquidator of a company, is personally a party to legal proceedings which he has adopted. The reason is that the assets of the bankrupt at the time of the commencement of the bankruptcy vest in him personally, and the bankrupt has no further interest in them. The rule, which dates back to the beginning of bankruptcy jurisdiction in England, is currently embodied in section 306 of the Insolvency Act 1986. The trustees position differs in this respect from that of a liquidator, for although a liquidator is a trustee for the proper administration and distribution of the estate, the assets remain vested in the company and proceedings are brought by or against the company. It follows that with the exception of a limited (and for present purposes irrelevant) class of purely personal actions, a bankrupt claimant has no further interest in the cause of action asserted in the proceedings. Likewise, as Hoffmann LJ observed in Heath v Tang [1993] 1 WLR 1421, 1424, where the bankrupt is the defendant, he has no further interest in the defence, because the only assets out of which the claim can be satisfied will have vested in the trustee. None of this means that the trustee is bound to adopt the action. If the trustee does not adopt it, the action cannot proceed and will be stayed or dismissed if the bankrupt is the claimant: Heath v Tang [1993] 1 WLR 1421. If the bankrupt is the defendant, an action which the trustee does not adopt is liable to be stayed under section 285(1) and (2) of the Insolvency Act 1986. If, however, the trustee does adopt the action, he becomes the relevant party in place of the bankrupt. In the ordinary course, he will be substituted for the bankrupt under what is now CPR 19.2. But it is well established that he will be treated as the party if he has in fact adopted the proceedings by conducting the litigation, even if there has been no formal substitution: Trustee of the Property of Vickery (a bankrupt) v Modern Security Systems Ltd [1998] 1 BCLC 428. It follows that an order for costs in favour of the other side is made against the trustee personally in the same way as it would be made against any other unsuccessful litigant. The cost of satisfying the order is treated as an expense of performing his office, for which he assumes personal liability just as he does for any other expenses and liabilities incurred in the administration and distribution of the estate, but subject to a right of indemnity against the assets if the expenses and liabilities were properly incurred. These principles are easy enough to apply in a case where substantially all the costs of the other side were incurred at a time when the litigation was being conducted by the trustee. But what is to happen if the proceedings were begun by or against a litigant who subsequently became bankrupt, and part of those costs was incurred by the other side before bankruptcy supervened? The only authority which deals directly with this question is Borneman v Wilson (1884) 28 Ch D 53, in which the Court of Appeal extended the personal liability of the trustee to cover costs incurred by the other side before his adoption of the proceedings. The facts were that the Wilsons, father and son, had acted as commercial agents of one Borneman. He began an action against them in the Chancery Division for an account of their dealings with his goods and obtained interlocutory relief on motion including an injunction and the appointment of a receiver. The Wilsons served a notice of appeal, but shortly afterwards a bankruptcy order was made against them. On 7 October 1884, a trustee in bankruptcy was appointed. On 18 October, the trustee was substituted as a defendant, apparently ex parte on the application of Borneman. On 31 October, he gave notice abandoning the appeal. He then entered an appearance in the substantive proceedings and called for a statement of claim. Borneman applied for an order against the trustee requiring him to pay the costs of the appeal which he had incurred before receipt of the notice of abandonment. The Court of Appeal (Bowen and Fry LJJ) made that order. Their reason was that notwithstanding the trustees prompt and express abandonment of the appeal, by appearing and calling for a statement of claim in the Chancery proceedings he had adopted the action, and that meant the entire action including the appeal. The trustee, said Bowen LJ, cannot adopt part of the action and leave out the rest. Fry LJ agreed. The trustee, he said, had put himself into the place of the bankrupt as regards the action and cannot take one part of it and reject another. On the face of it, Borneman v Wilson is authority for the proposition that the proceedings must as a matter of law be adopted either in their entirety (including any discrete prior proceedings conducted by the bankrupt before his appointment), or not at all. The decision has not subsequently been applied in any reported case, although it was treated as correct by a strong Court of Appeal (Lord Esher MR and Lopes and Kay LLJJ) in School Board for London v Wall Brothers (1891) 8 Morr 202 and by Sir John Vinelott in Trustee of the Property of Vickery (a bankrupt) v Modern Security Systems, supra, at 434. However, in my opinion it is no longer good law. The Court of Appeals rather cursory judgments give no reason for its all or nothing approach to the adoption of current legal proceedings. But their conclusion is nevertheless understandable in the light of the law as it then was, or at least as it was thought to be. At the time when Borneman v Wilson was decided, an order for costs could be made only against a party to the proceedings. The modern jurisdiction to make an order for costs against a non party is conferred by section 51(3) of the Senior Courts Act 1981, which dates back to section 5 of the Supreme Court of Judicature Act 1890. Even after 1890 the existence of the power was not recognised by the courts until the decision of the House of Lords in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965. It followed that once a party to subsisting legal proceedings had become bankrupt and the trustee had been substituted for him, there was no possibility of obtaining an order for costs against the bankrupt himself. Moreover, even if such an order had been possible (for example, because no formal substitution had occurred), it would have been pointless because a liability arising from a costs order made after the commencement of the bankruptcy would not have been provable against the estate. Although debts which were contingent at the commencement of the bankruptcy had in principle been provable since the Bankruptcy Act 1869, it was considered that the discretionary character of a costs order meant that it was not even a contingent liability until the order had actually been made: see In re Bluck, Ex p Bluck (1887) 57 LT 419, In re British Gold Fields of West Africa [1899] 2 Ch 7, In re A Debtor (No 68 of 1911) [1911] 2 KB 652, In re Pitchford [1924] 2 Ch 260, Glenister v Rowe [2000] Ch 76. These cases were overruled in In re Nortel GmbH (in administration); In re Lehman Brothers International (Europe) (in administration) [2014] AC 209: see paras 87 93 (Lord Neuberger), and 136 (Lord Sumption). This court held in that case that by participating in litigation, a party submitted himself to a liability to pay costs in accordance with rules of court, contingently upon an order for costs being made against him. It followed that where proceedings were begun by or against a company before it went into liquidation, a liability for costs under an order made after it went into liquidation was provable as a contingent debt. The position is the same in bankruptcy. Against this background, it is easy to understand why late Victorian judges should have been unwilling to allow the trustee to adopt an action for his own account without assuming the liabilities for what had gone before. The result would have been to allow the action to proceed while leaving the other side with no remedy in costs in respect of earlier stages of the proceedings, irrespective of the outcome. Freed of the baggage of earlier misconceptions, however, it is possible to revisit the issue as a matter of principle. Where an action in progress at the time of the trustees appointment is adopted by the trustee, one issue now open for reconsideration is whether there is any reason in principle why the trustee should necessarily be required, simply by virtue of his adoption of the action, to pay the other sides costs of legal proceedings including those incurred at a time when he was not a party and the action was being conducted by the bankrupt for his own account. Although this issue was not as such addressed by the parties submissions, I think that there can no longer be any absolute rule to that effect. The most that can be said is that it may be appropriate as a matter of discretion to make such an order. The trustee will have conducted the action for the benefit of the estate. The expenditure of costs on both sides will have been directed to achieving the desired outcome, and it may well be reasonable for that outcome to determine the incidence of costs whether they were expended before or after the trustees adoption of the action. Equally, it will be for the court, in the exercise of its discretion, to decide whether a non party order should be made against the bankrupt himself in respect of some part of the costs incurred while he was conducting the litigation before bankruptcy supervened. If this was the issue in the present case, it could not be right to pre empt the discretion in advance on an application like this one. But it is not the issue in the present case, because a trial and the successive appeals from the order made at trial are distinct proceedings for the purposes of costs, albeit distinct proceedings in the same action. A distinct order for costs will be made in respect of each of them. Costs incurred in generating material for the trial will be recoverable, if at all, under the costs order made in respect of the trial. It will not be recoverable as part of the costs of a subsequent appeal even if the material is reused on the appeal: Wright v Bennett [1948] 1 KB 601 (CA). Mr Gabriel was responsible for the entire conduct of the trial and the appeal to the Court of Appeal. The Court of Appeal has disposed of that appeal, and has ordered Mr Gabriel to pay BPEs costs at both stages. All of this happened before Mr Gabriel became bankrupt. His liability under the costs order of the Court of Appeal is a provable debt. Indeed, a proof has been lodged. If this court were in due course to dismiss the appeal, it would normally make no order of its own in relation to the costs below other than to affirm (or possibly to vary) the order which had already been made by the Court of Appeal. That order would continue to represent a liability of Mr Gabriel and not of the trustee. The mere fact that the trustee has adopted the appeal could not possibly justify this court in ordering the trustee to pay the costs which the Court of Appeal has ordered to be paid by Mr Gabriel. The trustee is entitled to adopt the appeal to this court without adopting the distinct proceedings below. Indeed, the adoption of proceedings below would be contrary to principle. In a case where the proceedings below had been conducted to their conclusion before the bankruptcy by the bankrupt himself, to order the trustee to pay them personally would in effect enable BPE to obtain an unwarranted priority for its claim under the Court of Appeals costs order. The trustee would recover an indemnity from the estate in respect of a provable debt to the full extent of the assets before any distribution fell to be made to other creditors. I would expect the result to be the same if the bankrupt had succeeded in the courts below and failed in this court, so that an order for costs in respect of the proceedings below was made in favour of the other side for the first time in this court. It is difficult to see any principled distinction between the two situations. But the position would be procedurally more complicated, because it would involve making a non party order against the bankrupt so that the resultant liability could be proved against the estate as a contingent debt. For that reason other questions may arise which are best left to a case where they are relevant. I would declare that in the event that the Trustee adopts the appeal to the Supreme Court he will not be held personally liable for any costs incurred by the respondent in relation to this action up to and including the order of the Court of Appeal dated 22 November 2013, by virtue only of the fact of his office as Trustee of Mr Gabriels estate in bankruptcy or of his adoption of the appeal. |
The claimant Kevin Nunn was convicted in November 2006 of the murder of his girlfriend following the ending of their relationship. His application for leave to appeal to the Court of Appeal (Criminal Division) was refused after hearing counsels written and oral representations on his behalf. He continues to protest that his conviction was wrong. The present proceedings for judicial review raise the question of the extent of any continuing duty of the police and the Crown Prosecution Service to assist him in gathering and examining evidence with a view to a further challenge to his conviction, which he asserts was a miscarriage of justice. It is common ground, and well understood, that while his trial was pending the Crown owed him the statutory duties of disclosure which are set out in sections 3 and 7A of the Criminal Procedure and Investigations Act 1996. That meant that it was the Crowns duty to disclose to him anything which had become known to it and which might reasonably be considered capable either of undermining the prosecution case or of assisting his own. At the heart of the submissions of Mr Southey QC for the claimant is the contention that this duty remains in existence in exactly the same form after as well as before his trial ended with his conviction. Whilst the statutory duties of disclosure are expressly framed as continuing only until the end of the trial, Mr Southey contends that those duties are only statutory enactments of the common law duty which pre-existed the 1996 Act, and that accordingly this common law duty remains binding on the Crown indefinitely. The basis for it, he argues, lies in the necessity of detecting and correcting any miscarriage of justice which may have occurred. Kevin Nunn had been the boyfriend of the deceased, Dawn Walker, for about two years prior to February 2005. They did not live together and she may have had other boyfriends during this period. It was agreed that on the evening of Wednesday 2 February their relationship was brought to an end in the course of a discussion between them at her home. The Crown case was that there was a noisy argument, overheard by the neighbours and seen by one, and that Dawn had ended the affair against Nunns wishes. His case by contrast was that it had been a matter of amicable agreement; there had been no argument and he had left well before the time spoken of by the neighbours. After that evening Dawn was not seen alive again. Her body was found by a river two days later on Friday 4 February. Attempts had been made to set fire to it at a different place near the river and at some stage it had been immersed in water. It had then been disposed in a sexually degrading position, unclothed except for a fleece over a sweatshirt pulled up above her breasts, which garments had been put on after death and burning in other clothes. The exact cause of death could not be determined. Her head and pubic hair had been shaved off, her ankles and Achilles tendon had been lacerated, and a length of reed had been inserted into her anus. The body must have been somewhere else during Wednesday night and Thursday, for it would have been seen if then by the river. In barest outline, the Crown case against the claimant relied upon (i) the motive afforded by Dawns rejection of him, (ii) evidence that he was of a jealous disposition and had stalked both Dawn and a previous partner, (iii) his admitted presence with her on the evening of her disappearance, (iv) the argument which the neighbours said that they had heard that night, (v) his having provided himself with a key to her home without her knowledge, which would have afforded access both to items found where the body had been burned and to a petrol can apparently removed from her shed for use in the burning, (vi) his having told her employers the next day that she was not at work because unwell, and (vii) the evidence of a neighbour who knew him and who said that she had seen him, with an accomplice, removing a large wrapped object, consistent with a body, from Dawns house in the small hours of the night before she was found. By contrast, the claimants case was that he had left Dawn in good health and had thereafter been elsewhere. He pointed to a telephone record of her mobile telephone calling his at 04.55 on the night of 2/3 February; he denied that he had made the call himself to lay a false trail, and he explained the absence on his own phone of the voicemail message which he said she had left by saying that he had accidentally deleted it. He said that footprints consistent with his boots near the riverbank burning site were there because he had gone looking for Dawn the day after she disappeared; he had walked the river bank but had not seen various items connected with her which others had seen there. He advanced the positive case that Dawn had been murdered by one, or perhaps another, of her previous boyfriends, to one of whom she was perhaps hoping to return. Both were called and cross examined on his behalf before the jury, as was the girlfriend of one of those men, who provided that alleged murderer with an alibi. The claimant pointed to the presence of traces of sperm (four cells) on Dawns inner thigh and pubic area (but not in her vagina) which, since he had had a vasectomy, were unlikely to derive from him; unless they had got there by secondary or tertiary transfer or unknown past sexual contact via clothing these, he suggested, were an indication of a killer other than him. These and other issues were all fully investigated at a trial which lasted some six weeks. In the course of it the jury heard and was able to judge the evidence of the claimant and of the identifying neighbour, as well as of the two men whom the claimant accused. The jurys verdict of guilty was returned on 20 November 2006. The Court of Appeal refused the application for leave to appeal against conviction on 17 October 2007. The claimant continued to protest his innocence. Beginning in January 2008, he made a series of written applications to the police for supply of all their records of the investigation. These will, for an investigation such as this, have been very voluminous; they were logged in detail under the normal police computerised system for major enquiries (HOLMES). He sought everything, including officers notebooks, computer files, incident logs, CID journals and the like, together with all photographs and forensic science records. The applications were framed under either the Freedom of Information Act 2000 or the Data Protection Act 1998. Whether or not the claimant fully appreciated the law, even if there was anything which could be obtained under these two statutes, these blanket applications were misconceived (see, inter alia, section 30 of the former and section 29 of the latter), quite apart from the fact that there is no suggestion that anything relevant had not been disclosed to the defendant, through his trial solicitors, before the trial. By February 2010, however, the claimant had instructed fresh solicitors, who had not represented him at his trial. He will have been entitled to call for the case papers, including unused prosecution material, from his trial solicitors to give to his new representatives. On 8 February 2010 the new solicitors wrote the first of a number of letters to the police seeking information. They said: We should be most obliged if you could serve upon us some relevant and as yet undisclosed material in relation to the finances of the deceased, Dawn Walker. The purpose of this enquiry is to ascertain whether Ms Walker had any undisclosed source of income which might indicate any form of economic activity which was not disclosed to the defence. This enquiry is necessitated in part by the conclusion drawn from the available facts that Ms Walker was living at a standard way beyond the income which she earned at [her employers]. .. We should also like to know whether the keys to the shed at Dawn Walkers home and her mobile phone can be made accessible to our expert, probably at the forensic science laboratory for the purpose of DNA testing. There is no sign that Ms Walkers finances had been thought by anybody to have any relevance at all to the trial or to the question of who had murdered her. The enquiry clearly indicated a wish to start afresh investigating the case. Nor was the request for anything specific; it was a request for the police to exhume all the investigation records, a little over three years after the end of the trial, and to review anything bearing on this new topic. By now the investigation documents were all in storage and some officers concerned had moved on to other postings. In the event, some research was undertaken and a positively worded letter from the CPS responded that the author had ascertained that the deceased had certainly not been living beyond her means. Nothing more seems to have been heard of this line of enquiry. Other requests, however, followed, some specific and some not. They included a request for sight of the notes of any forensic scientist who had worked on the case so that an independent expert could check their adequacy, and they sought access to various exhibits for further testing as and when their expert so advised. The solicitors made it clear that they were undertaking a full review of the case to determine what lines of enquiry may turn up fresh evidence. They referred to wanting to review material relating to DNA, pathology, soil composition, pollens and diatoms. In November 2010 an itemised list of requests for information was sent to the police. It asked a variety of questions which would have entailed a detailed review of the investigation documents. It included the question, described as relating to an obvious possibility, whether the murder of Dawn Walker had been linked to a series of high profile murders of prostitutes in Ipswich. The several letters made it clear that other requests would be likely to follow as the general review of the case proceeded. On 1 February 2011 the police replied formally, repeating what had already been said in correspondence, to the effect an obligation was accepted to disclose any material which came to light after the conviction and which might cast doubt on the safety of the conviction, but not to facilitate a general trawl through a finished case. The claimants application for judicial review followed. It sought: (a) A declaration that the defendant's 1 February 2011 refusal to grant the claimant access to prosecution evidence is unlawful being in breach of his rights under domestic common law, under articles 5 and 6 of the ECHR and/or under section 7 of the Data Protection Act 1998; and (b) a mandatory order requiring the Chief Constable to grant the claimant access to the prosecution evidence, together with such other declaratory relief as might be appropriate. The Divisional Court (Sir John Thomas P and Haddon-Cave J) refused the application. This is the claimants appeal from that refusal. It should be recorded that after the lodging of the claim for judicial review, and again between the hearing before the Divisional Court and that in this court, the apparent target of the claimants present requests has been narrowed. It seems that nothing is now made of the suggested obvious possibility that this murder was linked to the murders of prostitutes in Ipswich; the several important differences between the two cases which have been explained may have been taken on board. The focus is now upon (i) access to the working papers of the forensic scientists who advised the Crown and/or gave evidence and (ii) requests for re-testing, or first testing, of various exhibits recovered in the course of the investigation. At the trial, the scientific evidence was, in most respects, inconclusive as to the identity of the killer. The Crown did not rely on it to support the case against the claimant, as the trial judge carefully reminded the jury early in her summing up. There were the footprints near the river which were consistent with boots which the claimant wore, but they were not uniquely so, and he admitted walking there at the material time. DNA testing of various items found either on the body or where it had been burned provided nothing to associate them either with the claimant or with any of the other males who figured in the case. The scientific evidence of the presence of traces of sperm on the deceased was not disputed, and evidence was given about the possible ways in which, by secondary or tertiary transfer, such material might arrive where it was found. The claimant called expert evidence relating to the consequences of his vasectomy. What other scientific advice he had cannot, in the absence of waiver of privilege, be known. No forensic science report available to him at trial has ever been disclosed by him; there is of course no obligation upon a defendant to disclose such a report unless he proposes to rely upon it. A great many defendants decide, on advice, that there is nothing in the reports obtained for them which will help them or that the best use to which they can be put is to inform cross-examination of the Crown scientists without exposing points on which the reporting expert agrees. Some time after the claim for judicial review was lodged, the claimant provided the police and CPS with a full report from an independent forensic scientist who had clearly been instructed by the new solicitors some while beforehand, though long after the trial. While appeal to this court was pending, a further statement from a different forensic scientist has also been lodged, dealing with advances in DNA testing techniques over the period since the trial; this was admitted without objection before this court. Nevertheless, whilst the focus of the now current application to the police has narrowed, it is plain from the sequence of the requests made that what the claimant seeks is a full re-investigation, and access from time to time to whatever he thinks necessary to review any point which he wishes. Consistently with this, the appeal has been argued before this court at the general level of the extent of the duty, after conviction and exhaustion of appeal, to which the Crown and the police remain subject in relation to the products of the police enquiry. The question of law of general public importance which the Divisional Court certified at Mr Southeys request is: Whether the disclosure obligations of the Crown following conviction extend beyond a duty to disclose something which materially may cast doubt upon the safety of a conviction, so that the [Chief Constable] was obliged to disclose material sought by the claimant in these proceedings ? As is apparent from the summarised history of applications set out above, what this claimant chiefly seeks is not disclosure of something which has been withheld from him, but inspection of material which was fully and properly disclosed during the trial process. Disclosure and inspection are related, and governed by similar principles, but it does not at all follow that the exact content of the Crowns duty in a particular case can be understood without adverting where necessary to the difference between them. As Mr Southey rightly submits, the Crowns duty of disclosure and inspection was formulated by the common law in the second half of the twentieth century. There were parallel developments of rules of disclosure in other common law jurisdictions: see for example Brady v Maryland 373 US 83 (1963) in the United States of America. The precise extent of the duty in England and Wales before and during trial is not in issue in the present case and calls for no more than a summary. Early decisions, such as R v Bryant and Dickson (1946) 31 Cr App R 146 and Dallison v Caffery [1965] 1 QB 348 recognised the Crowns duty to disclose to a defendant the existence of a witness who can give material evidence. Later decisions expanded the rule into a general duty to disclose evidence of any kind which might reasonably be thought capable of assisting a defendant, in large part in response to a few notorious cases in which trials went wrong because defendants were unaware of such material although it was in the hands of the prosecution. R v Ward [1993] 1 WLR 619 is a well-known example, where wholesale failure to disclose scientific material bearing on the reliability of scientific evidence at the centre of the Crown case made it necessary to quash convictions for bomb-setting some twenty years after the event. A defendants right to have disclosed evidential material inspected on his behalf will generally go with the duty of disclosure. For example, R v Mills [1998] AC 382 held that a material witness statement should be provided for inspection as well as the existence of the witness disclosed. There are, however, inevitably additional considerations associated with inspection of evidential material other than witness statements. Occasionally, material may have had to be destroyed for reasons of safety, or may unavoidably have been used up in a testing process. If it remains available, inspection must be on terms that it is properly preserved and, if scientific, not exposed to risk of contamination. Particular issues may arise in relation to the cost of handling or preserving some kinds of material. There are special rules for material falling within the Sexual Offences (Protected Material) Act 1997 designed to prevent it from being put into the possession of individual defendants. In practice, in many cases, inspection is likely reasonably to be restricted to nominated and trusted professional or expert persons. What will be reasonable will vary from case to case. The Criminal Procedure and Investigations Act 1996 put the common law prosecution duty of disclosure into statutory form. It recognised a two-stage process of disclosure, initially under section 3 and continuing under what is now section 7A. It also inaugurated a duty of defence disclosure, which, although one of imperfect obligation, is connected to the prosecution duty since the defence statement required by section 5 and the advance notices required by sections 6C and 6D help to define the issues and thus to identify material which may be relevant to the duty of continuing disclosure. The Act somewhat modified the test for disclosure from that variously articulated in R v Ward and in R v Keane [1994] 1 WLR 746 at 752, whilst maintaining its purpose. Both the initial duty under section 3 and the continuing duty under section 7A are couched in the same terms. They apply to any material which the prosecution has or has inspected and which: .might reasonably be considered capable of undermining the case for the prosecution against the accused or of assisting the case for the accused. The Act dealt specifically with the timing of the duties which it created. In this and generally it gave effect to the recommendation of the Royal Commission on Criminal Justice (the Runciman Commission) (1993) (Cm 2263) which had expressed concern that the common law risked requiring detailed disclosure of matters whose potential relevance is speculative in the extreme and about the impracticability of the sheer bulk of disclosure which might be within the principle (chapter 6, p 95, at para 49). The Act met those concerns firstly by providing the test for disclosure set out above. By section 21, where the statutory duties created by the Act apply, they displace the former common law duties which cease to operate. The Act then recognised the two-stage disclosure procedure described above and it defined the period during which its statutory duties of disclosure are imposed. For trials on indictment, the duty begins with the arrival of the case (by whatever route) in the Crown Court: section 1(2). It ends with the end of the trial, whether by conviction, acquittal or the Crown discontinuing proceedings: section 7A(1)(b). It follows that the duty of disclosure created by the Act does not apply to the present claimant. The end of the trial is, however, not always the end of the criminal process. Any convicted defendant has the right to appeal to the Court of Appeal (Criminal Division) if he can show an arguable case that his conviction is not safe. If that fails, a defendant cannot mount a second appeal, because the court is functus officio. But, again in response to the recommendations of the Runciman Commission, the law of England and Wales (and also of Northern Ireland and Scotland) has put in place a separate body, the Criminal Cases Review Commission (CCRC), which has the power to review any conviction and which is charged, if it thinks that there is a real possibility that the Court of Appeal might quash the conviction, with the power to refer the case back to that court for, exceptionally, the hearing of a second appeal and on any grounds, whether the same as before or different. Such a referral by- passes the requirement for leave to appeal. An arguable case is assumed. The Court thereupon has the duty to investigate the safety of the conviction and must quash it if it is unsafe. The CCRCs extensive investigative powers include the power to require the production to it of any material in the hands of the police or any other public body, to appoint an investigator with all the powers of a police officer, and to assemble fresh evidence not before the court of trial. As summarised above, Mr Southeys essential submission is that the common law duty of disclosure was developed with the purpose of preventing miscarriages of justice. Whilst the common law duty is displaced where the Act applies, it remains in force, he submits, for periods before and after the Crown Court trial. In particular, it remains in force after conviction for the purpose of exposing and correcting any miscarriage of justice which may have occurred. Hence, he contends, the duty of the Crown in the present case is exactly the same now as it was while the claimants case was pending in the Crown Court. It follows, he says, that the police, as the custodians of the exhibits and the other products of the investigation, must afford the claimant such access as he seeks so that he can, if material emerges which supports him, challenge his conviction. Mr Southey accepts, as he must, that any such challenge can now only be brought to court if the CCRC decides to refer the conviction to the Court of Appeal (Criminal Division). But he contends that in order to demonstrate to the CCRC that this is a proper case in which it should launch a review, the claimant needs, via his solicitors, to re-investigate the several matters which they have identified and perhaps more. The principled origin of the duty of disclosure is fairness. Lord Bingham put it in this way in R v H [2004] UKHL 3; [2004] 2 AC 134, at para 14, speaking in the context of the proper procedure for handling claims to withhold disclosure on public interest grounds: Fairness ordinarily requires that any material held by the prosecution which weakens its case or strengthens that of the defendant, if not relied on as part of its formal case against the defendant, should be disclosed to the defence. Bitter experience has shown that miscarriages of justice may occur where such material is withheld from disclosure. There is no doubt that this principle of fairness informs the duty of disclosure at all stages of the criminal process. It does not, however, follow, that fairness requires the same level of disclosure at every stage. The terms of section 7A of the statute plainly suggest otherwise. So, on inspection, does the jurisprudence. The common law of England and Wales has proved capable of adapting the duty of disclosure to the different stages of the criminal process. In R v Director of Public Prosecutions, Ex p Lee [1999] 1 WLR 1950 the Divisional Court dealt with the position before committal to the Crown Court, and thus before the statutory duties under the Criminal Proceedings and Investigations Act apply. It held that some disclosure was indeed required at that early stage but not what Kennedy LJ described, at p 1963, as the full blown version applicable under the Act once Crown Court proceedings are under way. Examples of material which ought to be disclosed before committal would include evidence which bears on a bail application, or which is relevant to an application to stay for abuse, or which relates to unused eye witnesses whose evidence might be less effective unless promptly proofed. That illustrates the proposition that the common law duty did not remain the same throughout. Rather, it was tailored to the needs of the stage of the proceedings in question. Similarly, although the duties laid down by the Act cease on conviction, some continuing common law duty is recognised to apply pending sentence, but only in relation to material relevant to that stage. The Attorney-General has issued guidelines on disclosure for prosecutors. They recognise at para 58 that prosecutors must consider disclosing in the interests of justice any material relevant to sentence, such as information not known to the defendant which might assist him in placing his role in the offence in the correct context vis--vis other offenders. That correctly gives effect to the common law duty which at this point is limited to material not known to the defendant which might assist him in relation to sentence. In the same way, while an appeal is pending, a limited common law duty of disclosure remains. Its extent has not been analysed in English cases, but plainly it extends in principle to any material which is relevant to an identified ground of appeal and which might assist the appellant. Ordinarily this will arise only in relation to material which comes into the possession of the Crown after trial, for anything else relevant should have been disclosed beforehand under the Act. But if there has been a failure, for whatever reason, of disclosure at trial then the duty after trial will extend to pre-existing material which is relevant to the appeal. This was the case, for example in R v Makin [2004] EWCA Crim 1607, to which Mr Southey referred the court, where the complaint was of a failure of disclosure at trial, and disclosure pending appeal was necessary to enable the complaint to be investigated by the court, albeit on examination the court rejected it. A similar result was reached in McDonald v HM Advocate [2008] UKPC 46; 2010 SC (PC) 1 in relation to Scottish law (where the content of the duty of disclosure was then in a transitional state). The Judicial Committee of the Privy Council accepted that if there had been a failure of disclosure at trial, the duty on appeal was to make available what should have been provided at trial as well as material relevant to existing grounds of appeal. However, it roundly rejected the contention that at the appellate stage there arose a duty on the prosecution to re-perform the entire disclosure exercise, so that the appellant could see whether anything might emerge which could be used to devise some additional ground of appeal. Lord Rodger observed at para 71 that that was an extravagant proposition. He went on to explain why, at para 74: Not only would such an obligation be unduly burdensome, but it would often be quite inappropriate at the appeal stage. By then, the real issues in contention between the parties will have been focused at the trial. In this new situation material which might have seemed to be of potential significance for the defence before the trial (for instance as weakening the identification evidence of a witness to a murder) may now be seen to have actually been irrelevant (because for instance the accused admitted that he killed the deceased but pleaded self-defence). In other words, what fairness requires varies according to the stage of the proceedings under consideration. This conclusion is consistent with that reached in other common law jurisdictions. In the New Zealand case of The Queen v Nepia (unreported) 3 October 2000, the Court of Appeal found the source of the disclosure rule at the pre-appeal stage in the power of that court under section 389(a) of the Crimes Act to order production of any document exhibit or thing which appears to be necessary for the determination of the case (a provision equivalent to section 23 of the England and Wales Criminal Appeal Act 1968). It held that this jurisdiction, exercisable on appeal, is not part of an investigatory procedure and should not be used as part of a general fishing expedition. It held that a realistic evidential foundation will in general have to be laid before it is used. In the recent case of Cant v The Queen [2013] NZCA 321, again a pending appeal, the Court of Appeal similarly held that questions of the Crown were not appropriate, and that requests for disclosure must have a material bearing on an articulated ground of appeal. A similar approach was adopted in the Court of Appeal of Ontario in The Queen v Trotta [2004] CanLII 600114 (ON CA). Canadian law recognises a duty of disclosure for the purposes of trial which is equivalent to that imposed in England and Wales: R v Stinchcombe [1991] 3 SCR 326. Trotta held that in principle disclosure obligations continued into the appellate process. The court observed that the protection of the innocent is as important on appeal as it is prior to conviction. But it drew attention to the fundamental differences between the two stages when it comes to the content of the duty. The convicted person is no longer to be presumed innocent. He has exhausted his right to make full answer and defence. The duty of disclosure at this stage was held to extend to any information in the possession of the Crown where the accused can show that there is a reasonable possibility that it could assist him in the prosecution of his appeal. In that case, there had arisen since the trial some suggestions of lack of balance in the evidence given in other cases by the Crown pathologist. The Court held that there would be a duty to disclose this material to the appellant if there were any reason suggested to doubt the evidence which the pathologist had given in the instant case. Since there was not, the material was irrelevant and the request for it speculative. This is a good illustration of the difference between the two stages. There can be no doubt that, if it had then been in existence, the material affecting the pathologist would have been disclosable pre-trial, for at that stage it would not have been known whether there was or was not any challenge to his findings. The important differences between the pre-trial and post-conviction stages were similarly emphasised by the US Supreme Court in District Attorneys Office (Third Judicial District) v Osborne 557 US 52 (2009). The court divided 5:4 upon the jurisdictional question whether a complaint of denial of access to DNA testing post-conviction raised a constitutional issue, and thus on whether the issue was a proper one for the Supreme Court rather than for the federal or State courts. There was also disagreement on whether there was a right to such access in a case where it was agreed that the testing would be conclusive of guilt or innocence. But there was agreement that the position of a convicted person was not generally analogous to that of a person on trial. All the judges agreed that the disclosure rules applicable prior to and during trial, set out in Brady v Maryland 373 US 83, did not continue unaltered after conviction. Roberts CJ, giving the judgment of the majority, said this: Osbornes right to due process is not parallel to a trial right, but rather must be analysed in light of the fact that he has already been found guilty at a fair trial, and has only a limited interest in postconviction relief. Brady is the wrong framework. The minority opinion, delivered by Justice Stevens, agreed on this. It included approval of Luttig Js statement in the earlier case of Harvey v Horan 285 F 3d (2002) 298 at 305 that: no-one would contend that fairness, in the constitutional sense, requires a post-conviction right of access or a right to disclosure anything approaching in scope that which is required pre-trial Whilst the jurisdictional question was later resolved in favour of a different appellant in Skinner v Switzer 562 US (2011) nothing in that decision bears on the distinction between disclosure pending trial and disclosure post-conviction. There is thus no basis for saying that the common law ever recognised a duty of disclosure/inspection after conviction which was identical to that prevailing prior to and during the trial, and no case, whether in this jurisdiction or any other, has been found to suggest it. All the stages thus far considered are ones at which the criminal justice process remains afoot, with either trial or sentence or appeal to be catered for. When it comes to the position after the process is complete, the Attorney Generals guidelines deal specifically with disclosure of something affecting the safety of that conviction. The relevant paragraph in the most recent edition (2013), echoing the same principle in earlier editions, says this: Post conviction. 72. Where, after the conclusion of proceedings, material comes to light that might cast doubt upon the safety of the conviction, the prosecutor must consider disclosure of such material. The guideline must mean that not only should disclosure of such material be considered, but that it should be made unless there is good reason why not. Thus read, it is entirely consistent with the principle reflected in the position set out in the paragraphs above in relation to the pre-Crown Court stage, to the pending sentence stage and to the pending appeal stage. Mr Southeys submission entails the argument that the guidelines greatly understate the duty in the circumstances of the present claimant. He is entitled, if Mr Southey is right, to the full extent of the duty which the Crown had had during his trial. That would mean a duty to give active consideration, presumably continuously, to the state of the evidence. And, as the requests made of the police in the present case illustrate, it would mean a duty to respond from time to time to any requests for information, or for access to material, which the convicted defendant makes. The argument appears to be that his right to the performance of that duty endures indefinitely, or certainly whilst he, or perhaps anyone else, asserts that the conviction was wrong. The fallacy in this argument lies in the implicit assumption that the common law duty, as it evolved, was identical before and after conviction. As has been seen, it was not. Moreover, it does not at all follow from the fact that the common law developed the Crowns duty of disclosure with the object of minimising the risk of miscarriages of justice that a convicted defendant such as the claimant, who asserts that his conviction was wrong, is or ever was entitled to the same duty continuing indefinitely after that conviction. The common law developed the duty as an incident of the trial process, to ensure that that process was fair to defendants. It was designed to avoid trials creating miscarriages of justice, not as a means of investigating alleged miscarriages after a proper trial process has been completed. It was not devised in order to equip convicted persons such as the claimant with a continuing right to indefinite re-investigation of their cases, and the fact that some such persons assert that their convictions were miscarriages of justice does not mean that it was. The position of a convicted defendant is different in kind from that of a defendant on trial. The latter is presumed innocent until he is proved guilty, as he may never be. The former has been proved guilty. He is presumed guilty, not innocent, unless and until it be demonstrated not necessarily that he is innocent, but that his conviction is unsafe. The defendant on trial must have the right to defend himself in any proper way he wishes, and to make full answer to the charge. The convicted defendant has had this opportunity. The public interest until conviction is in the trial process being as full and fair as it properly can be made to be. After conviction, there is of course an important public interest in exposing any flaw in the conviction which renders it unsafe and in quashing any unsafe conviction, but there is also a powerful public interest in finality of proceedings. All concerned, including witnesses, complainants, the relatives of the deceased and others, have a legitimate interest in knowing that the legal process is at an end, unless there be demonstrated to be good reason for re-opening it. A duty such as that suggested by Mr Southey should not be assumed to be straightforward of performance. The products of a major investigation are typically voluminous, far more so than the evidence adduced at trial, extensive though that often is. Whilst they are generally catalogued on computer, many will be paper material. In smaller cases, in which the same duty would apply, there may be very little retained. Generally, materials will often be archived after the appeal process is exhausted. To make an informed or useful search of them requires them to be mastered. Police officers move on to other appointments, or retire; it cannot be assumed that the investigating officers will remain in the same place where they formerly were, or that they will continue to have regular access to the material. If the material is actively to be managed and re-considered, officers will have to be diverted to the task from other investigations. The evidence of the detective inspector in the present case was, for example, that reviewing the stored evidence in order to deal with the claimants subject access request under the Freedom of Information Act occupied approximately four man-days of police time. If there is demonstrated to be a good reason for this kind of review of a finished case, then the resource implications must be accepted. There is, however, a clear public interest that in the contest for the finite resources of the police current investigations should be prioritised over the re-investigation of concluded cases, unless such good reason is established. If, then, there is no basis for Mr Southeys principal submission, that the duty of disclosure remains the same after conviction as before, the question remains what the duty does entail at that stage. There can be no doubt that if the police or prosecution come into possession, after the appellate process is exhausted, of something new which might afford arguable grounds for contending that the conviction was unsafe, it is their duty to disclose it to the convicted defendant. Simple examples might include a new (and credible) confession by someone else, or the discovery, incidentally to a different investigation, of a pattern, or of evidence, which throws doubt on the original conviction. Sometimes such material may appear unexpectedly and adventitiously; in other cases it may be the result of a re-opening by the police of the enquiry. In either case, the new material is likely to be unknown to the convicted defendant unless disclosed to him. In all such cases, there is a clear obligation to disclose it. Para 72 of the Attorney Generals guidelines, quoted above, correctly recognises this. This is, however, plainly different from an obligation not to reveal something new, but to afford renewed access to something disclosed at time of trial, or to undertake further enquiries at the request of the convicted defendant. Miscarriages of justice may occur, however full the disclosure at trial and however careful the trial process. A convicted defendant clearly has a legitimate interest, if continuing to assert his innocence, to such proper help as he can persuade others to give him: see R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, where a prisoners right, for this purpose, to a visit by, and oral interview with, an investigative journalist was recognised. Quite apart from the defendants interest, the public interest is in such miscarriages, if they occur, being corrected. There is no doubt that there have been conspicuous examples of apparently secure convictions which have been demonstrated to be erroneous through the efforts of investigative journalists, or of solicitors acting on behalf of convicted persons or, sometimes, of other concerned persons. This court was referred to R v Hodgson [2009] EWCA Crim 490 as a particularly graphic illustration. There, the defendants conviction for rape and murder, based essentially upon the apparently compelling detail of his own circumstantial confessions, was, some twenty seven years later, demonstrated to have been wrong by the advances in science, and despite no one concerned with the investigation or trial having done anything which could be criticised. This was possible because samples of semen recovered from vaginal and anal swabs taken from the deceased could be analysed for DNA in a way which had not been possible at the time. A solicitor who was recently instructed on behalf of the defendant made the enquiry of the CPS and/or the police whether the samples remained in existence despite the passage of time. When it was found that they did, analysis of them by modern methods was immediately commissioned by the police and prosecution, with a view to immediate disclosure of the outcome. The semen could only have come from the rapist/murderer. The results excluded the defendant. A rapid joint submission to the CCRC followed, with an immediate reference by that body to the court. In quashing the conviction, the Court of Appeal, Criminal Division, gave appreciative recognition to the efforts of solicitor, police and prosecutor and to the level of co-operation between them. It does not, however, follow from cases such as this that the law ought to impose a general duty on police forces holding archived investigation material to respond to every request for further enquiry which may be made of them on behalf of those who dispute the correctness of their convictions. Indeed, the potential for disruption and for waste of limited public resources would be enormous if that duty were to be accepted. The claimants initial requests in the present case for investigation of the finances of the deceased, as well as his earlier applications for sight of the entire investigation files, afford good illustrations of the kind of speculative enquiry which such a rule would encourage. There is no such duty. If the duty of disclosure pending appeal is limited, as it plainly is, to material which can be demonstrated to be relevant to the safety of the conviction, it is all the clearer that after the appellate rights which the system affords are exhausted the continuing obligation cannot be greater than that stated in the Attorney Generals guidelines, read as explained in para 30 above. The safety net in the case of disputed requests for review lies in the CCRC. That body does not, and should not, make enquiries only when reasonable prospect of a conviction being quashed is already demonstrated. It can and does in appropriate cases make enquiry to see whether such prospect can be shown. It has ample power, for example, to direct that a newly available scientific test be undertaken. R v Shirley [2003] EWCA Crim 1976, a DNA case not unlike Hodgson, appears to be a case in which it did exactly that. What it ought not to do is to indulge the merely speculative. It is an independent body specifically skilled in examining the details of evidence and in determining when and if there is a real prospect of material emerging which affects the safety of a conviction. This exercise involves a detailed scrutiny of the other evidence in the case and a judgment on the likely impact of whatever it is suggested the fresh enquiries may generate. Whilst in principle the court retains control, via the remedy of judicial review, of the duty laid upon the police and prosecutors after the appeal process is exhausted, it is likely to determine, unless good reason for not doing so is provided, that relief by that route is inappropriate until the CCRC has had the opportunity to make a reasoned decision. The advances of science mean that from time to time it will become possible to undertake tests which were not available earlier. This possibility presents just one example of the approach set out above. Sometimes such tests will be potentially determinative of guilt, as they were in Hodgson. In other cases they will be simply speculative, either because there is great uncertainty about whether any result can be obtained or because any result will be consistent both with guilt and innocence. The difference between the two cases has given rise in the USA to debate about the extent of any right to re-testing especially if it is likely to be conclusive. Osborne, referred to above, records some of the debate and the fact that a large number of US states have made legislative provision for such testing in defined circumstances. There is, however, no body such as the CCRC in the United States, which can decide in an appropriate case to require testing. Here, there is. None of this means that the work of solicitors and others in the interests of convicted persons may not be of great value. There is no doubt that the CCRC is much assisted by informed legal analysis and presentation if an application for review is made to it, and not only because its funding is not unlimited, but also because accurate legal formulation focuses the mind correctly. Sometimes, such solicitors or others can usefully undertake enquiries of their own, respecting of course the interests of third parties. On other occasions they may well, by their arguments and presentations, enlist the co-operation of the police, or the prosecution, or both: Hodgson was just such a case. The police and prosecutors ought to exercise sensible judgment when representations of this kind are made on behalf of convicted persons. If there appears to be a real prospect that further enquiry will uncover something which may affect the safety of the conviction, then there should be co-operation in making it. It is in nobodys interests to resist all enquiry unless and until the CCRC directs it. It is enough to determine the instant appeal that after conviction there is no indefinitely continuing duty on the police or prosecutor either in the same form as existed pre-trial or to respond to whatever enquiries the defendant may make for access to the case materials to allow re-investigation. The duty is properly stated at para 72 of the Attorney Generals guidelines, read as explained in para 30 above, with the addition that if there exists a real prospect that further enquiry may reveal something affecting the safety of the conviction, that enquiry ought to be made. The Divisional Court held that there was no basis for concluding that any of the enquiries made in the present case go beyond the simply speculative and satisfy this latter condition. This court has, rightly, been pressed with argument chiefly on the principled point of law rather than on the facts of this case. This appeal ought not, however, to be left without the observation that the fact that DNA testing is one of the things sought does not by itself answer the question whether the request has a real prospect of uncovering material affecting the safety of the conviction. The request for sight of all forensic science working papers so that the scientists work could be checked was plainly speculative. The report provided by the claimant states specifically that there is no reason to query any of the work done or conclusions arrived at. The report also makes it clear in some instances that the request for testing of items which were not previously tested is made simply because the claimant or his family would like it done; those requests have the plain appearance of being likewise speculative. In the case of some of the testing proposed it seems likely that some alteration of the samples would be involved, by consolidating them; if this kind of operation is in question, there is a further decision to be made whether re-testing would rule out any future use of the material. There may be a separate question concerning the new possibilities of undertaking modern, and better, DNA testing of certain swabs, especially those from the thigh and genital region. Even there, however, the forensic science report now relied upon concludes that even if a match were found to one of the men under discussion in the case, that would not necessarily exclude the claimant as the killer. The killer may or may not have deposited traceable DNA. Although it is suggested for the claimant that if DNA attributable to one of these men were to be found, that would provide good evidence that he might be the killer, it must also be the case that any DNA which is found need not be related to the killing, particularly if the deceased had an association with the man in question. It is plain that the presence of a very few unattributed spermatozoa was known at the trial and the possibilities for innocent transfer were fully investigated. On the limited information presently available it seems unclear that a real prospect is established of material emerging affecting the safety of the conviction. However, any further request for access to the sample should be tested on the principles explained above, in the first instance by the police and if necessary by the CCRC. For these reasons, this appeal should be dismissed. |
What happens if land is registered as a town or village green when it should not have been? There is power to rectify the register, but what is the effect of the lapse of time (a less pejorative term than delay) between the registration and the application to rectify? There are many private and public interests in play those of the landowners who have wrongly been severely restricted in the use to which they can put their land, those of the local inhabitants who have rightly been enjoying the amenity of the green since its registration, and those of the wider public which are many and varied such as protecting the accuracy of public registers, preserving public open spaces, or securing that land earmarked or suitable for development can be used for that purpose. The statutory background The principal purpose of the Commons Registration Act 1965 was, as its long title says, to provide for the registration of common land and of town and village greens. Section 1(1)(a) requires that land which is a town or village green be registered in accordance with the Act. Section 1(2)(a) provides that no land capable of being registered under this Act shall be deemed to be . a town or village green unless it is so registered by the deadline prescribed by the Minister, which was 31 July 1970. This meant that the rights of local inhabitants over such ancient but unregistered greens were extinguished. However, the Act contemplated the possibility of land becoming a town or village green in the future. Regulations under section 13(b) could and did provide for registers to be amended where any land becomes . a town or village green (emphasis supplied) (see the Commons Registration (New Land) Regulations, SI 1969 No 1843). Three separate categories of town or village green are defined in section 22 of the Act (since amended by section 98 of the Countryside and Rights of Way Act 2000, but not so as to affect these cases): Town or village green means land which has been allotted by or under any Act for the exercise or recreation of the inhabitants of any locality or on which the inhabitants of any locality have a customary right to indulge in lawful sports and pastimes or on which the inhabitants of any locality have indulged in such sports and pastimes as of right for not less than twenty years. The first and the third might arise after the statutory deadline, whereas the second could not. In reality, however, provided that the local inhabitants continued to exercise their customary rights as of right for 20 years, they would be able to register the land as a new or modern green. But it was also possible for many other pieces of land on which the inhabitants of any locality had indulged in lawful sports and pastimes as of right for at least twenty years to be registered. This gave rise to several important cases deciding upon the requirements for registration as a new or modern green and on the consequences of such registration, many of them relevant to the issues in the two cases with which we are concerned: see, for example, R v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335, R (Beresford) v Sunderland City Council [2003] UKHL 60, [2004] 1 AC 889, Oxfordshire County Council v Oxford City Council [2006] UKHL 25, [2006] 2 AC 674, and R (Lewis) v Redcar and Cleveland Borough Council (No 2) [2010] UKSC 11, [2010] 2 AC 70. No procedure was laid down, either in the Act or in the Regulations, for the registration authority, normally a County Council, to decide such matters. Practice varies, with some holding elaborate public inquiries and others deciding matters more informally, as illustrated in the two cases before us. By section 10 of the Act, registration of any land as a town or village green is conclusive evidence of the matters registered, as at the date of registration. the register in two circumstances, only one of which is relevant here: Section 14 of the Act gives the High Court power to order the amendment of . if (b) the register has been amended in pursuance of section 13 of this Act and it appears to the court that no amendment or a different amendment ought to have been made and that the error cannot be corrected in pursuance of Regulations made under this Act; and . the court deems it just to rectify the register. Anyone may apply for rectification, although the owners of the land registered as a green are most likely to want to do so. There is no statutory deadline for making such an application. The question, therefore, once it has been decided that the entry on the register ought not to have been made, is the relevance of the lapse of time since the registration in deciding whether it is just to order rectification. Betterment: the facts In 1994, a Mrs Horne applied to Dorset County Council, on behalf of the Society for the Protection of Markham and Little Francis, for the registration of some 46 acres of open land in Weymouth. These were part of a larger area of land owned by the Curtis family which had been let for grazing but had ceased to be so used in around 1980. Two public footpaths crossed the land but local residents and their dogs had wandered more freely over the area. Mrs Horne relied upon 20 years use by local inhabitants for lawful sports and pastimes after 31 July 1970. The Curtis family objected. Her first application was declined but she made a second one in 1997 which the County Councils Rights of Way Sub committee decided should be referred to a non statutory public inquiry before a panel of three county councillors. They held an oral hearing in December 2000 and received a great deal of written material, oral evidence and both oral and written submissions. In June 2001, the Council notified the parties, in a detailed reasoned decision letter, that it had decided to register the land as a new town or village green. In December 2001, a Mr and Mrs Thompson bought a house at the south west corner of the registered land, having been told of the registration by the vendors and having researched the matter on the website of the Open Spaces Society (which is supporting this appeal). They also discovered that none of the Curtis familys land was designated for development in the draft local plan although the Curtis family were objecting to aspects of this. In August 2001, Mr Barry Curtis applied on behalf of the landowners for judicial review of the Councils decision. The Council objected that this was inappropriate as Parliament had provided the remedy of rectification in section 14 of the 1965 Act. Acting on legal advice, therefore, Mr Curtis discontinued the judicial review proceedings in December 2001, without prejudice to his right to apply under section 14. The Curtis family subsequently sold the land to Betterment Properties (Weymouth) Ltd for a price which was much less than the land would have been worth had it not been registered as a green but rather more than it was worth as a registered green. Agreement was reached with the various members of the Curtis family in stages over 2003 and 2004 and Betterment finally acquired title to the whole of the Curtis familys land in May 2005. In December 2005, Betterment began the present proceedings under section 14 for rectification of the register. Two preliminary issues were raised, one being the scope of the jurisdiction: was it a full rehearing or a review to be conducted on either appellate or judicial review principles? Lightman J determined that it was a full rehearing and this was confirmed by the Court of Appeal: [2008] EWCA Civ 22. The case therefore returned to the Chancery Division for a hearing, which was conducted by Morgan J over nine days in June 2010, partly in Weymouth and partly in London. By that time, Betterment accepted that most of the land had been used for lawful sports and pastimes for twenty years before the application made in 1997. The principal issues were whether the whole of the land had been used for that purpose for that period and whether the use had been as of right. Morgan J gave judgment allowing the application to rectify in November 2010: [2010] EWHC 3045 (Ch). The greater part of his judgment is devoted to the two substantive issues bearing on the first requirement of section 14(b): whether the entry on the register ought to have been made. He decided that it ought not: he found that the use of the land had been contentious and thus not as of right until some time in the 1980s, which he put at 1984. He went on to consider whether it would be just to rectify the register. In relation to Mr and Mrs Thompson he found that they bought the house on the basis that development to the north was unlikely, but without distinguishing between the registered green and the rest of the open land. If they had investigated the position further, they would have discovered that the landowners had reserved the right to apply to rectify the register. In any event, the landowners were not responsible for their state of mind. Among the other objections raised was the delay of 9 and a half years during which the land had been registered and the inhabitants had been enjoying its use. He did not see the mere passage of time as material, one way or the other, to the issue of the justice of rectifying the register (para 189). Balancing all proper points which could be made on behalf of the landowners and the inhabitants, he concluded that If rectification is ordered the result will be that the landowners will be free from burdens which should not have been placed upon them and the inhabitants of Wyke Regis will be denied, in the future, rights which they have enjoyed in the past, but which they should never have had (para 191). Mrs Taylor, who had replaced Mrs Horne as the representative of the Society for the Protection of Markham and Little Francis, appealed to the Court of Appeal, which dismissed her appeal: [2012] EWCA Civ 250. Once again the major part of the judgment is devoted to the as of right issue. However, Patten LJ, who gave the leading judgment, did comment that the justice issue had become the most significant aspect of both this and the Paddico appeals. In his view, although delay was a relevant factor, it will not be a barrier to rectification unless there is material before the court to show that other public or private decisions are likely to have been taken on the basis of the existing register which have operated to the significant prejudice of the respondents or other relevant interests (para 87). Sullivan LJ, with whom Carnwath LJ agreed (para 103), would have gone further. In his view, there is a strong public interest in upholding the register in the absence of a prompt challenge to its contents, so that there would be exceptional cases where the delay is so long that prejudice to good administration can properly be inferred in the absence of evidence of prejudice. He suggested that a decade would be capable of raising such an inference (para 95). Paddico: the facts In December 1996, application was made, on behalf of the Clayton Fields Action Group, for the registration of an area of some six and a half acres of grassland lying between Edgerton and Birkby in north west Huddersfield which had long been known as Clayton Fields. Most of the land was owned by Geo. H. Haigh and Co Ltd (the company). There were two extant planning permissions, dating back to the 1960s, for housing development on the land. The land had also been designated for housing in the Huddersfield Town map in 1972, again in the Huddersfield local plan in 1986, and in the draft Kirklees Unitary Development Plan in 1993. In 1997 an inspector reported that the land should remain allocated for housing, noting that a development brief including requirements for access, footpaths, open space and the protection of trees is to be prepared. This plan was eventually adopted by the Council in 1999. Meanwhile, the company had objected to the application to register the land as a green and on 14 April 1997 the Policy (General Purposes) (Executive) Sub Committee of Kirklees Metropolitan Council held an oral hearing. After a short adjournment the Chairman announced, without more, that the application was granted. The company began proceedings to rectify the register in May 1997 but these were delayed pending the decision of the House of Lords in the Sunningwell case. Following that decision, the company were advised that they were very likely to lose their action and so took no further steps. The action was automatically stayed under CPR Part 51, PD 19(1) in April 2000. In 2005, the company sold their land to Paddico (267) Ltd. As in the Betterment case, the price was much less than it would have been worth without it. Unlike the Betterment case, the contract included overage provisions, entitling the company to 30% of the uplift in market value in the event of planning permission being obtained for development of all or part of the land within 10 years of the transfer. In 2008 Paddico applied to lift the stay on the companys section 14 application and to be substituted as claimant. This was refused by the Deputy Master in 2009, permission to appeal was refused on paper in January 2010, and on renewal in March 2010. Meanwhile, Paddico had begun its own section 14 claim in January 2010. This was heard before Vos J over five days in May and June 2011. Vos J gave judgment allowing the application to rectify in June 2011: [2011] EWHC 1606, [2011] LGR 727. As with the Betterment case, the major part of the judgment is devoted to the substantive issue of whether the land ought to have been registered. This turned on the meaning of any locality in the definition in section 22(1). Vos J held that the inhabitants using the land for lawful sports and pastimes had to be predominantly from a single locality and that neither Edgerton nor Birkby qualified as a locality recognised by law, nor were the users predominantly from either of the suggested alternatives. As to the justice of rectifying the register after 14 years, he considered that the delay did weigh against rectification but was unlikely to be conclusive (para 118). The fact that registration was not justified in 1997 and if refused then would be very unlikely ever to be granted was a very strong, though not conclusive, factor. The delay was a significant factor, but little other prejudice had been demonstrated by the residents. The planning permission obtained required part of the land to be made available for recreation (para 119). Hence the balance came down fairly clearly in favour of rectification (para 120). Interestingly, he concluded with the hope that local residents would be allowed a reasonable area for recreation and in that way, perhaps, justice will ultimately be done (para 122). The appeal on behalf of the Action Group was heard by the same constitution of the Court of Appeal that heard the Betterment appeal and at the same time. But in this case, by a majority, the appeal was allowed: [2012] EWCA Civ 262, [2012] LGR 617. Once again, the greater part of the leading judgment, this time given by Sullivan LJ, was devoted to the locality issue. On this, the court was unanimous in upholding the judges decision that the amendment to the register ought not to have been made. But they differed on the justice issue. Sullivan LJ held that there was an analogy with judicial review of inaccurate entries in other registers, in particular the planning register, where section 31(6) of the Senior Courts Act 1981 gives the court power to refuse relief if delay is prejudicial to good administration. There was a strong public interest in resolving alleged errors in the register at the earliest opportunity. Although Parliament had not prescribed a time limit for making applications under section 14, it must have envisaged that persons adversely affected by an erroneous amendment of the register would take reasonably prompt action to secure rectification, and would not sleep on their rights. All other things being equal, the longer the delay in seeking rectification the less likely it is that it will be just to order rectification (para 37). In this case, he considered that all other things were equal, because neither side could claim prejudice: Paddico had taken a calculated risk (para 38). Over 12 years delay was so excessive as to make it not just to rectify (para 39). Carnwath LJ agreed. The owners rights were an important consideration. The rectification procedure fills the gap in a process of controlling the owners rights which would otherwise not comply with article 6 of the European Convention on Human Rights. Thus a precise analogy with judicial review was not appropriate (para 67). However, the balance had to include considerations of public administration. Justice in this context need not turn on proof of individual prejudice, but is wide enough to cover general prejudice to the public (including planning authorities) who are entitled to rely on the register to order their affairs, public and private. While it would not be appropriate for the court to lay down a specific time limit, he would regard a delay beyond the normal limitation period of six years as requiring very clear justification (para 68). Patten LJ disagreed. In his view, it was necessary to identify some significant or material prejudice attributable to the delay which makes it just to refuse to restore to Paddico its full legal rights as owner of this land (para 43). There would be an injustice to Paddico if rectification were refused (para 46), while there was no demonstrable prejudice in depriving the appellant of rights to which he was never entitled (para 44). Furthermore, the public interest in planning policies in relation to the land no longer being frustrated militated strongly in favour of rectification (para 45). The scope of this appeal The local inhabitants, in the person of Mrs Taylor on behalf of the Society for the Protection of Markham and Little Francis, appeal against the decision to allow rectification in the Betterment case. Paddico, supported by the company, which has been given permission to intervene in this Court, appeals against the refusal of rectification in their case. These appeals are not concerned with whether the courts below were correct in their judgments on the as of right and locality issues. They are solely concerned with the relevance of the lapse of time (as I prefer to call it) to whether or not it is just to rectify the register. The proper approach? What then is the proper approach in principle to the lapse of time? There are at least three possible analogies, none of which is precise: (1) with the principles applicable to public law claims; (2) with the principles applicable to private law claims where Parliament has provided a limitation period; and (3) with the principles applicable to private property law claims where Parliament has not provided a limitation period, as embodied in the equitable doctrine of laches. (1) Public law There is a public law aspect to such claims. This is a register kept by a public authority which is open to public inspection and upon which both public authorities and private persons may rely in making their decisions. The decision to make an entry may be challenged by way of judicial review as well as by an application to rectify. While no one is suggesting that the short time limit applicable to applications for judicial review should apply, all members of the Court of Appeal appear to have thought it appropriate to take into account the interests of good public administration. Section 31(6) of the Senior Courts Act 1981 provides that where the High Court considers that there has been undue delay in making an application for judicial review, it may refuse either to grant permission to make the application or the relief sought in it, if it considers that the granting of the relief sought would be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to good administration. This means that there is an interest in good administration which is independent of the interests of individuals. But it does, of course, beg the question of what is meant by a detriment to good administration. This criterion was recommended by the Law Commission in their Report on Remedies in Administrative Law (Law Com No 73, 1976) (Cmnd 6407). They pointed out that when an individual applies for judicial review, what will be in issue will be not only the vindication of his personal right but also the assertion of the rule of law in the public sphere. Hence they thought that the formula should recognise not only the interests of individuals but also the public interest in good administration (para 50). They did not, however, explain what they meant by this. On the one hand, there is the view taken by Lord Goff of Chieveley in Caswell v Dairy Produce Quota Tribunal for England and Wales [1990] 2 AC 738. He did not consider it wise to attempt to formulate a precise definition, because the contexts were so various, but in the context of the allocation of a finite quantity of milk quota between dairy farmers, the interest in good administration lies essentially in a regular flow of consistent decisions, made and published with reasonable dispatch; in citizens knowing where they stand, and how they can order their affairs in the light of the relevant decision. Allowing a late claim for judicial review of an erroneous decision could lead to attempts to reopen many other decisions, to the obvious prejudice to good administration (pp 749 750). A similar approach was taken, in the rather more analogous context of the grant of outline planning permission, in R v Newbury District Council, Ex p Chieveley Parish Council [1999] PLCR 51. Pill LJ observed that a planning permission is contained in a public document which potentially confers benefit on the land to which it relates. Important decisions may be taken by public bodies and private bodies and individuals upon the strength of it, both in relation to the land itself and in the neighbourhood. A chain of events may be set in motion. It is important to good administration that, once granted, a permission should not readily be invalidated. Hence, relief against an invalid grant of permission was refused on account of a three year delay in bringing the proceedings, notwithstanding the absence of convincing evidence that the applicants for planning permission have been prejudiced by the delay (pp 66 67). On the other hand, in R v Bassetlaw District Council, Ex p Oxby [1998] PCLR 283, 302, Hobhouse LJ stated that if it has been clearly established . that a planning consent was improperly and invalidly granted, then it should, in principle, be declared to be void. This was cited by Schiemann LJ in Corbett v Restormel Borough Council [2001] EWCA Civ 330, at para 24, who had earlier said this: However, as is well known, there clashes with this principle of legal certainty another principle which is also of great value the principle of legality which requires that administrators act in accordance with the law and within their powers. When they do things they are not empowered to do this principle points towards the striking down of their illegal actions. (para 16) Sedley LJ added this: Schiemann LJs reasoning shows once again how distracting and unhelpful [section 31(6) of the Senior Courts Act 1981] is. It selects one element time of the many which may affect the grant of relief and builds upon it some of the many other possible factors which can as the present case shows be relevant. It also includes, delphically, detriment to good administration. How, one wonders, is good administration ever assisted by upholding an unlawful decision? If there are reasons for not interfering with an unlawful decision, as there are here, they operate not in the interests of good administration but in defiance of it. (para 32) Nevertheless, Mr Charles George QC, on behalf of the inhabitants, has drawn our attention to other examples where the principle of certainty in upholding the contents of public registers of various sorts has prevailed over the principle of legality in ensuring the correctness of the decisions upon which the entries are based and hence the accuracy of those entries. Thus in Bahamas Hotel Maintenance & Allied Workers Union v Bahamas Hotel Catering & Allied Workers Union [2011] UKPC 4, the Privy Council upheld the trial judges refusal to grant judicial review of the unlawful registration of a trade union in part because of the delay by the rival union in challenging it. Lord Walker of Gestingthorpe observed that conclusive evidence provisions (there was one akin to section 10 of the 1965 Act here) are often included in legislation relating to official registers, because such registers cannot serve their purpose unless members of the public can safely rely on them (para 33). In Smith Kline & French Laboratories Ltd v Evans Medical Ltd [1989] 1 FSR 561, Aldous J refused an application to amend a patent (made in order to save the validity of the patent for the purpose of infringement proceedings) because of a delay of eight years in making the application. He held that where a patentee delays for an unreasonable period before seeking an amendment it will not be allowed unless he shows reasonable grounds for the delay (p 569). It was not enough to show that no one had been hurt by the delay (p 577). He had earlier cited the opinions in the House of Lords in Raleigh Cycle Co Ltd v Miller (H) & Co Ltd (1950) 67 RPC 226, where Lord Morton had placed particular emphasis on the fact that the wide claims had remained on the register of patents for a considerable period, so although bicycles were not being manufactured for a large part of it because of the second world war, it is impossible to say how many inventors and workers in this art may have been deterred from research and experiment by reason of the fact that the plaintiffs had marked out so wide a territory as their own (p 236). However, although the element of public confidence and possible reliance will be there irrespective of whether or not the applicant for relief knew of the illegality, Mr George accepts that it is only delay after the applicant knew or ought to have known of the illegality which should be taken into account. The above cases tend to support that proposition. Ironically, however, Mr George derives that proposition from the opinion of the Judicial Committee of the Privy Council in Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, which was a laches case. (2) Statutory limitation periods Although applications to rectify may be brought by anyone, the people most likely to apply are the owners of the registered land, whose own right to use that land is severely curtailed by the rights of the local inhabitants to use it for lawful sports and pastimes and by the Victorian legislation which prevents it being used for other purposes (see the Oxford City Council case). The view that this is principally a matter of vindicating private rights, rather than controlling the legality of the acts of public authorities, is reinforced by the European Convention on Human Rights. The rights conferred by registration, while they may not deprive the landowner of his property for the purposes of article 1 of the First Protocol to the Convention, undoubtedly control his use of it. This amounts to the determination of his civil rights and obligations within the meaning of article 6. The administrative process of registration does not fulfil the requirement in article 6 for a fair hearing by an impartial tribunal established by law. The section 14 process of rectification fills that gap. That is one reason why it has to be a full rehearing rather than a review of the registration authoritys decision. Most actions to vindicate private rights are subject to statutory limitation periods, typically, but not invariably, three, six or twelve years. Where an equitable claim is not expressly covered by any statutory [limitation] period but is closely analogous to a claim which is expressly covered, equity will act by analogy and apply the same period (Snells Equity, 32nd Edn (2010), para 5 018). Both Sullivan LJ and Carnwath LJ thought it appropriate to apply a similar approach, being prepared to infer prejudice to other interests after the lapse of time. Sullivan LJ talked of a delay of a decade or more, whereas Carnwath LJ talked of six years or more. There are, of course, many other periods which could have been chosen if this analogy were the appropriate one. Some might think that the most appropriate would be 12 years, the time limit for actions to recover land, after which title is extinguished (Limitation Act 1980, ss 15 and 17). There are many arbitrary features of the statutory limitation regime apart from the variety of periods prescribed. Except in cases of fraud or concealment, for example, the starting point is that knowledge of the facts giving rise to the cause of action is irrelevant; but that principle has been replaced in personal injury and some other cases with a date of knowledge principle (1980 Act, ss 11, 11A (as inserted by Schedule 1 to the Consumer Protection Act 1987), 12, and 14A (as inserted by section 1 of the Latent Damage Act 1986)). Another starting point is that there is no general discretion to disapply or extend these limitation periods; but again that principle has been departed from in defamation and personal injury cases (1980 Act, ss 32A (as substituted by section 5 of the Defamation Act 1996) and 33). Ms Crail, for Paddico, argues that Mr Georges concession that the duty to act promptly, for which he contends, does not arise unless the claimant has or ought to have knowledge is inconsistent with the approach of the majority in the Court of Appeal; they would be prepared to assume prejudice after a certain period of time; but if one allows for knowledge, such assumed prejudice loses the paramount importance which the majority attributed to it. (3) Laches Finally, therefore, there is the analogy of actions to vindicate private property rights, for which no limitation period has been prescribed by Parliament. Here the equitable doctrine of laches may provide the answer: inaccurately summed up in the Latin tag, vigilantibus, non dormientibus, jura subvenient (the law supports the watchful not the sleeping). Sullivan LJs reference to sleeping on his rights comes from the words of Lord Camden LC in Smith v Clay (1767) 3 Bro CC 639n, at 640n: A Court of Equity has always refused its aid to stale demands, where a party has slept upon his right and acquiesced for a great length of time. Nothing can call forth this Court into activity, but conscience, good faith, and reasonable diligence; where these are wanting, the Court is passive, and does nothing. According to Snells Equity (32nd Edn, para 5.016) mere delay, however lengthy, is not sufficient to bar a remedy (referencing Burroughs v Abbott [1922] 1 Ch 86 and Weld v Petrie [1929] 1 Ch 33). Mr George disputes this (but referencing Wright v Vanderplank (1856) 2 K & J 1, 8 De GM & G 133, where there was an express finding of acquiescence, and RB Policies at Lloyds v Butler [1950] 1 KB 76, which was a limitation case turning on the date when the cause of action accrued, so scarcely giving strong support for his position). This is not the place definitively to resolve that debate, as we are concerned with analogies rather than the direct application of the doctrine. Nevertheless, the general principle is that there must be something which makes it inequitable to enforce the claim. This might be reasonable and detrimental reliance by others on, or some sort of prejudice arising from, the fact that no remedy has been sought for a period of time; or it might be evidence of acquiescence by the landowner in the current state of affairs. In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, the judgment of the Board, given by Lord Selbourne LC (but wrongly attributed to Sir Barnes Peacock in the actual report), contains the following oft quoted passage: Now the doctrine of laches in Courts of Equity is not an arbitrary or technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. (pp 239 240) Lord Neuberger cited this passage in Fisher v Brooker [2009] UKHL 41, [2009] 1 WLR 1764, in support of his observation that Although I would not suggest that it is an immutable requirement, some sort of detrimental reliance is usually an essential ingredient of laches, in my opinion (para 64). Later in Lindsay Petroleum (p 241) Lord Selbourne said this: In order that the remedy should be lost by laches or delay, it is, if not universally at all events ordinarily . necessary that there should be sufficient knowledge of the facts constituting the title to relief. (p 241) It is for this reason that Mr George accepts that there must be knowledge of the facts before delay can constitute a bar to relief. Discussion Obviously, there is no precise analogy here, because there are elements of both public and private law involved. But it is necessary to have a starting point and it is always useful to start with the statute itself. First, it lays down no limitation period for section 14 applications. Second, in the rectification power contained in section 14, which is the one relevant to these proceedings, there is no bias either for or against rectification. The section merely requires that it be just. Third, it makes no reference to good administration, not surprisingly, as that concept was articulated later, in the Law Commissions Report. Furthermore, the principles of good administration seem to me to cut both ways. While there is a public interest in respecting the register, which is conclusive until rectified, there is also a public interest in the register being accurate and lawfully compiled. I share the view of Sedley LJ in Restormel that If there are reasons for not interfering with an unlawful decision, . they operate not in the interests of good administration but in defiance of it. Nor do I find the analogy with the other registers referred to compelling. Each register is compiled for different reasons and in a different context. To my mind, therefore, although the interests of the wider public are not irrelevant, the section is principally focussing on justice as between the applicant for rectification of a registration and the local inhabitants who are the beneficiaries of that registration. Where the applicant is the owner of the land, the starting point, as it seems to me, is that the landowners rights have been severely curtailed when they should not have been, and the inhabitants have acquired rights which they should not have had. It does not follow that the lapse of time is immaterial. None of the appellate judges thought that it was. Parliament has seen fit to deprive people of their right to bring proceedings to vindicate their rights after a certain period of time no matter how unjust this might seem to be (an illustration might be found in the facts of A v Hoare [2008] UKHL 6, [2008] AC 844, where the law as laid down in Stubbings v Webb [1993] AC 498 denied a remedy to the victim of a convicted rapist who had later won the lottery, until the House of Lords in Hoare departed from its previous decision in Stubbings). But Parliament has not seen fit to set a deadline for these applications, nor is there an obvious close analogy within the Limitation Acts. The better analogy would therefore appear to be with the equitable doctrine of laches, which generally requires (a) knowledge of the facts, and (b) acquiescence, or (c) detriment or prejudice. As to (a), this is unlikely to be a problem in most of these cases: the original landowner will have been notified of and had an opportunity of objecting to the proposed registration and a subsequent purchaser such as Betterment or Paddico will have had the opportunity of consulting the register before deciding to buy. But the point might arise in relation to other successors in title, such as donees or legatees, who have acquired the land in ignorance of the registration. However, if the landowner does know about the registration, it does not appear to me that the fact that a purchaser bought with knowledge of the registration and at a discounted price is likely to make much difference. His rights as landowner have still been severely curtailed and he sustains harm as a result. So too does the original landowner in the position of the company in the Paddico case. As Mr Carter pointed out on their behalf, the overage provisions in the contract of sale to Paddico meant that the company retained an interest in rectifying the register and from their point of view things were very definitely not equal, as Sullivan LJ suggested. As to (b), acquiescence may be especially relevant where an application for rectification is made by someone other than the landowner. Then the applicant probably has no private interest to vindicate and the fact that the landowner has chosen to take no action may be highly relevant to the justice of the case. Even here, however, the considerations might be different if the applicant were a public authority perhaps another local authority seeking to vindicate some public interest. It is a curiosity of the Paddico case that the land was registered as a green even though it had long been allocated for housing by the local planning authorities. The fact that the landowner was content for local inhabitants to enjoy rights of recreation which they should never have had might not be decisive if there were other such public interests in play. Whoever is the applicant, it would not in my view be appropriate to treat the landowners failure to object to the inhabitants use of the land after it had been registered as a green by putting up fences, notices, etc as acquiescence on his part. Once the land is registered, it is conclusive evidence of the inhabitants rights unless and until the register is rectified and he would not be entitled to prevent them. As to (c), detriment or prejudice, this, it seems to me, will usually be the crux of the matter. Because this is a public register and there are public as well as private interests involved I would not limit the potential prejudice caused by rectification to the prejudice to the local inhabitants who will no longer be entitled to use the land for lawful sports and pastimes. There are at least four categories of prejudice which might be relevant and no doubt more might be imagined: (i) Prejudice to the local inhabitants Given that this is a right which they should never have had, this element of prejudice may not be very weighty. Nevertheless, practices may have developed over the years which it would be detrimental to the inhabitants to lose, such as holding an annual fair or feast or celebrating the foiling of the gunpowder plot. Decisions may have been taken on the basis that the green would stay a green: for example, if the local cricket club had declined the opportunity of securing a cricket ground elsewhere in the village because they were entitled to play on the village green. (ii) Prejudice to other individuals There may be people who have made decisions which they would not otherwise have made on the basis that the land is a registered town or village green. People may have bought houses because of it or they may have refrained from selling houses because of it. It is worth bearing in mind, as Lord Sumption pointed out in the course of the hearing, that the right which is protected by registration is not the right to a view, but the right to use the land for lawful sports and pastimes. But many people are attracted to properties near a village green because of the recreational opportunities it offers and the community spirit which these engender anyone who grew up with a traditional village green can understand the focus it brings to village life which would not be there if the green were not there. (iii) Prejudice to public authorities and the public they serve The authorities too may have made decisions in reliance on the registration which they would not have made without it. For example, the local planning authority may have granted planning permission for residential development on other land because the green is not available for development. On the other hand, maintaining the registration of a village green which ought not to have been registered may be damaging to such interests, as where the land is allocated for much needed local housing. (iv) Prejudice to the fair hearing of the case The longer the lapse of time since the original registration, the more difficult it may be to have a fair trial of the issues relating to registration, perhaps in particular as to the length and nature of the use to which the land was put in the twenty years previously and to whether it was contentious or as of right. As this is a full hearing, evidence of those matters will be necessary, but the people who could give such evidence may have died or moved away or otherwise be unavailable. This is perhaps a species of prejudice to the local inhabitants, who may find it much more difficult many years later to adduce evidence of their use of the land than they would have done had the challenge been made earlier. There is a further point about prejudice. Mr Laurence on behalf of Betterment and Paddico objected in particular to the view of the majority in the Court of Appeal that after a certain lapse of time prejudice could be inferred without evidence. The correct view, as it seems to me, is that there must be some solid material from which such inferences can be drawn. Speculation or assumptions are not enough. But the longer the delay, the easier it will be to draw such inferences. In general I would agree with the approach of Patten LJ in the Betterment case, that there should be material before the court to show that other public or private decisions are likely to have been taken on the basis of the existing register which have operated to the significant prejudice of the respondents or other relevant interests. Application in the Betterment case I would not agree with the trial judge that the lapse of time is immaterial to the justice of the case. The Court of Appeal were correct to consider it a material factor. But the general approach of Patten LJ is closer to the principles discussed above than that of Sullivan and Carnwath LJJ. Even adopting their rather different approach, the majority did not consider that the lapse of time was such as to cause them to allow the appeal. Applying the principles set out above, I would agree with the Court of Appeal in the result. Specifically, the lapse of time between the registration and the Betterment application was from June 2001 to December 2005. During all of that time, the possibility of an application under section 14 was known to the registration authority and could presumably have been discovered by others had they asked. There is no evidence of prejudice and no material from which the likelihood of prejudice can be inferred, other than the position of Mr and Mrs Thompson. They contracted to buy their house in December 2001, only six months after the registration and long before there could be any suggestion that delay in applying for rectification would make it unjust to grant it. Application in the Paddico case The trial judge took the lapse of time into account in his consideration of the justice of the case but decided to order rectification nonetheless. The majority of the Court of Appeal disagreed. The approach of the trial judge and of Patten LJ is closer than theirs to the principles discussed above. The lapse of time between the registration and the Paddico application to rectify was from April 1997 to January 2010, much longer than in the Betterment case. But there had been an early application to rectify which was not pursued because of legal advice. During much of this time, the law was in a considerable state of flux, as the series of cases mentioned earlier made their way through the courts, sometimes reaching as far as the House of Lords. The same small group of lawyers were involved in most of these cases and were thoroughly aware of what was going on and how the arguments were shifting. There is no evidence at all of any specific prejudice to the local inhabitants, other than the loss of the right to use the land for recreation. On the other side of the coin, Sullivan LJ was in my view wrong to suggest that all other things were equal. Paddico would suffer injustice as a result of being wrongly deprived of the right to seek to develop the land. The company would suffer injustice in being deprived of the likelihood that they would benefit from the overage provisions in the sale contract. The public would suffer prejudice in the land not being available for the use to which the democratic planning procedures had decided that it should eventually be put. In my view the judge was entitled to reach the conclusion that he did and his decision should be restored. Conclusion I would therefore dismiss Mrs Taylors appeal on behalf of the Society in the Betterment case and allow the landowners appeal in the Paddico case. |
This appeal raises a short issue as to the requirements for valid service of a completion notice so as to bring a newly completed building within liability for non domestic rates. The statutory framework Liability for non domestic rates depends on a property being entered as a hereditament in the rating list. The completion notice procedure, under section 46A of and Schedule 4A to the Local Government Finance Act 1988, as inserted, (the Act) provides a mechanism whereby a new building, which has not yet been occupied, may be brought into the rating list. Subject to any appeal, a validly served completion notice has the effect that the building to which it relates is deemed to have been completed on the date specified in the notice. It is then shown in the rating list as a separate hereditament (or hereditaments), and is valued as if it were complete (section 46A(2)). Once the building is so shown in the rating list, its owner (or its occupier if it becomes occupied) becomes liable to an assessment for non domestic rates. The procedure is set out in Schedule 4A. Paragraph 1(1) of Schedule 4A provides that, if it comes to the notice of a billing authority that the work remaining to be done on a new building in its area can reasonably be expected to be completed within three months, it shall (unless the valuation officer directs otherwise) serve on the owner of the building a notice, known as a completion notice. Paragraph 1(2) contains a similar provision in respect of a new building that has been completed. The completion notice must (a) specify the building to which it relates and (b) state the day which the billing authority proposes as the completion day (para 2(1)). In the case of a building which has yet to be completed, the completion day proposed should be: [s]uch day, not later than three months from and including the day on which the notice is served, as the authority considers is a day by which the building can reasonably be expected to be completed. (para 2(2)) In the case of a building which appears to have been completed, it should be the day on which the notice is served (para 2(3)). A person on whom the completion notice is served may appeal to the Valuation Tribunal on the ground that the relevant building has not been or cannot reasonably be expected to be completed by the day stated in the notice (para 4(1)). Where an appeal is not withdrawn or dismissed, the completion day shall be such day as the tribunal shall determine (para 4(2)). An appeal must be brought within 28 days after the date on which the appellant received the completion notice (Non Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 (SI 2009/2268) regulation 19(1), made under paragraph 8(2)(a) of Schedule 11 to the Act). Paragraph 8, which deals with service, provides: Without prejudice to any other mode of service, a completion notice may be served on a person (a) by sending it in a prepaid registered letter, or by the recorded delivery service, addressed to that person at his usual or last known place of abode or, in a case where an address for service has been given by that person, at that address; in the case of an incorporated company or body, (b) by delivering it to the secretary or clerk of the company or body at their registered or principal office or sending it in a prepaid registered letter or by the recorded delivery service addressed to the secretary or clerk of the company or body at that office; or (c) where the name or address of that person cannot be ascertained after reasonable inquiry, by addressing it to him by the description of owner of the building (describing it) to which the notice relates and by affixing it to some conspicuous part of the building. General provision for the service of statutory notices by local authorities is also made by section 233 of the Local Government Act 1972. In particular it provides: (7) If the name or address of any owner, lessee or occupier of land to or on whom any document mentioned in subsection (1) above is to be given or served cannot after reasonable inquiry be ascertained, the document may be given or served either by leaving it in the hands of a person who is or appears to be resident or employed on the land or by leaving it conspicuously affixed to some building or object on the land. As to the date of service, under such statutory provisions, section 7 of the Interpretation Act 1978 provides: Where an Act authorises or requires any document to be served by post (whether the expression serve or the expression give or send or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. Factual background In January 2009 the respondent (UKI) began the redevelopment of a building at 1 Kingsway to provide 130,000 sq ft of office space. In February 2012 the appellant council informed UKIs agents that it intended to serve a completion notice specifying a completion date of 1 June 2012. It asked the agents to confirm the identity of the owner of the building, but the agents declined to do so without obtaining instructions from their client which were not forthcoming. At that time the building was managed by Eco FM (Eco) under a contract with UKI, but Eco had no authority to accept service of documents on its behalf. On 5 March 2012, the council delivered a completion notice by hand to the building, specifying 1 June 2012 as the completion date. The notice was addressed to the Owner, 1 Kingsway, London WC2B 6AN. It was given to a receptionist employed by Eco, who scanned and emailed a copy of the notice to UKI. It was received by UKI not later than 12 March 2012. On 29 March 2012 an appeal was lodged by UKIs agents against the completion notice, purportedly on behalf of Eco, on the grounds (inter alia) that the service of the notice was invalid. On 7 May 2013, the premises were brought into the list with a rateable value of 2,750,000 with effect (as subsequently corrected) from 1 June 2012. This was met by a proposal on behalf of UKI that the entry be deleted. The proposal was not accepted by the valuation officer and was transmitted to the Valuation Tribunal for determination on appeal. The appeals against both the completion notice and the inclusion of the premises in the list were consolidated and heard by the Valuation Tribunal (President Graham Zellick QC), which allowed the appeal. That decision was reversed by the Upper Tribunal (Deputy President Martin Rodger QC) [2015] RA 433 but re instated by the Court of Appeal (Gloster, Macur, and King LJJ) [2017] PTSR 1606. The Court of Appeal (para 37) recorded as common ground: i) that the state of the premises at the relevant time was such that, but for the deeming effect of a completion notice, the premises could not have been entered in the rating list; ii) that the name and address of UKI as owner of the building could have been ascertained by the council by reasonable inquiry, notwithstanding the fact that UKI had instructed the agents not to divulge its name. Accordingly, the council could not rely on the means of service on the premises permitted by paragraph 8(c) of Schedule 4A to the Act, or section 233(7) of the Local Government Act 1972. The issue for this court, as identified in the agreed statement of facts and issues, is whether the completion notice was validly served on the date that it was received by UKI, in circumstances where: i) it was not delivered directly to UKI by the council, but passed through the hands of the receptionist employed by Eco, who was not authorised for that purpose by either party; ii) it was received by UKI in electronic rather than paper form. Service the authorities It is common ground that, by virtue of the opening words of paragraph 8 of Schedule 4A to the Act, the three specific methods there set out do not exclude other methods of service available under the general law. There is no serious dispute as to what that entails. In Sun Alliance and London Assurance Co Ltd v Hayman [1975] 1 WLR 177, 185 CA (a case under the Landlord and Tenant Act 1954), Lord Salmon said: According to the ordinary and natural use of English words, giving a notice means causing a notice to be received. Therefore, any requirement in a statute or a contract for the giving of a notice can be complied with only by causing the notice to be actually received unless the context or some statutory or contractual provision otherwise provides (No distinction is drawn in the cases between serving and giving a notice: see Kinch v Bullard [1999] 1 WLR 423, 426G.) To similar effect in Tadema Holdings Ltd v Ferguson (1999) 32 HLR 866, 873, Peter Gibson LJ said (in a case relating to service of a notice under the Housing Act 1988): Serve is an ordinary English word connoting the delivery of a document to a particular person. Specific statutory provisions such as paragraph 8 are designed, not to exclude other methods, but rather to protect the server from the risk of non delivery. As was said by Slade LJ in Galinski v McHugh (1988) 57 P & CR 359 (in relation to a similar service provision in the Landlord and Tenant Act 1927 section 23(1)): This is a subsection appearing in an Act which contains a number of provisions requiring the giving of notice by one person to another and correspondingly entitling that other person to receive it. In our judgment, the object of its inclusion . is not to protect the person upon whom the right to receive the notice is conferred by other statutory provisions. On the contrary, section 23(1) is intended to assist the person who is obliged to serve the notice, by offering him choices of mode of service which will be deemed to be valid service, even if in the event the intended recipient does not in fact receive it. (p 365, original emphasis) Indirect service More controversial, and relevant in the present case, is whether it matters that the notice reaches the intended recipient, not directly or through an agent authorised for that purpose, but by the action of a third party. On this point we were referred to an observation (obiter) of Sir Robert Megarry V C in Townsends Carriers Ltd v Pfizer Ltd (1977) 33 P & CR 361. That concerned a break option in a lease exercisable by either party upon the giving of written notice to the other. The premises were used by U Ltd, an associated company of the defendant, and correspondence relating to rent demands and other matters had been between that company and WT Ltd, an associated company of the claimant. It was held that a notice given by U Ltd to WT Ltd was valid, on the basis of an assumed general agency arising from past conduct, even though neither company was expressly authorised for that purpose. The Vice Chancellor also noted but rejected an argument that the relevant clause required the tenant to give notice to the landlord, and that, although the landlord had ultimately received the notice, no notice had ever been given to the landlord as such. He said: I do not think that a requirement to give notice is one that excludes the indirect giving of notice. The question is whether the notice has been given, not whether it has been given directly. If the notice emanates from the giver and reaches the ultimate recipient, I do not think that it matters if it has passed through more hands than one in transit. (p 366) Electronic communication The other main issue in this appeal is whether it matters that the notice was received by UKI in electronic form. We were referred to no direct authority on service of a scanned copy of a notice by email. However, Mr Kokelaar for the council relied on two earlier authorities in which delivery of notices by fax was accepted as valid. In Hastie & Jenkerson v McMahon [1990] 1 WLR 1575 the Court of Appeal accepted that service of a list of documents by fax was valid service for the purposes of a consent order in civil proceedings under the Rules of the Supreme Court. In the leading judgment, Woolf LJ said: . are there any legal reasons why advantage should not be taken of the progress in technology which fax represents to enable documents to be served by fax, assuming that this is not contrary to any of the Rules of the Supreme Court? The purpose of serving a document is to ensure that its contents are available to the recipient and whether the document is served in the conventional way or by fax the result is exactly the same. [Counsel] on behalf of the defendant submits that what is transmitted by fax is not the document but an electronic message. However, this submission fails to distinguish between the method of transmission and the result of the transmission by fax. What is produced by the transmission of the message by fax, admittedly using the recipients machine and paper, is the document which the other party intended should be served. What is required is that a legible copy of the document should be in the possession of the party to be served. This fax achieves. I therefore conclude that service by fax can be good service subject to any requirement of the order requiring service of a particular document and any requirement of the Rules of the Supreme Court. (pp 1579 1580). I emphasise that if a document is served by a means for which neither the rule nor statute provides, there will only be good service if it be proved that the document, in a complete and legible state, has indeed been received by the intended recipient. I realise that transmission of documents by fax is a relatively recent development. If, in a particular case, what emerges from the recipients fax machine is not, or may not be, complete or is not wholly legible, a court will be justified in concluding that the document has not been properly served. (p 1585) Agreeing, Glidewell LJ added: The third member of the court Lloyd LJ, while not dissenting, expressed some misgivings. He would have preferred to wait for consideration of the question by the Supreme Court Procedure Committee. As he said, while it is easy enough for courts to give a benevolent construction to the rules to take account of some new contrivance, such as the telex machine or the fax, it is not so easy to see what the repercussions will be, and what other consequential amendments to the rules may be required (p 1586). The other authority to which we were referred on this point was PNC Telecom plc v Thomas [2003] BCC 202. Sir Andrew Morritt V C held that a letter sent by fax constituted a validly deposited notice to convene an extraordinary general meeting under section 368 of the Companies Act 1985. The Vice Chancellor noted that by that time the Electronic Communications Act 2000 (2000 Act) enabled specific modifications to be made to authorise communication by electronic means under existing statutes, including the Companies Act. Some such modifications had been made, but not in respect of section 368. Counsel before him had been unable to indicate the basis on which some of these provisions had been singled out for amendment but others not (para 14). In any event, he did not think that the 2000 Act could be regarded as designed to introduce fax as a permitted means of communication for that had been done on a case by case basis over the preceding 30 years or so (para 16). Among other authorities he referred to the words of Woolf LJ set out above. He also noted with agreement observations of Laddie J in Inland Revenue Comrs v Conbeer [1996] BCC 189, on the potential advantages of delivery by fax in terms of reliability and speed. He saw no reason why fax transmission should not give rise to a valid deposit under section 368, in circumstances where no one had been misled or disadvantaged, and the ultimate result is exactly the same as if it had been transmitted in person or by post (para 22). The principal dispute on this part of the case is whether these authorities can be relied on as extending to a copy sent by email, having regard in particular to the provisions made in that respect by the 2000 Act. Section 8 empowers Ministers to make regulations to modify primary and secondary legislation for the purpose of authorising or facilitating the use of electronic communications. Electronic communication is widely defined as including any form of communication transmitted while in an electronic form (section 15(1)). In respect of non domestic rates (and council tax) specific regulations have been made for the use of electronic billing in certain circumstances, and subject to particular restrictions: see the Council Tax and Non Domestic Rating (Electronic Communications) (England) Order 2003 (SI 2003/2604). Thus for example provision is made for the service of certain forms of notice to be given to a person by sending the notice by electronic communication to such address as may be notified by that person for that purpose (see article 4). No such modification has been made in respect of completion notices. The judgments below In the Valuation Tribunal (at para 38), the President thought that, even accepting the formulation by Peter Gibson LJ in the Tadema Holdings case (para 15 above), there had been no delivery of the actual notice to the owner. In his view intended recipients were entitled to receive the original of any formal notice, in the absence of an expression of willingness to accept electronic service. The Upper Tribunal took a different view. The Deputy President found it difficult to accept that: in a case where the vital information has successfully been imparted to the person who needs to receive it, and that person has acted on it by exercising the right of appeal, the need for discipline and regularity in the exercise of the statutory power should be sufficiently powerful considerations to require that the recipients liability be determined on the basis that the information had never been received. (para 46) Unlike the President he did not see that this approach offended any public interest consideration. Referring to the dicta in the Townsends Carriers case, he said: If the mode of service selected by the billing authority achieves its objective I find it very difficult to see why the public interest or the interests of justice to which the President referred should render service legally effective in some cases but ineffective in others. In my judgment a document which arrives in the hands of the intended recipient by an unorthodox route has still been served (para 47) In sending on the notice to UKI, the receptionist had been doing no more than one would expect of a responsible employee of a company engaged to manage the building (para 48). He dealt more shortly with the issue of electronic communication, saying simply that, there being no dispute that the electronic copy had been received, he could see no justification for distinguishing between notices in different forms (para 49). The Court of Appeals conclusion turned principally on what they understood to be the natural or normal usage of the statutory language. As Gloster LJ said; The relevant statutory requirements of section 46A of and paragraph 1 of Schedule 4A to the 1988 Act for present purposes are: (a) that the billing authority (b) shall serve the required completion notice (c) on the owner of the building. For the billing authority merely to leave the notice with a third party, not authorised to accept service of the notice on the owners behalf, or, indeed, to effect service on the authoritys behalf, in the hope, or with the intention, that the notice will somehow be brought to the attention of the owner, and where a copy of the notice or its contents are in fact subsequently communicated to the owner by the third party, does not, on any natural or normal usage of the words serve and on, constitute service on the owner by the authority. In other words, the concept of service on the owner by the authority in paragraph 1 of Schedule 4A to the 1988 Act cannot be construed as including effectively all methods of communication or transmission, which ultimately result in the information in the notice (or the notice itself) being brought to the attention of, or delivered to, the owner, in circumstances where the information in the document, or the document itself, has been communicated to the owner by a third party who is not authorised either to accept, or effect, service . (para 44) She also attached weight to the statutory context: it is a taxing statute which imposes rating liability on a property owner on an assumed basis. The timetable for a taxpayer to raise an appeal against the completion notice is strict and is based upon the date upon which it received the completion notice. In those circumstances there are obvious policy considerations which point to a need for certainty and precision as to the date of service (para 49) On the question of indirect service she did not think that the observations of Sir Robert Megarry V C could be treated as of general application: It is clear from subsequent cases that Megarry V Cs dictum has not been generally applied to justify an expansion of the concept of service to embrace all situations where ultimately the person on whom the relevant notice or document ought to be served has come to know of the contents of the notice, irrespective of whether he or his authorised agent have actually been served. Thus, for example, in Fagan v Knowsley Metropolitan Borough Council (1985) 50 P & CR 363 this court rejected the application of the dictum in circumstances where what was relevant was the mandatory statutory code for service under section 30 of the Compulsory Purchase Act 1965. The fact that the service provisions were mandatory in that case does not detract from UKIs submission that what has to be considered in each case is what are the necessary requirements for service under the relevant statutory scheme. Likewise, a number of cases have emphasised the well established principle that service on a solicitor who does not have authority to accept service of the particular notice on behalf of his client is not valid service on that party. Glen International Ltd v Triplerose Ltd [2007] L & TR 28; [2007] EWCA Civ 388 makes clear that the Townsends case can be distinguished as being a decision on the particular facts (see para 22) rather than laying down any generally applicable principle. In the Glen International Ltd, the Court of Appeal did not go on to consider whether the solicitors had passed a copy of the notice to their client. But it is implicit in that judgment that onward transmission would not have rendered ineffective service effective. (paras 51 52) On the issue of electronic communication, while inclining to a different view from that of the Upper Tribunal, she preferred to leave the matter undetermined in the absence of more detailed submissions on the statutory regime (para 54). The submissions in this court For the council, Mr Kokelaar adopts the reasoning of the Upper Tribunal, as supported by the authorities to which I have referred. In summary, he submits, the words serve and service in Schedule 4A should be given their ordinary meaning, that is delivery of a document to a particular person. Under general principles, a notice (under statute or contract) is regarded as having been served if it has been received by the intended recipient. In this case the notice was received by UKI and served its statutory purpose of communicating to UKI the completion date proposed by the council, and it was acted upon by UKI. As in Townsends Carriers the fact that it passed through the hands of the receptionist did not invalidate service. Alternatively, the receptionist must be taken as having been impliedly authorised to pass it on to UKI. In relation to service by email, the reasoning of the authorities on service by fax is indistinguishable. There is nothing in Schedule 4A, or in the 2000 Act, to exclude service of a completion notice by electronic means, where the ultimate result is exactly the same as if a hard copy had been transmitted in person or by post. For UKI Mr Kolinsky QC supports the reasoning of Gloster LJ in the Court of Appeal. In particular he adopts her three stage analysis of the relevant provision, arguing that the council failed at the first stage, that is the requirement for service on the owner by the billing authority. Whatever method is adopted, it must be the authority itself (acting through its officers) which effects the service. Service through a third party, which is neither the owners agent nor duly authorised to act on the authoritys behalf, is not service on the owner by the authority. Further, Mr Kolinsky submits that the involvement of the Eco receptionist broke the necessary chain of causation. Mr Kokelaars suggestion that the receptionist had implied authority to act for the council was misplaced, having regard to the detailed statutory scheme governing delegation of local authority functions. It would have been different if for example the council had used a process server under its contractual control to carry out personal service. Use of such a method might be authorised as incidental to the authoritys functions under section 111(1) of the Local Government Act 1972, without involving any unlawful delegation. He relies on statements by the Court of Appeal as to the permissible use of contractors or agents under that section, in Crdit Suisse v Allerdale Borough Council [1997] QB 306, 359G per Hobhouse LJ. Mr Kolinsky also repeats Gloster LJs emphasis on the need for certainty in a taxing statute. In that context he relies on paragraph 2(3) of Schedule 4A to the Act where (in relation to a completed building) the authority is required to specify the date of service as the date from which liability is to begin. There can be no such certainty if the council has no control over the process by which the notice reaches the recipient. On the issue of electronic communication, he points to the fact that ministerial intervention was considered necessary to authorise the use of such communication in some aspects of the non domestic rating scheme, while no such intervention was made in respect of completion notices. This carefully drawn scheme would be otiose if there existed some common law rule permitting the use of electronic service as a generality. Further the limitation of electronic service to cases where the ratepayer had assented by providing an address for electronic service would make no sense if the authority were able to serve without the ratepayers consent. Discussion The method of attempted service adopted by the council was far from ideal. As already noted, the purpose of specific provisions such as paragraph 8 is to provide reliable methods of service and to minimise the risk to the council of non delivery. Given that, as is now accepted, the name and address of the owner could have been discovered by reasonable inquiry, it is not clear why this was not done. We have had no satisfactory explanation for this failure, nor indeed for the failure to take corrective action when the objection to service was raised. Nothing in this judgment should be taken as detracting from the good sense of the Presidents observation (Valuation Tribunal, para 43): In practice, billing authorities would be well advised to secure the protection afforded by paragraph 8 and not serve outside those provisions unless confident that the circumstances are such that good service will be effected. However, the two legal issues on which the judges below disagreed are of some general importance and merit consideration by this court. Hence the grant of permission to appeal. Indirect service The difference between the Upper Tribunal and the Court of Appeal comes down to a narrow point. The Upper Tribunal thought that, since the notice issued by the council reached the hands of the intended recipient, it mattered not that the route was unorthodox. Gloster LJ thought that this approach failed to give effect to the concept of service on the owner by the authority (emphasis added). For my part I would accept that the means by which the notice arrives at its destination is not wholly immaterial. In itself the reference to the billing authority is simply to identify the body responsible for service; it says nothing about how that is to be done. The real issue, as I see it, adopting the words of Lord Salmon in the Sun Alliance case, is whether the authority caused the notice to be received by UKI. In other words there must be a sufficient causal connection between the authoritys actions and the receipt of the notice by the recipient. Mr Kolinsky appeared implicitly to accept that analysis, but he submitted that the chain of causation was broken by the interposition of a third party in the form of the Eco receptionist. He challenged Mr Kokelaars suggestion that the receptionist was given implied authority to serve the notice, at least in any formal sense. To that extent I would agree with him; but it is unnecessary and unrealistic in my view to introduce concepts of agency or statutory delegation into this simple sequence of events. As the Deputy President accepted, the Eco receptionist, on receiving from the council officer a hand delivered notice addressed to the Owner, did no more than would reasonably be expected of a responsible employee in that position: that is, pass on the notice to the person to whom it was addressed. It was the natural consequence of the councils actions. Mr Kolinsky objected that the receptionist was not under the control of the council, as would have been for example a process server acting under contract. However, causation does not necessarily depend on control. Mr Kokelaar countered with the example of a notice correctly addressed, but mistakenly delivered to a neighbouring address and then passed on by the occupant to the intended recipient. Like him I see no reason why that should not be treated as effective service under ordinary principles of causation, even though the friendly neighbour was not under the control of either party. This approach to indirect service is consistent with that of Sir Robert Megarry V C in the Townsends Carriers case. I would agree with Gloster LJ (see para 29 above) that his words cannot be read as intended to embrace all situations where ultimately the intended recipient has come to know of the contents of the notice. There needs to be actual receipt of the notice, and a sufficient causal link with the actions of the council. Of the cases to which she referred, Fagan v Knowsley Metropolitan Borough Council provides no assistance, because, as she acknowledged, it was concerned with a mandatory statutory code. More pertinent perhaps is her reference to cases relating to service of notice on solicitors. As she says, service of a notice on a solicitor who does not have his clients authority to accept service of the particular notice is not in itself valid service. She cited Glen International which concerned service of a notice by the landlord in relation to leasehold enfranchisement. It is true that, having found that the tenants solicitor on whom the notice was served had no authority to accept it, the court did not go on to inquire whether the notice was in fact passed on to the tenant. It is also true, as Gloster LJ noted, that Townsends Carriers case was referred to as a decision on the particular facts, but that seems to have been on the agency issue. There is no indication that the case was used to support an argument based on indirect service; nor indeed that there was any evidence that the solicitor had passed on the actual notice, nor any reasonable expectation that he would do so. That situation is readily distinguishable in my view from the purely mechanical role played by the receptionist in this case. A further argument against the Upper Tribunals approach was the potential uncertainty it leaves as to the date of service. As Mr Kolinsky points out, it may be important not only for both parties, but also for the valuation officer, to be able to identify the date of service with precision. Thus, in respect of a building which appears to have been completed, the date of service must be identified in the notice (paragraph 2(3)), and, subject to appeal, is treated as the completion day so triggering liability to rates. In respect of a building yet to be completed the proposed completion day must be not later than three months from and including the date of service (Schedule 4A, paragraph 2(2)). The difficulty with this argument, in my view, is that some uncertainty in this respect is inherent in the legislation, in which neither the methods of service, nor the dates of service in different circumstances, are exhaustively defined. The simple answer for the authority may be that, where the date of service is critical, it is able to choose a statutory method which eliminates or minimises the risk of the notice being rendered invalid by failure to specify the correct date of service. If it chooses a non statutory method it must bear that risk. The risk of prejudice to the owner is limited, since outside the statutory grounds service depends on actual receipt by the intended recipient, and the time for appeal is also related to receipt. Electronic communication In spite of the misgivings expressed by Lloyd LJ in the Hastie case, it does not appear that the reasoning of the majority has been questioned in any subsequent cases, before or since the enactment of the 2000 Act. Notably it was applied in the PNC Telecom case notwithstanding the recognition that modifications had been made under the 2000 Act to other parts of the Companies Act 1985. Although those cases were concerned specifically with fax transmission of a copy of the relevant notice, no good reason has been suggested for distinguishing that from transmission by email as in this case. Given that this was the state of the general law immediately preceding the enactment of the 2000 Act, Parliament must be taken to have legislated against that background. Mr Kolinsky would need to point to some provision of that Act which expressly or impliedly restricts the previous law, or overall inconsistency sufficient to overcome the general presumption that Parliament does not intend to change the common law (see Bennion on Statutory Interpretation sections 25.6, 25.8). In my view he was unable to do so. Nor did he refer to any authority to support such a submission. It is not enough that the new law may overlap in certain respects with the general law. The purpose of the 2000 Act, as stated in its long title, was to make provision to facilitate the use of electronic communications . There is nothing to indicate an intention to cut down the existing law. Against the background of the detailed scheme established by or under the 2000 Act, it may seem anomalous that the same result may be achieved in some cases by more informal means. However, the purpose of the Act and Orders made under it is to provide a clear and certain basis for the routine use of such methods by authorities. That purpose is not undermined by a conclusion that under general principles, and on the particular facts of this case, the notice was successfully served. Conclusion For these reasons, in respectful disagreement with the Court of Appeal, I would allow the appeal and restore the order of the Upper Tribunal. |
No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. So spoke Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341, 343, ushering in two centuries and more of case law about the extent and effect of this maxim. He stated that the reason was one of public policy: If, from the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, potior est conditio defendentis. Illegality has the potential to provide a defence to civil claims of all sorts, whether relating to contract, property, tort or unjust enrichment, and in a wide variety of circumstances. Take the law of contract. A contract may be prohibited by a statute; or it may be entered into for an illegal or immoral purpose, which may be that of one or both parties; or performance according to its terms may involve the commission of an offence; or it may be intended by one or both parties to be performed in a way which will involve the commission of an offence; or an unlawful act may be committed in the course of its performance. The application of the doctrine of illegality to each of these different situations has caused a good deal of uncertainty, complexity and sometimes inconsistency. Holman v Johnson involved a claim for the price of goods which the plaintiff sold to the defendant in Dunkirk, knowing that the defendants purpose was to smuggle the goods into England. The plaintiff was met with a defence of illegality. The defence failed. Lord Mansfield held that knowledge on the part of the plaintiff that the defendant intended to smuggle the goods did not affect the plaintiffs entitlement to recover the price of the goods, since he was not himself involved in the smuggling. By contrast, in Pearce v Brooks (1866) LR 1 Ex 213 a claim by a coachbuilder against a prostitute for the hire of what was described in the law report as an ornamental brougham was held to be unenforceable for illegality after the jury found that the defendant hired it for the purpose of prostitution and that the plaintiff knew that this was her purpose. It would seem that the difference between Holman v Johnson and Pearce v Brooks had to do with the type of goods supplied, because in both cases the plaintiff knew that the defendant was entering into the contract for an illegal or immoral purpose. In JM Allan (Merchandising) Ltd v Cloke [1963] 2 QB 340, 348, Lord Denning MR endeavoured to rationalise the authorities by saying that active participation debars, but knowledge by itself does not. However, the Law Commission commented in its discussion of the subject in its Consultation Paper on Illegal Transactions: the Effect of Illegality on Contracts and Trusts, LCCP 154 (1999) that the case law lacks clear guidance on what amounts to participation in this context. It is unclear to what extent the doctrine of illegality applies to a contract whose object includes something which is in some respect unlawful, or the performance of which will involve some form of illegality, but not in a way which is central to the contract. In St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267, 288, Devlin J said: If a contract has as its whole object the doing of the very act which the statute prohibits, it can be argued that you can hardly make sense of a statute which forbids an act and yet permits to be made a contract to do it; that is a clear implication. But unless you get a clear implication of that sort, I think that a court ought to be very slow to hold that a statute intends to interfere with the rights and remedies given by the ordinary law of contract. Caution in this respect is, I think, especially necessary in these times when so much of commercial life is governed by regulations of one sort or another, which may easily be broken without wicked intent. As to illegality in the manner of performance of a contract, Mance LJ observed in Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225, 246, that the conceptual basis on which a contract not illegal nor prohibited at the time of its formation may become unenforceable due to the manner of its performance is open to debate. In Anderson Ltd v Daniel [1924] 1 KB 138 a claim for the price of goods was held to be unenforceable because the seller had failed to give the buyer an invoice containing details which the seller was required to give him by statute. In the St John Shipping case Devlin J rejected the interpretation that the claim in Anderson Ltd v Daniel failed because in the course of performing a legal contract the plaintiff had done something illegal. The correct interpretation, he said, was that the way in which the contract was performed turned it into the sort of contract that was prohibited by the statute: [1957] 1 QB 267, 284. In the St John Shipping case the claim was for freight under a charter party. In the course of taking on bunkers the vessel was overloaded and the master thereby committed an offence, for which he was prosecuted and fined 1,200. The extra freight earned by the overloading was 2,295 and to that extent the ship owners stood to profit from their wrong. The cargo owners refused to pay that part of the freight. Devlin J rejected their defence. He held that since the goods had been delivered safely, the ship owners had proved all that they needed. He was not prepared to construe the statute as having the effect of making the contract prohibited. If it had been otherwise, the ship owners would not have been entitled to any freight and would therefore have suffered an additional penalty, much greater than that provided for by Parliament, for conduct which might have been unintentional. In Ashmore, Benson, Pease and Co Ltd v Dawson [1973] 1 WLR 828 the Court of Appeal adopted a different approach. Manufacturers of heavy engineering equipment entered into a contract of carriage with road hauliers. There was nothing illegal in the formation of the contract, but the hauliers overloaded the vehicles which were to transport the load, in breach of road traffic regulations, and one of the lorries toppled over during the journey as a result of the drivers negligence. The manufacturers transport manager was present when the goods were loaded and was aware of the overloading. A claim by the manufacturers for the cost of repair of the damaged load was rejected on grounds of illegality. The Court of Appeal did not perform the same analysis as had Devlin J in the St John Shipping case. They held simply that the manufacturers participated in the illegal performance of the contract and were therefore barred from suing on it. These and other cases led the Law Commission to describe the effect that unlawful performance has on the parties contractual rights as very unclear. (Consultative Report on the Illegality Defence, LCCP 189 (2009), para 3.27.) In this case the issue is whether Lord Mansfields maxim precludes a party to a contract tainted by illegality from recovering money paid under the contract from the other party under the law of unjust enrichment (to use the term now generally favoured by scholars for what used previously to be labelled restitution and, before that, quasi contract). On one side it is argued that the maxim applies as much to such a claim as to a claim in contract, and that the court must give no assistance to a party which has engaged in any form of illegality. On the other side it is argued that such an approach would not advance the public policy which underlies Lord Mansfields maxim, once the underlying policy is properly understood. Structure of this judgment With that introduction I turn to the facts of Mr Patels claim and how it was decided in the courts below: see paras 11 16. A central part of their judgments, and of Mr Mirzas argument, concerns the doctrine of reliance applied by the House of Lords in Tinsley v Milligan [1994] 1 AC 340: see paras 17 20. That decision led to the Law Commission conducting a comprehensive review of the law of illegality and making proposals for addressing what the Commission perceived to be its unsatisfactory features: see paras 21 49. Paras 33 39 concern European law and its potential impact on our domestic law. The approach adopted in Australia, Canada and the USA is considered at paras 50 66. Paras 67 81 address developments since the Law Commissions report, including three recent decisions of this court which laid bare a division of opinion about the framework for deciding issues of illegality. Paragraphs 82 94 contain a section entitled The law at a crossroads. This leads to the critical part of the judgment, which considers the way forward and ends in a summary and proposal for the disposal of this appeal: paras 95 121. The reader who is more interested in what the judgment has to say about the future than the past will no doubt wish to concentrate on the final section. Mr Patels claim The essential facts can be shortly told. Mr Patel transferred sums totalling 620,000 to Mr Mirza for the purpose of betting on the price of RBS shares, using advance insider information which Mr Mirza expected to obtain from RBS contacts regarding an anticipated government announcement which would affect the price of the shares. Mr Mirzas expectation of a government announcement proved to be mistaken, and so the intended betting did not take place, but Mr Mirza failed to repay the money to Mr Patel despite promises to do so. Mr Patel thereupon brought this claim for the recovery of the sums which he had paid. The claim was put on various bases including contract and unjust enrichment. A fuller account of the facts is given in the judgments of the courts below and in the judgment of Lord Neuberger. The agreement between Mr Patel and Mr Mirza amounted to a conspiracy to commit an offence of insider dealing under section 52 of the Criminal Justice Act 1993. In order to establish his claim to the return of his money, it was necessary for Mr Patel to explain the nature of the agreement. A defendants enrichment is prima facie unjust if the claimant has enriched the defendant on the basis of a consideration which fails. The consideration may have been a promised counter performance (whether under a valid contract or not), an event or a state of affairs, which failed to materialise. (See Professor Andrew Burrows A Restatement of the English Law of Unjust Enrichment, 2012, p 86, para 15). In Sharma v Simposh Ltd [2013] Ch 23, at para 24, the Court of Appeal cited with approval Professor Birks summary of the meaning of failure of consideration in his revised edition of An Introduction to the Law of Restitution (1989), p 223: Failure of the consideration for a payment means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself. For Mr Patel to show that there was a failure of consideration for his payment of moneys to Mr Mirza, he had to show what the consideration was, and that required him to establish the nature of their agreement. Applying the reliance principle stated in Tinsley v Milligan [1994] 1 AC 340, the judge held that Mr Patels claim to recover the sum paid was unenforceable because he had to rely on his own illegality to establish it, unless he could have brought himself within the exception of the doctrine known, misleadingly, as locus poenitentiae; and that he could not bring himself within that exception since he had not voluntarily withdrawn from the illegal scheme. In the Court of Appeal the majority agreed with the judge on the reliance issue, but disagreed with him on the application of the locus poenitentiae exception. They held that it was enough for the claim to succeed that the scheme had not been executed. Gloster LJ agreed with the majority that Mr Patels claim should succeed but she took a different approach to it. She began her thoughtful analysis with a cri de coeur (para 47): As any hapless law student attempting to grapple with the concept of illegality knows, it is almost impossible to ascertain or articulate principled rules from the authorities relating to the recovery of money or other assets paid or transferred under illegal contracts. In summary, she rejected the view that Tinsley v Milligan was to be taken as laying down a rule of universal application that the defence of ex turpi causa must apply in all circumstances where a claim involves reliance on the claimants own illegality. It was necessary in her view to consider whether the policy underlying the rule which made the contract illegal would be stultified by allowing the claim. In addressing that issue, relevant factors included the degree of connection between the wrongful conduct and the claim made, and the disproportionality of disallowing the claim to the unlawfulness of the conduct. She identified the mischief at which the offence of insider trading was aimed as market abuse by the exploitation of unpublished price sensitive information obtained from a privileged source. If no such activity occurred, Gloster LJ said that it was hard to see on what basis public policy should bar the return of money which had previously been intended to be used for that purpose. Mr Patel was not seeking to make a benefit from wrongdoing, and she did not consider that such an outcome would be just and proportionate. On the issue of reliance, Gloster LJ did not consider it necessary for Mr Patel to establish that the intended betting on RBS shares was to be done with the benefit of insider information; it would have been enough for him to establish that the funds had been paid for the purpose of a speculation on the price of the shares which never took place. If, however, she were wrong on that issue, she agreed with the other members of the court on the locus poenitentiae issue. The reliance principle and Tinsley v Milligan The facts of Tinsley v Milligan are well known. Miss Tinsley and Miss Milligan each contributed to the purchase of a home. It was vested in Miss Tinsleys sole name, but on the mutual understanding that they were joint beneficial owners. It was put in her sole name so as to assist Miss Milligan to make false benefit claims from the Department of Social Security (DSS), which she did over a number of years with Miss Tinsleys connivance. The money obtained from the DSS helped them to pay their bills, but it played only a small part in the acquisition of the equity in the house. Eventually Miss Milligan confessed to the DSS what she had done and made terms with it, but the parties fell out. Miss Tinsley gave Miss Milligan notice to quit and brought a claim against her for possession. Miss Milligan counterclaimed for a declaration that the property was held by Miss Tinsley on trust for the parties in equal shares. The Court of Appeal by a majority decided in favour of Miss Milligan by applying the test whether it would be an affront to the public conscience to grant the relief claimed by her. The House of Lords unanimously rejected the public conscience test, but by a three to two majority upheld the Court of Appeals decision. The leading speech was given by Lord Browne Wilkinson. His starting point was that title to property can pass under an unlawful transaction; but he held that the court would not assist an owner to recover the property if he had to rely on his own illegality to prove his title. The Court of Appeal had recognised that distinction in Bowmakers Ltd v Barnet Instruments Ltd [1945] KB 65 in a case concerning personal property, referred to in more detail at para 111 below, and Lord Browne Wilkinson held that the same applied to real property in which the claimant had a beneficial interest. Lord Browne Wilkinson held that it was enough for Miss Milligan to show that she had contributed to the purchase of the property and that there was a common understanding that the parties were joint owners. She did not have to explain why the property had been put into Miss Tinsleys sole name. If the relationship between them had been that of daughter and mother, and each had contributed to the purchase of a property in the daughters name, the result would have been different, because there would then have been a presumption of advancement in the daughters favour. The mother would in those circumstances have had to rely on the illegal nature of the transaction to rebut the presumption, and her claim would therefore have been defeated by the doctrine of illegality. Lord Browne Wilkinson acknowledged the procedural nature of this approach at [1994] 1 AC 340, 374: The effect of illegality is not substantive but procedural. The question therefore is, In what circumstances will equity refuse to enforce equitable rights which undoubtedly exist. Lord Goff, in the minority, held at p 356 that if A puts property in the name of B intending to conceal As interest for a fraudulent or illegal purpose, neither law nor equity will allow A to recover the property, and equity will not assist him in asserting an equitable interest in it. It made no difference whether As case could be advanced without reference to the underlying purpose. He recognised, at p 363, the resulting hardship and said that he did not disguise his unhappiness at the result, but he did not regard it as appropriate for the courts to introduce a discretion. He considered, at p 364, that reform should be instituted only by the legislature, after a full inquiry by the Law Commission, which would embrace not only the advantages and disadvantages of the present system, but also the likely advantages and disadvantages of a discretionary system. He added that he would be more than happy if a new system could be evolved which was both satisfactory in its effect and capable of avoiding the kind of result which in his judgment flowed from the established rules in cases such as Tinsley v Milligan. Tinsley v Milligan has been the subject of much criticism in this and other jurisdictions, for its reasoning rather than its result, but this is the first time in this jurisdiction that its reasoning has been directly called into question. Two decades have since passed since the decision and it is right to trace the developments which have occurred in that period. Law Commission After the decision in Tinsley v Milligan the Law Commission included the illegality defence in its Sixth Programme of Law Reform (1995) (Law Com 234). It undertook a full inquiry of the kind which Lord Goff envisaged. It published its first consultation paper, Illegal Transactions: The Effect of Illegality on Contracts and Trusts (LCCP 154), in 1999. The responses, and developments in the case law, led the Commission to re consider the problems and its proposals for reform. In 2009 it issued a further public consultation paper, The Illegality Defence: A Consultative Report (LCCP 189). In 2010 it issued its final confirmatory report, The Illegality Defence (Law Com 320). In relation to trust law, it proposed statutory reform and it produced a draft bill. In relation to the law of contract and unjust enrichment, the Commission considered that there were serious problems but that they were capable of being, and could best be, tackled by the process of judicial development. In 2012 the government announced that it did not intend to take forward the Commissions recommendation for statutory reform of the law relating to trusts, because it did not consider reform of this area of the law to be a pressing priority for the government. From its study of the case law and academic writing, the Commission identified the principal policy rationales for the illegality doctrine as 1) furthering the purpose of the rule infringed by the claimants behaviour, 2) consistency, 3) prevention of profit from the claimants wrongdoing, 4) deterrence and 5) maintaining the integrity of the legal system. It observed that these rationales were not mutually exclusive but overlapped to a greater or lesser degree. A sixth possible rationale, punishment, was controversial. The large majority of consultees considered that punishment was a matter for the criminal courts (to which one might add regulators) and should not be invoked in determining parties civil disputes. (LCCP 189, paras 2.5 2.31.) The conclusion that the illegality defence presented serious problems represented the overwhelming view of academic commentators and consultees generally. The Commission analysed the problems under four heads complexity, uncertainty, arbitrariness and lack of transparency. It did not suggest that the problems resulted generally in unsatisfactory outcomes, but it was critical of the way in which they were reached. It said that, on the whole, the case law illustrated the judges threading a path through the various rules and exceptions in order to reach outcomes which for the most part would be regarded as fair between the parties involved, although there were instances of results which the Commission considered to be unduly harsh, for example in unlawful employment cases. Generally, the courts managed to avoid unnecessarily harsh decisions either by creating exceptions to the general rules or by straining the application of the relevant rules on the particular facts so as to meet the justice of the case. Seldom was there an open discussion in the judgments of the considerations which led the court to its decision. (LCCP 189, paras 3.50 3.60.) The Commission considered that Tinsley v Milligan, and cases following it, exemplified the problems of arbitrariness, uncertainty and potential for injustice. The rule applied in that case was arbitrary in that the question whether the illegality affected the recognition or enforcement of the trust depended not on the merits of the parties, nor the policies underlying the illegality defence, but on a procedural issue. Moreover the effect of applying the reliance principle in cases involving the presumption of advancement gave that presumption an overriding importance which it was never intended to have. It led to uncertainty because there was much confusion over what exactly amounted to reliance, particularly when the claimant was seeking to establish an equitable interest under a constructive trust. It had the potential to force the court into unjust decisions because, by focusing on procedural matters, the reliance principle precluded the court from paying attention to the policies that justified the existence of the defence, or taking into account such matters as the seriousness of the illegality and the value of the interest at stake. (Law Com 320, paras 2.13 2.15.) The Commission examined the law in other jurisdictions, European law and European human rights law. In its first consultation paper in 1999 the Commissions proposed recommendation was to introduce statutory reform on the lines of the New Zealand model. The New Zealand Illegal Contracts Act 1970, section 7, provides that the court may grant to any party to an illegal contract such relief by way of restitution, compensation, variation of the contract, validation of the contract in whole or part or for any particular purpose, or otherwise howsoever as the court in its discretion thinks just. In its 2009 consultative report the Commission noted that the operation of this provision had been widely heralded as a success; that it had not created the deluge of litigation that was feared by some commentators; and that this model of reform, with slight variations, had been recommended by the law reform bodies of several other Commonwealth jurisdictions (LCCP 189, para 3.81). Nevertheless, in its 2009 consultative report and in its final report the Commission did not recommend statutory change (except in relation to trusts) for a combination of reasons. Although the proposal for statutory reform in the 1999 consultation paper had been supported by a majority of consultees, a minority had made critical comments which persuaded the Commission that judicial reform was a better way forward, and the Commission found difficulties in drafting a satisfactory statutory model. Most importantly, developments in the case law and the critical responses of consultees led the Commission to conclude that it was open to the courts to develop the law in ways that would render it considerably clearer, more certain and less arbitrary. Among domestic authorities, the Commission referred to the decisions of the House of Lords in Bakewell Management Ltd v Brandwood [2004] 2 AC 519 and Gray v Thames Trains Ltd [2009] AC 1339. Bakewell bought an area of land registered as a common. Owners of neighbouring properties had for years driven across the land to reach the public highway. Bakewell brought an action to prevent them from continuing to do so. The defendants claimed to have acquired rights of way by prescription, but by driving across the land without the owners consent they had committed offences under the Law of Property Act 1925. So to establish their property rights the defendants had to rely on conduct which was criminal. This, Bakewell submitted, they were not entitled to do. Its argument was rejected. The House of Lords held that public policy did not prevent the defendants from acquiring an easement where the landowner could have made a grant which would have removed the criminality of the user. Lord Walker, with whom Lord Bingham and Lady Hale agreed, said at para 60: I do not see this as reintroducing the public conscience test which this House disapproved in Tinsley v Milligan [1994] 1 AC 340. It is merely a recognition that the maxim ex turpi causa must be applied as an instrument of public policy, and not in circumstances where it does not serve any public interest: see for instance National Coal Board v England [1954] AC 403, 419. Gray v Thames Trains Ltd was a case in tort. Mr Gray developed post traumatic stress disorder through being involved in a major railway accident, which caused him to suffer depression and a substantial personality change. He was previously of unblemished character but two years after the accident, and while under medical treatment, he pursued and stabbed to death a man who had stepped in front of his car. His plea of guilty to manslaughter on the ground of diminished responsibility was accepted and he was ordered to be detained in a mental hospital. He sued the train operator for negligence and liability was admitted. His claim for damages included compensation for his loss of liberty, damage to reputation and loss of earnings during his detention. The House of Lords held that public policy precluded him from recovering damages under those heads. The leading opinion was given by Lord Hoffmann, with whose reasoning Lord Phillips (subject to certain additional observations) and Lord Scott agreed. Lord Hoffmann observed, at paras 30 32, that the maxim ex turpi causa expresses not so much a principle but a policy based on a group of reasons, which vary in different situations. The courts had therefore evolved varying rules to deal with different situations. Because questions of fairness and policy were different in different cases and led to different rules, one could not simply extrapolate rules applicable to one situation and apply them to another. It had to be assumed that the sentence was what the criminal court regarded as appropriate to reflect Mr Grays personal responsibility for the crime he had committed. It was therefore right to apply the rule that he could not recover damages for the consequences of the sentence, reflecting an underlying policy based on the inconsistency of requiring someone to be compensated for a sentence imposed because of his personal responsibility for a criminal act. It was also to right to apply a wider rule that you cannot recover damage which is the consequence of your own criminal act, reflecting the idea that it is offensive to public notions of the fair distribution of resources that a claimant should be compensated (usually out of public funds) for the consequences of his own criminal conduct. Lord Phillips said, at para 15, that he would reserve judgment as to whether the ex turpi causa maxim should apply if it were clear from the judges sentencing remarks that the claimants offending behaviour played no part in the decision to impose a hospital order, or, where the claimants criminal act demonstrated a need to detain him both for his own treatment and for the protection of the public, if the judge made it clear that he did not believe that the claimant should bear significant personal responsibility for his crime. Lord Brown agreed with Lord Phillips reservations. Lord Rodger said, at paras 78 83, that the civil court must assume that the order made by the criminal court was appropriate to reflect Mr Grays personal responsibility for the crime he had committed. The right approach on the facts of the case was that the court must cleave to the same policy as the criminal court. However, he considered that the approach might well be different if the offence of which he had been convicted was trivial but revealed that he was suffering from a mental disorder, due to the defendants fault, which made a hospital order appropriate. The Law Commission drew from the various judgments a readiness on the part of the judges to examine the policy reasons which justified the application of the illegality defence and to explain why those policies applied to the facts of the case. The Commission also considered the question how far illegal conduct may deprive claimants of rights under European Union law (LCCP 189, paras 3.82 3.89). Some contractual rights are now derived from EC directives. For example, the right to equal pay granted by the Equal Pay Directive (directive 75/117/EEC) is implied as a term into the employment contract. In other cases, such as the Sale of Consumer Goods Directive (directive 99/44/EC), EU law provides remedies that depend on the existence of a contract. The issue may therefore arise whether a national illegality doctrine which prevents a party from enforcing a contract is compatible with the EU law from which the contractual right arose. In the 1990s various breweries let pubs to tenants on terms containing beer ties. These were found to be unenforceable because they breached article 81 (previously article 85) of the European Community Treaty. The issue then arose whether the fact that the tenant had been party to an illegal contract precluded him from claiming damages from the brewery. In Gibbs Mew plc v Gemmell [1999] 1 EGLR 43, 49 the Court of Appeal held that this was so, because English law does not allow a party to an illegal agreement to claim damages from the other party for loss caused to him by being a party to the illegal agreement (per Peter Gibson LJ). In Courage Ltd v Crehan (Case C 453/99) [2002] QB 507, the Court of Appeal referred the question to the European Court of Justice, which took a different view. Advocate General Mischo expressed the view, at paras 38 43, that although the individuals protected by article 81 were primarily third parties (consumers and competitors), a rule which automatically excluded a party to the agreement from the protection of article 81 was too formalistic and does not take account of the particular facts of individual cases; and that a party which was too small to resist the economic pressure imposed on it by the more powerful undertaking had more in common with a third party than with the author of the agreement. (The potential parallel with the relationship in some cases between an employer and an employee is obvious.) The court agreed with the Advocate General. It held that where a contract was liable to restrict or distort competition, community law did not preclude a rule of national law from barring a contracting party from relying on his own illegal actions, if it was established that that party bore significant responsibility for the distortion of competition. In that context the matters to be taken into account by the national court included the respective bargaining power and the conduct of the parties to the agreement in the economic and legal context in which they found themselves. It was for the national court to ascertain whether the party who claimed to have suffered loss through concluding such a contract was in a markedly weaker position than the other party, such as seriously to compromise or even eliminate his freedom to negotiate the terms of the contract. An absolute bar to an action being brought by a party to a contract which violated the competition rules would not advance the full effectiveness of the prohibition contained in the Treaty, but rather the reverse. The effect of the courts decision was not to treat article 81 as intended for the protection of parties who infringed it, as a class, but to treat it as a matter for the national court to determine whether on the facts of a particular case a party should be regarded as sinned against rather than sinning, and therefore entitled to damages for the consequences of the offending provision of the agreement. The potential impact of European law was referred to, obiter, by Mance LJ in Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225. The claimant was dismissed from her employment as a chef when her employer became aware that she was pregnant. She brought a claim in the industrial tribunal for compensation under the Sex Discrimination Act 1975. The Act pre dated the Equal Treatment Directive (76/207/EEC) but gave effect to its provisions. Mrs Hall succeeded on liability, but it emerged during the remedies hearing that her employer was defrauding the Inland Revenue by falsely pretending that her net salary of 250 per week was her gross salary. She was aware of the fraud, because she was given pay slips which showed her gross pay as 250, deductions of 63.35 and net pay of 186.65. She knew that this was untrue, but when she raised the matter with her employer she was told that this was the way in which they did business. The tribunal held that the contract was tainted by illegality and that she had no right to compensation under the Act. Its decision was upheld by the appeal tribunal but reversed by the Court of Appeal, which held that her acquiescence in the employers conduct was not causally linked with her sex discrimination claim and that public policy did not preclude her from enforcing her statutory claim. Mance LJ observed additionally that the Act should as far as possible be read as providing the same scope of protection as the Directive. Mrs Halls position fell within the wording and purpose of the Directive despite the tribunals finding of her knowledge of the fraud on the Inland Revenue. That case did not involve the direct enforcement of a contractual obligation, but in cases where European Union rights depend on the existence of a contract (for example, in the consumer context), the Law Commission doubted whether the Court of Justice would be content with a system of domestic illegality rules which were formalistic and did not allow room for a proportionate balancing exercise to be carried out on the basis of clear principles of public policy (LCCP 189, para 3.89). Where the terms or performance of a contract involve breach of a legislative provision, it is rare (as the Commission noted) for the statute to state expressly what are to be the consequences in terms of its enforceability. (For an example of an express statutory unenforceability provision, see section 127(3) of the Consumer Credit Act 1974, which arose for consideration in Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816.) It is to be noted that in the present case, as Gloster LJ pointed out, section 63(2) of the Criminal Justice Act 1993 stipulated that No contract shall be void or unenforceable by reason only of section 52, presumably because of a concern that if a contract which involved insider dealing contrary to section 52 were void, there could be undesirable consequences for parties down the line. The question whether a statute has the implied effect of nullifying any contract which infringes it requires a purposive construction of the statute, as illustrated by the decision of the Court of Appeal in Hughes v Asset Managers plc [1995] 3 All ER 669 which the Commission commended. If a contract involving prohibited conduct is not void as a matter of statutory construction, the Commission recommended that in deciding whether a claim arising from it should be disallowed by reason of illegality, the court should have regard to the policies that underlie the doctrine. It stressed that it was not advocating a general discretion, but a principled evaluation recognising (as Lord Walker put it in the Bakewell case, at para 60) that the maxim ex turpi causa must be applied as an instrument of public policy and not in circumstances where it would not serve the public interest. The Commission identified a number of potentially relevant factors: most importantly, whether allowing the claim would undermine the purpose of the rule which made the relevant conduct unlawful, and, linked to that question, the causal connection between the illegality and the claim (including how central the illegality was to the contract), the gravity of the conduct of the respective parties and the proportionality of denying the claim. (LCCP 189, para 3.142) The Commission recommended a broadly similar approach to the maxim ex turpi causa in cases of unjust enrichment, tort and enforcement of property rights. The Commission considered that it was within the power of the courts to develop the law in that direction and that there were signs of willingness to do so. The underlying principles were already to be found in the case law and courts were in practice influenced by them in reaching their decisions, in some cases more openly than in others. In relation to the application of the illegality defence to claims of unjust enrichment, the Commission carried out a detailed review in its 1999 consultation paper (LCCP 154, paras 2.32 2.56) and a further review in its 2009 consultative report (LCCP 189, paras 4.1 4.62). An unjust enrichment claim may simply be to unwind the transaction by repayment of moneys paid and restoration of the parties to their original position, or it may take the form of a claim for recompense for benefits provided by one party to the other (a quantum meruit claim). The Commission observed that one might have expected to find that illegality has little role to play as a defence to a claim for unjust enrichment, since the claimant is not seeking to execute the contract. However, after a more liberal start, the courts adopted a much tougher stance, applying the ex turpi causa maxim to such claims unless the claimant could bring himself within certain recognised exceptions. These were a) duress, b) possibly ignorance of a fact or law that rendered the contract illegal, c) possibly membership of a vulnerable class protected by statute and d) locus poenitentiae. The locus poenitentiae exception has given rise to difficult and conflicting case law, which was meticulously analysed in the judgments of the courts below in the present case with different conclusions. I do not propose to repeat their analysis because I do not consider it necessary to do so. The topic has only acquired importance because of the strictness of the basic rule which the courts have applied. Not every case, however, has received such strict treatment. In Mohamed v Alaga & Co [2000] 1 WLR 1815 the Court of Appeal took a more flexible approach. The plaintiff, a Somali translator and interpreter, sued the defendant solicitors for breach of a contract by which he was to introduce Somali refugees to the firm, and assist in the preparation and presentation of their asylum claims, in consideration for a half share of the legal aid fees received by the firm. Alternatively, he claimed payment for his professional services as a translator and interpreter on a quantum meruit. His claim was struck out on the ground that the alleged fee sharing contract contravened rules which had statutory force under the Solicitors Act 1974 and that he was therefore precluded by the doctrine of illegality from claiming payment for services provided under the contract. The Court of Appeal restored the claim for payment on a quantum meruit. Lord Bingham CJ (with whom the other members of the court agreed) differentiated between the claims for breach of contract and quantum meruit. As to the former, he held that the purpose of the prohibition in the statutory rules was the protection of the public, and that it would defeat the purpose of the prohibition if a non solicitor party to the agreement could invoke the courts aid to enforce the agreement. As to the quantum meruit claim, Lord Bingham acknowledged that on one view of the case the plaintiff was seeking to recover part of the consideration payable under an unenforceable contract. But he preferred to view it as a claim for a reasonable reward for professional services rendered. He considered it relevant (obviously to the question of the public interest in permitting or disallowing the claim) that the parties were not equal in blameworthiness. The firm could be assumed to know the rules and the likelihood was that it had acted in knowing disregard of them. By contrast, Lord Bingham had no difficulty in accepting that the plaintiff was unaware of any reason why the firm should not make the agreement, which was a common type of agreement in other commercial fields. Mr Matthew Collings QC for Mr Mirza submitted in this case that Mohamed v Alaga & Co was a one off case and either represents an exception, peculiar to its particular facts, to the general rule that a party is not entitled to payment for services rendered under an illegal contract or was wrongly decided. The Commission considered that the policies which underlie the illegality defence are less likely to come into play where parties are attempting to undo, rather than carry out, an illegal contract. As in the case of contractual enforcement, it recommended that a decision on disallowing a particular restitutionary claim for illegality should be based openly on the policies underlying the defence, taking into account the same sort of factors (such as the relative conduct of the parties and the proportionality of denying the claim). I have said that the Commission examined the law of other jurisdictions. Before considering developments in domestic law since the Commissions final report, it is convenient at this stage to refer to the law in Australia, Canada and the USA. Australia In Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, the High Court of Australia considered essentially the same issues as in Tinsley v Milligan, which it declined to follow. As the widow of a mariner who had served in World War 1, Mrs Nelson was eligible under the Defence Service Homes Act 1918 to buy a house with the benefit of a subsidy from the Commonwealth of Australia, provided that she did not own or have a financial benefit in another house. She provided the money to buy a house in Bent Street, Sydney, but the transfer was taken in the names of her son and daughter. Their common intention was that Mrs Nelson should be the beneficial owner of the house. The reason for putting the Bent Street property in the names of her children was to enable her to buy another property with the benefit of a subsidy under the Act. This she did. One year later the Bent Street property was sold. By this time Mrs Nelson and her daughter had fallen out, and a dispute arose as to who was entitled to the sale proceeds. Mrs Nelson and her son brought proceedings against the daughter for a declaration that the proceeds were held by the son and daughter in trust for their mother. The daughter opposed the claim and sought a declaration that she had a beneficial interest. Under Tinsley v Milligan the daughter would have succeeded, because the illegal purpose of the parties in arranging for the property to be transferred into the names of the children would have prevented Mrs Nelson from rebutting the presumption of advancement in their favour. The High Court unanimously rejected that approach. The majority (Deane, McHugh and Gummow JJ) held that the court should use its equitable jurisdiction to grant the declaration sought by Mrs Nelson, with the proviso that it should be subject to terms designed to ensure that the benefit wrongly obtained on the purchase of the second property should be repaid to the Commonwealth. The minority (Dawson and Toohey JJ) would have made the declaration without any such proviso, since the Commonwealth was not a party to the proceedings and should in their view be left to decide what action, if any, it wished to take. Toohey J said at pp 595 597: Once we are in the realm of public policy we are in a rather shadowy world. It is perhaps the more shadowy here because Mrs Nelson is not asking the court to enforce a contract but rather to give effect to the resulting trust which would ordinarily arise once the presumption of advancement has been rebutted. To allow the result in such a situation to be determined by the procedural aspects of a claim for relief is at odds with the broad considerations necessarily involved in questions of public policy. Although the public policy in discouraging unlawful acts and refusing them judicial approval is important, it is not the only relevant policy consideration. There is also the consideration of preventing injustice and the enrichment of one party at the expense of the other (St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267, 288 289, per Devlin J). McHugh J, at p 609, described as unsatisfactory a doctrine of illegality that depended upon the state of the pleadings. He said at p 611: The doctrine of illegality expounded in Holman was formulated in a society that was vastly different from that which exists today. It was a society that was much less regulated. With the rapid expansion of regulation, it is undeniable that the legal environment in which the doctrine of illegality operates has changed. The underlying policy of Holman is still valid today the courts must not condone or assist a breach of statute, nor must they help to frustrate the operation of a statute However, the Holman rule, stated in the bald dictum: No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act is too extreme and inflexible to represent sound legal policy in the late twentieth century even when account is taken of the recognised exceptions to this dictum. McHugh J went on to suggest that except in a case where a statute made rights arising out of a particular type of transaction unenforceable in all circumstances, a court should not refuse to enforce legal or equitable rights on the ground of illegality if to do so would be disproportionate to the seriousness of the conduct or if it would not further the purpose of the statute. He said at 612 613: It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality. McHugh Js approach was cited with approval by a majority of the High Court in Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215. Noting the criminal sanctions which were available under the Act (imprisonment for up to two years) and the ability of the Commonwealth to recover any payments wrongly obtained by Mrs Nelson, the court did not consider that it should impose a further sanction by refusing to enforce her equitable rights, particularly when such a refusal would result in a penalty out of all proportion to the seriousness of her conduct (pp 570 571 per Deane and Gummow JJ, 590 591 per Toohey J and 616 617 per McHugh J). Canada In Hall v Hebert [1993] 2 SCR 159 the owner of a car allowed a passenger to drive it in the knowledge that he had drunk a large amount of beer during the course of the evening. The car overturned and the driver suffered head injuries. The Supreme Court held that the drivers claim against the owner in negligence was not barred by illegality, but that there should be a reduction in damages for contributory negligence. The judgment of the majority was given by McLachlin J. She held that the courts should be allowed to bar recovery in tort on the ground of the plaintiffs illegal or immoral conduct only in very limited circumstances. The basis of the power lay in the duty of the courts to preserve the integrity of the legal system and it was exercisable only where that concern was in issue. It was in issue where a damage award in a civil suit would allow a person to profit from illegal or wrongful conduct, or would permit an evasion or rebate of a penalty prescribed by the criminal law. In such instances the law refused to give by its right hand what it took away by its left hand. McLachlin J emphasised the importance of defining what was meant by profit when speaking of the plaintiff profiting from his or her own wrong. It meant profit in the narrow sense of a direct pecuniary award for an act of wrongdoing. Compensation for something other than wrongdoing, such as for personal injury, would not amount to profit in that sense. Compensation for the plaintiffs injuries arose not from the illegal character of his conduct, but from the damage caused to him by the negligent act of the owner in letting him drive. It represented only the value of, or substitute for, the injuries he had suffered by the fault of another. He would get nothing for being engaged in illegal conduct. McLachlin J accepted that there might be cases where a claim should be barred from tort recovery which did not fall within the category of profit, in order to prevent stultification of the criminal law or the evasion of a criminal penalty, but the underlying principle was that the use of the power to deny recovery on the ground of illegality was justified only where the claim would introduce inconsistency into the fabric of the law. In Still v Minister of National Revenue (1997) 154 DLR (4th) 229 an American citizen lawfully entered Canada and applied for permanent residence status. Pending consideration of her application, acting in good faith, she accepted employment but did so without obtaining a work permit as required by the Immigration Act 1985. She was subsequently laid off and submitted a claim for benefits under the Unemployment Insurance Act 1985. Her claim was rejected on the ground that the employment on which she relied in order to found her claim was prohibited under the Immigration Act. She appealed successfully to the Federal Court of Appeal. The judgment of the court was given by Robertson JA. The court accepted that her employment without a work permit was expressly prohibited by the Immigration Act. It acknowledged that under what it described as the classical model of the illegality doctrine, the fact that the applicant acted in good faith was irrelevant; her employment under an illegal contract could not constitute insurable employment for the purposes of the Unemployment Insurance Act. However, it said at para 24 that in recognition of the rigidity and oft times unfair application of the classical illegality doctrine, the courts had developed several ways in which a party may be relieved of the consequences of illegality where appropriate. The difficulty with those exceptions arose from the legal manoeuvring that must take place to arrive at what is considered a just result. The court examined, at paras 25 36, a line of authorities of the Ontario courts which showed the courts turning from the classical model towards a modern approach. It expressed the view, at para 42, that the classical model had lost its persuasive force, and was now honoured more in the breach than in its observance through the proliferation of so called judicial exceptions to the rule. The new approach involved an examination of the purpose underlying the relevant prohibition, and its rationale was explained by McLachlin J in Hall v Hebert. After citing McLachlin Js judgment in Hall v Hebert, the court said at para 49: As the doctrine of illegality rests on the understanding that it would be contrary to public policy to allow a person to maintain an action on a contract prohibited by statute, then it is only appropriate to identify those policy considerations which outweigh the applicants prima facie right to unemployment insurance benefits. While on the one hand we have to consider the policy behind the legislation being violated, the Immigration Act, we must also consider the policy behind the legislation which gives rise to the benefits that have been denied, the Unemployment Insurance Act. The court proceeded to consider the objectives underlying each of the two Acts. As to the policy consideration that a person should not benefit from his or her own wrong, the court regarded it as a critically significant fact that she had not deliberately broken the law but acted in good faith, and it noted that during her employment both the applicant and her employer had contributed to the unemployment insurance fund. Taking account of the objectives underlying each Act and the facts of the case, it concluded that denial of the application was not required in order to preserve the integrity of the legal system and would be disproportionate to the breach involved in failing to have obtained a work permit. The American Law Institutes Restatement (2nd) of Contracts (1981) states at para 178(1): A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement in such terms. Nizamuddowlah v Bengal Cabaret Inc (1977) 399 NYS 2d 854 provides a practical example in the case of a devious and oppressive employer. The central defendant (the effective owner of the company named as first defendant) met the plaintiff in Bangladesh and offered to employ him at the defendants restaurant in New York City. The plaintiff was to work for an initial period of three months without payment, after which he was to be paid a waiters salary. The plaintiff accepted the offer. The defendant arranged for the plaintiffs travel and entry to the USA on a visitors visa, and he also promised to obtain a resident visa or green card for him. The plaintiff worked for the defendant for 20 months, but he received no payment despite several demands. He also made repeated inquiries about his green card, but the defendant persistently stalled him. The plaintiff eventually managed to obtain a green card through his own efforts and sued the defendant to recover wages under the Minimum Wage Act. The defendant sought the dismissal of the action on the ground that the contract was illegal. By working in the USA before he obtained a green card the plaintiff violated the immigration laws, and the judge was not prepared to accept his plea of ignorance, since he was warned in his application form for a visitors visa that gainful employment would constitute a breach of his visa conditions. The judge concluded that he had willingly fallen in with the defendants proposal because of his strong desire to emigrate to the USA. The judge identified the public harm liable to result from the type of conduct exposed by the case: employment of aliens such as the plaintiff in times of high unemployment deprived citizens and legally admitted aliens of jobs; their employment on substandard terms could depress wages and working conditions; and it could diminish the effectiveness of labour unions. However, the judge found that the defendant was the main perpetrator, intent on evading and taking advantage of the immigration laws. He said that knowing about the immigration laws, and aware that a party to an illegal contract could not ask a court to help him to carry out his illegal objective, the defendant ran his enterprise without fairly compensating his employees. The judge concluded that the equitable course was that the plaintiff should be paid on the basis of unjust enrichment, and he calculated the amount of the award by reference to the statutory minimum wage. The New York Supreme Court, Appellate Division, upheld the judgment at (1979) 415 NYS 2d 685. Observing that the Minimum Wage Act contained no indication of a legislative intent to protect only American workers, the court said: Even illegal aliens have the right to pursue civil suits in our courts, and the practice of hiring such aliens, using their services and disclaiming any obligation to pay wages because the contract is illegal is to be condemned. The law provides penalties for aliens who obtain employment in breach of their visa obligations, but deprivation of compensation for labor is not warranted by any public policy consideration involving the immigration statutes. Developments since the report of the Law Commission The Court of Appeal supported and followed the approach of the Law Commission in Les Laboratoires Servier v Apotex Inc [2012] EWCA Civ 593, [2013] Bus LR 80 and ParkingEye Ltd v Somerfield Stores Ltd [2013] QB 840. In the latter case ParkingEye contracted to provide a system of automated monitoring of car parking at Somerfields supermarkets. The system recorded vehicle registration numbers and customers would be charged for staying beyond a set period. The contract was to be for an initial term of 15 months and ParkingEyes remuneration was to come from the charges levied over that period. Overstayers were to be sent letters of demand in a standard form agreed between the parties in advance of the conclusion of the contract. If the first demand did not result in payment, it was to be followed by a series of further demands in stronger terms. The third pro forma letter was deceptive because it falsely represented that ParkingEye had the authority and intention to issue proceedings against the customer if payment was not made within a stipulated period. Six months into the contract Somerfield repudiated it for reasons unconnected with the letters of demand. By that time the monitoring system had been installed at 17 of its stores. ParkingEyes claim for damages was met with a defence which included a plea of illegality based on the intended use of deception in the performance of the contract. The trial judge rejected the defence and awarded ParkingEye damages of 350,000 for loss of profits caused by Somerfields repudiatory breach. The Court of Appeal upheld his decision. The legally objectionable letter was only a small part of the intended performance of the contract and was not essential to it. The judge had found that ParkingEye did not appreciate that the letter would be legally objectionable when the parties agreed on its form, and that, if someone had pointed the matter out, the letter would have been changed. When its objectionable nature occurred to Somerfield, the proper and reasonable course would have been for Somerfield to raise the matter with ParkingEye and continue to honour the contract, so long as ParkingEye made the necessary alteration and performed the contract in a lawful manner, as it would have done. The court held that denial of ParkingEyes claim was not justified by the policies underlying the doctrine of illegality and would have led to a disproportionate result. In that case I said at paras 52 53: Rather than having over complex rules which are indiscriminate in theory but less so in practice, it is better and more honest that the court should look openly at the underlying policy factors and reach a balanced judgment in each case for reasons articulated by it. 53. This is not to suggest that a list of policy factors should become a complete substitute for the rules about illegality in the law of contract which the courts have developed, but rather that those rules are to be developed and applied with the degree of flexibility necessary to give proper effect to the underlying policy factors. On the relevance of ParkingEyes state of mind, I referred at para 66 to Waugh v Morris (1873) LR 8 QB 202. The case arose from a charter party under which a cargo of hay was to be shipped from Trouville to London. On arrival in London the master learned that a few months before the conclusion of the contract an order had been published under the Contagious Diseases (Animals) Act 1869 making it illegal to land hay brought from France. The master refrained from landing the cargo and, after some delay, the charterer transhipped and exported it. Meanwhile the contractual laydays had expired and the owner claimed for detention. The charterer resisted the claim on the ground that the contract was void for illegality, because its purpose was the delivery of the consignment to London, which was prohibited by law. The defence was rejected. Giving the judgment of the court, Blackburn J said that all that the owner had bargained for was that on the ships arrival in London the freight should be paid and the cargo unloaded. He contemplated that it would be landed and thought that this would be legal; but if he had thought of the possibility of the landing being prohibited, he would probably and rightly have expected that the charterer would not violate the law. Blackburn J said at 208: We quite agree, that, where a contract is to do a thing which cannot be performed without a violation of the law it is void, whether the parties knew the law or not. But we think, that in order to avoid a contract which can be legally performed, on the ground that there was an intention to perform it in an illegal manner, it is necessary to show that there was the wicked intention to break the law; and, if this be so, the knowledge of what the law is becomes of great importance. Since the decisions of the Court of Appeal in Les Laboratoires Servier v Apotex Inc and the ParkingEye case, there have been three decisions by the Supreme Court involving the doctrine of illegality. The first was Hounga v Allen [2014] 1 WLR 2889, a case with features similar to Nizamuddowlah v Bengal Cabaret Inc. Miss Hounga was a 14 year old Nigerian. Mr and Mrs Allen offered to employ her as a home help in the UK in return for schooling and 50 per month. With their help she entered the UK on false identity documents and obtained a six months visitors visa. The plan was masterminded by Mrs Allens brother who lived in Lagos. He drafted an affidavit for Miss Hounga to swear, giving her surname as that of Mrs Allens mother and a false date of birth. The affidavit led to the issue of a passport in that name. Mrs Allens family then arranged for Miss Hounga to be taken to the British High Commission in Lagos, where she produced a document purporting to be an invitation from Mrs Allens mother pretending to invite her granddaughter to visit her in the United Kingdom. The High Commission was duped into issuing her with entry clearance. Mrs Allens brother then bought a ticket for Miss Hounga to travel to England. On arrival at Heathrow Miss Hounga confirmed to an immigration officer that the purpose of her visit was to stay with her grandmother. Subsequently a psychologist reported that Miss Hounga, who was illiterate, had low cognitive functioning, a learning disability and a developmental age much lower than her chronological age. Nevertheless she knew that she had entered the UK on false pretences, that it was illegal for her to remain beyond six months and that it was illegal for her to take employment in the UK. After her arrival Miss Hounga lived at the Allens home, looking after their children and doing housework. She was not enrolled in a school or paid any wages. She was told by Mrs Allen that if she were found by the police she would be sent to prison. This caused her extreme concern. Mrs Allen also subjected her to serious physical abuse. After 18 months an incident occurred in which Mrs Allen beat Miss Hounga, threw her out of the house and poured water over her. Miss Hounga slept that night in the Allens garden in wet clothes. Next day they refused to let her back in, and she made her way to a supermarket car park, where she was found and taken to the social services department of the local authority. Miss Hounga brought claims against the Allens in the employment tribunal for unfair dismissal, breach of contract and unpaid wages. They were dismissed on the ground that her contract of employment was unlawful. She appealed unsuccessfully to the appeal tribunal and she did not seek to appeal further. Neither the Court of Appeal nor the Supreme Court therefore had occasion to consider whether she was entitled to be paid for the services which she rendered on a quantum meruit (by analogy with cases such as Mohamed v Alaga & Co and Nizamuddowlah v Bengal Cabaret Inc et al). Miss Hounga also claimed to have been the victim of the statutory tort of unlawful discrimination under the Race Relations Act 1976, section 4(2)(c), in relation to her dismissal. The tribunal found that she had been dismissed because of her vulnerability consequent upon her immigration status. She was therefore the victim of unlawful discrimination and she was awarded compensation for her resulting injury to feelings. The tribunals order was set aside by the Court of Appeal, which held that the claim was tainted by the illegal nature of her employment and that for the court to uphold it would be to condone the illegality, but it was restored by the Supreme Court. The leading judgment was given by Lord Wilson, with whom Lady Hale and Lord Kerr agreed. Lord Wilson did not consider that the solution of the case lay either in asking whether Miss Allen needed to rely on an illegal contract or in asking whether there was an inextricable link between the illegality to which she was a party and her claim. At the heart of the judgment Lord Wilson set out his approach in para 42: The defence of illegality rests on the foundation of public policy. The principle of public policy is this said Lord Mansfield by way of preface to his classic exposition of the defence in Holman v Johnson (1775) 1 Cowp 341, 343. Rules which rest on the foundation of public policy, not being rules which belong to the fixed or customary law, are capable, on proper occasion, of expansion or modification: Maxim Nordenfelt Guns and Ammunition Co v Nordenfelt [1893] 1 Ch 630, 661 (Bowen LJ). So it is necessary, first, to ask What is the aspect of public policy which founds the defence? and, second, to ask But is there another aspect of public policy to which the application of the defence would run counter? On the first question, drawing on the judgment of McLachlin J in Hall v Hebert, Lord Wilson addressed the policy consideration of preserving the integrity of the legal system and not allowing persons to profit from their illegal conduct. He concluded that an award of compensation for damage to Miss Houngas feelings was not a form of profit from her employment; it did not permit evasion of a penalty prescribed by the criminal law; and it did not compromise the integrity of the legal system. Conversely, he said that application of the defence could encourage those in the situation of Mrs Allen to believe that they could discriminate against people like Miss Hounga with impunity and could thereby compromise the integrity of the legal system. On the second question, Lord Wilson said that the Court of Appeals decision ran strikingly counter to the public policy against forms of people trafficking and in favour of the protection of its victims. Weighing the policy considerations, he concluded that insofar as any public policy existed in favour of applying the illegality defence, it should give way to the public policy to which its application would be an affront. Hounga v Allen was a case in tort, but Lord Wilsons approach to the illegality defence was applied by the Court of Appeal in R (Best) v Chief Land Registrar [2016] QB 23, where the issue was whether a claim to be registered under the Land Registration Act 2002 (LRA) as the proprietor of a residential building by adverse possession was barred by illegality. The circumstances were that part of the relevant period of possession involved the commission of trespass which constituted a criminal offence under section 144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPOA). Sales LJ (with whom McCombe LJ agreed) expressed the view, at para 51, that the best guidance on the relevant analytical framework was to be found in Lord Wilsons judgment (from which he quoted para 42 and the passage which followed it). Applying that guidance, he examined the public policy considerations underlying the provisions of the LRA governing acquisition of title to land and the public policy considerations underlying section 144 of LASPOA. He concluded that the mischief at which section 144 was aimed was far removed from the intended operation of the law of adverse possession and that public policy did not preclude the claim for registration. After Hounga v Allen came the decision of the Supreme Court in Les Laboratoires Servier v Apotex Inc [2015] AC 430. The issue of illegality arose in the context of a claim to enforce a cross undertaking in damages given as a condition of an interlocutory injunction in proceedings which ultimately failed. The claim was therefore akin to a claim in contract. The facts were somewhat complicated but do not matter for present purposes. The court held unanimously that the Court of Appeal had reached the right result, but the majority of this court expressed the view, at para 21, that the Court of Appeals decision could not possibly be justified by the considerations put forward by that court, which had in broad terms followed the approach commended by the Law Commission. I expressed a different view, at para 62, observing that the Court of Appeal had adopted a similar approach to that taken by this court in Hounga v Allen. After Les Laboratoires Servier v Apotex Inc came Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1. There was a sharp division of opinion about the proper approach to the defence illegality between, on the one hand, a strictly rule based approach and, on the other hand, a more flexible approach by which the court would look at the policies underlying the doctrine and decide whether they militated in favour of the defence, taking into account a range of potentially relevant factors. The majority did not consider it necessary to resolve the difference in that case, since it did not affect the result, but Lord Neuberger said at para 15 that it needed to be addressed as soon as appropriately possible. The law at a crossroads In his Restatement of the English Law of Contract (Oxford University Press, 2016), pp 221 222, Professor Andrew Burrows explained the difficulty of attempting to state the law in relation to illegality: Leaving aside the law on what one can loosely label statutory illegality [cases where a statute makes a contract or a contract term unenforceable by either or one party] the law on the effect of illegality in contract (which one may loosely refer to as the common law of illegality) is in a state of flux Traditionally, two Latin maxims have often been referred to without greatly illuminating the legal position: ex turpi causa non oritur actio (no action arises from a disgraceful cause) and in pari delicto potior est conditio defendentis (where both parties are equally in the wrong the position of the defendant is the stronger). As previously understood, illegality in the law of contract as developed from those Latin maxims was governed by a series of rules which tended to distinguish, for example, between illegality in formation and illegality in performance. Unfortunately, commentators and courts have found it very difficult to state those rules with confidence and precision. Hence the textbook treatments not only differ from each other but are characterised by long winded attempts to explain the law. Sharp propositions when offered by the courts or the books have to be qualified by reference to cases or hypothetical examples that do not fit those rules; and convincing justifications of those rules have proved elusive. More recently, therefore, and in line with a similar trend in respect of illegality as a defence in tort, some courts have favoured greater flexibility culminating in a range of factors approach aimed at achieving a proportionate response to contractual illegality in preference to the traditional rule based approach. Since the law was at a crossroads, Professor Burrows set out alternative possible formulations of a rule based approach and a range of factors approach. One possible version of a rule based approach, at p 224, which Tinsley v Milligan and Les Laboratoires Servier v Apotex Inc could be interpreted as supporting, would be a single master rule based on reliance: If the formation, purpose or performance of a contract involves conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade), a party cannot enforce the contract if it has to rely on that conduct to establish its claim. An alternative rule based formulation, at p 225, saw the reliance rule as only one of a number of rules and essentially confined to the creation of property rights. On this approach a formulation of the rules might be: Rule 1. A contract which has as its purpose, or is intended to be performed in a manner that involves, conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade) is unenforceable (a) by either party if both parties knew of that purpose or intention; or (b) by one party if only that party knew of that purpose or intention. Rule 2. If rule 1 is inapplicable because it is only the performance of a contract that involves conduct that is illegal or contrary to public policy, the contract is unenforceable by the party who performed in that objectionable way but is enforceable by the other party unless that party knew of, and participated in, that objectionable performance. Rule 3. Proprietary rights created by a contract that involves conduct that is illegal or contrary to public policy will not be recognised unless the claimant can establish the proprietary rights without reliance on that conduct. Professor Burrows identified six criticisms of those rules and, more generally, of a rule based approach to illegality. First, the difficulty with the Tinsley v Milligan reliance rule, whether as a master rule or as a rule restricted to cases involving the assertion of proprietary rights, was that it could produce different results according to procedural technicality which had nothing to do with the underlying policies. The decision of the Court of Appeal in Collier v Collier [2002] EWCA 1095; [2002] BPIR 1057 provides a good illustration. A father granted a lease of property to his daughter to hold on trust for him in order to deceive creditors. His claim to beneficial title was rejected on the ground of illegality, because it was held that he needed to rely on the illegal purpose in order to rebut the presumption of illegality which arose in favour of the daughter. Mance LJ considered at paras 105 106 what appeared to be the distinction introduced by Tinsley v Milligan between a beneficial interest which could be established by some objectively provable and apparently neutral fact and a beneficial interest arising only from an agreement made for an unlawful purpose. He described the effect as little more than cosmetic where the court was perfectly well aware of the close involvement of both parties in the illegality. Tempted as he was to adopt a severely limited view of the meaning of reliance (encouraged by the judgment of Dawson J in Nelson v Nelson), he rightly did not consider that it was open to the Court of Appeal on the authorities to do so. He expressed strong sympathy with the criticisms of the law expressed by the Law Commission, and he concluded at para 113 that he had no liking for the result which the court was compelled to reach. Second, the difficulties with rule 1 were illustrated by the ParkingEye case. The illegality in that case went to the contract as formed, because from the outset it was intended to send out to customers a form of letter of demand which contained some deliberate inaccuracies. The rule as stated did not permit differentiation between minor and serious illegality or between peripheral and central illegality. To have deprived ParkingEye of what would otherwise have been a contractual entitlement to damages of 350,000 would have been disproportionate. Moreover, as Sir Robin Jacob pointed out in that case, at paras 33 34, there was something odd about a rule which differentiated according to whether the intention was formed before or after the contract was made. Third, as with the criticism of rule 1, the reference in rule 2 to performance that involved illegal conduct drew no distinction between serious criminality and relatively minor breach of a statutory regulation. Fourth, although a purported advantage of firm rules is greater certainty, the cases do not always fit the rules because courts have often sought ways around them when they do not like the consequence. The flexible approach would not only produce more acceptable results, but would in practice be no less certain than the rule based approach. Fifth, although Lord Mansfield made it clear in Holman v Johnson that the illegality defence operates as a rule of public policy and is not designed to achieve justice between the parties, that does not mean that any result, however arbitrary, is acceptable. The law should strive for the most desirable policy outcome, and it may be that it is best achieved by taking into account a range of factors. Sixth, although it may be argued that if there are deficiencies in the traditional rules, the way forward is to refine the rules to remove the deficiencies by appropriate exceptions, that task is one which has never been satisfactorily accomplished. The reason is that there are so many variables, for example, in seriousness of the illegality, the knowledge and intentions of the parties, the centrality of the illegality, the effect of denying the defence and the sanctions which the law already imposes. To reach the best result in terms of policy, the judges need to have the flexibility to consider and weigh a range of factors in the light of the facts of the particular case before them. suggested, at pp 229 230, that a possible formulation would read as follows: If the formation, purpose or performance of a contract involves conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade), the contract is unenforceable by one or either party if to deny enforcement would be an appropriate response to that conduct, taking into account where relevant If a range of factors approach were preferred, Professor Burrows (a) how seriously illegal or contrary to public policy the conduct was; (b) whether the party seeking enforcement knew of, or intended, the conduct; (c) how central to the contract or its performance the conduct was; (d) how serious a sanction the denial of enforcement is for the party seeking enforcement; (e) whether denying enforcement will further the purpose of the rule which the conduct has infringed; (f) whether denying enforcement will act as a deterrent to conduct that is illegal or contrary to public policy; (g) whether denying enforcement will ensure that the party seeking enforcement does not profit from the conduct; (h) whether denying enforcement will avoid inconsistency in the law thereby maintaining the integrity of the legal system. Professor Burrows noted that the final factor is capable of a wider or narrower approach, depending on what one understands by inconsistency. The reference to what is an appropriate response brings to the surface the moral dimension underlying the doctrine of illegality, which inevitably influences the minds of judges and peeps out in their judgments from time to time. Tinsley v Milligan caused disquiet to Lord Goff and others precisely because its reasoning jarred with their sense of what was just and appropriate. The way forward In Yarmouth v France (1887) 19 QBD 647, 653, Lord Esher MR said: I detest the attempt to fetter the law by maxims. They are almost invariably misleading: they are for the most part so large and general in their language that they always include something which really is not intended to be included in them. In Lissenden v C A V Bosch Ltd [1940] AC 412, 435, Lord Wright quoted Lord Eshers words and added: Indeed these general formulae are found in experience often to distract the courts mind from the actual exigencies of the case, and to induce the court to quote them as offering a ready made solution. The maxims ex turpi causa and in pari delicto are no exception. It is interesting that, according to Professor JK Grodecki, Lord Mansfield himself was conscious that if the brocard in pari delicto was to be a beneficial rule of jurisprudence it should not be allowed to become rigid and inflexible: In pari delicto potior est conditio defendentis (1955) 71 LQR 254, 258. Professor Grodecki gave examples including Smith v Bromley (1760) 2 Doug KB 696n; 99 ER 441 and Walker v Chapman (1773) Lofft 342, 98 ER 684. In Smith v Bromley (the earliest case in which the maxim in pari delicto appears to have been used) Lord Mansfield granted recovery to the plaintiff of money paid by the plaintiff to procure her brothers discharge from bankruptcy, which was an illegal consideration. As he explained, Lord Mansfield, at p 698, regarded it as in the public interest that the plaintiff should be repaid notwithstanding the illegal purpose of the payment: Upon the whole, I am persuaded it is necessary, for the better support and maintenance of the law, to allow this action; for no man will venture to take, if he knows he is liable to refund. In Walker v Chapman the defendant, who was a page to the King, offered to take a bribe of 50 from the plaintiff in return for securing him a place in the Customs. The bribe was paid but the plaintiff did not obtain the appointment and so he sued for the return of his money. It was argued for the defendant that no action would lie, the plaintiff being party to an iniquitous contract, and that the law would not suffer a party to draw justice from a foul fountain. Lord Mansfield rejected the defence, distinguishing between a claim to overturn an illegal contract and a claim to obtain benefit from it. Later judges have taken a different and stricter approach. Looking behind the maxims, there are two broad discernible policy reasons for the common law doctrine of illegality as a defence to a civil claim. One is that a person should not be allowed to profit from his own wrongdoing. The other, linked, consideration is that the law should be coherent and not self defeating, condoning illegality by giving with the left hand what it takes with the right hand. Lord Goff observed in the Spycatcher case, Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 286, that the statement that a man shall not be allowed to profit from his own wrong is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case. In Hall v Hebert [1993] 2 SCR 159 McLachlin J favoured giving a narrow meaning to profit but, more fundamentally, she expressed the view (at 175 176) that, as a rationale, the statement that a plaintiff will not be allowed to profit from his or her own wrongdoing does not fully explain why particular claims have been rejected, and that it may have the undesirable effect of tempting judges to focus on whether the plaintiff is getting something out of the wrongdoing, rather than on the question whether allowing recovery for something which was illegal would produce inconsistency and disharmony in the law, and so cause damage to the integrity of the legal system. That is a valuable insight, with which I agree. I agree also with Professor Burrows observation that this expression leaves open what is meant by inconsistency (or disharmony) in a particular case, but I do not see this as a weakness. It is not a matter which can be determined mechanistically. So how is the court to determine the matter if not by some mechanistic process? In answer to that question I would say that one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without a) considering the underlying purpose of the prohibition which has been transgressed, b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality. We are, after all, in the area of public policy. That trio of necessary considerations can be found in the case law. The relevance of taking into account the purpose of the relevant prohibition is self evident. The importance of taking account of the relevant statutory context is illustrated by Hardy v Motor Insurers Bureau [1964] 2 QB 745. The Road Traffic Act 1960 required a motorist to be insured against the risk of causing death or personal injury through the use of a vehicle on a road, but a line of authorities established that a contract to indemnify a person against the consequences of a deliberate criminal act is unenforceable. The plaintiff, a security officer at a factory, was injured when he was trying to question the driver of a van, who drove off at speed and dragged him along the road. The driver was convicted of unlawfully causing grievous bodily harm. The driver being uninsured, the plaintiff sued the defendant under an agreement between the defendant and the Minister of Transport, by which the defendant agreed to satisfy any judgment against a motorist for a liability required to be covered under a motor insurance policy. The defendant relied on the maxim ex turpi causa, arguing that a contract purporting to insure the driver against his own deliberate criminal conduct would have been unlawful. The defence was rejected. Diplock LJ said at p 767: The rule of law on which the major premise is based ex turpi causa non oritur actio is concerned not specifically with the lawfulness of contracts but generally with the enforcement of rights by the courts, whether or not such rights arise under contract. All that the rule means is that the courts will not enforce a right which would otherwise be enforceable if the right arises out of an act committed by the person asserting the right (or by someone who is regarded in law as his successor) which is regarded by the court as sufficiently anti social to justify the courts refusing to enforce that right. He observed that the purpose of the relevant statutory provision was the protection of persons who suffered injury on the road by the wrongful acts of motorists. This purpose would have been defeated if the common law doctrine of illegality had been applied so as to bar the plaintiffs claim. Hounga v Allen and R (Best) v Chief Land Registrar are illustrations of cases in which there were countervailing public interest considerations, which needed to be balanced. As to the dangers of overkill, Lord Wright gave a salutary warning in Vita Food Products Inc v Unus Shipping Co Ltd [1939] AC 277, 293: Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds. To similar effect Devlin J questioned whether public policy is well served by driving from the seat of judgment everyone who has been guilty of a minor transgression in St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267, 288 289. In Saunders v Edwards [1987] 1 WLR 1116, 1134, Bingham LJ said Where issues of illegality are raised, the courts have (as it seems to me) to steer a middle course between two unacceptable positions. On the one hand it is unacceptable that any court of law should aid or lend its authority to a party seeking to pursue or enforce an object or agreement which the law prohibits. On the other hand, it is unacceptable that the court should, on the first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct. In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant. Professor Burrows list is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases. Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties respective culpability. The integrity and harmony of the law permit and I would say require such flexibility. Part of the harmony of the law is its division of responsibility between the criminal and civil courts and tribunals. Punishment for wrongdoing is the responsibility of the criminal courts and, in some instances, statutory regulators. It should also be noted that under the Proceeds of Crime Act 2002 the state has wide powers to confiscate proceeds of crime, whether on a conviction or without a conviction. Punishment is not generally the function of the civil courts, which are concerned with determining private rights and obligations. The broad principle is not in doubt that the public interest requires that the civil courts should not undermine the effectiveness of the criminal law; but nor should they impose what would amount in substance to an additional penalty disproportionate to the nature and seriousness of any wrongdoing. ParkingEye is a good example of a case where denial of claim would have been disproportionate. The claimant did not set out to break the law. If it had realised that the letters which it was proposing to send were legally objectionable, the text would have been changed. The illegality did not affect the main performance of the contract. Denial of the claim would have given the defendant a very substantial unjust reward. Respect for the integrity of the justice system is not enhanced if it appears to produce results which are arbitrary, unjust or disproportionate. The courts must obviously abide by the terms of any statute, but I conclude that it is right for a court which is considering the application of the common law doctrine of illegality to have regard to the policy factors involved and to the nature and circumstances of the illegal conduct in determining whether the public interest in preserving the integrity of the justice system should result in denial of the relief claimed. I put it in that way rather than whether the contract should be regarded as tainted by illegality, because the question is whether the relief claimed should be granted. I agree with the criticisms made in Nelson v Nelson and by academic commentators of the reliance rule as laid down in Bowmakers and Tinsley v Milligan, and I would hold that it should no longer be followed. Unless a statute provides otherwise (expressly or by necessary implication), property can pass under a transaction which is illegal as a contract: Singh v Ali [1960] AC 167, 176, and Sharma v Simposh Ltd [2013] Ch 23, paras 27 44. There may be circumstances in which a court will refuse to lend its assistance to an owner to enforce his title as, for example, where to do so would be to assist the claimant in a drug trafficking operation, but the outcome should not depend on a procedural question. In Bowmakers [1945] 1 KB 65 the claim was for conversion of goods which had been obtained by the plaintiffs and supplied to the defendant under transactions which were assumed to be tainted by illegality. The Court of Appeal rightly said, at p 71, that a mans right to possess his own chattels will as a general rule be enforced against one who, without any claim of right, is detaining them or has converted them to his own use, even though it may appear either from the pleadings, or in the course of the trial, that the chattels in question came into the defendants possession by reason of an illegal contract between himself and the plaintiff, but it added the qualifying words provided that the plaintiff does not seek, and is not forced, either to found his claim on the illegal contract or to plead its illegality in order to support his claim. The objections to the proviso have already been identified. It makes the question whether the court will refuse its assistance to the claimant to enforce his title to his property depend on a procedural question and it has led to uncertain case law about what constitutes reliance. The court ended its judgment, at p 72, by saying: We are satisfied that no rule of law, and no considerations of public policy, compel the court to dismiss the plaintiffs claim in the case before us, and to do so would be, in our opinion, a manifest injustice. That conclusion, rather than the answer to a procedural question, should have been the end of the illegality defence, since it is based on public policy. In Tinsley v Milligan, even if Miss Milligan had not owned up and come to terms with the DSS, it would have been disproportionate to have prevented her from enforcing her equitable interest in the property and conversely to have left Miss Tinsley unjustly enriched. Critics of the range of factors approach say that it would create unacceptable uncertainty. I would make three points in reply. First, one of the principal criticisms of the law has been its uncertainty and unpredictability. Doctrinally it is riven with uncertainties: see, for example, paras 4 8 above. There is also uncertainty how a court will in practice steer its way in order to reach what appears to be a just and reasonable result. Second, I am not aware of evidence that uncertainty has been a source of serious problems in those jurisdictions which have taken a relatively flexible approach. Third, there are areas in which certainty is particularly important. Ordinary citizens and businesses enter into all sorts of everyday lawful activities which are governed by well understood rules of law. Lord Mansfield said in Vallejo v Wheeler (1774) 1 Cowp 143, 153: In all mercantile transactions the great object should be certainty: and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other. Because speculators in trade then know what ground to go upon. The same considerations do not apply in the same way to people contemplating unlawful activity. When he came to decide cases involving illegality, Lord Mansfield acted in accordance with his judgment about where the public interest lay: see paras 96 98. In Tinsley v Milligan Lord Goff considered that if the law was to move in a more flexible direction, to which he was not opposed in principle, there should be a full investigation by the Law Commission (which has happened) and that any reform should be through legislation. Realistically, the prospect of legislation can be ignored. The government declined to take forward the Commissions bill on trusts because it was not seen to be a pressing priority for government (a phrase familiar to the Commission), and there is no reason for optimism that it would take a different view if presented with a wider bill. In Clayton v The Queen (2006) 231 ALR 500, para 119, Kirby J said that waiting for a modern Parliament to grapple with issues of law reform is like waiting for the Greek Kalends. It will not happen and that Eventually courts must accept this and shoulder their own responsibility for the state of the common law. The responsibility of the courts for dealing with defects in the common law was recently emphasised by this court in R v Jogee [2016] 2 WLR 681, para 85, and Knauer v Ministry of Justice [2016] 2 WLR 672, para 26. In each of those cases the court decided that it should depart from previous decisions of the House of Lords. That is never a step taken lightly. In departing from Tinsley v Milligan it is material that it has been widely criticised; that people cannot be said to have entered into lawful transactions in reliance on the law as then stated; and, most fundamentally, that the criticisms are well founded. In the present case I would endorse the approach and conclusion of Gloster LJ. She correctly asked herself whether the policy underlying the rule which made the contract between Mr Patel and Mr Mirza illegal would be stultified if Mr Patels claim in unjust enrichment were allowed. After examining the policy underlying the statutory provisions about insider dealing, she concluded that there was no logical basis why considerations of public policy should require Mr Patel to forfeit the moneys which he paid into Mr Mirzas account, and which were never used for the purpose for which they were paid. She said that such a result would not be a just and proportionate response to the illegality. I agree. It seems likely that Lord Mansfield would also have agreed: see Walker v Chapman. Mr Patel is seeking to unwind the arrangement, not to profit from it. It is not necessary to discuss the question of locus poenitentiae which troubled the courts below, as it has troubled other courts, because it assumed importance only because of a wrong approach to the issue whether Mr Patel was prima facie entitled to the recovery of his money. In place of the basic rule and limited exceptions to which I referred at para 44 above, I would hold that a person who satisfies the ordinary requirements of a claim in unjust enrichment will not prima facie be debarred from recovering money paid or property transferred by reason of the fact that the consideration which has failed was an unlawful consideration. I do not exclude the possibility that there may be particular reason for the court to refuse its assistance to the claimant, applying the kind of exercise which Gloster LJ applied in this case, just as there may be a particular reason for the court to refuse to assist an owner to enforce his title to property, but such cases are likely to be rare. (At para 110 I gave the example of a drug trafficker.) In Tappenden v Randall (1801) 2 Bos & Pul 467, 471, 126 ER 1388, 1390, a case of a successful claim for the repayment of money paid for an unenforceable consideration which failed, Heath J said obiter that there might be cases where the contract may be of a nature too grossly immoral for the court to enter into any discussion of it: as where one man has paid money by way of hire to another to murder a third person. The case was mentioned by the Law Commission (LCCP 189, para 4.53), but there is a dearth of later case law on the point. This is hardly surprising because a person who takes out a contract on the life of a third person is not likely to advertise his guilt by suing. But as a matter of legal analysis it is sufficient for present purposes to identify the framework within which such an issue may be decided. No particular reason has been advanced in this case to justify Mr Mirzas retention of the monies beyond the fact that it was paid to him for the unlawful purpose of placing an insider bet. In support of his argument that this purpose was sufficient to disentitle Mr Patel from obtaining the return of his money, Mr Collings relied on cases such as Parkinson v College of Ambulance Ltd [1925] 2 KB 1. In that case the plaintiff made a donation to a charity to secure a knighthood. When the honour failed to materialise he sued for the return of his money. The claim was rejected. Bribes of all kinds are odious and corrupting, but it does not follow that it is in the public interest to prevent their repayment. There are two sides to the equation. If today it transpired that a bribe had been paid to a political party, a charity or a holder of public office, it might be regarded it as more repugnant to the public interest that the recipient should keep it than that it should be returned. We are not directly concerned with such a case but I refer to it because of the reliance placed on that line of authorities. Since criticism was made of the Court of Appeals decision in Mohamed v Alaga and Co, I would affirm its correctness and reject the view that it should somehow be confined to its own peculiar facts. With hindsight, it is perhaps unfortunate that this court did not have the opportunity of considering a claim by Miss Hounga for a quantum meruit. Summary and disposal The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case). In assessing whether the public interest would be harmed in that way, it is necessary a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, b) to consider any other relevant public policy on which the denial of the claim may have an impact and c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts. Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way. The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate. A claimant, such as Mr Patel, who satisfies the ordinary requirements of a claim for unjust enrichment, should not be debarred from enforcing his claim by reason only of the fact that the money which he seeks to recover was paid for an unlawful purpose. There may be rare cases where for some particular reason the enforcement of such a claim might be regarded as undermining the integrity of the justice system, but there are no such circumstances in this case. I would dismiss the appeal. LORD KERR: (agrees with Lord Toulson) For the reasons given by Lord Toulson, with which I completely agree, I consider that this appeal should be dismissed. The approach commended by Lord Toulson does not involve engaging with an open and unsettled range of factors Lord Mance at para 192 of his judgment. On the contrary, as I see it, Lord Toulsons judgment outlines a structured approach to a hitherto intractable problem. It is an approach, moreover, which, if properly applied, will promote, rather than detract from, consistency in the law. And it has the added advantage of avoiding the need to devise piecemeal and contrived exceptions to previous formulations of the illegality rule. Central to Lord Toulsons analysis is the trio of considerations which he identified in para 101 of his judgment. The first of these involves an examination of the underlying purpose of the prohibition which has been transgressed. By this, I understand Lord Toulson to mean the reasons that a claimants conduct should operate to bar him or her from a remedy which would otherwise be available. That such reasons should be subject to scrutiny is surely unexceptionable. Whether in order to preserve the integrity of the legal system (per McLachlin J in Hall v Hebert [1993] 2 SCR 159 at 169) or to allow a proper understanding of the true nature of the public policy imperative for recognising a defence of illegality, the purpose of the denial of a remedy to which the claimant would otherwise be entitled should be clearly understood. As it happens, McLachlin J disagreed with Cory Js suggestion that the doctrine of ex turpi causa non oritur actio should be replaced with a power vested in the courts to reject claims on considerations of public policy p 168. But what is the preservation of the integrity of the legal system, if not a public policy consideration? Moreover, the underpinning of the preservation of that integrity (which McLachlin J said was that a person in a civil suit should not be permitted to profit from illegal or wrongful conduct or to benefit from an evasion or rebate of a penalty prescribed by the criminal law) is par excellence a public policy consideration. And McLachlin J seemed to acknowledge as much when she said (at p 169) that the principle could be described by an old fashioned Latin name or by the currently fashionable concept of public policy. It is doubtful that a public policy consideration in the context of the defence of illegality could now be properly described as a currently fashionable concept. Indeed, in a number of cases that I will refer to briefly below, the maxim ex turpi causa has been recognised in this country as an expression of policy, rather than a principle. And in Canada it appears to be accepted that the weighing of public policies is the proper approach to take in order to determine whether a defence of illegality should be allowed to prevail. In Still v Minister of National Revenue (1997) 154 DLR (4th) 229 (which is discussed by Lord Toulson in paras 58 et seq of his judgment) the Federal Court of Appeal considered that the doctrine of illegality now rests on the understanding that it would be contrary to public policy to allow a person to maintain an action on a contract prohibited by statute (emphasis supplied). On that basis, Robertson JA, who delivered the judgment of the court, said that it was necessary to identify the policy considerations which outweighed the applicants right to a remedy. Although this was said in relation to competing policy goals in two items of legislation, there is no reason not to adopt the same approach in evaluating rival policy considerations in the non statutory context. To take this case as an example, why should Mr Mirzas wrongful retention of Mr Patels money not be weighed against the undoubted illegality on the part of Mr Patel in entering an agreement to wrongly benefit from Mr Mirzas claimed ability to obtain access to insider information? If one concentrates on the illegal nature of the contract to the exclusion of other considerations, an incongruous result in legal and moral terms may be produced. This can be avoided by taking into account and giving due weight to the second and third of Lord Toulsons considerations viz countervailing public policies which would be wrongly discounted by denial of the claim and the proportionality of refusing to acknowledge its legitimacy. It is, of course, possible to reach the same outcome that a weighing of the competing policy considerations produces by treating this case as one of unjust enrichment which warranted returning the parties to the position that they occupied before the transaction. This is on the basis that the court is not required to give effect to the illegal contract in order to find that Mr Mirza should not be allowed to retain Mr Patels money. It would simply return the parties to the status quo ante where they should always have been. Lord Sumption at para 268. That seems to me, however, to be a much more adventitious and less satisfactory route to the proper disposal of the case than that represented by a rounded assessment of the various public policy considerations at stake. Moreover, if the ex turpi causa axiom is itself no more than an expression of policy, the taking into account of countervailing policy considerations, in order to decide whether to give effect to it in a particular instance, is the only logical way to proceed. That it is, in truth, a policy based rule has been clearly recognised. In Gray v Thames Trains Ltd [2009] UKHL 33; [2009] AC 1339, para 30, Lord Hoffmann said that the maxim expressed, not so much a principle as a policy and that it did not have a single basis of justification but was rather based on a group of reasons which vary in different situations. And in Stone and Rolls Ltd v Moore Stephens [2009] UKHL 39; [2009] AC 1391, para 25 Lord Phillips expressly endorsed what Lord Hoffmann had said about the public policy nature of ex turpi causa, observing that it was necessary to consider the policy underlying it, in order to decide whether the defence of illegality was bound to defeat a claim. Finally, in Les Laboratoires Servier v Apotex Inc [2012] EWCA Civ 593; [2013] Bus LR 80, after referring (in para 66) to the Law Commissions recommendation in its 2010 Report (Law Com 320) to the effect that the illegality offence should be allowed where its application could be firmly justified by one or more of the rationales underlying it existence, Etherton LJ said, at para 73: It is clear, then, that the illegality defence is not aimed at achieving a just result between the parties. On the other hand, the court is able to take into account a wide range of considerations in order to ensure that the defence only applies where it is a just and proportionate response to the illegality involved in the light of the policy considerations underlying it. Lord Sumption has said in para 262(iii) of his judgment in this case that this court in Les Laboratoires Servier [2015] AC 430 had overruled the view expressed by the Court of Appeal that an illegal act might nevertheless found a cause of action if it was not as wicked as all that. That may be so, but I do not understand the judgment of this court in Les Laboratoires Servier to have expressly rejected the notion that whether the defence should be available depends on an examination of the policy considerations which underlie it in any particular instance and those which militate against it. At para 61 of his judgment in Les Laboratoires Servier Lord Toulson quoted with approval the statement of Lord Wilson in Hounga v Allen [2014] 1 WLR 2889 at para 42 to the effect that, in considering whether to allow a defence of illegality, it is necessary, first, to ask What is the aspect of public policy which founds the defence? and, second, to ask But is there another aspect of public policy to which application of the defence would run counter? The decision in Hounga was not mentioned in the judgment of the majority in Les Laboratoires Servier. Lord Sumption did refer to Hounga, however, in the later case of Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1. He sought to explain the decision in Hounga on the basis that Ms Hounga did not rely, and did not need to rely, on the circumstances in which she had entered the United Kingdom (she had entered illegally). This is correct but she did need to rely on the fact of her employment in advancing a claim for unlawful discrimination in her dismissal from that employment. Since the employment was not legally sanctioned, she was therefore confronted with the illegality defence and, indeed, the Court of Appeal had held that the illegality of the contract of employment formed a material part of Ms Houngas complaint and that to uphold it would be to condone the illegality. It was held in Hounga that the appellants claim was not inextricably linked to her illegal conduct. On that account her action could not be defeated on the basis that her contract of employment was illegal. But Lord Wilsons discussion of the manner in which competing public policy considerations should be viewed, in calculating whether a defence of illegality should be permitted to defeat an otherwise viable claim, unquestionably forms part of the ratio of the decision. The way is now open for this court to make its choice between, on the one hand, cleaving to the rule based approach exemplified by Tinsley v Milligan [1994] 1 AC 340 and, arguably, the decision of the majority in Les Laboratoires Servier, and, on the other, a more flexible approach, taking into account the policy considerations that are said to favour recognising the defence of illegality, those which militate against such recognition and the proportionality of allowing the defence to prevail. In Bilta (UK) Ltd Lord Neuberger said that the proper approach to the defence of illegality needed to be addressed by this court as soon as appropriately possible para 15. This case unmistakably presents us with the opportunity to address the question and for the reasons given by Lord Toulson, I believe that the approach which he commends is plainly to be preferred. A rule based approach to the question of the effect of illegality on the availability of a remedy has failed to deliver on what some have claimed to be its principal virtues viz ease of application and predictability of outcome. This case exemplifies the point. There was a sharp but perfectly respectable difference of view in the judgments of the Court of Appeal as to whether the necessary ingredient of reliance on the illegal aspect of the agreement between Mr Mirza and Mr Patel was present. This is hardly surprising. In many situations in which transactions between parties are tainted by some form of illegality, it is not always easy to decide what it is that needs to be relied on when an unravelling of those transactions or some means of dealing with their failure is sought. On the question of unravelling or unpicking an agreement, I do not consider that Tinsley is an example of the court conducting an unravelling exercise or of its returning the parties to the status quo ante. This much is clear from the speech of Lord Browne Wilkinson at 376F of the report: Miss Milligan established a resulting trust by showing that she had contributed to the purchase price of the house and that there was common understanding between her and Miss Tinsley that they owned the house equally. She had no need to allege or prove why the house was conveyed into the name of Miss Tinsley alone, since that fact was irrelevant to her claim: it was enough to show that the house was in fact vested in Miss Tinsley alone. The illegality only emerged at all because Miss Tinsley sought to raise it. Having proved these facts, Miss Milligan had raised a presumption of resulting trust. There was no evidence to rebut that presumption. Therefore, Miss Milligan should succeed. (original emphasis) In effect, in Tinsley the majority gave effect to rather than unravelled the illegal agreement made between the parties. The agreement was that the ownership of the house should be shared equally between Miss Milligan and Miss Tinsley, and that they should represent to the Department of Social Security that it was owned solely by Miss Tinsley. It was because Miss Milligan did not need to rely on the illegal component of the agreement (that they make the false representation to the department) that she was able to succeed. This was not, therefore, a case of unravelling the agreement or restoring the parties to the status quo ante. To the contrary, it was an instance of segregating the illegal part of the agreement from that which, it was considered, could be enforced. Reference to or reliance on the objectionable part could thereby be avoided. To claim that such a contrivance produces a predictable, much less a certain, outcome, for such arrangements is, I believe, extremely far fetched. Even if the claim to predictability of outcome for the reliance test could be made good, however, it is questionable whether particular weight should be given to this consideration in circumstances where a claimant and defendant have been parties to an agreement which is plainly illegal. Certainty or predictability of outcome may be a laudable aim for those who seek the laws resolution of genuine, honest disputes. It is not a premium to which those engaged in disreputable conduct can claim automatic entitlement. For the reasons I have given, however, I do not believe that outcomes are easier to forecast on a rule based approach. Quite apart from the difficulty in predicting whether a claimant has to rely on the illegal dimension of an agreement in order to advance his claim, there is something unattractive and contrived about the means by which attempts have to be made in order to avoid the spectre of reliance. Professor Burrows in his Restatement of the English Law of Contract (Oxford University Press) outlined what he described as his single reliance master rule at p 224 in this way: If the formation, purpose or performance of a contract involves conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade), a party cannot enforce the contract if it has to rely on that conduct to establish its claim. In this case the formation of the contract, its purpose and its performance all involved illegality. Under the single reliance master rule, it is said that all of this can be ignored because it is not necessary to rely on the terms of the agreement, other than to demonstrate that there was no legal basis for the payment of the money to Mr Mirza. So, the looming presence of illegality does not require to be confronted at all. The issue is side stepped and avoided. This cannot be the correct way in which to deal with the impact of illegality in fact, under this approach, illegality is not addressed at all. It is surely better and more principled to examine why illegality should or should not operate to deny Mr Patel a remedy. Returning the parties to the status quo ante likewise side steps the issue of illegality. This approach proceeds on the basis that the transaction should simply never have taken place or that the parties should be returned to the condition that they ought always to have occupied. The contract is unpicked because it should not have been made. Mr Mirza is deprived of the money because it is unjust enrichment. No examination of the effect that the illegality has is warranted; recognition that there has been unjust enrichment is all that is required. This is objectionable not only because it effectively ignores the illegality that surrounded the making of the contract but also because it produces an inconsistent result with that which is founded on a breach of contract claim. This leads to what Professor Peter Birks, in an article entitled, Recovering Value Transferred under an Illegal Contract (2000) 1 TIL 155, describes as self stultification. Entitlement to restitution of money paid on foot of an illegal contract on the basis of unjust enrichment makes a nonsense, he says, of refusal to enforce the contract and, at p 160, it is important that the law as stated in one area should not make nonsense of the law as stated in another. Self stultification can be avoided by adoption of the approach suggested by Lord Toulson. His mode of analysis requires examination of the justification for the defence of illegality in whatever context it arises, not a decision to circumvent the defence because of the type of remedy that is claimed. That appears to me to be a much more principled approach than one which avoids having to engage with the merits of the defence at all. Not having to engage with the merits on the basis that one does not have to rely on the illegality is a matter of fortuity. Because of that incidental circumstance an avenue to an equivalent outcome to that which would result from enforcement of the contract opens up. An examination of the impact of the illegality becomes irrelevant. That this should be a matter of happenstance is deeply unsatisfactory. Lord Toulsons solution to this question also permits readier access to investigation of the traditional justifications for the ex turpi causa maxim preservation of the integrity of the legal system and preventing profit from wrongdoing. If, on examination of the particular circumstances of the case, these can be shown to weigh heavily in the balance, it is more likely that the defence will be upheld. Carving out an exception to the application of the defence on the basis that it does not affect a claim for unjust enrichment where the illegality of the claimant does not require to be relied on does nothing to directly protect or uphold these values. For these reasons and those given by Lord Toulson, I would dismiss the appeal. LORD NEUBERGER: The present appeal concerns a claim for the return of money paid by the claimant to the defendant pursuant to a contract to carry out an illegal activity, and the illegal activity is not in the event proceeded with owing to matters beyond the control of either party. The specific issue on this appeal In such a case, the general rule should in my view be that the claimant is entitled to the return of the money which he has paid. In the first place, such a rule (the Rule) is consistent with the law as laid down in the 18th century by two eminent judges, one of whom is regarded as the founder of many aspects of the common law, including illegality; in addition it has support from some more modern cases. Secondly, the Rule appears to me to accord with policy, which is particularly important when illegality arises in the context of a civil claim. Thirdly, the Rule renders the outcome in cases in one area of a very difficult topic, that of contracts involving illegality, and the maxim ex turpi causa non oritur actio (ie that no claim can be based on an illegal or immoral arrangement), relatively clear and certain. I turn first to the authorities. In Smith v Bromley (1760) 2 Doug KB 696n, the Court of Kings Bench permitted a plaintiff to recover money she had paid to someone who had agreed to procure her brothers discharge from bankruptcy, which was an illegal consideration. Lord Mansfield CJ said at p 698 in the course of his judgment that, although the payment had been made for an illegal purpose: Upon the whole, I am persuaded it is necessary, for the better support and maintenance of the law, to allow this action; for no man will venture to take, if he knows he is liable to refund. Lord Mansfield subsequently followed this approach in Walker v Chapman (1773) Lofft 342, where a bribe to the defendant to secure a job for the plaintiff in Government service was held recoverable, in circumstances where the job was not in fact obtained. In Neville v Wilkinson (1782) 1 Bro CC 543, 547 Lord Thurlow LC approved this approach, and declared his opinion that: [I]n all cases where money was paid for an unlawful purpose, the party, though particeps criminis, might recover at law; and that the reason was, that if courts of justice mean to prevent the perpetration of crimes, it must be not by allowing a man who has got possession to remain in possession, but by putting the parties back to the state in which they were before. In the following century, the same approach was adopted in Taylor v Bowers (1876) 1 QBD 291 (which involved transfer of goods rather than of cash). Cockburn CJ said at first instance at p 295 that it was well established that where money has been paid, or goods delivered, under an unlawful agreement, but there has been no further performance of it, then the party paying the money or delivering the goods may repudiate the transaction, and recover back his money or goods. The Court of Appeal agreed, and at p 300 Mellish LJ, with whom Baggallay JA and Grove J agreed, said this: To hold that the plaintiff is enabled to recover does not carry out the illegal transaction, but the effect is to put everybody in the same situation as they were before the illegal transaction was determined upon, and before the parties took any steps to carry it out . It is true that the actual decision in that case can be justified on the ground that property in the goods concerned had never passed (which was the basis of James LJs judgment), but it seems to me that the reasoning of Mellish LJ, like that of Cockburn CJ, reflects the proposition found in the 18th century judgments I have quoted. It is also fair to say that Fry LJ doubted the correctness of Mellish LJs dictum in Kearley v Thomson (1890) 24 QBD 742, 746, and that in some subsequent cases the principle has not been applied. An obvious example is Parkinson v College of Ambulance [1925] 2 KB 1, where a donor was held to be disentitled from recovering a gift to a charity obtained by the charitys illegal (and dishonest) promise to obtain an honour for the donor. I consider that that case was wrongly decided. It seems to me that the judgment in that case got close to representing what Bingham LJ described as the court on the first indication of unlawfulness affecting any aspect of a transaction, draw[ing] up its skirts and refus[ing] all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct (which he considered to be unacceptable) Saunders v Edwards [1987] 1 WLR 1116, 1134. I agree with the view that the decision in Parkinson represented a new and regrettable extension of the scope of the maxim of ex turpi causa (to quote from Professor Grodeckis article (1955) 71 LQR 254, 263), and I consider that it should be overruled. The Rule also derives some support from the Court of Appeals decision in Tribe v Tribe [1996] Ch 107, where the plaintiff was held to be entitled to recover shares which he had transferred to his son in order deceptively to improve his negotiating position in relation to an anticipated claim by his landlord, which in the event did not materialise. The question for the Court of Appeal was whether, following the controversial decision of the House of Lords in Tinsley v Milligan [1994] 1 AC 340 (the details of which are set out in paras 17 19 above), the father could rebut the presumption of advancement by giving evidence of his illegal purpose, to quote from Millett LJs judgment at pp 129H 130A. It was held that he could, on the basis that [t]he transferor can lead evidence of the illegal purpose whenever it is necessary for him to do so provided that he has withdrawn from the transaction before the illegal purpose has been wholly or partly carried into effect per Millett LJ at pp 134G H. There is some support in the cases for the notion that different considerations should apply depending whether the claimants claim for return of money or property paid pursuant to an unperformed illegal contract is based on a common law claim or a claim in equity (compare the Privy Council decisions in Singh v Ali [1960] AC 167 and Chettiar v Chettiar [1962] AC 294). I do not consider that such a distinction is appropriate (and it may be that in that connection I differ from Millett LJ in Tribe at p 129G although see at p 130E). I agree with Lord Browne Wilkinsons observation in Tinsley at p 371, where he said that [i]f the law is that a party is entitled to enforce a property right acquired under an illegal transaction, the same rule ought to apply to any property right so acquired, whether such right is legal or equitable. That proposition is supported, as I see it, by the second reason supporting the Rule, namely policy. As Millett LJ said in Tribe at p 133F, the justification for this rule [which precludes the court from lending its assistance to a man who founds his cause of action on an illegal or immoral act] is not a principle of justice but a principle of policy, citing Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341, 343. That approach is also supported by Lord Hoffmann in Gray v Thames Trains Ltd [2009] AC 1339, para 30, where he went on to say that the policy is not based upon a single justification but on a group of reasons, which vary in different situations. Similarly, in Bakewell Management Ltd v Brandwood [2004] 2 AC 519, para 60, Lord Walker said that the maxim ex turpi causa must be applied as an instrument of public policy, and not in circumstances where it does not serve any public interest. More broadly, it appears to me that policy supports the Rule, in part for the simple reasons given in the passages cited in para 147 above. Further, as Lord Mance points out, there is obvious attraction in the notion that, if all transfers made pursuant to an unexecuted illegal contract are re transferred, then the parties are back in the position that they were, ie as if there had been no illegal contract, which again would seem to comply with policy. It also appears to me that the Rule is consistent with the approach adopted in McLachlin Js analysis in the Canadian Supreme Court case Hall v Hebert [1993] 2 SCR 159, 176. She explained that the basic justification for refusing relief to a plaintiff who relied on an illegal contract was that to allow recovery would be to allow recovery for what is illegal. It would put the courts in the position of saying that the same conduct is both legal, in the sense of being capable of rectification by the court, and illegal. It would, in short, introduce an inconsistency in the law. Later at pp 179 180, she suggested that the courts power to refuse relief in a claim where illegality is involved is a limited one and that the use of the power is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law. This approach (which is more fully analysed by Lord Mance) finds an echo in Lord Rodgers observation in Gray, para 82, that the civil court should cleave to the same policy as the criminal court. For some time, it was assumed that the Rule could be invoked not merely when the anticipated illegal purpose not been proceeded with at all, but with the super added requirement that it had not done so because of the repentance of the plaintiff who was seeking to get his money back. Like Millett LJ in Tribe at p 135D E, I would reject that notion. As he said, [j]ustice is not a reward for merit, and in any event the notion that repentance is needed could lead to bizarre results. Further, a claimants repentance may be born of, or combined with, self interest, in which case, if repentance is the essential factor, the court would face a real difficulty. In my opinion, the notion that the application of a rule should depend on whether or not the claimant has repented typifies the inappropriately moralistic approach of some courts when they have to deal with claims based in some way on illegality, which was rightly criticised by Bingham LJ in Saunders [1987] 1 WLR 1116, 1134. Rather, the courts should adopt a more objective and analytical approach like that of McLachlin J in Hall. Quite apart from principle, it appears to me that the Rule would establish, or maintain, a degree of clarity and certainty in relation to one aspect of the law on the vexed topic of the effect of illegality on contractual claims. One thing which is clear from reading only some of the large number of judgments on the law on that topic over the past 350 years is the inconsistency of reasoning and outcome in different cases. Those responsible for making and developing the law in any area must strive to achieve as much clarity and as much certainty as are consistent with principle and practicality. There is, I acknowledge, some attraction in the point that the need for certainty in this area is diminished by the fact that parties to an arrangement which is illegal have less cause for complaint if the law is uncertain. However, criminals are entitled to certainty in the law just as much as anyone else. In any event, third parties are often affected by the enforceability of rights acquired or lost under contracts, and innocent third parties, it could be said with force, are in a particularly strong position to expect certainty and clarity from the law. Quite apart from this, there is a general public interest in certainty and clarity in all areas of law, not merely because it is a fundamental aspect of the rule of law, but also because the less clear and certain the law on any particular topic, the more demands there are on the services of the courts. That leaves open two issues. First, the issue of what constitutes an illegal contract for the purpose of the Rule. In my view, as a general proposition, the rule would apply to any contract where the illegality would result in the court (if it could otherwise do so) not being able to order specific performance of the contract or damages for its breach. It would thus normally apply to any contract whose performance would inevitably involve the commission of a crime (i) because the whole purpose of the contract was the commission of a crime (eg a contract killing), or (ii) because it was a contract whose essential ingredient was the commission of a crime (the present case is an example), or (iii) because the contract could not be performed without the commission of a crime. In practice, of course, category (iii) would cover the other two categories, but setting out the three categories may help to illustrate the extent of the application of the rule. As to category (iii), I have difficulties in seeing how a court could order specific performance of a contract which necessarily involved one or other of the parties committing a crime (even a minor crime). Requiring the contract to be performed would involve the court ordering a party to act illegally: that cannot be a course open to a court. For the same reason I have difficulties in seeing how a court could normally award damages for breach of such a contract. Conceptually, damages are a substitute for non performance, and performance is not something the court can award; and it seems inconsistent with the courts function to penalise a defendant in damages for not doing something illegal or to compensate a claimant for not having a benefit which would have required either or both of the parties doing something illegal. For the court to make an order for specific performance or damages in such cases would seem to infringe the principle of consistency discussed in the judgment of McLachlin J in Hall. The second issue is foreshadowed by the fact that I have described the Rule as being generally applicable. That is because the need for certainty must, particularly given the importance of policy, yield to the fact that, in this difficult and potentially multi faceted area, there will inevitably be exceptions. Experience and common sense both suggest that any attempt to lay down a clear and inflexible rule on even one aspect of the topic of illegality in the context of contractual claims will lead to difficulties. (Both the majority and the minority reasoning in Tinsley are a good example of this). Indeed, the very fact that the approach of the courts in cases on this topic is based on policy suggests that strict immutable rules are inappropriate. Nonetheless, that does not negate any attempt to identify principles such as that suggested by McLachlin J and general rules such as that described in the cases mentioned in paras 147 and 148 above. The fact that the approach of the law to contracts with an illegal aspect is based on policy does not discharge judges from the normal duty of ensuring that the law on any topic is as clear and certain as it can be. By way of example, I would mention two possible exceptions. First, where one of the parties, especially the defendant, is in a class which is intended to be protected by the criminal legislation involved, it may well be inappropriate to invoke the Rule. Secondly, there could well be no recovery (or only partial recovery) by a plaintiff where the defendant was unaware of the facts which gave rise to the illegality especially if he had received the money and had altered his position so that it might be oppressive to expect him to repay it. There will no doubt be other exceptions, but I do not think that that undermines the usefulness of having the Rule as the prima facie or presumptive approach. (I discuss in paras 172 175 below with the test for determining whether it is appropriate to apply the Rule in any particular case). In the present case, Mr Patel paid 620,000 to Mr Mirza pursuant to a contract, under which Mr Mirza was to use the money to trade in RBS shares with the benefit of inside information for their common benefit. That was a contract whose agreed fundamental purpose was illegal. In fact, the anticipated inside information was not forthcoming and the contract effectively lapsed. I can see no good reason on these simple facts for not applying the Rule and accordingly I consider that Mr Patel is entitled to the return of the 620,000. Venturing further The majority, and indeed Lord Mance and Lord Sumption, would go wider in their judgments on this appeal, by laying down some wider and more general principles or rules relating to the effect of illegality on contracts. There is considerable attraction in doing so, not least because the law is in a state of uncertainty. The reasoning of the majority in the most recent decision of the House of Lords, Tinsley, is generally thought to be unsatisfactory: for a convincing analysis see the judgments in the decision of the High Court of Australia in Nelson v Nelson (1995) 184 CLR 538 (discussed more fully in paras 50 54 above). And the result arrived at by the minority in Tinsley is plainly unsatisfactory. I fear that the different approaches adopted by members of this court in the recent cases of Hounga v Allen [2014] 1 WLR 2889, Les Laboratoires Servier v Apotex Inc [2015] AC 430 and Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1 have left the law on the topic in some disarray. As I said in Bilta, para 15, the proper approach to the defence of illegality needs to be addressed by this court (certainly with a panel of seven and conceivably with a panel of nine Justices) as soon as appropriately possible. Nonetheless, there are arguments for not looking more widely at the issue of illegality in the contractual context. Thus, in all three recent Supreme Court cases (as in the present one), while there are some fairly sharp differences of opinion as to the proper approach, there is no real dispute as to the outcome. More broadly, the common law traditionally develops on a case by case basis, and there are self evident dangers for a court to paint on an unnecessarily broad canvas, particularly bearing in mind that it is proceeding by reference to the facts of one particular case. And that can be said to be particularly true in the area of illegal contracts, where, as already mentioned, experience has shown that it is a topic fraught with difficulties, as is evidenced by the fact that the reasoning and outcomes in a number of cases concerning contracts affected by illegality over the past 300 years are hard to reconcile. Reading those cases also shows that it would be impossible to envisage, and therefore to cater for, every type of problem which might arise in this field. Nonetheless, it seems to me right to venture further in this case, essentially for the reasons summarised in para 164 above. The first general point I should make is that, in my view, even where the contemplated illegal activity has been performed in part or in whole, it would be right to apply the Rule in appropriate cases. Thus, in the case of an illegal contract where money is paid by the claimant to the defendant, and the contract is then partly or wholly performed by the defendant paying a lesser sum to the claimant, I do not see why, at least in the absence of good reasons to the contrary, the court should not order that the claimant should recover the money that he paid the defendant, albeit reduced by the lesser sum which the claimant subsequently received from the defendant. Similarly, where the contract is wholly performed. In effect, the reasons supporting the application of the Rule in cases where the illegal activity has not occurred, apply for the same reasons to contracts where the contemplated illegal activity has been wholly or partly performed. And there is the added reason of consistency with a case where the contract has not been performed. Thus, in my view, if the defendant in this case had only been able to purchase just a few shares on inside information and had accounted to the claimant for the proceeds of sale of those shares in the sum of, say 10,000, the contract would have been partly performed, but I consider that the claimant could have successfully sued to recover the 620,000 he had paid, less the 10,000 which he had received. There are, I think, three arguments against such a conclusion. The first is that there are a number of judgments, including those in and Taylor v Bowers 1 QBD 291, Kearley v Thomson 24 QBD 742 and Tribe v Tribe [1996] Ch 107, where it has been expressly stated that the Rule only applies where the illegal purpose has [not] been wholly or partly performed to quote from Millett LJ in Tribe at p 124E. However, perhaps particularly once one strips away the notion that repentance is irrelevant, I can see no good reason for not extending the rule to partly or even wholly performed contracts where restitutio in integrum can be achieved in practical terms and would be consistent with policy and proportionality. In the present case, for example, it would seem to be penal on the claimant that he could be deprived of 610,000 (and by the same token it would seem absurdly gratuitous that the defendant could benefit to the tune of 610,000) simply because the contract had been performed to a small extent. Secondly, it may be argued that, once the contract has been partly performed, the basis for restitutio in integrum has gone. But that argument is only right if the basis of the Rule is total failure of consideration. In my view, that is not necessarily the correct analysis (unless the illegal consideration for which the money was paid is treated in law as no consideration, because it is illegal). Indeed, in the end, the correct analysis is not the centrally important issue, given that the question as to how the court deals with illegal contracts is ultimately based on policy. The ultimate function of the courts in common law and equity is to formulate and develop rules of a clear and practical nature. Now that the judiciary (rightly) pay more attention than we did to legal books and articles, we judges can look to legal academics not only to identify what they think are judicial inconsistencies and errors, but also to develop and modify their analyses of legal principles when we consider it necessary to change, develop or clarify the law. Thirdly, it may be said that application of the Rule would result in the court sometimes getting precious close to enforcing an illegal contract a course which the court most certainly cannot take, as already mentioned. I accept that application of the Rule would sometimes involve the court making an order whose effect in practice is similar to performance of the illegal contract. But there is nothing in that point. If a particular outcome is correct, then the mere fact that the same outcome could have been arrived at on a wrong basis does not make it the wrong outcome. Indeed, it is worth noting that the outcome in Tribe was precisely what it would have been if the contract in question had been enforced. The father had transferred the shares on the basis that it would help him avoid a threatened claim and that they would be transferred back when the claim was no longer threatened; he sought an order for the retransfer after the threat had gone away, and application of the rule resulted in that order. That, of course, leaves open what would constitute an appropriate case for the application of the Rule and good reasons to the contrary for these purposes. The exceptions which I have referred to in para 162 above would be examples of where it might not be appropriate to invoke the Rule. However, it seems to me to be clear that there could be many other circumstances where application of the Rule would not be appropriate in circumstances where the illegal activity has been wholly or partly put into effect. In that connection, some assistance can be obtained from the guidance given by McLachlin J. Beyond that, it may be that some or all of the factors identified by Professor Burrows in the passage quoted by Lord Toulson in para 93 above could be relevant depending on the facts and issues in any particular case. However, I am not convinced that it is helpful to list all the potentially relevant factors and say that it is a matter for the court in each case to decide which of those factors apply in that case and what weight to give them. Once a judge is required to take into account a significant number of relevant factors, and the question of how much weight to give each of them is a matter for the judge, the difference between judgment and discretion is, I think, in practice pretty slight. I have come to the conclusion that the approach suggested by Lord Toulson in para 101 above provides as reliable and helpful guidance as it is possible to give in this difficult field. When faced with a claim based on a contract which involves illegal activity (whether or not the illegal activity has been wholly, partly or not at all undertaken), the court should, when deciding how to take into account the impact of the illegality on the claim, bear in mind the need for integrity and consistency in the justice system, and in particular (a) the policy behind the illegality, (b) any other public policy issues, and (c) the need for proportionality. I must admit that I was initially not attracted by this approach because it seemed close to giving a discretion to judges when it comes to deciding how to deal with a claim based on a contract with an illegal element. However, on further reflection, it appears to me that, unlike the multi factorial approach proposed by Professor Burrows, the structured approach proposed by Lord Toulson is not akin in practice to a discretion, and, in any event, it is the best guidance that can sensibly be offered at the moment. Experience shows that it is simply not possible to identify a more helpful or rigorous test. When considering whether it is possible to give more specific or firm guidance, I have considered some examples, which ultimately have helped to persuade me that greater clarity, strictness or specificity is simply not possible, at any rate at this stage, and they have served to conform the aptness of the approach set out in para 101 above. A simple example is a case where the consideration for which the claimant paid or owed money was inherently illegal, rather than happening to involve an illegal act in order to be achieved. In such cases, it seems to me that considerations of certainty and policy indicate that the claimant should generally be able to refuse to pay any money which is due under the contract and, indeed, to recover the money he had paid. Thus, if the claimant paid a sum to the defendant to commit a crime, such as a murder or a robbery, it seems to me that the claimant should normally be able to recover the sum, irrespective of whether the defendant had committed, or even attempted to commit, the crime. If the defendant had not attempted the crime, the Rule would generally apply. If he had actually succeeded in carrying out the crime, he should not be better off than if he had not done so. I suppose one could justify that conclusion on the ground that the law should not regard an inherently criminal act as effective consideration. That example might appear to suggest that more specific guidance could be given. However, even in relation to cases of the type described in para 176, there could be exceptions such as those mentioned in para 162 above. And, bearing in mind the enormous number of different crimes and different factual circumstances which could arise, it would be little short of foolhardy to imagine that there could not be other cases of this type where it would be inappropriate to apply the Rule. Further, different considerations would often, I suspect very often, apply where the contract was not inherently illegal, but necessarily involved an illegal action. An extreme case might be where an employer employed a builder to carry out construction work which they both knew would inevitably require the builder to park illegally say on a double red line. As already explained in para 160 above, if the defendant refused to carry out the work, the contract could not be enforced prospectively by the employer, but he would be entitled to recover any money he had paid. However, if the builder carried out the work, the employer would not be able to avoid liability to pay in full: the fact that the defendant could not perform his obligations under the contract without committing a relatively technical and incidental crime would not deprive him of the right to payment in full for such performance. However, greater problems and uncertainties could arise in other cases eg where the nature of the criminal activity was more serious and/or more central to the activity involved, where the illegal activity was expressly included in the contract, or where one of the parties did not know or intend that the activity in question to be carried out was illegal but the other did, or where the proceedings arose out of the fact that such a contract had only been partly performed. Further, where a claimant has performed his part of a contract which was inherently lawful but was unlawful for some other reason, there is real room for debate in any particular case whether he should be entitled to claim payment on a quantum meruit basis, even though he cannot enforce his right to contractual payment compare Mohamed v Alaga & Co [2000] 1 WLR 1815 and Taylor v Bhail [1996] CLC 377. While it would be possible to lay down a general rule as to whether or not a claimant could recover in such a case, it seems to me to be more satisfactory for the outcome to turn on the factors mentioned in para 174 above. Similarly, it seems to me that the justification for the decision of the majority in Tinsley was, as Lord Toulson says, that it would have been disproportionate to have refused to enforce Miss Milligans equitable interest in the relevant property on the grounds of her illegal activity, and the policy behind the law making the activity in question illegal was not infringed by acceding to her claim. It is also worth referring back to the two examples set out in para 162 above. If the purpose of rendering an activity illegal is to protect a class of persons which includes only one of the parties to the contract, then, absent any other argument based on policy or proportionality, it would seem appropriate that that party should not be disadvantaged by the illegality, and/or should be entitled to rely on the fact that the activity is illegal, as against the other party. And, if a claimant seeks recovery of money paid to a defendant under a contract which can only be performed illegally, and has not been performed, proportionality and policy may well justify the court refusing repayment if the defendant has spent the money and was unaware of the facts giving rise to the illegality at the time he spent it. I would make three concluding points. First, quite apart from being persuaded by the reasons which justify the approach I have summarised in para 174 above, I consider that the fact that it is consistent with judgments of the courts in Australia and Canada, as explained by Lord Toulson in paras 50 61 above is a good reason for adopting the approach. When considering how to characterise, or whether to develop, any fundamental principle of the common law, it is normally sensible for a judge to consider how the principle has been approached in other common law jurisdictions, and it is desirable, if not always achievable, that all common law jurisdictions adopt the same approach. Secondly, I should briefly address the fact that the criminal law and the Proceeds of Crime Act 2002 (POCA) may inevitably have some impact on the rights and duties of parties who have entered into contracts with an illegal connection. The involvement of the criminal law played a very important part in the judgment of McLachlin J in Hall v Hebert. It seems to me to have two main components. First, it is for the criminal law, not the civil law, to penalise a party or parties for entering into and/or performing a contract with an illegal component. Secondly, in so far as the civil law is fashioned by judges in a particular case, they must ensure that it is not inconsistent with the criminal law. So far as POCA is concerned, it enables the courts, through statutory powers, to do that which a common law judge cannot do, and which many might think was the best outcome in many of the more serious cases involving illegality, namely to ensure that the proceeds of crime are retained by neither party, but are paid over to the Government. This is not the occasion to discuss the effect of POCA, save to say that I would take some persuading that the common law should be influenced by the fact that POCA is or is not being invoked in any particular case, although the civil courts should not make any order, or at least permit the enforcement of any order, if its effect would run counter to the provisions of POCA or to any step which was being contemplated under POCA by the relevant authorities. Finally, I should say that, although my analysis may be slightly different from that of Lord Toulson, I do not think that there is any significant difference between us in practice. I agree with his framework for arriving at an outcome, but I also consider that there is a prima facie outcome, namely restitution in integrum. LORD MANCE: That the law of illegality, particularly as it results from Tinsley v Milligan [1994] 1 AC 340, merits at the highest level the consideration now being given to it, I would be among the first to accept. I indicated as much as a party to the unsatisfying decision which the Court of Appeal had to reach in Collier v Collier [2002] BPIR 1057: see in particular para 106. Whether it is, however, appropriate to abandon basic principles going back nearly 250 years, resting on the sound appreciation of as a great a judge as Lord Mansfield CJ and approved and elucidated by the Supreme Court of Canada in an authoritatively reasoned judgment in 1993, is a different matter. The basic problem, identified clearly and succinctly by Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341, is that there are at least three potential interests when questions of illegality arise for consideration: those of two parties and the public interest. It is, as he said, for reasons of public interest that an otherwise good cause of action may sometimes fail, where there has been illegality. In the absence of any relevant statutory power, the court has no direct power to mediate between these three interests, by for example requiring the public interest to be satisfied by a payment to the public purse. It does not even have the power, conferred by statute in New Zealand, to vary or validate an illegal contract in part or otherwise howsoever (New Zealand Illegal Contracts Act 1970, section 7). The application of the principle stated by Lord Mansfield was expanded in scope after his day (notably by Lord Eldon in Muckleston v Brown (1801) 6 Ves 52 as described by Lord Browne Wilkinson in Tinsley v Milligan at p 372F. But, more recently it has diminished, Tinsley v Milligan being itself actually an example of this, in so far as it confirmed both that legal title to property could pass under an illegal contract and that equitable title was capable of recognition. The courts recognition of the equitable title was, however, made subject to the (problematic) pre condition that the claimant could avoid reliance on illegality by relying on a procedural presumption. The court was able, in Tinsley v Milligan, to derive this presumption from the objectively demonstrable contribution made by Miss Milligan to the cost of acquiring the property. At the same time the court was prepared to ignore the fact, perfectly well known to it, of the parties illegal intentions. In common with Lord Toulson (paras 100 101), I consider that valuable insight into the appropriate approach to the significance of illegality under todays conditions is found in the judgment of McLachlin J (as she was) writing for the majority the Supreme Court of Canada in Hall v Hebert [1993] 2 SCR 159. The case concerned a claim in tort by a passenger against the owner of a car, who lost the keys when they fell out of the ignition when the car stalled and who decided in these circumstances that his passenger (who he knew to have drunk 11 or 12 bottles of beer) should drive while he tried to push start the car. Unsurprisingly, the manoeuvre led to the passenger losing control, the car turning over and the passenger being injured. The Canadian Supreme Court upheld the passengers claim, subject to contributory negligence. The majority in the Canadian Supreme Court rightly regarded the case as one of great importance. A number of points emerge with great clarity from McLachlin Js judgment: i) First, rejecting Cory Js suggestion that a power to reject claims on considerations of public policy should replace the maxim ex turpi causa non oritur action, McLachlin J expressed her concern that public policy would provide no clear guidance as to when judges could exercise this draconian power and upon what grounds. She went on: I fear that unless placed upon a firm doctrinal foundation and made subject to clear limits, this general power to invalidate actions on grounds of public policy might prove more problematic than has the troubled doctrine of ex turpi causa non oritur actio. We would be trading one label for another without coming to grips with the fundamental problem. (p 169) ii) Second, she saw tort, not contract, as the real problem area in relation to illegality, expressing the view that: The use of the doctrine of ex turpi causa to prevent abuse and misuse of the judicial process is well established in contract law and insurance law, where it provokes little controversy. The same cannot be said for tort. (p 171) iii) Third, after examining authorities where the maxim applied to prevent claimants from profiting or obtaining exemplary damages in circumstances of illegality, she identified its rationale in todays world, in terms which have equal relevance to contract and tort: The narrow principle illustrated by the foregoing examples of accepted application of the maxim of ex turpi causa non oritur actio in tort, is that a plaintiff will not be allowed to profit from his or her wrongdoing. This explanation, while accurate as far as it goes, may not, however, explain fully why courts have rejected claims in these cases. Indeed, it may have the undesirable effect of tempting judges to focus on the issue of whether the plaintiff is getting something out of the tort, thus carrying the maxim into the area of compensatory damages where its use has proved so controversial, and has defeated just claims for compensation. A more satisfactory explanation for these cases, I would venture, is that to allow recovery in these cases would be to allow recovery for what is illegal. It would put the courts in the position of saying that the same conduct is both legal, in the sense of being capable of rectification by the court, and illegal. It would, in short, introduce an inconsistency in the law. It is particularly important in this context that we bear in mind that the law must aspire to be a unified institution, the parts of which contract, tort, the criminal law must be in essential harmony. For the courts to punish conduct with the one hand while rewarding it with the other, would be to create an intolerable fissure in the laws conceptually seamless web: Weinrib [Illegality as a Tort Defence (1976) 26 UTLJ 28], at p 42. We thus see that the concern, put at its most fundamental, is with the integrity of the legal system. (pp 175 176) iv) Fourth, McLachlin J said that such compensatory damages as were claimed in Hall v Hebert are not properly awarded as compensation for an illegal act, but only as compensation for personal injury. Such damages accomplish nothing more than to put the plaintiff in the position he or she would have been in had the tort not occurred. No part of the award which compensates injury can be said to be the profit of, or the windfall from, an illegal act. (p 176) In substance, McLachlin J can in this passage be said to have been applying a reliance test in tort. To establish a right to compensation, all that the plaintiff had to rely on was the tortious conduct, consisting of the causing of injury by negligent driving. v) Finally, she concluded that: there is a need in the law of tort for a principle which permits judges to deny recovery to a plaintiff on the ground that to do so would undermine the integrity of the justice system. The power is a limited one. Its use is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law. Its use is not justified where the plaintiffs claim is merely for compensation for personal injuries sustained as a consequence of the negligence of the defendant. (pp 179 180) In my opinion, what is called for is a limited approach to the effect of illegality, focused on the need to avoid inconsistency in the law, without depriving claimants of the opportunity to obtain damages for wrongs or to put themselves in the position in which they should have been. This will offer the opportunity of resolving such problems as have, rightly, been identified in the present law, without replacing it wholesale with an open and unsettled range of factors. The latter might, in McLachlin Js words, prove more problematic than has the troubled doctrine of ex turpi causa itself. McLachlin Js emphasis on the admissibility of compensatory claims leads me to the principle traditionally addressed under the head of locus poenitentiae. This principle in fact had a relevant role in the Tinsley v Milligan in so far as it was recognised as demonstrating that the effect of illegality is not to prevent a proprietary interest in equity from arising or to produce a forfeiture of such right: the effect is to render the equitable interest unenforceable in certain circumstances: per Lord Browne Wilkinson, p 374D. But its true significance is considerably greater. Where it applies, it fulfils a not dissimilar function to a claim for damages in tort. It puts the parties back in the position that they should have been in, in this case but for the entry into of the contract which was or became affected and unenforceable by reason of the illegality. In early authorities the principle was put in wide terms. Smith v Bromley (1760) 2 Doug KB 696n was a case where the plaintiff was able to recover money she had paid to procure her brothers discharge from bankruptcy, which was an illegal payment. The primary reason was that the law making it illegal was for the protection of bankrupts and their families (so that the plaintiff and the defendant were non in pari delictu). An editors footnote (F7) on p 697 gives this as one of two exceptions to the principle that, in a case of illegality, matters are left to lie where they fall (potior est conditio defendentis). But Lord Mansfield CJ reinforced this reason by the more general consideration at p 698, that, although the payment had been made for an illegal purpose: Upon the whole, I am persuaded it is necessary, for the better support and maintenance of the law, to allow this action; for no man will venture to take, if he knows he is liable to refund. The other exception identified in the footnote was that where the contract is not excecuted, there is a locus poenitentiae, the delictum is incomplete, and the contract may be rescinded by either party. In Neville v Wilkinson (1782) I Bro Ch 543, 547, Lord Thurlow LC approved this approach, and declared his opinion that: [I]n all cases where money was paid for an unlawful purpose, the party, though particeps criminis, might recover at law; and that the reason was, that if courts of justice mean to prevent the perpetration of crimes, it must be not by allowing a man who has got possession to remain in possession, but by putting the parties back to the state in which they were before. In Taylor v Bowers (1876) 1 QBD 291 possession of goods had been passed by the plaintiff, their owner, to A, in exchange for fictitious bills of exchange, in order to deceive creditors. But no compromise was achieved with creditors, the illegal transaction was not carried out, and it wholly came to an end (p 300). In these circumstances, the plaintiff successfully sought recovery of the goods: To hold that the plaintiff is enabled to recover does not carry out the illegal transaction, but the effect is to put everybody in the same situation as they were before the illegal transaction was determined upon, and before the parties took any steps to carry it out. (p 300) The plaintiff was not seeking to enforce the illegal transaction, but, on the contrary, setting it aside and not setting up his own fraud in order to make a title, but repudiating the fraud and setting up his own prior rightful title as owner of the goods (p 301). Like Lord Sumption (paras 245 252), I see this principle of rescission as having become unduly limited with time, particularly in 20th century authority, and I consider that it should be restored to its former significance and generalised. Further, I consider that there is no reason why rescission should necessarily be restricted, as it was even in these earlier authorities, by reference to a test of execution or carrying out of the illegal purpose. The logic of the principle is that the illegal transaction should be disregarded, and the parties restored to the position in which they would have been, had they never entered into it. If and to the extent that the rescission on that basis remains possible, then prima facie it should be available. In addition, as at present advised, I would not see any necessary objection to permitting rescission after part performance, by making, where possible, appropriate adjustments for benefits received. Equally, picking up points in Lord Neubergers judgment (para 162) which I have read since writing the bulk of this judgment, I would not as at present advised see an imbalance or lack of parity of delict between the parties as a necessary or even probable bar to rescission, though I would agree that, in accordance with general principle, factors such as change of position could well preclude rescission. Complications may also arise in a context where a benefit received under an illegal transactions is capable of forfeiture under the Proceeds of Crime Act 2002. We did not hear submissions on the position in such circumstances, and I express no opinion on it. On the above basis, reliance on illegality remains significant as a bar to relief, but only in so far as it is reliance in order to profit from or otherwise enforce an illegal contract. Reliance in order to restore the status quo is unobjectionable. The result is, as I see it, not dissimilar to that which (leaving aside the potential effects of section 7) results under section 6(1) of the New Zealand Illegal Contracts Act 1970, providing that: Notwithstanding any rule of law or equity to the contrary, but subject to the provisions of this Act and of any other enactment, every illegal contract shall be of no effect and no person shall become entitled to any property under a disposition made by or pursuant to any such contract The approach I adopt avoids unsatisfactory results such as that reached in Collier v Collier, where it would have been entirely possible to achieve rescission even though the illegal scheme had been in some measure executed or carried out. The father there could require the restoration of the property of which he had for an illegal purpose allowed his daughter to have the legal title. Similarly, in a situation like that in Tinsley v Milligan, it should be possible to avoid reliance on the artificial procedural concept of a presumption of a resulting trust. Such a presumption was available in that case to give effect to (though without necessarily referring to) the parties actual intentions regarding equitable ownership or the reason (although the court was well aware of it) for structuring the transactions as they were. But, as Collier v Collier demonstrates, an artificial procedural presumption of this nature cannot be relied upon to be available in every case. In future, Miss Milligan should simply be able to reverse the effect, as between herself and Miss Tinsley, of the property transactions which they arranged for the illegal purpose, which they carried out, of deceiving public authorities. Because the court would be reversing, rather than enforcing the illegal transactions, the court could take into account both the objective fact of joint contributions and the parties actual and, by itself, legal purpose of joint ownership. Setting on one side the transactions by which they sought to achieve their illegal purpose, the underlying equitable interests, which they shared based on their contributions and intentions, would be enforceable as such. The court could on that basis order the property to be registered in the joint names of Miss Tinsley and Miss Milligan. It follows from what I have so far said that I cannot accept Lord Toulsons view (para 116) that it is unnecessary to consider the scope of locus poenitentiae. The underlying concept behind locus poenitentiae is restitutionary. It recognises that neither an admission of nor reliance on illegality is a bar to relief involving the reversal of an illegal transaction. In the full restitutionary sense I have discussed, the concept must be seen as an integral part of the overall principle governing illegality, and as the corollary of McLachlin Js limited rationalisation of that principle. Understood in that sense, free of early 20th century moralising, it restores the position to what it would and should have been, without any illegality. It avoids windfall benefits and disproportionate losses, without involving the positive enforcement of or the recovery of profits based on illegal bargains. No doubt, however, it would be desirable to avoid the moral undertones of the Latin brocard, and to encapsulate the full width of the modern principle, by referring in future simply to parties normal entitlement to reverse the effects of an illegal transaction, where possible, even though the transaction may have been wholly or in part executed or carried into effect. It also follows that in the present case I consider that no problem exists about recognising that Mr Patel is entitled to require Mr Mirza to return the stake which Mr Patel put up for the illegal purpose of use by Mr Mirza to make profits for their joint benefit by misuse of inside information. The claim does not seek to enforce or profit by the illegality. It seeks merely to put the position back to where it should have been, and would have been had no such illegal transaction ever been undertaken. I add that, having written the above and read Lord Neubergers judgment in draft, it seems to me that, thus far, my analysis is essentially the same as that which Lord Neuberger describes in his judgment as the Rule. Before leaving the case, I must however return to the suggestion, unnecessary in my view for the resolution of this appeal, that the law of illegality should be generally rewritten. The new approach is advocated primarily by Lord Toulson, but Lord Neuberger appears, unless I have misunderstood him, to suggest that it could serve both as a potential modification or qualification of the Rule and as an approach to be adopted to claims positively to enforce a contract, and to claims for damages for breach of contract or a quantum meruit for services rendered under an illegal contract (see his paras 174 175 and 178 180). The new approach is ostensibly based by Lord Toulson on Hall v Hebert, but it is transmuted by the statement (by Lord Toulson in para 101) that: one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without a) considering the underlying purpose of the prohibition which has been transgressed, b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality. We are, after all, in the area of public policy. That trio of necessary considerations can be found in the case law. Under consideration c), it is then indicated (paras 107 and 108) that: 107. In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant. Professor Burrows list is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases. Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties respective culpability. 108. The integrity and harmony of the law permit and I would say require such flexibility. The reference to Professor Burrows list is to the list which Lord Sumption sets out and analyses in his paras 259 and 260. What is apparent is that this approach, would introduce not only a new era but entirely novel dimensions into any issue of illegality. Courts would be required to make a value judgment, by reference to a widely spread mlange of ingredients, about the overall merits or strengths, in a highly unspecific non legal sense, of the respective claims of the public interest and of each of the parties. But courts could only do so, by either allowing or disallowing enforcement of the contract as between the two parties to it, unless they were able (if and when this was possible) to adopt the yet further novelty, pioneered by the majority of the Australian court in Nelson v Nelson [1995] HCA 25, (1995) 184 CLR 538, of requiring the account to the public for any profit unjustifiably made at the public expense, as a condition of obtaining relief. Although other jurisdictions are invoked, it is notable how slender the basis for doing so is. It comes down to the New Zealand statute and the Australian authorities of Nelson v Nelson and Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17, (1997) 189 CLR 215. We have no idea or information as to whether or not the approach there has proved unproblematic for the profession or the courts. What we do however have is an authoritative decision of the Canadian Supreme Court in Hall v Hebert, which does not in any way support the wholesale abandonment of a clear cut test, but rather explains and redefines the principle ex turpi causa in a manner which (consistently with the way in which the common law usually develops) offers every prospect of avoiding the evident anomalies which an over formalistic approach has in the past evidenced. Lord Toulson also starts his judgment with a series of paragraphs (1 to 9) instancing what are supposed to be problems existing under the present law. I would only say as to Holman v Johnson (1775) 1 Cowp 341 and Pearce v Brooks (1866) LR 1 Ex 213 that the question what constitutes knowing participation sufficient to render a contract unenforceable is a discrete problem, which is unlikely to be resolved any more simply under the range of factors approach now advocated. Likewise, the St John Shipping case [1957] 1 QB 267 and Ashmore Benson Pease & Co Ltd v A V Dawson Ltd [1973] 1 WLR 828 arose in areas where the purpose and effect of statutory provisions were central to the decision (as it was in cases such as Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225, Still v Minister of National Revenue (1997) 154 DLR (4th) 229 and Nizamuddowlah v Bengal Cabaret Inc (1977) 399 NYS 2d 854, mentioned by Lord Toulson in paras 6, 58 61 and 63 66). Questions as to the effect of collateral or minor illegality (such as parking on a double red line, instanced by Lord Neuberger in para 178) on the enforceability of contractual rights have not, I believe, led to real difficulty in achieving just solutions under these and other authorities (compare also McLachlin Js view cited in para 191(ii) above) and certainly not to such difficulty as to justify tearing up the existing law and starting again. Again, the new approach now advocated, with its wide range of additional factors, over and above statutory purpose and effect, would be unlikely to avoid similar analysis of statutory policy and similarly nice issues. More importantly, these are problems in areas far removed from the present, and do not to my mind throw any light on the issues we have to decide on this appeal. For the reasons I have given, which correspond with those given by Lord Clarke and Lord Sumption, I would dismiss this appeal. LORD CLARKE: As I see it, there is no disagreement between members of the court as to the correct disposal of this appeal. It is that the appeal must be dismissed because Mr Patel is entitled to restitution of the 620,000 that he paid to Mr Mirza on the basis that otherwise Mr Mirza would be unjustly enriched. As it seems to me, the application of orthodox principles of unjust enrichment, rescission and restitutio in integrum leads to this conclusion. Those principles are consistently set out by Lord Mance and Lord Sumption. Although Lord Sumption sets out a broader statement of principle, he agrees with Lord Mance and vice versa. As it seems to me, there is no difference between their approach and the application by Lord Neuberger of what he calls the Rule, which he defines in paras 145 and 146, as the right to return of money paid by the claimant to the defendant pursuant to a contract to carry out an illegal activity and the illegal activity is not in the event proceeded with owing to matters beyond the control of either party. Lord Sumption, at para 252, emphasises that the Rule arises automatically and by operation of law; a right to restitution that in principle follows from the legal ineffectiveness of the contract . I do not understand Lord Neuberger or Lord Mance to disagree with that. As Lord Neuberger says in para 146, the Rule is consistent with authority and with policy and renders the outcome in cases of contracts involving illegality and the maxim ex turpi causa non oritur action relatively clear and certain. As Lord Neuberger says at para 154, in agreement with Lord Mance, there is obvious attraction in the notion that, if all transfers made pursuant to an unexecuted illegal contract are re transferred, then the parties are back in the position they were, ie as if there had been no illegal contract, which would seem to comply with public policy. This approach does not require any balancing of a series of different factors. It simply applies the principles derived from the authorities to the facts of the case. Lord Neuberger, Lord Mance and Lord Sumption have referred in detail, and (so far as I can see) consistently, to the authorities over very many years. None of them supports a balancing of the kind suggested by Lord Toulson. To my mind the most important sources are the judgments of Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 341 and McLachlin J (now CJ) in Hall v Hebert [1993] 2 SCR 159. Lord Mance sets out in para 191 what he calls a number of points which emerge with great clarity from McLachlin Js judgment. I will not repeat those passages here. The critical point for present purposes is that she stressed the importance of having a firm doctrinal foundation for what she described as a narrow principle. She was concerned, at p 169, that public policy would provide no clear guidance as to when judges could exercise this draconian power and upon what grounds. The draconian power was a power to reject claims on considerations of public policy. On the facts of Hall v Hebert she concluded that such compensatory damages as were claimed in that case were not properly to be regarded as awarded as compensation for an illegal act but only as compensation for personal injury. Then, as Lord Mance says, finally she concluded that: there is a need in the law of tort for a principle which permits judges to deny recovery to a plaintiff on the ground that to do so would undermine the integrity of the justice system. The power is a limited one. Its use is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law. Its use is not justified where the plaintiffs claim is merely for compensation for personal injuries sustained as a consequence of the negligence of the defendant. I entirely agree with that approach. I have always thought that the power of the court to deny recovery on the ground of illegality should be limited to well defined circumstances. I agree with Lord Mance in para 192 that, in the absence of such circumstances, claimants should not be deprived of the opportunity to obtain damages for wrongs or to put themselves in the position in which they should have been. As I see it, there is no need to replace that approach with what he calls an open and unsettled range of factors. I agree with Lord Sumptions opinion in this regard. As he puts it at para 257, the search for principle which led McLachlin J to identify consistency as the foundation of this area of the law was a response to Cory J, who had favoured a more flexible approach which would have depended upon whether the relevant public policy required that result on the facts of each case. The majority, including McLachlin J, did not agree. In para 258 Lord Sumption draws attention to the similar opinion of Lord Goff in Tinsley v Milligan [1994] 1 AC 340 at 358E F, where he objected to the public conscience test adopted in the Court of Appeal, under which the court must weigh, or balance, the adverse consequences of respectively granting or refusing relief. Lord Goff added that that was little different, if at all, from stating that the court has a discretion whether to grant or refuse relief and that it was very difficult to reconcile with the principle of policy stated by Lord Mansfield in Holman v Johnson. As Lord Sumption observes, on this point Lord Goff was supported by the whole of the Appellate Committee. Between paras 259 and 265 Lord Sumption considers what he calls the range of factors approach and gives his reasons for rejecting it. I agree with him, and will not repeat his reasoning here, save for the following passage at para 262(iv): The range of factors test discards any requirement for an analytical connection between the illegality and the claim, by making the nature of the connection simply one factor in a broader evaluation of individual cases and offering no guidance as to what sort of connection might be relevant. I have already observed that the reliance test is the narrowest test available. If it is no longer to be decisive, the possibility is opened up of an altogether wider ambit for the illegality principle, extending to cases where the relevant connection was remote or non existent but other factors not necessarily involving any connection at all, were thought to be compelling. In short, such a test does not apply the principles laid down in the cases, and is inconsistent with the approach in Tinsley v Milligan and, in particular, the reliance test. In para 265 Lord Sumption says that he cannot agree with the conclusion of Lord Toulson (at para 109) that the application of the illegality principle should depend on the policy factors involved and the nature and circumstances of the illegal conduct, in determining whether the public interest in preserving the integrity of the justice system should result in the denial of the relief claimed. I agree with Lord Sumption that this is far too vague and potentially far too wide to serve as the basis on which a person may be denied his legal rights. As he says, it converts a legal principle into an exercise of judicial discretion, in the process exhibiting all the vices of complexity, uncertainty, arbitrariness and lack of transparency which Lord Toulson attributes to the present law. The illegality defence deprives claimants of their legal rights. The correct response for us is not to leave the problem to a case by case evaluation by the lower courts by reference to a potentially unlimited range of factors, but to address the problem by supplying a framework of principle which accommodates legitimate concerns about the present law. Lord Mance expresses much the same conclusion in paras 204 to 207, with which I also agree. It is to my mind noteworthy that Lord Toulson puts his conclusion thus in para 109: The courts must obviously abide by the terms of any statute, but I conclude that it is right for a court which is considering the application of the common law doctrine of illegality to have regard to the policy factors involved and to the nature and circumstances of the illegal conduct in determining whether the public interest in preserving the integrity of the justice system should result in denial of the relief claimed. I put it in that way rather than whether the contract should be regarded as tainted by illegality, because the question is whether the relief claimed should be granted. The striking feature of that approach is as I see it that it puts the question, not whether the contract should be regarded as tainted by illegality but whether the relief claimed should be granted. That seems to me to be essentially a question of discretion, or at least a consideration of all the relevant factors in order to decide where the balance should be struck. As I see it, there is no support in any of the authorities for that approach and it is directly contrary to many of the cases referred to by Lord Sumption and Lord Mance, in particular the reasoning of the majority in Hall v Hebert and of the House of Lords in Tinsley v Milligan, where it was expressly rejected by Lord Goff. It would be close to reviving the public conscience test. In my opinion the question posed in para 109 is the wrong question. I recognise that common law principles develop from time to time. Two such developments are relevant here. The first is this. Lord Sumption and Lord Mance both focus on the scope of the principle of restitutio in integrum, as does Lord Neuberger. For example, Lord Neuberger first sets out the basis of the Rule, which seems to me to be consistent with the principles identified by Lord Sumption and Lord Mance. Thus in much of his judgment, notably in paras 145 to 160, Lord Neuberger stresses that the Rule supports the importance of certainty in the law. He then gives some examples of possible extensions of the Rule. So, for example, he says in paras 167 to 169 that the Rule may apply where the illegal contract is wholly or partly performed by the plaintiff paying a lesser sum to the defendant. I agree, but that is on the basis that it is essentially ordering restitution so far as appropriate in accordance with the underlying principle embodied in the Rule. As Lord Neuberger puts it in para 169, there is no good reason for not extending the Rule to partly or even wholly performed contracts where restitutio in integrum can be achieved in practical terms and would be consistent with policy and proportionality. As I read his judgment, save at the very end his approach is orthodox and contemplates a development of the legal principles identified by Lord Sumption and Lord Mance. The second relevant development is this. It is now recognised that some of the reasoning in Tinsley v Milligan can no longer stand: see in particular Lord Sumption at paras 236 to 239 and Lord Mance at paras 199 to 201. It is I think now accepted on all sides that, if Collier v Collier [2002] BPIR 1057 came before the courts today it would be decided differently. That is not however because the court will adopt the proposals of Lord Toulson but because the relevant legal principles have developed in a normal way. Finally, I should note that it is not in dispute that the appeal should be dismissed on conventional principles. I recognise that Lord Neuberger has expressed some support for the approach of Lord Toulson but I am not persuaded by his reasoning that it is appropriate. LORD SUMPTION: (with whom Lord Clarke agrees) Two questions arise on this appeal. The first is whether the contract between these parties is affected by the principle of public policy ex turpi causa non oritur actio (the illegality principle, as I shall call it). The second is whether, if so, Mr Patel is entitled to restitution of the 620,000 that he paid to Mr Mirza. The first question has divided the courts below. The Deputy Judge (David Donaldson QC) and the majority of the Court of Appeal (Rimer LJ and Vos LJ) thought it plain that Mr Patels claim was founded on an illegal agreement and could not be sustained unless he could invoke a special exception for executory agreements. They considered that there was such an exception. Gloster LJ on the other hand declined to see the problem in terms of rule and exception. At the risk of a rather crude summary of her thoughtful analysis, I would summarise her reasons as follows. Her first and main point (paras 67, 69 70, 72, 79 80) was that the rationale of the illegality rule did not require Mr Patel to be denied restitutionary relief, because it did not involve enforcing his contract with Mr Mirza or enabling him to derive any benefit from it. Mr Patels right to restitution was, she considered, collateral. Second, that Mr Mirza and Mr Patel were not equally blameworthy because Mr Mirza was a finance professional while Mr Patel was not, and would not necessarily have known that insider dealing was illegal. Third, section 63(2) of the Criminal Justice Act 1993 provided that no contract should be void or unenforceable by reason of the prohibition of insider dealing in section 52. The fourth was that Mr Patel did not need to rely on the illegal character of his agreement with Mr Mirza in order to recover the money. It was enough that he had paid it for a speculation that never occurred. The illegality principle and its rationale The present appeal exposes, not for the first time, a long standing schism between those judges and writers who regard the law of illegality as calling for the application of clear rules, and those who would wish address the equities of each case as it arises. There are recent statements of this court in support of both points of view: see Les Laboratoires Servier v Apotex Inc [2015] AC 340 and Hounga v Allen [2014] 1 WLR 2889, paras 44 45. It also raises one of the most basic problems of a system of judge made customary law such as the common law. The common law is not an uninhabited island on which judges are at liberty to plant whatever suits their personal tastes. It is a body of instincts and principles which, barring some radical change in the values of our society, is developed organically, building on what was there before. It has a greater inherent flexibility and capacity to develop independently of legislation than codified systems do. But there is a price to be paid for this advantage in terms of certainty and accessibility to those who are not professional lawyers. The equities of a particular case are important. But there are pragmatic limits to what law can achieve without becoming arbitrary, incoherent and unpredictable even to the best advised citizen, and without inviting unforeseen and undesirable collateral consequences. Ancient as it is, the classic statement of the principle as it has traditionally been understood remains that of Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 341: The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. There was a time when the courts approached the application of the illegality principle on the footing that a court should not be required to sully its hands by dealing with criminal ventures. In Everet v Williams (1725), noted at (1893) LQR 197, the notorious case in which two highwaymen sought an account of the division of their profits, the court not only dismissed the action but fined the plaintiffs solicitors for the indignity visited upon it. There are periodic echoes of this attitude in later cases, notably Parkinson v College of Ambulance Ltd [1925] 2 KB 1, 13, in which Lush J thought that no adjudication on a contract to procure an honour could be undertaken with propriety or decency. This notion has sometimes been thought to derive support from Lord Mansfields reference to the court withholding its aid. But the truth is that it has rarely risen above the level of indignant judicial asides. There are many purposes for which courts must necessarily inquire into the illegal acts of litigants. There are principled exceptions to the illegality principle, which may entitle a party to base a claim on an illegal act. There are statutory schemes of apportionment which may require liability for dishonest acts to be distributed among the wrongdoers. The notion of judicial abstention could never be unqualified, nor has it been historically. The law, as Bingham LJ observed in Saunders v Edwards [1987] 1 WLR 1116, 1134, must steer a middle course between two unacceptable positions. On the one hand it is unacceptable that any court of law should aid or lend its authority to a party seeking to pursue or enforce an object or agreement which the law prohibits. On the other hand, it is unacceptable that the court should, on the first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct. In its consultative report of 2009, The Illegality Defence (LCCP 189), at para 2.5, the Law Commission identified six policy rationales for the rule, which could be found in the case law and the academic literature. They were: (1) furthering the purpose of the rule which the claimant's illegal behaviour has infringed; (2) consistency; (3) the need to prevent the claimant profiting from his or her own wrong; (4) deterrence; (5) maintaining the integrity of the legal system; and (6) punishment. By maintaining the integrity of the legal system (rationale (5)), the Law Commission meant sparing the judiciary from involvement in serious wrongdoing: see para 2.24. I have given my reasons for rejecting this rationale. The Law Commission itself (paras 2.28 2.29) rejected rationale (6), punishment, on the ground that although rules of civil law might have a punitive effect, this was no part of their purpose. With very limited exceptions, such as certain rules of causation in fraud cases or the rare occasions for awarding punitive damages, I think that this is correct. The other four rationales overlap. All of them to my mind are subsumed in no (2), the principle of consistency. The most influential statement of that principle is to be found in the much admired judgment of McLachlin J delivering the judgment of the majority of the Supreme Court of Canada in Hall v Hebert [1993] 2 SCR 159, 169: Whether we describe the principle under which judges are allowed to deny recovery to a plaintiff by an old fashioned Latin name or by the currently fashionable concept of public policy, the underlying problem remains the same: under what circumstances should the immoral or criminal conduct of a plaintiff bar the plaintiff from recovering damages to which he or she would otherwise be entitled. My own view is that courts should be allowed to bar recovery in tort on the ground of the plaintiffs immoral or illegal conduct only in very limited circumstances. The basis of this power, as I see it, lies in duty of the courts to preserve the integrity of the legal system, and is exercisable only where this concern is in issue. This concern is in issue where a damage award in a civil suit would, in effect, allow a person to profit from illegal or wrongful conduct, or would permit an evasion or rebate of a penalty prescribed by the criminal law. The idea common to these instances is that the law refuses to give by its right hand what it takes away by its left hand. After examining cases in which damages were refused when they represented a loss of benefits which would have been derived from an illegal contract or activity, she observed, at p 176: A more satisfactory explanation for these cases, I would venture, is that to allow recovery in these cases would be to allow recovery for what is illegal. It would put the courts in the position of saying that the same conduct is both legal, in the sense of being capable of rectification by the court, and illegal. It would, in short, introduce an inconsistency in the law. It is particularly important in this context that we bear in mind that the law must aspire to be a unified institution, the parts of which contract, tort, the criminal law must be in essential harmony. For the courts to punish conduct with the one hand while rewarding it with the other, would be to create an intolerable fissure in the laws conceptually seamless web. Her conclusion, at pp 179 180, was that: there is a need in the law of tort for a principle which permits judges to deny recovery to a plaintiff on the ground that to do so would undermine the integrity of the justice system. The power is a limited one. Its use is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law. Hall v Hebert was a tort case, and the implications of illegality are not in all respects the same in the law of tort as in they are other branches of law. I shall return to this point below. But, as McLachlin J pointed out in the passage cited, the law is a unified institution. At the most fundamental level of policy, its internal coherence requires that contract, tort and criminal law should be in harmony. In practice the illegality principle has almost invariably been raised as a defence to a civil claim based on a breach of the criminal law. In Les Laboratoires Servier v Apotex Inc [2015] AC 430, this court held that with immaterial exceptions the defence is available only in such cases. This conclusion tends to reinforce the significance of the principle of consistency as a rationale. The civil courts of the state cannot coherently give effect to legal rights founded on criminal acts which are contrary to the states public law. There is no reason to regard this as any less important according to whether the civil claim lies in contract or tort. The English courts have taken a broader view than McLachlan J did of what constitutes profiting from an illegal act, but that is by the way. Her rationalisation of the illegality principle as being based on the consistency and internal coherence of the law has been consistently adopted in England in tort and contract cases alike by this court and by the Appellate Committee of the House of Lords before it: see R v Islam [2009] AC 1076, para 38 (Lord Mance); Stone and Rolls Ltd v Moore Stephens [2009] 1 AC 1391, paras 128 (Lord Walker), 226 (Lord Mance); Hounga v Allen [2014] 1 WLR 2889, para 43 (Lord Wilson); Les Laboratoires Servier v Apotex Inc [2015] AC 430, para 24 (Lord Sumption); Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1, para 172 (Lord Toulson and Lord Hodge). In Gray v Thames Trains [2009] 1 AC 1339, Lord Hoffmann (with whom the rest of the Appellate Committee agreed) put forward the principle of consistency as the rationale of what he called the narrower rule precluding the recovery of damages representing loss directly arising from the sentence of a criminal court. He was inclined to think that the wider rule that a person cannot recover for damage which is the consequence of his own criminal act was based on a different principle concerned with public notions of the fair distribution of resources: para 51, and cf Lord Rodger at para 84. Certainly, the inconsistency of awarding damages representing loss arising from a criminal sentence is more obvious and direct than it is when the claimant is claiming other damages causally flowing from his commission of a crime. But it seems to me, as it did to McLachlan J and those who have adopted her approach more generally, that the internal coherence of the law is also the reason why it will not give effect in a civil court to a cause of action based on acts which it would punish in a criminal court. As Lord Hughes put it in Hounga v Allen (para 55), a dissenting judgment but not on this point, the law must act consistently; it cannot give with one hand what it takes away with another, nor condone when facing right what it condemns when facing left. When is a civil claim founded on an illegal act? The starting point is that the courts exist to provide remedies in support of legal rights. It is fundamental that any departure from that concept should have a clear justification grounded in principle, and that it should be no more extensive than is required by that principle. The underlying principle is that for reasons of consistency the court will not give effect, at the suit of a person who committed an illegal act (or someone claiming through him), to a right derived from that act. The test which has usually been adopted for determining whether this principle applies is the reliance test. The question is whether the person making the claim is obliged to rely in support of it on an illegal act on his part. The reliance test is implicit in Lord Mansfields statement of principle, which assumes that the plaintiffs action is founded on his illegal act. But the modern origin of the test is the decision of the Court of Appeal in Bowmakers Ltd v Barnet Instruments Ltd [1945] 1 KB 65, which concerned a hire purchase agreement illegal under wartime regulations. When the hirer disposed of the goods, the owner was held entitled to damages for conversion notwithstanding the illegality, because his right of action was based on his ownership. He could establish that without relying on the illegal hire purchase agreement. The reliance test was subsequently approved by the Privy Council in Singh v Ali [1960] AC 167 and Chettiar v Chettiar [1962] AC 294 and by the House of Lords in Tinsley v Milligan [1994] 1 AC 340. All of these decisions, were about title to property, real or personal. But in Clunis v Camden and Islington Health Authority [1998] QB 978 the Court of Appeal applied it to a claim in tort. In St John Shipping Co Ltd v Joseph Rank Ltd [1957] 1 QB 267, 291 292, Devlin J had applied it to a claim for freight under a contract of carriage. In Hewison v Meridian Shipping Services PTE Ltd [2003] ICR 766, the Court of Appeal applied it to a concurrent claim for damages in contract and tort in which the measure of damages depended on the terms of a contract. The claimants action for damages against his employer for an injury at work failed because in order to prove his loss of earnings he had to show that he would have continued to deceive his employer about his fitness to operate machinery, as he had in the past. There is, as these decisions suggest, nothing about the reliance test that limits its relevance to certain causes of action. But the test may apply in different ways, depending on what it is that the law regards as illegal. In a tort case or a property case it is generally enough to identify the illegal act and demonstrate the dependence of the cause of action upon the facts making it illegal. In a contract case, the position is less straightforward. A contract may be affected by illegality because terms lawful in themselves are intended to be performed in an illegal way or for an illegal purpose not apparent from the contract itself. This does not mean that contracts vitiated by this circumstance can be enforced simply by putting the case without reference to the illegal purpose or proposed mode of performance. It is enough to give rise to the defence that the claimant must rely on a contract which is in fact illegal, whether that is apparent from the terms or not. The problem about the reliance test is not so much the test itself as the way in which it was applied in Tinsley v Milligan. The facts of that case are well known. Ms Tinsley and Ms Milligan contributed in approximately equal shares to the cost of buying a house in which both of them intended to live and run their lodging rooms business. They decided that it would be conveyed into the sole name of Ms Tinsley so as to enable Ms Milligan to defraud the Department of Social Security by pretending that she did not own her home and paid rent. Ms Tinsley claimed an order for possession on the footing that she was the sole owner. The Appellate Committee held by a majority that Ms Milligan was entitled to assert a 50% interest in the house notwithstanding the illegal purpose for which it had been conveyed into Ms Tinsleys sole name. There were two stages in the reasoning of Lord Browne Wilkinson, who delivered the leading speech for the majority. The first was that where property is transferred for an illegal purpose, the transferee nevertheless obtains a good title, notwithstanding that the transaction being illegal it would not have been specifically enforced. This is so whether the title in question is legal or equitable. The decision of the majority on this point settled a question on which there had been inconsistent authorities dating back to the beginning of the 19th century. It did so in a way which reflected the laws traditional reluctance to disturb settled titles. The result represents a notable difference between the law relating to the creation of legal or equitable titles and the law relating to contractual obligations generally. It means that although a contract may be vitiated by its illegal purpose or the illegal way in which it was intended to be performed, this is not true of title to property. It followed in that case that Ms Tinsley had a good title to the disputed property. The second stage of the reasoning was that an equitable interest in the property would also be recognised, provided that the person claiming it was not forced to plead or rely on the illegality (p 376E). In Ms Milligans case, equity presumed a resulting trust in her favour by virtue only of her contribution to the purchase price. She did not therefore have to plead or prove the reasons why the property had been conveyed into Ms Tinsleys sole name. It followed that she could make good her claim to an interest. The problem about this is that it makes the illegality principle depend on adventitious procedural matters, such as the rules of pleading, the incidence of the burden of proof and the various equitable presumptions. If Ms Tinsley had been a man and Ms Milligan had been his daughter, the decision would have gone the other way because the presumption of resulting trust would have been replaced by a presumption of advancement. She would have had to rebut it by reference to the actual facts. This is what the Privy Council decided in Chettiar v Chettiar [1962] AC 294 and the Court of Appeal in Collier v Collier [2002] BPIR 1057, in both of which property was gratuitously transferred for an illegal purpose by a father to his son or daughter. The father was accordingly unable to establish his interest. Yet the distinction between these cases and Tinsley v Milligan is completely arbitrary. This is because the equitable presumptions operate wholly procedurally, and have nothing to do with the principle which the court is applying in illegality cases. In Nelson v Nelson (1995) 184 CLR 538, the majoritys analysis in Tinsley v Milligan was criticised on this ground in the High Court of Australia: see pp 579 580 (Dawson J), 592 593 (Toohey J), 609 610 (McHugh J). In my opinion, these criticisms are justified, although I would not go as far as McHugh did in Nelson v Nelson. He, alone among the judges of the High Court of Australia, would have jettisoned the reliance test altogether. What then is the true principle? In property cases, as the House held in Tinsley v Milligan, title is not vitiated by an antecedent illegal arrangement. An equitable interest in property may accordingly arise from a tainted scheme. Whether an equitable interest exists depends on the intentions of the parties. The true principle is that the application of the illegality principle depends on what facts the court must be satisfied about in order to find an intention giving rise to an equitable interest. It does not depend on how those facts are established. Ms Milligan was entitled to the interest which she claimed in the property because she paid half of the price and there was no intention to make a gift. That was all that the court needed to be satisfied about. Likewise, if Collier v Collier were to come before the courts today, the result should be the same notwithstanding that the equitable presumption went the other way. Mr Collier leased his property to his daughter for an illegal purpose, namely to deceive his creditors in the event that he became insolvent. He had an equitable interest in the property because the lease was gratuitous and there was no intention to make a gift. It would make no difference to the recognition of that interest that the purpose of the transaction was illegal. Why he chose to organise his affairs in that way would no doubt emerge in the course of the evidence, but would be irrelevant to the facts which founded his claim. The point was well made by Dawson J in Nelson v Nelson, at p 580: There may be an illegal purpose for the transfer of the property and that may bear upon the question of intention, but it is the absence of any intention to make a gift upon which reliance must be placed to rebut the presumption of advancement. Intention is something different from a reason or motive. The illegal purpose may thus be evidentiary, but it is not the foundation of a claim to rebut the presumption of advancement. Shorn of the arbitrary refinements introduced by the equitable presumptions, which in any event apply only in property cases, the reliance test accords with principle. First, it gives effect to the basic principle that a person may not derive a legal right from his own illegal act. Second, it establishes a direct causal link between the illegality and the claim, distinguishing between those illegal acts which are collateral or matters of background only, and those from which the legal right asserted can be said to result. Third, it ensures that the illegality principle applies no more widely than is necessary to give effect to its purpose of preventing legal rights from being derived from illegal acts. The reliance test is the narrowest test of connection available. Every alternative test which has been proposed would widen the application of the defence as well as render its application more uncertain. This last objection applies in particular to the main alternative test which has been proposed in the case law, namely that the facts relied upon should be inextricably linked with the illegal act. The difficulty about inextricable linkage as a test of connection is that it is far from clear what it means. On the face of it, the only link between the illegal act and the claim which is truly inextricable, is a link based on causation and necessary reliance. So far as the test of inextricable linkage broadens the required connection more widely, it seems to me to be contrary to principle. Its vices may be illustrated by reference to the decision in Cross v Kirkby [2000] EWCA Civ 426, The Times 5 April 2000, where it was first proposed by Beldam LJ. The facts were that a hunt saboteur started a fight with a hunt follower at a meet and came out of it worst. He ended up with a fractured skull, and sued the hunt follower for damages occasioned by his injuries. The main issue was whether the hunt follower had defended himself with excessive force. Beldam LJ held that he had not. But in case he was wrong about that, he held that the saboteurs injuries were inextricably linked with the fact that he had started the fight, so that his claim was barred by the illegality principle. Otton LJ agreed generally with Beldam LJ, but Judge LJ agreed only on the primary ground. To my mind, Beldam LJs alternative ground was unprincipled. It only arose if the hunt follower responded to the attack with excessive force, and on that footing it was irrelevant who started the fight. The illegality principle served simply to deprive the plaintiff of a proper claim arising from the unlawful use of excessive force against him. The case illustrates the tendency of any test broader than the reliance test to degenerate into a question of instinctive judicial preference for one party over another. Exceptions To the principle that a person may not rely on his own illegal act in support of his claim, there are significant exceptions, which are as old as the principle itself and generally inherent in it. These are broadly summed up in the proposition that the illegality principle is available only where the parties were in pari delicto in relation to the illegal act. This principle must not be misunderstood. It does not authorise a general enquiry into their relative blameworthiness. The question is whether they were legally on the same footing. The case law discloses two main categories of case where the law regards the parties as not being in pari delicto, but both are based on the same principle. One comprises cases in which the claimants participation in the illegal act is treated as involuntary: for example, it may have been brought about by fraud, undue influence or duress on the part of the defendant who seeks to invoke the defence. The best known example is Burrows v Rhodes [1899] 1 QB 816, where the illegality consisted in the plaintiff having enlisted in the defendants private army for the Jameson raid, contrary to the Foreign Enlistment Act 1870. The illegality principle was held not to arise because he had been induced to do so by the defendants fraudulent misrepresentation that the raid had the sanction of the Crown, which if true would have made it legal. Cases in which the illegality consisted in the act of another for which the claimant is responsible only by virtue of a statute imposing strict liability, fall into the same category: see Osman v J Ralph Moss Ltd [1970] 1 Lloyds Rep 313; Les Laboratoires Servier v Apotex [2015] AC 430, para 29. In such cases, however, the construction and purpose of the statute in question will call for careful attention. The other category comprises cases in which the application of the illegality principle would be inconsistent with the rule of law which makes the act illegal. The paradigm case is a rule of law intended to protect persons such as the plaintiff against exploitation by the likes of the defendant. Such a rule will commonly require the plaintiff to have a remedy notwithstanding that he participated in its breach. The exception generally arises in the context of acts made illegal by statute. In Browning v Morris (1778) 2 Cowp 790, 792, Lord Mansfield expressed the point in this way: Where contracts or transactions are prohibited by positive statutes for the sake of protecting one set of men from another set of men, the one, from their situation and condition being liable to be oppressed or imposed upon by the other, there the parties are not in pari delicto; and in furtherance of these statutes, the person injured, after the transaction is finished and completed, may bring his action and defeat the contract. The classic modern illustration is Kiriri Cotton Co Ltd v Dewani [1960] AC 192, in which a tenant was held entitled to recover an illegal premium paid to the landlord, notwithstanding that his payment of it involved participating in a breach of an ordinance regulating tenancies. Lord Denning, delivering the advice of the Privy Council, observed at p 205 that: The duty of observing the law is firmly placed by the Ordinance on the shoulders of the landlord for the protection of the tenant. Hounga v Allen [2014] 1 WLR 2889 on its facts illustrates the same principle. The claimant had been illegally trafficked into the United Kingdom by her employer. Her vulnerability on that account enabled her employer to exploit and ultimately to dismiss her. An attempt to bar her claim for unlawful discrimination on account of her participation in her own illegal trafficking failed. There was no claim under the employment contract itself, which was illegal, but it may well be that a claim for a quantum meruit for services performed would have succeeded on the same ground. There is New York authority for such a result: see Nizamuddowlah v Bengal Cabaret Inc (1977) 399 NYS 2d 854. Protective statutes are the plainest examples of rules of law which implicitly exclude the operation of the illegality principle, but they are not the only ones. Some statutes, on their proper construction, are inconsistent with the application of the illegality principle even if they are in no sense protective. The statutory prohibitions against the overloading of ships are wholly directed to the operational safety of ships and their crews. On that ground, among others, Devlin J held in St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267 that a breach of the Merchant Shipping (Safety and Load Line Conventions) Act 1932 did not justify shippers and bill of lading holders in defending an action for freight. For the same reason, the illegality principle has been held to have no application to claims to contribution under the Civil Liability (Contribution) Act 1978. The reason is that this would be inconsistent with the scheme of the Act: K v P [1993] Ch 140. In Stone and Rolls Ltd v Moore Stephens [2009] AC 1391, three members of the Appellate Committee, Lord Phillips, Lord Scott and Lord Mance, regarded the application of the illegality principle to an auditors negligence as turning on the purpose of the auditors statutory functions, although they reached different conclusions about what that purpose was. Restitution and loci poenitentiae The next question is whether the illegality principle bars an action for the recovery of the money which Mr Patel paid under the contract. English law does not have a unified theory of restitution. Failure or absence of basis, which supplies such a theory in most civil law systems, was rejected as the overarching rationale of the law of restitution in Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70, 172 (Lord Goff). For the moment, therefore, as Lord Hoffmann observed in Deutsche Morgan Grenfell Group plc v Inland Revenue Comrs [2007] 1 AC 558, para 21, the claimant has to prove that the circumstances in which the payment was made come within one of the categories which the law recognizes as sufficient to make retention by the recipient unjust. It is nonetheless true that failure of basis is the reason (or at least a reason) why the retention of a benefit is treated in some categories of case as unjust. One of these is the category of case in which a money benefit is conferred on the recipient under or in anticipation of a contract and the basis for that transfer has failed, for example by frustration, total failure of consideration or want of contractual capacity or vires on the part of one of the parties. As a general rule, benefits transferred under a contract which is void or otherwise legally ineffective are recoverable: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1994] 4 All ER 890 (Hobhouse J), approved (obiter) on appeal to the House of Lords [1996] AC 669, 681 682 (Lord Goff), 714 (Lord Browne Wilkinson), 723 (Lord Woolf). In Guinness Mahon & Co Ltd v Kensington and Chelsea Royal London Borough Council [1999] QB 215, the Court of Appeal held that the ineffectiveness of the transaction was a ground of restitution independent of total failure of consideration, and therefore available even if the contract had been partly performed. The reason, as Morritt LJ observed (p 230) is that: The bank did not get in exchange for that performance all it expected, for it did not get the benefit of the contractual obligation. One would expect the same reasoning to apply where the contract is unenforceable for illegality. In fact, however, the courts have not said this. The reason is that they have treated restitution as being available only where the payer was entitled to a locus poenitentiae in which to withdraw from the transaction. The breadth of this locus has varied with judicial fashion, but for much of the 20th century it was very narrowly interpreted indeed. This approach is not consistent with the recognition of a general right to the restitution of money paid under an illegal contract, in spite of the close analogy with other cases of ineffective contracts. In one sense, the contract between these parties may be said to have been frustrated by the failure of the inside information to materialise, or to have resulted in a total failure of consideration because as a result the shares were never purchased. But that cannot be an adequate explanation of the reason why someone in Mr Patels position may be entitled to restitution even on the limited basis which the concept of a locus poenitentiae allows. That concept permits the recovery of money paid even before (indeed, especially before) the time for performance has arrived, and therefore in many cases before the contract was frustrated or the question of failure of consideration could arise. The ground of restitution in these circumstances can only be that the contract was illegal and that the basis for the payment had failed. Of course, in order to demonstrate that the basis for the payment had failed, Mr Patel must say what that basis was, which would necessarily disclose its illegality. In my opinion, the reason why the law should nevertheless allow restitution in such a case is that it does not offend the principle applicable to illegal contracts. That principle, as I have suggested above, is that the courts will not give effect to an illegal transaction or to a right derived from it. But restitution does not do that. It merely recognises the ineffectiveness of the transaction and gives effect to the ordinary legal consequences of that state of affairs. The effect is to put the parties in the position in which they would have been if they had never entered into the illegal transaction, which in the eyes of the law is the position which they should always have been in. The judges who first formulated the modern law of illegality at the end of the 18th century had no difficulty about this. In Smith v Bromley (1760) 2 Doug 696n, 697, one of Lord Mansfields earliest statements on this area of law, he thought that restitution of an illegal consideration was necessary for the better support and maintenance of the law. In Neville v Wilkinson (1782) Lord Chancellor Thurlow referred to this statement and declared his opinion, that, in all cases where money was paid for an unlawful purpose, the party, though particeps criminis, might recover at law; and that the reason was, that if courts of justice mean to prevent the perpetration of crimes, it must be not by allowing a man who has got possession to remain in possession, but by putting the parties back to the state in which they were before. This was the basis on which relief was granted, at any rate by Mellish LJ and Bagallay LJ, in Taylor v Bowers (1876) 1 QBD 291 traditionally regarded as the leading case, and by Lord Atkinson delivering the advice of the Privy Council in Petherpermal Chetty v Muniandi Servai (1908) LR 35 Ind App 98, 103. In the course of the twentieth century, the law took a different and to my mind less satisfactory turn. The courts began to treat the right of restitution as depending on the moral quality of the plaintiffs decision to withdraw. They reasoned that if the object of allowing restitution was to encourage withdrawal from an illegal venture, it ought to be withheld if the claimant had withdrawn involuntarily, for example because the other party withdrew first or the venture became impossible or failed for some reason other than his genuine regret. Although there are earlier traces of this notion, it is first overtly expressed in Parkinson v College of Ambulance [1925] 2 KB 1, 16, where Lush J suggested that there was no locus poenitentiae if there was no penitence. It may be said to have reached its high point in the three decisions in Alexander v Rayson [1936] 1 KB 169, Berg v Sadler & Moore [1937] 2 KB 158 and Bigos v Bousted [1951] 1 All ER 92. The concept of penitential withdrawal leads to difficult distinctions and suggests an enquiry into a partys state of mind of a kind which the law rarely contemplates. It was rejected, rightly to my mind, by Millett LJ in Tribe v Tribe [1996] Ch 107, 135 Justice is not a reward for merit, he said: restitution should not be confined to the penitent. I agree. But for the same reason I would reject the suggestion that Millett LJ went on to make that the right to restitution should still depend on the voluntary character of the plaintiffs withdrawal. As with the notion of penitence, this is to put a moral gloss on a principle that depends simply on the right to restitution that in principle follows from the legal ineffectiveness of the contract under or in anticipation of which the money was paid. The courts view about when the right of restitution ceases to be available has closely reflected the way in which they have analysed that right. At the outset, and throughout the 19th century, they held that the right of restitution ceased in contract cases once the contract had been executed at least in part. The reason for this was that they viewed the right of restitution as arising from a principle analogous to rescission for mistake or misrepresentation. They therefore applied to it the then current doctrine that an executed contract could not be rescinded at law except for fraud. In Lowry v Bourdieu (1780) 2 Doug 468, 471, Buller J observed that in this context there was a sound distinction between contracts executed and executory; and if an action is brought to rescind a contract, you must do it while the contract continues executory. Lord Mansfield, who sat in that case, presumably agreed, for he had expressed the same view less expansively in Browning v Morris (1778) 2 Cowp 790. Later, when the courts came to regard the locus poenitentiae as depending on the moral quality of the plaintiffs reason for resiling, they reframed the proposition so as to suggest that the right of restitution ceased to be available when the illegal purpose of the venture had been carried out. This might be the same as the point of time when the contract was executed. But it might be later, as in the numerous cases where a person nominally transferred his property to another with a view to defrauding his creditors. This test seems to me to be practically unworkable. Are we to distinguish between cases where the relevant representation was never made to the creditors and cases where it was but they did not believe it? More fundamentally, it proceeds from the same spurious moral gloss on the legal principle as the notion that the claimants withdrawal must have been voluntary or penitent. The rule against rescinding executed contracts has now gone, and the limitation to cases in which the unlawful purpose has not been carried out never was sound. The rational rule, which I would hold to be the law, is that restitution is available for so long as mutual restitution of benefits remains possible. In most such cases, the same facts will give rise to a defence of change of position. I would also reject the dicta, beginning with Tappenden v Randall (1801) 2 B&P 467, 470 and Kearley v Thomson (1890) 24 QBD 742, 747, to the effect that there may be some crimes so heinous that the courts will decline to award restitution in any circumstances. There are difficulties about distinguishing between degrees of illegality on what must inevitably be a purely subjective basis. But the suggestion is in any event contrary to principle. If I pay 10,000 to a hitman to kill my enemy, he should not kill my enemy and should not have 10,000. The fact that when it comes to the point he is unwilling or unable to kill my enemy does not give him any legal or moral entitlement to keep the 10,000. If he does kill him, the rational response is the same. He should be convicted of murder, but he should never have received the money for such a purpose and by the same token should not be allowed to retain it. Of course, in practice, this is all rather artificial. In a case involving heinous crimes, both parties would be exposed to confiscation orders under the Proceeds of Crime Act 2002. St Thomas Aquinas thought the ideal solution to such a conundrum was that neither party should have the money, which should be paid to charity: Summa Theologica II.2, Q 62, para 5. The courts have no power to order that, but statute has now intervened to produce something like the same result. I say nothing about cases in which an order for restitution would be functionally indistinguishable from an order for enforcement, as in a case of an illegal loan or foreign exchange transaction. The traditional view is that if the law will not enforce an agreement it will not give the same financial relief under a different legal label: Boissevain v Weil [1950] AC 327. I am inclined to think that the principle is sound, but I should prefer not to express a concluded view on the point. It is not the position here. The rule based approach and the range of factors approach I can now return to the judicial schism to which I referred at the outset of this judgment. A convenient starting point is the Supreme Court of Canadas decision in Hall v Hebert, to which I have already referred. It is important to remember that the search for principle which led McLachlin J to identify consistency as the foundation of this area of law was a response to the judgment of Cory J in the same case. He had favoured a more flexible test for applying the illegality principle, which would have depended on whether the relevant public policy required that result on the facts of each case: see p 205. That approach was not accepted by the rest of the court. Part of McLachlin Js concern about it arose from the absence of clear guidance as to when judges could exercise this draconian power and upon what grounds. I fear that unless placed upon a firm doctrinal foundation and made subject to clear limits, this general power to invalidate actions on grounds of public policy might prove more problematic than has the troubled doctrine of ex turpi causa non oritur actio. We would be trading one label for another without coming to grips with the fundamental problem. (p 169) In Tinsley v Milligan [1994] 1 AC 340, a similar view was taken by Lord Goff. I have cited extensively from this part of his speech in my judgment in Les Laboratoires Servier v Apotex Inc [2015] AC 430, para 16, and the exercise need not be repeated here. In summary, Lord Goff objected to a test for applying the illegality principle which would require the court to weigh, or balance, the adverse consequences of respectively granting or refusing relief (p 358E F). The adoption of such a test, he considered, at p 363, would constitute a revolution in this branch of the law, under which what is in effect a discretion would become vested in the court to deal with the matter by the process of a balancing operation, in place of a system of rules, ultimately derived from the principle of public policy enunciated by Lord Mansfield CJ in Holman v Johnson. On this point, Lord Goff was supported by the whole of the Appellate Committee. For many years, the chief critic of this approach was the Law Commission, which at one stage proposed legislation along the lines of the New Zealand Illegal Contracts Act 1970 to make the application of the illegality principle subject to a broad judicial discretion. More recently, Professor Burrows has proposed that the same solution should be adopted by judicial decision, in his Restatement of the Law of Contract (2016). He would make the application of the illegality principle dependent, at any rate in contract cases, on a range of factors approach. This would require the judge to assess whether to deny a remedy would be an appropriate response to the claimants conduct, taking account where relevant of eight factors. These factors are for the most part derived from the Law Commissions Consultative Report (paras 8.3, 8.11). They are: (a) how seriously illegal or contrary to public policy the conduct was; (b) whether the party seeking enforcement knew of, or intended, the conduct; (c) how central to the contract or its performance the conduct was; (d) how serious a sanction the denial of enforcement is for the party seeking enforcement; (e) whether denying enforcement will further the purpose of the rule which the conduct has infringed; (f) whether denying enforcement will act as a deterrent to conduct that is illegal or contrary to public policy; (g) whether denying enforcement will ensure that the party seeking enforcement does not profit by the conduct; (h) whether denying enforcement will avoid inconsistency in the law, thereby maintaining the integrity of the legal system. Lord Toulson, in his judgment on the present appeal, supports this approach while suggesting that yet further factors may also be relevant. With the arguable exception of (a) and (d) all of the considerations identified by Professor Burrows have been influential factors in the development of the rules of law comprised in the illegality principle as it stands today. Thus (b) is reflected in the requirement that, except where the making of the contract was itself illegal, there should have been some degree of participation by the claimant in the illegal act. It is also reflected in the exception for cases in which he was liable for the acts of another by virtue only of a rule imposing strict liability. As to (c), the purpose of the reliance test is to confine the illegality principle to cases in which the illegal act was truly central. Factor (e) is the basis of the exception discussed earlier in this judgment for cases in which the application of the illegality principle would be inconsistent with the legal rule which makes the act illegal, for example because its object is the protection of someone in the position of the claimant. It is also the basis on which claims are allowed for the restitution of money paid under an illegal contract. As to (f) and (g), there can be no doubt that historically the hope of deterring illegal conduct and depriving those responsible of any benefit arising from it have been important factors in the development of the illegality principle, although I personally doubt whether any but the best advised litigants have enough knowledge of the law to be deterred by it. Factor (h), as I have suggested, is the most widely accepted rationale for the illegality principle in the modern law. The real issue, as it seems to me, is whether the range of factors identified by the Law Commission and Professor Burrows are to be regarded (i) as part of the policy rationale of a legal rule and the various exceptions to that rule, or (ii) as matters to be taken into account by a judge deciding in each case whether to apply the legal rule at all. As matters stand, the former approach represents the law. The latter would require the courts to weigh, or balance, the adverse consequences of respectively granting or refusing relief on a case by case basis, which was the very proposition that the House of Lords unanimously rejected in Tinsley v Milligan. We are entitled to change the law, but if we do that we should do it openly, acknowledging what we are doing and assessing the consequences, including the indirect consequences, so far as we can foresee them. In my opinion, it would be wrong to transform the policy factors which have gone into the development of the current rules, into factors influencing an essentially discretionary decision about whether those rules should be applied. Neither party contended for such a result, and their reticence was in my view entirely justified. It would be unprincipled and uncertain, and far from confining the ambit of the illegality principle to its essential minimum, it could only broaden it beyond its proper limits. Perhaps most important of all, justice can be achieved without taking this revolutionary step. The reason why the application of the range of factors test on a case by case basis is unprincipled is that it loses sight of the reason why legal rights can ever be defeated on account of their illegal factual basis. It is I think right to make four points: i) Whatever rationale one adopts for the illegality principle, it is manifestly designed to vindicate the public interest as against the interests and legal rights of the parties. That is why the judge is required to take the point of his own motion even if the parties have not raised it, as the deputy judge did in this case. The operation of the principle cannot therefore depend on an evaluation of the equities as between the parties or the proportionality of its impact upon the claimant. ii) The range of factors test largely devalues the principle of consistency, by relegating it to the status of one of a number of evaluative factors, entitled to no more weight than the judge chooses to give it in the particular case. The criminal law, which is in almost every case the source of the relevant illegality, is a critical source of public policy. It is the prime example of the positive law (Lord Mansfields phrase) which has always moulded the law of illegality in civil proceedings. The courts cannot consistently or coherently recognise legal consequences for an act which the law treats as punishable. Gloster LJ, for example, thought it relevant that there was no finding that Mr Patel knew that insider dealing was illegal. Yet that would have been of no relevance in a criminal court, and it is difficult to see why it should be any more relevant in a civil one. Professor Burrows factor (f) (whether denying enforcement will ensure that the party seeking enforcement does not profit by the conduct) is surely fundamental to the principle of consistency, and not just a factor to be weighed up against others. iii) The main justification for the range of factors test has always been that it enables the court to avoid inflicting loss on the claimant disproportionate to the measure of his badness. This was the instinct that led the Court of Appeal in Euro Diam Ltd v Bathurst [1990] 1 QB 1 to propose that the illegality principle should be applied only where the alternative would be shocking to the public conscience. That concept was rejected in Tinsley v Milligan. Since then, it has been suggested that there may be cases at the opposite end of the spectrum of gravity, in which the offence was too trivial to engage the illegality principle: see Gray v Thames Trains Ltd, at para 83 (Lord Rodger). One would expect most if not all such offences to be covered by the exception for cases in which the application of the illegality principle would be inconsistent with the legal rule which makes the act illegal. But, extremes apart, it is difficult to reconcile with any kind of principle the notion that there may be degrees of illegality, as Professor Burrows factor (a) seems to envisage. If the application of the illegality principle is to depend on the courts view of how illegal the illegality was or how much it matters, there would appear to be no principle whatever to guide the evaluation other than the judges gut instinct. This was why this court recently rejected the view expressed by the Court of Appeal in Les Laboratoires Servier v Apotex Inc [2013] Bus LR 80 that an illegal act might nevertheless found a cause of action if it was not as wicked as all that. iv) The range of factors test discards any requirement for an analytical connection between the illegality and the claim, by making the nature of the connection simply one factor in a broader evaluation of individual cases and offering no guidance as to what sort of connection might be relevant. I have already observed that the reliance test is the narrowest test available. If it is no longer to be decisive, the possibility is opened up of an altogether wider ambit for the illegality principle, extending to cases where the relevant connection was remote or non existent but other factors not necessarily involving any connection at all, were thought to be compelling. The reason why the adoption of a range of factors test on a case by case basis would be uncertain is obvious in the light of these considerations. An evaluative test dependent on the perceived relevance and relative weight to be accorded in each individual case to a large number of incommensurate factors leaves a great deal to a judges visceral reaction to particular facts. Questions such as how illegal is illegality would admit of no predictable answer, even if the responses of different judges were entirely uniform. In fact, it is an inescapable truth that some judges are more censorious than others. Far from resolving the uncertainties created by recent differences of judicial opinion, the range of factors test would open a new era in this part of the law. A new body of jurisprudence would be gradually built up to identify which of a large range of factors should be regarded as relevant and what considerations should determine the weight that they should receive. No one factor would ever be decisive as a matter of law, only in some cases on their particular facts. The size of the authorities bundles in this and other recent appeals to this court on the illegality principle is testimony to the volume of litigation which the principle has generated in every period of its history. I do not suppose that those who are about to enter into an illegal transaction are in the habit of studying the decisions of the courts on the point, but those who advise them after the event do, and the resultant uncertainty is likely to generate a great deal of wasteful and unnecessary litigation. I would readily accept that certainty is not the only value, or even necessarily the most important. But we are concerned in this case with the law of contract, an area in which the value of certainty is very great. It is one thing to say that a legal right may be overridden by a rule of law. It is another thing altogether to make a legal right, and particularly a contractual right, dependent on a judges view about whether in all the circumstances it ought to be enforced. Finally, I would point out that the adoption of such a revolutionary change in hitherto accepted legal principle is unnecessary to achieve substantial justice in the great majority of cases. The unsatisfactory features of the illegality principle as it has traditionally been understood have often been overstated, in part because of the way in which they were emphasised by Lord Goff in Tinsley v Milligan. It was, he said, not a principle of justice; it is a principle of policy, whose application is indiscriminate and so can lead to unfair consequences as between the parties to litigation (p 355B C). That observation, however, reflected his view that no equitable interest in property could ever be claimed where the legal title had been vested in another for dishonest purposes. The law had been stated in this way by Lord Eldon at the beginning of the 19th century: see Muckleston v Brown (1801) 6 Ves 52 and Curtis v Perry (1802) 6 Ves 739. But Lord Eldons approach, although adopted by Lord Goff, was rejected by the majority of the Committee. When the law of illegality is looked at as a whole, it is apparent that although governed by rules of law, a considerable measure of flexibility is inherent in those rules. In particular, they are qualified by principled exceptions for (i) cases in which the parties to the illegal act are not on the same legal footing and (ii) cases in which an overriding statutory policy requires that the claimant should have a remedy notwithstanding his participation in the illegal act. Properly understood and applied, these exceptions substantially mitigate the arbitrary injustices which the illegality principle would otherwise produce. At the same time, the wider availability of restitutionary remedies which will result from the present decision will do much to mitigate the injustices which have hitherto resulted from the principle that the loss should lie where it falls. For these reasons, I regret that I cannot agree with the conclusion of Lord Toulson (para 109) that that the application of the illegality principle should depend on the policy factors involved and the nature and circumstances of the illegal conduct, in determining whether the public interest in preserving the integrity of the justice system should result in the denial of the relief claimed. In my opinion, this is far too vague and potentially far too wide to serve as the basis on which a person may be denied his legal rights. It converts a legal principle into an exercise of judicial discretion, in the process exhibiting all the vices of complexity, uncertainty, arbitrariness and lack of transparency which Lord Toulson attributes to the present law. I would not deny that in the past the law of illegality has been a mess. The proper response of this court is not to leave the problem to case by case evaluation by the lower courts by reference to a potentially unlimited range of factors, but to address the problem by supplying a framework of principle which accommodates legitimate concerns about the present law. We would be doing no service to the coherent development of the law if we simply substituted a new mess for the old one. Application to the present case Against that background it is in my view entirely clear that the transaction into which these parties entered was affected by the illegality principle. The agreement pleaded, and found by the deputy judge to have been made, was not simply that Mr Mirza would place bets on movements of RBS shares for the joint account of himself and Mr Patel, but that he would do so with the benefit of inside information. Subject to immaterial exceptions, section 52 of the Criminal Justice Act 1993 makes it an offence for a person in possession of inside information to deal or encourage another person to deal in securities, including contracts for differences. This was accordingly an agreement for Mr Mirza to commit a criminal offence. It was also a criminal conspiracy to that end. Section 63(2) of the 1993 Act provides that: No contract shall be void or unenforceable by reason only of section 52. The contracts affected by section 52 are contracts by way of dealing in securities. It follows that if Mr Mirza had placed the spread bets with IG Index, as he had conditionally promised to do, the contract would have been enforceable as between himself and IG Index. But Mr Patel could not have obtained specific performance of the distinct contract between himself and Mr Mirza or damages for breach of it. This is because, first, he would have had to rely on the contract, which provided as one of its terms that the dealing should be carried out with the benefit of inside information. Mr Patel could not have avoided this result by simply characterising it as an agreement to speculate in RBS shares without referring to the basis on which it was agreed that that should happen. Secondly, none of the possible exceptions apply. The parties were on the same legal footing. Both would be liable to conviction for conspiracy in a criminal court, and any difference in the degree of their fault would be relevant only to the sentence. Section 52 of the Criminal Justice Act 1993 is not a statute designed to protect the interests of persons entering into an agreement to commit the offence of insider dealing, and there is no other overriding statutory policy which requires their participation in the offence to be overlooked when it comes to determining its civil consequences. However, restitution still being possible, none of this is a bar to Mr Patels recovery of the 620,000 which he paid to Mr Mirza. The reason is simply that although Mr Patel would have to rely on the illegal character of the transaction in order to demonstrate that there was no legal basis for the payment, an order for restitution would not give effect to the illegal act or to any right derived from it. It would simply return the parties to the status quo ante where they should always have been. The only ground on which that could be objectionable is that the court should not sully itself by attending to illegal acts at all, and that has not for many years been regarded as a reputable foundation for the law of illegality. This was Gloster LJs main reason for upholding Mr Patels right to recover the money. Although my analysis differs in a number of respects from hers, I think that the distinction which she drew between a claim to give effect to a right derived from an illegal act, and a claim to unpick the transaction by an award of restitution, was sound. In the circumstances, Mr Mirzas only arguable defence was that he had paid the money to Mr Georgiou, the intermediary who had proposed the deal. But the judge declined to make a finding to this effect, and rejected a defence of change of position on the ground that even if it was true, Mr Mirza had had no reason to repay the money to anyone but Mr Patel from whom he had received it. The Court of Appeal gave judgment for Mr Patel for 620,000 with interest. For the reasons which I have given, which correspond to those given by Lord Mance and Lord Clarke, I would dismiss the appeal against that order. |
These appeals raise a number of points, some technical, others fundamental, relating to the requirements of and consequences of non compliance with the short and inflexible time limits introduced by the Extradition Act 2003. Parts 1 and 2 of that Act deal with extradition to respectively category 1 territories in practice other member states of the European Union party to the Council Framework Decision of 13 June 2002 (2002/584/JHA) introducing the European Arrest Warrant, to which Part 1 gives effect and category 2 territories in relation to which a different and more traditional scheme applies. Each of the schemes contained in Part 1 and 2 leads to the person whose extradition is requested being brought before a judge. The judge then decides, by considering a series of questions laid down in the Act, whether or not, in the case of Part 1, to order extradition or, in the case of Part 2, to send the case to the Secretary of State for his decision whether to extradite. Depending upon the judges decision, there are rights of appeal to the High Court on law and fact. These are given under Part 1 to the individual (section 26) or to the authority issuing the warrant (section 28) and under Part 2 to the individual (section 103) or the authority acting on behalf of the category 2 territory seeking extradition (section 105). Rights of appeal also exist under Part 2, if the Secretary of State orders extradition (sections 108(1) and 110(1)). These rights of appeal must all be exercised within short time limits, described as the permitted periods. Thus, section 26(4) provides in the case of an order for extradition to a Part 1 territory that: Notice of an appeal under this section must be given in accordance with rules of court before the end of the permitted period, which is seven days starting with the day on which the order is made. Section 28(4) gives the authority a parallel right in the case of an order for discharge, providing for a like seven day permitted period starting with the day on which the order for the persons discharge is made. Sections 103, 105, 108 and 110 provide for appeals from a judges order sending a case to the Secretary of State for his decision whether a person is to be extradited and from any order subsequently made by the Secretary of State for extradition. In each case the permitted period within which notice of an appeal must be given in accordance with rules of court is 14 days starting with the day on which the Secretary of State informs the person affected or the person acting on behalf of the category 2 territory (as the case may be) of the order. In Mucelli v Government of Albania; Moulai v Deputy Public Prosecutor in Creteil, France [2009] UKHL 2; [2009] 1 WLR 276, the House of Lords held by a majority (Lord Rodger dissenting) that the requirement in sections 26(4) and 103(9) that notice of an appeal be given within the relevant permitted period meant that it had both to be filed in the High Court and served on all respondents to the appeal within such period. A similar requirement must necessarily exist under sections 28, 105, 108 and 110. The Supreme Court was asked on the present appeal to revisit and reverse that decision. The House in Mucelli distinguished between the requirement to give notice of an appeal within the permitted period and the requirement that such notice should be given in accordance with the rules. Failure to comply with the mandatory requirement (interpreted in Mucelli as involving both filing and service) is on this basis fatal to any appeal, since the statutory language only permits appeals within the permitted periods with no possibility of extension. Failure to comply with the rules can, on the other hand, be cured by the court in the exercise of its discretion under (in England) CPR 3.9 and 3.10. The result is similar to that achieved in Pollard v The Queen [1995] 1 WLR 1591, where the Privy Council held that a notice of appeal which was required by statute to be given "in such manner as may be directed by rules of court", but which did not comply with such rules because it was not signed by the appellant personally, was nonetheless a notice within the meaning of the relevant statutory provision, at least once the irregularity was waived by the court, and that such waiver validated the notice from the date of its lodging and did not merely bring into existence for the first time a valid notice. The House in Mucelli further held that the rules of court were incapable of cutting down the statutory permitted period; thus, CPR 3.6 providing (at the relevant time) that any document served after 16.00 should be deemed to be served on the next day was incapable of rendering out of time a notice of appeal served by Mr Moulai after 16.00 on the seventh and last day of the permitted period. Subsequent case law in the High Court shows the distinction between requirements of the statute and of the rules to have proved contentious. One line of authority has taken a relaxed view of the statutory requirements. In Office of Public Prosecutor of Hamburg, Germany v Hughes [2009] EWHC 279 (Admin), the court, rightly in my view, treated as a mere procedural error, which could be corrected, the endorsement in a notice of appeal of a wrong date of arrest (the effect of such endorsement being that, on the face of the notice, the 40 day period allowed for the court to begin to hear the substance of the appeal would have expired a month early). In a series of further cases, the court accepted that service of an unsealed notice of appeal was, at most, a procedural error: Pawel Sciezka v Court in Sad Okregowy, Poland [2009] EWHC 2259 (Admin), Dunne v High Court Dublin [2009] EWHC 2003 (Admin), Arunthavaraga v Administrative Court Office [2009] EWHC 18921 (Admin) and R (Kane) v Trial Court No 5 Marbella, Spain [2011] EWHC 824 (Admin); [2012] 1 WLR 375. In Kaminski v Judicial Authority of Poland [2010] EWHC 2772 (Admin) the court refused to strike out appeals where no or only plainly inadequate grounds were stated in the notice of appeal. It did so on the basis that the inclusion of grounds was a matter for rules (in which connection the court also thought that the rules made no provision for grounds). Other courts have taken a more stringent line. In Regional Court in Konin, Poland v Walerianczyk [2010] EWHC 2149 (Admin); [2012] 1 WLR 363, service of an unsealed copy notice of appeal was held insufficient to satisfy the statutory requirement under section 28 a decision which meant that it was the Polish authority that was out of time to appeal. In R (Bergman) v District Court in Kladno, Czech Republich [2011] EWHC 267 (Admin), a notice of appeal was prepared by an unrepresented defendant who had been remanded in custody, and was then faxed in draft to the judicial authority and filed, all within the 7 day period, but no stamped copy was served, or indeed received back by the defendant, until much later. Following Walerianczyk, it was held that there could be no appeal, although Irwin J, at para 10, recorded his "concern that unrepresented litigants who are in custody will often find it very hard to comply with the necessary requirements, despite every effort on the part of the court staff". In Szelagowski v Regional Court of Piotrkow Trybunalski Poland [2011] EWHC 1033 (Admin), a clerk was instructed, after filing a notice of appeal, to serve it on the Crown Prosecution Service with a letter on which he wrote the relevant Crown Office reference. The letter was expressed to cover the delivery of the appellants notice and grounds and to request a signature by way of receipt, and the Crown Prosecution Service gave such a receipt. But the clerk handed over the wrong accompanying package. Nothing in the package handed over or in the covering letter could be described as a notice of appeal. There was held to be no valid appeal. Sullivan LJ observed (para 18) that: this case demonstrates how a rigid statutory time limit which cannot be extended under any circumstances can work injustice in practice, but the statutory scheme is very clear. In the cases of Lukaszewski, Pomiechowski and Rozanski [2011] EWHC 2060 (Admin); [2012] 1 WLR 391, now before the Supreme Court, each of the appellants is a Polish citizen who is the subject of a European Arrest Warrant issued by the Polish court on the basis that he is wanted in order to serve an existing sentence, and, in the case of Mr Lukaszewski, that he is also wanted to stand trial on ten charges of fraud. The appellants were arrested and brought before the City of Westminster Magistrates Court, where their extradition was ordered on (respectively) 28th January 2011, 2nd March 2011 and 4th March 2011. Mr Lukaszewski and Mr Rozanski had each only been arrested on the day before such order. Mr Pomiechowski was also brought before the court on the day after his arrest, but his case was twice adjourned and he was remanded in custody until 2nd March 2011. He was then refused a further adjournment, and his extradition was ordered. Westminster Magistrates Court is the dedicated court for extradition proceedings, with three of its ten court rooms apparently being devoted to that purpose. It is a busy court. Article 11(2) of the Framework Decision stipulates that a person arrested for the purpose of the execution of a European Arrest Warrant shall have a right to be assisted by a legal counsel and by an interpreter in accordance with the national law of the executing Member State. At the City of Westminster Magistrates Court, such legal assistance is provided by duty solicitors before though not, it appears, after an extradition order is made by a magistrate. On Mr Lukaszewskis (untested) account, he was able to speak to the duty solicitor only briefly for two or three minutes through the glass of the dock immediately before the hearing with the security guard by him, and was not aware that the matter would proceed straight to a decision. Mr Pomiechowski was, in contrast, provided after his first appearance with a solicitor, and wished to oppose extradition on the grounds of delay, but on his account the solicitor had not produced a skeleton on this point by the 2nd March 2011, when a further adjournment was refused. In the event, none of these three appellants argued any substantive points before the magistrate in opposition to extradition. It is not difficult to see how, under such circumstances, the statutory right of appeal might prove relevant. Having regard to the dates on which their extradition was ordered, the permitted periods for Mr Lukaszewski, Mr Pomiechowski and Mr Rozanski to give notices of an appeal expired at midnight on respectively 3rd February, 8th March and 10th March 2011. Each appellant was remanded in custody (Mr Rozanski because he was unable to meet a condition of bail that he lodge security of 1,500), and taken to HMP Wandsworth. All three had been made aware, by the magistrate and/or the relevant duty solicitor or legal representative, at least in general terms of the permitted period of 7 days for appealing. Each had at this point no legal assistance, but each was assisted by a prison officer working in the prisons Legal Services Department to complete a Form N161 notice of appeal. Officers working in the prison legal services department have no legal background, but have completed a three day training course, which does not include extradition training. They seek to help unrepresented prisoners and to facilitate their appeals against extradition. For completeness, I record that Mr Lukaszewski sought to raise issues relating to his mental health, put later as involving a risk of suicide and as entitling him to protection from extradition under sections 25 and 21 of the 2003 Act. Mr Pomiechowskis grounds are not before the court, but appear to have invoked the delay elapsed since he left Poland in 2000. Mr Rozanski invoked compassionate grounds and inhuman conditions that he said that he would face in a Polish prison. However, no point arises or has been raised at this stage on the contents or merits of these appellants notices of appeal. The points before the Supreme Court are points of principle, which affect the admissibility of appeals, however good or bad. The legal services department faxed the notices of appeals to the Administrative Court for filing and stamping. The Administrative Court faxed a copy of the sealed front page back to the legal services department. The legal services department then faxed to the Crown Prosecution Service (as the legal representatives of the judicial authority of the state requesting surrender) a copy of the sealed front page together with a cover sheet. In the case of each of these three appellants all this occurred within the seven day permitted period. In the case of Mr Lukaszewski, the cover sheet faxed on 2nd February 2011 bore the words Sealed copy and his name with the explanation extradition appeal, and in the case of Mr Pomiechowski the cover sheet faxed on 8th March 2011 identified the copy as sealed and said see attached front page of Extradition paperwork for Mr Pomiechowski. Objection was not at once taken to the service only of a sealed front page. But, once taken, it was accepted by the High Court. It was also only after the course of events recounted in the previous paragraphs that the solicitors now acting for Mr Lukaszewski, Mr Pomiechowski and Mr Rozanski first became involved. In the cases of Lukaszewski and Pomiechowski, [2012] 1 WLR 391, para 20, Laws LJ and Kenneth Parker J held on 15th June 2011 that, in order [to] be or purport to be a notice of appeal, the document must (a) identify the appellant, (b) identify the decision against which he seeks to appeal and (c) pace Ouseley J in Kaminksi v Judicial Authority of Poland [2010] EWHC 2772, set out at least the gist of the basis on which the appeal is sought to be presented. Laws LJ reasoned that: So much is, I think, inherent in any sensible understanding of a notice of appeal. A document without statement of any grounds at all could not support an appeal. The absence of grounds from the notice at the beginning of the process will, I think, be apt to lengthen that process by later procedural contests. The case of Rozanski came on later, on 17th November 2011, before Moore Bick LJ who followed the decision in Lukaszewski and Pomiechowski. The fourth appellant before the court is Mr Halligen, a British citizen whose extradition is sought to the United States of America under Part 2 of the 2003 Act to face allegations of wire fraud and money laundering. He was arrested and brought before the City of Westminster Magistrates Court which on 4th November 2010 ordered that the case be sent to the Secretary of State for her to decide whether Mr Halligen should be extradited, and remanded Mr Halligen in custody. Mr Halligens extradition was ordered by the Secretary of State under section 93 on 22nd December 2010. The order and a letter setting out the Secretary of States reasons were sent not only by post, but also by fax (timed at either 15.48 or 16.48) to Mr Halligens solicitors on the same day. The Secretary of States letter addressed an objection which Mr Halligen had raised with reference to alleged national security grounds (see section 208 of the 2003 Act). It also informed Mr Halligen of his right under section 108 to give notice of appeal within 14 days to the High Court, pointing out explicitly that the giving of such notice requires both filing and service of the appellants notice within such 14 days and that under the rules any papers filed at the High Court must also be served upon the Home Office and the Crown Prosecution Service. Mr Halligen had solicitors. Evidently, they were quick to prepare grounds of appeal, since those attached to the notice of appeal are dated 23rd December 2010. The notice of appeal (by which he sought to pursue his alleged national security points by reference to the Secretary of States failure to exercise her powers under section 208 of the 2003 Act) was filed and stamped on prescribed form N161 on 29th December 2010. This was well within the fourteen day permitted period. If one takes 22nd December 2010 as the date on which the Secretary of State informed Mr Halligen of his decision, that period expired at midnight on 4th January 2011. Also on 29th December 2010, Mr Halligen himself wrote from prison by fax to the Home Office, asking them to accept this letter as notice & service of my intent to appeal that decision, and adding that My solicitors have been duly instructed and this letter is only necessitated by the imposed due date of 4th January 2011 and my inability to make contact with them given the restrictions imposed by HMP Wandsworth. His apparent concern was justified, since his solicitors let him down. It was only on 5th January 2011 that they sent the notice of appeal to the Crown Prosecution Service by fax and to the Home Office by post, reaching the latter on 6th January 2011. On 25th February 2011 the Treasury Solicitor wrote stating that there would be an application to have the appeal dismissed accordingly. In the ensuing High Court proceedings and before the Supreme Court, Mr Halligen has been represented by different solicitors to those to whom reference has been made in this paragraph. The High Court on 19th April 2011 accepted it had no jurisdiction to hear Mr Halligens appeal. Applying Mucelli Stadlen J, giving a judgment with which Laws LJ agreed, rejected a submission that the court had power to dispense with service. The High Court rejected a submission that Mr Halligens letter dated 29th December 2010 constituted or purported to constitute a notice of appeal to the Secretary of State. It rejected a submission that, assuming that the fax of 22nd December 2010 was sent at 16.48 (rather than 15.48), the Secretary of State should be treated as having informed Mr Halligen of her decision only on 23rd December 2010, with the result that the fax sent to the Crown Prosecution Service on 5th January 2011 would have been in time. This submission was advanced on the basis that it was only open to the Secretary of State to inform someone of an extradition decision within normal working hours, which could in turn be regarded as ending at 16.30, by analogy with CPR 6.26, governing documents to be served in accordance with the CPR or any Practice Direction. Finally, it rejected more general submissions that the court should under section 3 of the Human Rights Act 1998 read the mandatory requirements of section 108(4) of the 2003 Act as subject to an implied qualification and/or to the power of relief contained in CPR 3.10, in order to cater for the large number of public holidays that occurred during the relevant 14 day period and/or to avoid the loss of the right of appeal which would otherwise follow from Mr Halligens solicitors failings. Nevertheless Stadlen J commented (para 31): It would seem to offend basic principles of fairness that a person served with a notice of extradition should be deprived of a statutory right of appeal through no fault of his own. The first question is whether the Supreme Court should apply or decline to follow the Houses decision in Mucelli. Lord Rodgers dissenting approach in that case was that all that the statute required was filing, and not service, within the statutory period. I understand the attraction of preferring this dissenting approach, in so far as to do so would enable all the current hard cases to be resolved quite easily in the appellants favour. That would not itself be a good reason for adopting such an approach. It would also not resolve other hard cases, for example those which could well arise if a negligent solicitor failed to file notice of appeal with the court within the permitted period, or if a prison riot or a defendants collapse and illness following receipt of information about an extradition decision prevented him giving any instructions to lodge notice of appeal (see in this connection para 70 of Lord Neubergers speech in Mucelli). Further, it would not address the very real considerations which led the majority in Mucelli to their decision. The structure of the relevant sections, with the distinctions drawn between appealing, or bringing an appeal, to the High Court and giving notice of an appeal within the relevant permitted periods, is itself difficult to reconcile with any conclusion that some form of notice to the respondents is not required (a point to which Lord Neuberger referred at para 65). I would not therefore depart from Mucelli in so far as it requires not merely filing of an appeal, but also some form of notice of an appeal being given to the respondents, both within the permitted period. The question remains what form of notice of an appeal is required. In Mucelli the argument and majority judgments proceeded on the basis that what was required was service of the notice of appeal. It was however recognised, and was one plank of Lord Rodgers dissent, that in Scotland the requirement is that a note of appeal should be served (necessarily in draft) before lodging with the court (Mucelli, para 19). Mucelli concerned the question whether the statute (as opposed to the rules) required notice of an appeal to be given to all respondents within the permitted period. The House spoke of a statutory requirement of service. But the question what sort of notice was required by the statute (as opposed to the rules) was not the focus of decision. The statute requires notice of an appeal to be given in accordance with rules of court, so any failure to comply with the rules of court requires the appellant to seek relief from the court to cure the irregularity. But this does not answer the question what constitutes giving notice of an appeal to the respondents which, if not in accordance with the rules, nonetheless satisfies the statutory requirement and is capable of being cured. In my view, a generous view can and should be taken of this, bearing in mind the shortness of the permitted period and the fact that what really matters is that an appeal should have been filed and all respondents should be on notice of this, sufficient to warn them that they should not proceed with extradition pending an appeal. This should not however be taken as a licence to appellants to give informal notices of appeal. Any potential appellant serving anything other than a complete copy of the sealed Form N161 will need to seek and will depend upon obtaining the courts permission to cure the position under the rules. However, it follows from the foregoing that I cannot agree with Laws LJs reasoning in the cases of Lukaszewski and Pomiechowski. To have any prospect of success an appeal must at some point be supported by grounds. Rules may provide that such grounds must be stated or summarised in the appeal notice, and do in fact do so: CPR 52.4, read with note 52.4.4, prescribed form N161 section 6 and Practice Direction Appeal, para 3.2 at 52PD.5. Non constat however that a purported notice of appeal is a nullity unless accompanied from the outset by grounds. If, contrary to rules of court, it is not, that is an irregularity, but one which can in an appropriate case be cured under CPR 3.9 and 3.10. This is the position in principle. As a matter of practice also, there is no attraction in a conclusion whereby a notice without any grounds would be a nullity incapable of grounding any appeal, whereas a notice with palpably inadequate grounds would be merely irregular and capable of cure by amendment. The front page of the notices of appeal returned by the court and served by fax in the cases of Lukaszewski, Pomiechowski and Rozanski showed the relevant High Court references and stamps with the dates of filing as well as the names and addresses of the appellants and the respondent Polish court. The subsequent pages which were not returned or served identified matters such as the decision appealed (though in current extradition practice this would be a decision of the Westminster Magistrates Court), its date, the grounds and a statement of belief. The irregularity involved in their absence was capable of cure, and on the present facts certainly merited this. The Crown Prosecution Service can have had no difficulty in identifying the decision being appealed, and it would be disproportionate if the practice followed by the court and the prison Legal Services Department should lead to these appellants losing any right of appeal. I would therefore allow the appeals in all three Polish cases, and remit the appeals against the relevant extradition decisions to the High Court to be heard there. The position in Halligen is more problematic. Again his notice of appeal was filed with the court in time, but notice was required to both the Secretary of State and the Crown Prosecution Service. Taking the Secretary of State first, Mr Halligen has to rely on his letter dated 29th December 2010, which he asked the Home Office Extraditions Section to accept as notice & service of my intent to appeal. In terms of the rules, this was a highly irregular notice of any appeal, and, although it was dated the same date as his solicitors in fact filed notice of appeal with the court on his behalf, it was framed as notice of my intent to appeal, rather than as notice of an actual appeal. Nonetheless, the statute is capable of embracing the Scottish practice, whereby a draft note of an appeal is served before being lodged with the court. It follows that notice of an intent to appeal must be within the statutory language. I would regard Mr Halligens letter as notice to the Secretary of State of an appeal within the statute, albeit that the letter was highly irregular in terms of the rules. Provided it counts as a notice within the statute, the court is able to cure the irregularity if it thinks fit. The circumstances again militate strongly in favour of doing this. However, Mr Halligen faces the further difficulty that he has to show that notice of an appeal was given to the Crown Prosecution Service. The first submission made on his behalf in this connection is that the Secretary of State informed him on 23rd rather than 22nd December 2010. Like the High Court, and for the same reasons, I am unable to accept this submission. Making the assumption in Mr Halligens favour, in the absence of any evidence either way, that the relevant fax was timed at 16.48 rather than 15.48 on 22nd December 2010, there is no basis for applying, directly or by analogy, CPR 6.26 which only governs documents to be served in accordance with the CPR or any Practice Direction. I add that, even if it were relevant (which it is not in my view) to consider whether the notice was transmitted at an hour when it would be expected to come to the attention of someone responsible in the receiving solicitors firm, there would be no basis for treating 16.48 as not being such an hour. Indeed, as far as anyone knows, the fax was immediately read and addressed, and some support for this may be found in the dating of the grounds in the notice of appeal on the next day (23rd December 2010). It was also faintly submitted that the fourteen day period should be extended by reference to the large number of public holidays occurring during it. But, contrary to the situation considered by Lord Neuberger in Mucelli at paras 83 84, the last day of the fourteen day period was not a public holiday. Lord Neubergers approach allows for the human propensity to think about things at the last moment, but I do not think that it should be extended to situations where the last moment is a business day on which the intended appellant could have filed and served a notice of appeal. It follows that no notice of an appeal was given to the Crown Prosecution Service within the permitted period, and Mr Halligens appeal is on its face impermissible as against both respondents. It is therefore necessary to consider whether the apparently inflexible time limits for appeals in the 2003 Act are subject to any qualification or exception. The appellants in the cases of Lukaszewski, Pomiechowski and Rozanski have in particular sought to rely on article 5(4) of the Human Rights Convention, read with section 3 of the Human Rights Act 1998. Section 3 requires the court, so far as it is possible to do so, to read the relevant sections in a way which is compatible with the Convention. Article 5(4) reads that Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful. The appellants submit that, in so far as the 2003 Act provides rights of appeal, such rights cannot consistently with article 5(4) be made subject to limitations which restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired and that any such restriction must pursue a legitimate aim and there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved: Tolstoy Miloslavsky v United Kingdom (1995) 20 EHRR 442, para 59. Tolstoy was a case concerning appeals in a context to which Article 6(1) applied, but the appellants in invoking article 5(4) rely by analogy upon the case law under article 6(1). The difficulty which these appellants face in relying upon article 5(4) is that their grievance relates to the extradition decision, rather than the fact, incidental to that decision, that they were remanded in custody pending extradition. In MT (Algeria) v Secretary of State for Home Department [2009] UKHL 10; [2010] 2 AC 110, the House was concerned with challenges to deportation decisions upheld in partly closed proceedings before the Special Immigration Appeals Tribunal (SIAC). The appellants were by reason of such decisions detained with a view to deportation, and submitted on that basis that the proceedings before SIAC were subject to article 5(4). The House did not accept the submission. Lord Phillips noted that the European Court of Human Rights had held in Chahal v United Kingdom (1996) 23 EHRR 413 that the lawfulness of the detention of a person with a view to deportation did not depend upon whether the underlying decision to deport could be justified, and that the appellants had not made an independent challenge of [sic] his detention as opposed to the decision to deport him (paras 89 90). Lord Hoffmann noted, at para 173, that the European court in Chahal had decided that an alien who was detained pending deportation was entitled by virtue of article 5(4) to a substantial measure of procedural justice in proceedings to determine the lawfulness of his detention (paragraph 131) but not to a judicial tribunal to review whether the underlying decision to expel could be justified under national or Convention law (paragraph 128). Lord Hope and Lord Brown and I all expressed our agreement with these parts of Lord Phillips and Lord Hoffmanns speeches (paras 226, 252 and 262). In Chahal, para 128, the European Court in fact said this: 128. The Court refers again to the requirements of Article 5 para. 1 (article 5 1) in cases of detention with a view to deportation (see paragraph 112 above). It follows from these requirements that Article 5 para. 4 (article 5 4) does not demand that the domestic courts should have the power to review whether the underlying decision to expel could be justified under national or Convention law. The present appellants suggest that the conclusion and reasoning in MT (Algeria) requires reconsideration in the light of other authority in which article 5(4) has been relied upon as indicating that a court must have jurisdiction to consider whether an extradition decision involves an abuse of process. In R (Kashamu) v Governor of Brixton Prison [2002] QB 887, the Divisional Court (Rose LJ and Pitchford J) was faced with a series of pre Human Rights Act decisions at the highest level: Atkinson v United States of America [1971] AC 197, R v Governor of Pentonville Prison, Ex p Sinclair [1991] 2 AC 64 and In re Schmidt [1995] 1 AC 339. These cases had held that, despite the development in other fields of a general power on the part of a court to intervene on the grounds of abuse of process, any challenge on such grounds to the lawfulness of a decision ordering a persons extradition and detention with a view to extradition was a matter for the Secretary of State rather than the courts: the courts could become involved at most only on a subsequent application for judicial review of the Secretary of States decision. In Kashamu the Divisional Court relied upon section 6(1) of the Human Rights Act 1998 and upon article 5(4) to hold that such decisions could no longer be applied, and that it was, under schedule 1 to the Extradition Act 1989, incumbent on the district judge to consider whether there had been abuse of process rendering the detention unlawful under article 5(4), rather than to leave this issue for a minister to consider. The abuse of process alleged is only briefly outlined in relation to one of the three persons concerned in Kashamu. In relation to him it consisted of a prior arrest, conceded to have been irregular due to non disclosure (para 11). It seems clear that the abuse asserted would have affected not only any detention pending extradition but also, more fundamentally, any possibility of extradition. Under para 6(1) of Schedule 1 to the Extradition Act 1989, the district judge in Kashamu had had the same powers, as near as may be, . as if the proceedings were the summary trial of an information against him for an offence committed in England and Wales. On a summary trial, those powers would have included considering and applying article 5(4) in relation to any issue whether detention was justified. In these circumstances, I am not surprised that the Divisional Court held that the district judge had the power to investigate the possibility of abuse, which earlier authority had confined to the High Court by way of judicial review. The decision in Kashamu was followed and approved by the Privy Council in Fuller v Attorney General of Belize [2011] UKPC 23. There was in Fuller no equivalent provision to para 6(1) to Schedule 1 to the Extradition Act 1989, and the Board simply treated article 5(4) and its Belizean analogue, section 5(2)(d) of the Constitution, as applicable to detention for the purpose of extradition. As the Board made clear the abuse alleged went, in that case also, to the extradition as much as to any prior detention: paras 5 and 53 54. Indeed, Mr Fuller had been released on bail, although it is established for the purposes of a challenge to extradition under domestic law that an applicant for habeas corpus is to be treated as effectively in custody, even if released on bail: R v Secretary of State for the Home Department, Ex p Launder (No 2) [1998] QB 994, 1000G 1001G and 1011G H. Where detention and the extradition proceedings as a whole stand and fall together, according to whether or not they involve an abuse of process, then Fuller suggests that article 5(4) may be an effective means by which a root and branch challenge to extradition may be pursued. The decision in MT (Algeria) was not however cited in Fuller, and both Kashamu and Fuller were concerned with a question whether the previous restriction on an extradition courts ordinary power to restrain proceedings conducted in abuse of process should continue to be recognised. It is unsurprising that the courts should conclude that this limitation was no longer appropriate. There is no suggestion of any abuse of process at the root of the present extradition proceedings. The present appeals concern the single question whether proceedings to challenge an extradition decision are subject to the procedural guarantee contained in article 5(4). Proceedings to challenge an extradition decision are capable of raising a whole range of issues which have nothing to do with abuse of process or, indeed, with the question whether the person concerned is actually detained in the sense clearly envisaged in article 5(4). For example, they may raise questions whether the alleged offence is an extradition offence (section 10), whether extradition is barred by the rule against double jeopardy, extraneous considerations, the passage of time, age, hostage taking considerations, speciality, earlier extradition to the United Kingdom or earlier transfer to the International Criminal Court (sections 11 to 19A) and whether extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 (section 21). The reasoning in Kashamu and Fuller does not suggest, or justify a conclusion, that all such questions engage the procedural guarantee contained in article 5(4). This is so whether the person concerned is in custody or whether, even if he is not, he is to be treated as if he were for the domestic law purposes of a challenge to the proceedings by writ of habeas corpus. I do not therefore consider that either Kashamu or Fuller affects the careful distinction drawn by the European Court of Human Rights in Chahal between challenges to detention and to the underlying decision to remove an alien from the jurisdiction. The same careful distinction was followed in MT (Algeria), which in my view governs the present situation of a challenge made essentially to an extradition decision. I would therefore hold that article 5(4) did not apply and that the present appellants were not entitled to a judicial decision under article 5(4). Article 5(4) is not however the only potential string in the appellants bow. Mr Halligen also invokes article 6(1). The respondent, the Secretary of State, in reply submits that it is clear that article 6(1) has no application to decisions to expel or extradite. She cites a number of decisions of the European Court. H. v Spain (Application no. 10227/82) concerned an American citizen whose extradition from Spain was sought by the United States and who complained that he had had inadequate legal representation and interpretation before the Audiencia Nacional. The Commission held the complaint inadmissible on the ground that extradition proceedings do not involve the determination of a criminal charge within article 6(1), because in this context the word determination involves the full process of the examination of an individuals guilt or innocence of an offence. E.G.M. v Luxembourg (Application No 24015/94) concerned a Colombian national whose extradition from Luxembourg was sought by the United States. He complained that the extradition proceedings in Luxembourg violated the principle ne bis in idem and his rights of defence. The Commission held that the former principle was not guaranteed by the Convention, in the context of different criminal proceedings in different states, and that the rights and freedoms recognised in the Convention do not include any right not to be extradited. It referred in the latter connection to a prior statement to this general effect in G.K. and B.J.F. v The Netherlands (Application No 12543/86), based in turn on a similar general statement in X v Belgium (Application No 7256/75). Another case in which a similar statement appears is Salgado v Spain (Application No 65964/01). These were all again cases concerning aliens, in the first and third complaining that he would be ill treated in the requesting country and in the second that his extradition violated the terms of an extradition treaty. Lastly, the Commission in E.G.M. v Luxembourg referred to its established case law whereby the words determination . of a criminal charge . relate to the full process of the examination of an individuals guilt or innocence, and not merely to the process of determining whether or not a person may be extradited to another country, citing H v Spain and Kirkwood v United Kingdom (Application No 10479/83), (1984) 37 DR 158. In Kirkwood the applicant, a United States national, claimed that the proceedings for his extradition from the United Kingdom to the United States infringed article 6(3)(d), because he was not permitted to cross examine the witnesses against him in the United Kingdom. The Commission held that, although the tasks of the Magistrates' Court included the assessment of whether or not there was, on the basis of the evidence, the outline of a case to answer against the applicant and [t]his necessarily involved a certain, limited, examination of the issues which would be decisive in the applicant's ultim[at]e trial, nevertheless, these proceedings did not in themselves form part of the determination of the applicant's guilt or innocence, which will be the subject of separate proceedings in the United States which may be expected to conform to standards of fairness equivalent to the requirements of article 6, including the presumption of innocence, notwithstanding the committal proceedings. In these circumstances the Commission concluded that the committal proceedings did not form part of or constitute the determination of a criminal charge within the meaning of Article 6 of the Convention (para 9). The House of Lords cited and applied para 9 of the Commissions ruling in Kirkwood, when rejecting similar claims to rely on article 6(3)(d) by the appellants in R (Al Fawwaz) v Governor of Brixton Prison [2001] UKHL 69 [2002] 1 AC 556. In Maaouia v France (2001) 33 EHRR 42, a Tunisian citizen sought to resist his exclusion from France on the ground that the length of the proceedings had been unreasonable and excessive. He failed emphatically, for reasons which emphasised his position as an alien. The Court said: 37. The Court therefore considers that by adopting Article 1 of Protocol No.7 containing guarantees specifically concerning proceedings for the expulsion of aliens the States clearly intimated their intention not to include such proceedings within the scope of Article 6(1) of the Convention. 38. In the light of the foregoing, the Court considers that the proceedings for the rescission of the exclusion order, which form the subject matter of the present case, do not concern the determination of a "civil right" for the purposes of Article 6(1). The fact that the exclusion order incidentally had major repercussions on the applicant's private and family life or on his prospects of employment cannot suffice to bring those proceedings within the scope of civil rights protected by Article 6(1) of the Convention. 39. The Court further considers that orders excluding aliens from French territory do not concern the determination of a criminal charge either. In that connection, it notes that their characterisation within the domestic legal order is open to different interpretations. In any event, the domestic legal order's characterisation of a penalty cannot, by itself, be decisive for determining whether or not the penalty is criminal in nature. Other factors, notably the nature of the penalty concerned, have to be taken into account. On that subject, the Court notes that, in general, exclusion orders are not characterised as criminal within the Member States of the Council of Europe. Such orders, which in most States may also be made by the administrative authorities, constitute a special preventive measure for the purposes of immigration control and do not concern the determination of a criminal charge against the applicant for the purposes of Article 6(1). The fact that they are imposed in the context of criminal proceedings cannot alter their essentially preventive nature. It follows that proceedings for rescission of such measures cannot be regarded as being in the criminal sphere either. 40. The Court concludes that decisions regarding the entry, stay and deportation of aliens do not concern the determination of an applicant's civil rights or obligations or of a criminal charge against him, within the meaning of Article 6(1) of the Convention. In Mammatkulov and Askarov v Turkey (2005) 41 EHRR 494, in the context of complaints about the fairness of Turkish extradition proceedings, the European Court reiterated, at para 82, that decisions regarding the entry, stay and deportation of aliens do not concern the determination of an applicant's civil rights or obligations or of a criminal charge against him, within the meaning of Article 6(1) of the Convention. This examination of Strasbourg case law shows that the Commission and Court have stood firm against any suggestion that extradition as such involves the determination of a criminal charge or entitles the person affected to the procedural guarantees provided in the determination of such a charge under article 6(1) or 6(3). The cases involved are all also cases involving the extradition of aliens. The last two decisions emphasise that proceedings for the extradition of aliens do not involve the determination of any civil rights within the meaning of article 6(1). By the same token they underline a potential difference in this respect between aliens and citizens. Both in international law and at common law British citizens enjoy a common law right to come and remain within the jurisdiction, and Mr Halligen is such a citizen. Blackstone (Commentaries on the Laws of England 15th ed (1809) vol 1, p 137) stated: But no power on earth, except the authority of Parliament, can send any subject of England out of the land against his will; no, not even a criminal. This passage was cited and approved by Lord Hoffmann in R (Bancault) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61; [2009] AC 453, para 44. In R v Bhagwan [1972] AC 60, 77G Lord Diplock spoke of the common law rights of British subjects . to enter the United Kingdom when and where they please and on arrival to go wherever they like within the realm. In Case 41/74 Van Duyn v Home Office [1975] Ch 358, para 22, the European Court of Justice recognised that: it is a principle of international law, which the EEC Treaty cannot be assumed to disregard in the relations between member states, that a state is precluded from refusing its own nationals the right of entry or residence. The principle is the necessary corollary of a states right (subject to obligations undertaken by e.g. the Geneva Refugee Convention and the European Convention on Human Rights) to refuse aliens permission to enter or stay in its territory. Were it otherwise, the Flying Dutchman would be no fleeting phantom. In these circumstances, Mr Halligen enjoyed a common (or civil) law right to enter and remain in the United Kingdom as and when he pleased. The next question is whether proceedings under the Extradition Act 2003, in that they may affect his freedom to remain in the United Kingdom at least for the duration of American criminal proceedings, involve the determination of that civil right. The 2003 Act has the authority of Parliament, and to that extent Mr Halligens right to remain in the United Kingdom is potentially qualified. But under the Act it is only through domestic extradition proceedings that this right can be affected and suspended for the purpose and period of any American proceedings and of any sentence which might thereafter be passed on him, if found guilty. In so far as it may be suspended, the extradition proceedings determine whether Mr Halligen may continue to enjoy his common law right for whatever proves to be the relevant period. A claim to extradite him does not involve the determination of a criminal charge, and he is not entitled to any full process of examination of his guilt or innocence, or to the procedural guarantees which would attend that. But he is entitled to a fair determination as to his common law right to remain within the jurisdiction. In these circumstances, it follows in my view that the extradition proceedings against Mr Halligen fall within article 6(1). In so far as the proceedings involve under the statute a right of appeal against any extradition decision, article 6(1) also requires that it be free of limitations impairing the very essence of the right, pursue a legitimate aim and involve a reasonable relationship of proportionality between the means employed and the aim sought to be achieved in accordance with the standard identified in Tolstoy Miloslavsky v United Kingdom, cited in para 22 above. I cannot regard the provisions regarding appeals contained in the 2003 Act as meeting the standard set in Tolstoy Miloslavsky. Indeed I note that the Review of the United Kingdoms Extradition Arrangements of 30 September 2011 identified the time limits as an unsatisfactory feature about the appeals process, and mentioned a number of trenchant judicial criticisms, some already set out, as well as the particular difficulties posed for those remanded in custody. In the end, however, after identifying as possible mechanisms for alleviating potential injustice either extending the time limit for Part 1 from seven to fourteen days or giving the court a discretion to extend the time limit in the interests of justice, the Review said that On the whole we prefer the former, as this is an area in which certainty and finality is important. Finality and certainty are important legal values. But, although the cases to date may not be large in absolute numerical terms, they indicate that neither finality nor certainty has been achieved to date. Even on the more relaxed view of the statutory conditions which I consider appropriate, the statute will be capable of generating considerable unfairness in individual cases, unless some further relief is available. More importantly, it is not sufficient under article 6(1) if in most or nearly all cases the right of appeal can be or should be capable of being exercised in time. The very essence of the right may be impaired in individual cases and there may still be no reasonable relationship of proportionality between the means employed and the aim sought to be achieved. It has been held, in the public law context of removal from the jurisdiction of an alien, that a litigant must answer for the failings of his legal advisers, with the result that he was unable to obtain the reopening of an adjudicators decision on the ground of such advisers negligent failure to inform him of the hearing: R v Secretary of State for the Home Department, Ex p Al Mehdawi [1990] 1 AC 876. Any other decision would, it was said, come at the cost of opening such a wide door which would indeed seriously undermine the principle of finality in decision making: per Lord Bridge, at p 901E. In Ex p Al Mehdawi there was however a residual discretion in the Secretary of State to refer the matter back to an adjudicator. In contrast, in an asylum context where no such residual discretion existed, the Court of Appeal in FP (Iran) v Secretary of State for the Home Department [2007] EWCA Civ 13 held ultra vires immigration rules deeming a party to have received notice of a hearing served on the most recent addresses notified to the relevant tribunal and requiring the tribunal to proceed in the partys absence if satisfied that such notice had been given. The solicitors acting for the asylum seekers in FP (Iran) had failed to give the tribunal new addresses to which the asylum seekers had been moved by the National Asylum Support Service. Distinguishing Ex p Al Mehdawi, the Court of Appeal held that there was no universal surrogacy principle which (reformulated) rules would have to depart from in order to operate justly (para 46). The rules were framed so as to be productive of irremediable procedural unfairness. Both the appellants were among those affected by this deficiency, because both have lost the opportunity to be heard through the default of their legal representatives and not through their own fault (para 48). This decision (reached in the context of aliens) turned on common law principles regarding access to justice, though reference was made by analogy to the position under the European Convention on Human Rights. The position is a fortiori in so far as article 6(1) is directly applicable in Mr Halligens case. It is clear that the statutory provisions regarding the permitted periods for appeals may in individual cases impair the very essence of the right of appeal. The previous judicial expressions of concern are eloquent about the potential and actual unfairness of the position in which prisoners find themselves in trying to meet the statutory requirements, with such aid as the prison legal services department or legal advisers can, under difficult conditions, provide. The problems of communication from prison with legal advisers in the short permitted periods of seven and fourteen days are almost bound to lead to problems in individual cases. It is no satisfactory answer that a person wrongly extradited for want of an appeal as a result of failings of those assisting him might, perhaps, be able to obtain some monetary compensation at some later stage. Strict application of the surrogacy principle would be potentially unjust. I am not persuaded that the interests of finality and certainty outweigh the interests of ensuring proper access to justice by appeal in the limited number of extradition cases where this would otherwise be denied. There would not be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved. What then does this mean for Mr Halligen? The opposed possibilities are, on the one hand, that the statute can be read in a manner consistently with the Convention rights, pursuant to the courts duty under section 3 of the Human Rights Act so to read it so far as it is possible to do so, and, on the other hand, that the statutory time limits are simply incompatible with article 6(1). The former solution may involve reading in words, provided that they are compatible with the underlying thrust of the legislation and do not go against the grain of the legislation: Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, paras 33, per Lord Nicholls, and 121, per Lord Rodger; and see R v A (No 2) [2001] UKHL 25, [2002] 1 AC 45, where statutory restrictions on cross examination were read as subject to a further implied exception to enable a fair trial under article 6(1), and Connolly v Director of Public Prosecutions [2007] EWHC 237 (Admin), [2008] 1 WLR 276, para 18, where the High Court was prepared to read a statutory prohibition on sending another person certain material as subject to an implied provision that this was not to apply where the prohibition would involve a breach of the senders Convention rights under article 10. In the present case, there is no reason to believe that Parliament either foresaw or intended the potential injustice which can result from absolute and inflexible time limits for appeals. It intended short and firm time limits, but can only have done so on the basis that this would in practice suffice to enable anyone wishing to appeal to do so without difficulty in time. In these circumstances, I consider that, in the case of a citizen of the United Kingdom like Mr Halligen, the statutory provisions concerning appeals can and should all be read subject to the qualification that the court must have a discretion in exceptional circumstances to extend time for both filing and service, where such statutory provisions would otherwise operate to prevent an appeal in a manner conflicting with the right of access to an appeal process held to exist under article 6(1) in Tolstoy Miloslavsky. The High Court must have power in any individual case to determine whether the operation of the time limits would have this effect. If and to the extent that it would do so, it must have power to permit and hear an out of time appeal which a litigant personally has done all he can to bring and notify timeously. The position of others who are not British citizens of the United Kingdom and do not enjoy the protection of article 6(1) is not, as it happens, relevant to the outcome of any of the appeals now before the Supreme Court. However, their position, as well as that of persons enjoying the protection of article 6(1), would, on the information before the court, appear to deserve attention. This includes specifically whether they are currently provided with meaningful and effective legal assistance in relation to the whole extradition process, including any appeal they may wish to bring. For the reasons I have explained, I would allow Mr Halligens appeal and remit his case, as well as those of Mr Lukaszewski, Pomiechowski and Rozanski (see paragraph 19 above), to the High Court for the hearing of all their four appeals against the relevant extradition decisions. LADY HALE I agree that these appeals should be allowed for the reasons given by Lord Mance. They have highlighted a number of aspects of the present law which may be thought unsatisfactory. First, section 26(4), section 103(9) and section 108(4) of the Extradition Act 2003 lay down tight deadlines within which the requested person must give notice of appeal against, respectively, an extradition order under Part 1 of the 2003 Act, a decision to send the case to the Secretary of State under Part 2, and the Secretary of States extradition order under Part 2. Sections 35 and 117 lay down tight deadlines within which the person must be extradited if no notice of appeal is given before the end of the permitted period. In Mucelli v Government of Albania [2009] UKHL 2, [2009] 1 WLR 276, therefore, the House of Lords proceeded on the assumption that, unless the appellant gave notice to the respondent(s) within the permitted period, the extraditing authorities would not know whether the clock had stopped. We now know that that assumption is incorrect, for two reasons. The first is that the respondent(s) to the appeals are not the extraditing authorities for this purpose. The respondents will be those acting on behalf of the issuing judicial authority (in Part 1) or the requesting authority and the Secretary of State (in Part 2). The extraditing authority is the Serious Organised Crime Agency (SOCA) in Part 1 and the Secretary of State in Part 2. So giving notice to the respondent(s) is not, in itself, sufficient for the extraditing authority to know that the clock has stopped. Secondly, the uncontradicted evidence of Mr Evans, solicitor for the first two appellants, is that Westminster Magistrates Court informs SOCA by email when an extradition order is made and that the High Court emails SOCA when an appeal is filed. That is what alerts SOCA to the fact that it is no longer obliged, or indeed entitled, to extradite the requested person within the required period. This undermines a substantial part of the reasoning of the majority in Mucelli at least in relation to Part 1 cases. The best point remaining is the linguistic difference between an appeal . may be brought in section 26(3), section 103(4), (7) and (8)(b), and section 108(4), and notice of an appeal . must be given in section 26(4), section 103(9) and section 108(4). But there is no magic in those words. Different terms are used for the process of bringing an appeal in the three different jurisdictions which make up the United Kingdom. In Lord Rodgers view, the draftsman has just chosen a familiar form of words for referring to the bringing of an appeal [14]. It would have been so easy for the draftsman to have said filed and served if that is what he had meant but he did not. Be that as it may, this court is not constituted to depart from the decision in Mucelli and there is no need for it to do so in the Polish cases. However, the new information does underline the fact that there is no good practical reason for the court to construe what is meant by giving notice to the respondents in a demanding way. The clock will have stopped, but if the rules about service have not been properly complied with, the court has power either to grant an extension or to impose sanctions, including the sanction of striking out the appeal, as appropriate. Secondly, however, the court does have to contend with Mucelli in the case of Mr Halligen. We can treat his letter to the Secretary of State as notice for this purpose, but we cannot treat his notice to Crown Prosecution Service as arriving in time. There are two possible ways of solving the problem, should we think this result to be unnecessary and unjust. One is to depart from Mucelli. For the reasons indicated earlier, we could conclude that it was not the intention of Parliament that there should be no jurisdiction to entertain an appeal in such circumstances. The other is to employ the obligation of conforming interpretation in section 3(1) of the Human Rights Act 1998 in cases where the ordinary interpretation produces results which are incompatible with the Convention rights of the requested person. Section 3(1) requires that So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. As is now well established, this requires the court (and others) to read (and give effect to) legislation compatibly with the Convention rights even if this is not what, on ordinary principles of construction, Parliament intended, so long as it is possible to do so. The appellants and the Secretary of State consider that it is possible in this case. The respondents consider that it is not, and if (which they do not accept) the strict application of the time limit for service is incompatible, the only course would be a declaration of incompatibility under section 4 of the 1998 Act. The right of a person to enter and remain in the country of which he is a national is the most fundamental right of citizenship. The United Kingdom has signed but not ratified Protocol No 4 to the ECHR, article 3 of which makes this right crystal clear. But, as Lord Mance has demonstrated, it has been part of United Kingdom law for centuries. It is perhaps more questionable whether it counts as a civil right for the purpose of the right to a fair hearing in article 6(1) of the Convention. As originally conceived, this did not apply to the rights enforceable only in public law. But that limitation has been steadily eroded: see the jurisprudence discussed by Lord Hope in Ali v Birmingham City Council [2010] UKSC 8, [2010] 2 AC 39, [28] to [49]. And in any event, this right is not like a claim to a social security benefit (which is a civil right) or to a social service (which currently is not), for these can only be enforced as provided for by the statute or by judicial review. Should the need arise, this right could be claimed in ordinary civil proceedings against a person who was denying it. I therefore agree with Lord Mance that the extradition proceedings against Mr Halligen involve the determination of his civil rights for the purpose of article 6(1). I also agree that to insist upon the time limit for service in the particular circumstances of his case is a disproportionate limitation upon his right of access to the appeal process. I further agree that it is possible to read and give effect to section 108(4) and, it would necessarily follow, section 26(4) and section 103(9) in the manner which Lord Mance suggests at paragraph 39. However, it does seem to me unsatisfactory that we are taking this course, rather than the more straightforward course of departing from Mucelli. There is very good reason to think that the House decided Mucelli on a mistaken factual assumption. There were very good reasons, trenchantly expressed in Lord Rodgers dissenting opinion, to think that the intention of Parliament was to insist only on filing, rather than on service, of the notice of appeal before the deadline. For my part, I consider it more satisfactory to comply with the actual intention of Parliament than to resort to the obligation of conforming interpretation (whether under the European Communities Act 1972 or the Human Rights Act 1998). Resorting to section 3 of the 1998 Act, although two of the parties consider this possible, produces two distortions in the extradition process. It discriminates between nationals and aliens. It also discriminates between the requested persons and the requesting authorities, for the latter can have no convention rights which mandate a compatible interpretation. Thus section 28(4), section 105 (5) and section 110(5), which impose the same time limits upon appeals against discharge by the first instance court or by the Secretary of State, cannot be read down so as to forgive such trivial failures as these on the part of the requesting authorities. Thirdly, however, whichever of the above courses is taken in this case, recognition that the right of a citizen to remain in this country is a civil right for the purposes of article 6(1) of the ECHR leaves open the possibility that section 26(4) and also section 103(9) and section 108(4) would also have to be read down if the rigid time limits for the filing of a notice of appeal were to be held a disproportionate limitation on a citizens right of access to the appeal process. There was talk during the hearing of riots, strikes or fires at the prison to which the requested person was remanded making the service of notice impossible, but such extraordinary events might also make the filing of a notice of appeal impossible. As things currently stand, a requested person who is remanded in custody does not always have access to a lawyer who can protect his interests. While we know that HMP Wandsworth has a Legal Services Department staffed by prison officers who provide assistance, we do not know whether similar facilities are available to requested persons who are remanded to other prisons. We do know that, given the pace of proceedings, quite properly arguable grounds for resisting extradition or the execution of a European arrest warrant may not have been put before the district judge. I do not, of course, say that it would indeed be possible to read down the legislation in such circumstances, but merely that our decision in this case makes the argument possible. Had other members of the court been of the same mind, therefore, I would have allowed all these appeals, but for reasons other than those given by Lord Mance. But those reasons are not incompatible with the reasons which he gives and with which I am also content to agree. |
On 11 December 2013 an International Centre for Settlement of Investment Disputes (ICSID) tribunal made a final investment arbitration award (the Award) in favour of the Respondents to this appeal (the Claimants) against the appellant (Romania). The Award related to investments made by the Claimants in food production in Romania prior to Romanias accession to the European Union on 1 January 2007. The present appeal is the latest chapter in the Claimants extensive attempts in a number of different jurisdictions to enforce their award against Romania and the attempts of the European Commission (the Commission) to prevent enforcement on the ground that it would infringe EU law prohibiting unlawful State aid. More specifically, this appeal arises out of Romanias application in the Commercial Court to set aside the registration of the Award or to stay enforcement pending the determination of the proceedings in the EU courts, and out of the Claimants application in response for security in the amount of the Award. Factual and procedural background The First and Second Claimants are brothers born in Romania who became Swedish nationals in 1995 and 1992 respectively, having renounced their Romanian nationality. The Third to Fifth Claimants are Romanian companies incorporated by the First and Second Claimants. In 1993 Romania entered into an association agreement with the European Community and the then 15 member states of that Community, which entered into force in 1995 (the Europe Agreement). The Europe Agreement included a provision on State aid and required Romania eventually to introduce State aid rules similar to the EC rules on State aid. The Europe Agreement further encouraged Romania to establish and improve a legal framework which favours and protects investment and to conclude agreements for the promotion and protection of investment. In 1997 to 1998 the Commission was of the view that Romania did not yet meet the criteria for EU membership and recommended, inter alia, that Romania pursue rapid privatisation, secure foreign direct investment and engage in regional development. In 1999, in the context of attempting to develop its regional policy, Romania adopted an investment incentive scheme in the form of Emergency Government Ordinance No 24/1998 (EGO 24). With effect from 1 April 1999 the tei Nucet region of Romania was designated as a disfavoured region for a ten year period. The designation was later extended to include Drgneti. On 30 June 1999 Romania adopted Law No 143/1999 incorporating State aid rules into domestic law and designating the Romanian Competition Council as the competent authority for authorising the grant of State aid. On 15 May 2000 the Romanian Competition Council issued Decision No 244/2000 declaring that certain facilities provided under EGO 24 distorted competition because they constituted incompatible State aid within the meaning of Law No 143/1999 and therefore had to be eliminated unless modified. On 16 June 2000 Romania passed Emergency Government Ordinance No 75/2000 which, with effect from 1 July 2000 modified but did not eliminate EGO 24. The Claimants do not accept that the Romanian Competition Council had authority to require the revocation of the schemes or that its decision followed from EU State aid rules. During the early 2000s, the Claimants, in reliance on the EGO 24 incentives (which required investments to be maintained for twice the period of the benefits received) invested in a large, highly integrated food production operation in that region as part of a ten year business plan. In 2002 Romania and Sweden negotiated the Sweden Romania Bilateral Investment Treaty on the Promotion and Reciprocal Protection of Investments (the BIT). The BIT entered into force on 1 April 2003. It provided for reciprocal protection of investments and included provision for investor State dispute resolution under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). Romania had ratified the ICSID Convention in 1975 and the United Kingdom had done so in 1966. During the formal accession negotiations between Romania and the EU from 2000 to 2004, the EU informed Romania that various Romanian government schemes, including the EGO 24 scheme, were not in line with the State aid rules of the acquis communautaire. The EU urged Romania to bring its schemes into alignment without delay. The EU in 2001 also invited Romania to identify existing schemes that Romania considered were compatible with the acquis and to provide information on the benefits of schemes to disfavoured regions. In a 2003 paper the EU proposed that Romania close existing schemes to new entrants. On 31 August 2004 Romania passed a Government Ordinance repealing all but one of the tax incentives provided in EGO 24 subject to certain transitional periods agreed with the EU with effect from 22 February 2005. The government report accompanying these measures indicated that the repeal was effected in order to meet the criteria in the Community rules on State aid and also facilitate completion of accession negotiations. On 28 July 2005 the Claimants filed a request for arbitration with ICSID under the terms of the BIT, claiming that the repeal of the EGO 24 incentives was a breach of the BIT. Romania contended that it was forced to revoke the incentives in order to comply with EU requirements and allow lawful accession by Romania to the EU. The Commission participated in the arbitration as amicus. Both Romania and the Commission submitted that any payment of compensation arising out of any award in the arbitration would constitute illegal State aid under EU law and render the award unenforceable in the EU. On 1 January 2007 Romania acceded to the EU. On 24 September 2008 the ICSID Tribunal dismissed Romanias objections on jurisdiction and admissibility and concluded that it had jurisdiction over the claims asserted by the Claimants. On 11 December 2013 the ICSID Tribunal issued the Award. It held that Romania had breached the terms of the BIT by failing to ensure fair and equitable treatment, respect the Claimants legitimate expectations and act transparently. Compensation of RON 376,433,229 was awarded (approximately 70m at the time) plus interest to the date of the award of RON 424,159,150 (approximately 80m at the time) plus compound interest until satisfaction of the Award. The Tribunal declined to address in the Award the effect of the EU State aid rules on its enforceability. On 9 April 2014 Romania applied to annul the Award under the procedure set out in the ICSID Convention and to suspend its enforcement pending a decision on that application. Following Romania purportedly implementing the Award in part by setting off tax debts owed by the Third Claimant (which set off was later annulled by the Romanian courts), on 26 May 2014 the Commission issued an injunction under article 11(1) of Regulation 659/1999 (the injunction decision) ordering Romania to suspend any action which might lead to the execution or implementation of the Award until the Commission had taken a final decision on the compatibility of that State aid with the EU internal market, on the ground that the execution of the Award appeared to the Commission to constitute unlawful State aid contrary to article 107(1) of the Treaty on the Functioning of the EU (TFEU). On 7 August 2014 the ICSID ad hoc Committee agreed to a continuation of the stay of enforcement of the Award, provided that Romania filed an assurance that it would pay the Award in full and subject to no conditions whatsoever if the annulment application was dismissed. Romania did not give this assurance and the stay was revoked in September 2014. On 1 October 2014 the Commission took a decision formally opening the State aid investigation (the initiating decision). On 30 March 2015 the Commission adopted Final Decision 2015/1470 (the Commission Decision) which was addressed to Romania. It decided that the payment of the Award by Romania constituted State aid within article 107(1) TFEU and was incompatible with the internal market. It prohibited Romania from making any payment of such State aid to the Claimants and demanded that Romania recover any payments already made under the Award. It further provided that the Claimants and five other entities directly or indirectly owned by the First and Second Claimants were jointly liable to repay any sums received by any one of them as part payment of the Award. Proceedings seeking annulment of the Commission Decision were commenced before the General Court of the European Union (GCEU) by the Third to Fifth Claimants on 6 November 2015, by the First Claimant on 28 November 2015 and by the Second Claimant on 30 November 2015. The Claimants did not apply for interim relief before the GCEU. On 26 February 2016, having heard arguments from the parties to the arbitration and from the Commission as amicus, the ICSID ad hoc Committee delivered a decision rejecting Romanias application to annul the Award. On 18 June 2019 the GCEU annulled the Commission Decision on the ground that the Commission had purported retroactively to apply its powers under article 108 TFEU and Regulation No 659/1999 to events predating Romanias accession to the EU: European Food SA and Others v European Commission (Cases T 624/15, T 694/15 and T 704/15) EU:T:2019:423. The GCEU did not rule upon certain other grounds of appeal presented by the Claimants because, in the light of its decision, they did not arise. On 31 July 2019 the Commission adopted a decision to appeal against the decision of the GCEU. That decision was communicated to this court and the parties on 13 August 2019. On 27 August 2019 the Commission lodged its appeal to the Court of Justice of the European Union (CJEU). The appeal is limited to the pleas of law addressed by the GCEU in its judgment of 18 June 2019. Should it succeed on its appeal, the Commission has invited the CJEU to remit the remaining pleas to the GCEU for further consideration. There are ongoing enforcement proceedings by the Claimants in the United States, France, Belgium, Luxembourg and Sweden. On 12 March 2019 the Brussels Court of Appeal referred three questions to the CJEU concerning the enforcement of the Award and the principle of sincere co operation in EU law. On 7 September 2018 the Commission responded to a request for an opinion from Romania stating, inter alia, that it continued to view the payment into court of security by Romania as breaching the Commission Decision, the position it maintained throughout the High Court and Court of Appeal proceedings. On 7 December 2018 the Commission adopted a decision empowering it to refer Romania to the CJEU for infringement proceedings for failure to recover sums said to have been paid by Romania to the Claimants under the Award. The proceedings in this jurisdiction On 2 October 2014 the First Claimant applied without notice for registration of the Award in the Commercial Court, pursuant to the Arbitration (International Investment Disputes) Act 1966 (the 1966 Act). Registration was effected on 17 October 2014. On 28 July 2015 Romania filed an application to the Commercial Court to vary or set aside the registration order. By a counter application the Claimants sought an order for security to be made in the event that a stay of enforcement was ordered. In a judgment dated 20 January 2017 [2017] EWHC 31 (Comm); [2017] Bus LR 1147 Blair J dismissed Romanias application to set aside registration, but granted Romanias application to stay enforcement of the Award pending determination of the proceedings in the GCEU. (1) The Claimants had advanced a case on the basis that the Award was res judicata. The judge held that he could not determine whether the Award could be enforced on this basis, because this was in issue in the pending proceedings before the GCEU and accordingly there was a real risk of inconsistent decisions if the domestic court were to decide as a matter of EU law that the Award could be enforced. (2) The judge held that the Commission Decision did not prevent registration of the Award and accordingly he refused Romanias application to set aside registration. However, he held that the domestic court could not enforce the judgment consequent on registration of the Award in circumstances in which the Commission had prohibited Romania from making any payment under the Award to the Claimants. In his view this did not create a conflict with the international obligations of the United Kingdom under the ICSID Convention, because a purely domestic judgment would be subject to the same limitation. (3) The judge held that the domestic court could not rule on whether article 351 TFEU applies in the present case because it was being considered by the GCEU and so there was a real risk of conflicting decisions if the domestic court were now to rule on the issue. (4) The judge held that there was no conflict between the European Communities Act 1972 and the 1966 Act and accordingly he rejected a submission on behalf of the Claimants that the court should give priority on this ground to the 1966 Act. (5) The judge held that he could not rule on the Claimants arguments that EU law did not preclude enforcement because the issue had been raised before the GCEU and there was a real risk of conflict. (6) The judge rejected arguments by Romania that the Award had already been paid in full. (7) The judge held that the domestic court cannot rule on the validity of the BIT between Sweden and Romania, although he accepted the submission of behalf of the Claimants that the validity of that treaty was not relevant to the issues to be decided. Following a further hearing in May 2017, Blair J handed down a second judgment on 15 June 2017 [2017] EWHC 1430 (Comm) in which he refused the Claimants application for security. He considered that, as payment under the Award was prohibited under the Commission Decision, if the court were to proceed to enforce the award against the assets of Romania it would be acting in direct contradiction of the Decision. Accordingly, it was not possible to order security as a condition of the stay. The judge also rejected a submission on behalf of the Claimants that the consequences of non compliance with an order for security need not be set out in the order which could instead provide that the parties could come back to court to consider what the consequences should be. He considered that the balance at that time was against ordering security but he did not rule it out definitively for the future. The Claimants appealed both orders to the Court of Appeal. On 27 July 2018 the Court of Appeal (Arden, Hamblen and Leggatt LJJ) [2018] EWCA Civ 1801; [2019] Bus LR 1394 dismissed the appeal against the order for a stay but allowed the appeal against the security order and ordered that security should be provided in the sum of 150m. In dismissing the Claimants appeal against the grant of a stay: (1) The Court of Appeal did not agree with Blair J that the issue ought not to be decided because of a risk of conflict with the GCEU. However, it considered that to permit enforcement on the basis that the Award was res judicata would frustrate the effective application of EU State aid law. (2) Arden and Leggatt LJJ held that Blair J had erred in holding that the effect of the 1966 Act, in implementing the ICSID Convention in domestic law, is to give an award upon registration the same status within English law as any other judgment. Hamblen LJ dissented on this issue and considered that Blair J had correctly held that there was no conflict between the international obligations of the United Kingdom under the ICSID Convention (and the 1966 Act which gives effect to those obligations) and under EU law. (3) Arden and Leggatt LJJ held that a stay was within the powers of the domestic court because it was consistent with the purposes of the ICSID Convention and it was appropriate to exercise the discretion to order a stay on the facts of the case. (4) Leggatt and Hamblen LJJ held that, if there was a conflict between the international obligations of the United Kingdom under the ICSID Convention as reflected in the 1966 Act and the courts duties under EU law, the judge had correctly concluded that there ought to be a stay because the applicability of article 351 TFEU was an issue before the GCEU and there was a clear risk of conflicting decisions. The Court of Appeal held that there was power to order security. It considered that the judge was correct in holding that the duty of sincere co operation precluded the provision of security as a condition of the stay. However, the Court of Appeal held that EU law did not preclude an order for security which did not provide as a consequence of any failure to provide security that the stay would be lifted. It considered that there was no material risk of conflict which would preclude such an order. Accordingly, it ordered Romania to provide security in the sum of 150m. It suspended enforcement of the Court of Appeal security order, however, to allow Romania time to lodge an application for permission to appeal to the Supreme Court. On 31 October 2018 the Supreme Court granted Romania permission to appeal limited to Grounds 1, 3 and 4 as set out in the notice of appeal. The Supreme Court also ordered that the stay of the security order made by the Court of Appeal be continued until determination of the appeal or further order. The same order granted the Commission permission to intervene in the appeal, as it had in the High Court and the Court of Appeal. On 11 April 2019 the Supreme Court granted the Claimants permission to cross appeal in relation to the order for a stay on Grounds 1 and 2 in the notice of cross appeal and reserved to the hearing the question of permission to cross appeal on Grounds 3 and 4 in that notice. The grounds of appeal are set out at paras 37 to 39 below. The appeal was listed for hearing over three days commencing on 18 June 2019. On the morning of that day the GCEU handed down its judgment annulling the Commission Decision. As the Court of Appeals order of a stay had lapsed with the GCEU giving its judgment, and as security had been ordered as a term of the stay, by its order of 18 June 2019, the Supreme Court adjourned the hearing to a further hearing listed for 7 9 October 2019 and gave directions for other steps to be taken with a view to establishing or clarifying the basis on which it would have jurisdiction to hear the appeals. Following the Commissions confirmation that it intended to appeal against the decision of the GCEU to the CJEU, Romania issued an application for the stay of enforcement of the Award, which had lapsed with the GCEUs judgment, to be imposed or extended pending determination of the appeal to the CJEU. The Claimants also issued applications against Romania for security in respect of any stay. These applications were heard by Phillips J on 9 September 2019. On 10 September 2019 Phillips J [2019] EWHC 2401 (Comm) ordered that enforcement of the Award be stayed pending the final determination of the CJEU appeal proceedings. He also ordered that Romania provide security in the amount of 150m by 17 October 2019. Following judgment, the parties applied for certificates for a leapfrog appeal to the Supreme Court under the Administration of Justice Act 1969, which the judge granted. Grounds of appeal Romania appeals against the order for security on the following grounds. Ground 1: The Court of Appeal erred in its approach to assessing whether there was a risk of conflict. Ground 3: The security ordered and whether it is to be used to pay the Award is to be subject to the jurisdiction of the Commercial Court, which, from the date on which the United Kingdom withdraws from the EU, will not be bound to observe EU law. While the United Kingdom remains a member state of the EU, it is contrary to EU law for the Court of Appeal as an emanation of the State to create a situation whereby the authority of the EU institutions could be wholly circumvented. Ground 4: By ordering Romania to provide security, the Court of Appeal has erred in going further than the process of enforcement which it itself considered to be premature. The Claimants cross appeal against the grant of a stay on the following original grounds. Original Ground 1: Under the ICSID Convention and the 1966 Act there is no power to order a stay of the Award. Original Ground 2: The stay is incompatible with the ICSID Convention in any event and serves no useful purpose. Original Ground 3: The European Communities Act 1972 does not require the United Kingdom to breach its pre accession obligations under the ICSID Convention as implemented by the 1966 Act. Original Ground 4: Article 351 TFEU applies with the result that the obligations of the United Kingdom under the pre accession ICSID Convention are not subject to the over riding effect of EU law. In addition, the Claimants, with the permission of the Supreme Court, rely on a new ground of appeal: New Ground: The effect of the GCEUs judgment annulling the Commission Decision is that the duty of sincere co operation can no longer require courts in this jurisdiction to stay enforcement of the award. It is convenient to consider the Claimants appeal (by way of the cross appeal) in respect of the stay first. The Stay Appeal The new ground Article 4(3) of the Treaty on European Union (TEU) provides: Pursuant to the principle of sincere cooperation, the Union and the member states shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties. The member states shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union. The member states shall facilitate the achievement of the Unions tasks and refrain from any measure which could jeopardise the attainment of the Unions objectives. The duty of sincere co operation contained in article 4(3) TEU was described, in its application to State aid law, in the following terms by the Court of Justice in Deutsche Lufthansa AG v Flughafen Frankfurt Hahn GmbH (Ryanair Ltd intervening) (Case C 284/12) [2014] 2 CMLR 20, para 41: It is also important to note that the application of the European Union rules on State aid is based on an obligation of sincere co operation between the national courts, on the one hand, and the Commission and the courts of the European Union, on the other, in the context of which each acts on the basis of the role assigned to it by the Treaty. In the context of that co operation, national courts must take all the necessary measures, whether general or specific, to ensure fulfilment of the obligations under European Union law and refrain from those which may jeopardise the attainment of the objectives of the Treaty, as follows from article 4(3) TEU. Therefore, national courts must, in particular, refrain from taking decisions which conflict with a decision of the Commission . In imposing and upholding the stay in the present case, Blair J and the Court of Appeal both referred to this passage and acted on the premise that the Commission Decision was valid in accordance with the principle stated in Masterfoods v HB Ice Cream (Case C 344/98) [2001] All ER (EC) 130, para 53 that: Acts of the Community institutions are in principle presumed to be lawful until such time as they are annulled or withdrawn. In the changed circumstances brought about by the decision of the GCEU annulling the Commission Decision, however, the Claimants now advance, with the permission of this court, their new ground of appeal. The courts below proceeded on the basis that the duty of sincere co operation in EU law required a stay of enforcement because there was a valid Commission decision which imposed a direct prohibition on Romania from paying the Award. The Claimants now submit that as the Commission Decision has been annulled and the Commission has not sought interim measures staying the effect of the judgment, there is no EU law duty on courts in this jurisdiction to stay enforcement of the Award. They submit that the presumption of validity no longer applies in respect of the Commission Decision and that, on the contrary, the applicable and binding act of the EU institutions is now the judgment annulling the Commission Decision. In their submission the authoritative determination of the EU institutions, binding on the UK courts, is that the Commission had no competence to find that the Award was State aid or to apply EU law to the Award at all and that, accordingly, the basis for the stay has fallen away entirely. They further point to article 278 TFEU which states: Actions brought before the Court of Justice of the European Union shall not have suspensory effect. The Court may, however, if it considers that circumstances so require, order that application of the contested act be suspended. In the present case, no application has been made to suspend the application of the judgment of the GCEU. Similarly, article 279 TFEU provides that the CJEU may, in any cases before it, prescribe any necessary interim measures. No such measures have been sought or ordered. Accordingly, the Claimants submit that the reasoning in and the annulment ordered pursuant to the GCEUs judgment have full legal effect. In response, the Commission and Romania submit that the effects of the GCEUs judgment are limited to annulling the Commission Decision, and that this does not extend to: (1) the injunction decision of 26 May 2014 prohibiting Romania from implementing the award pending further investigation by the Commission; or (2) the initiating decision of 1 October 2014 by which the Commission formally opened the State aid investigation. They contend that neither is the subject of any successful or pending legal challenge and that, accordingly, the consequence of the relief granted by the GCEU is that the Commissions State aid investigation into Romanias implementation of the Award is reopened. The effect of this, they say, is that even if the Commission does not succeed in its appeal to the CJEU, it will be open to the Commission to re take a State aid decision provided it can do so by addressing and avoiding the legal difficulties identified in the GCEUs judgment. In the meantime, the injunction decision continues to have effect. They maintain that the duty of sincere co operation requires courts in this jurisdiction to refrain from taking decisions that would conflict with these decisions. In addition, they point to the pending appeal by the Commission to the CJEU and the possibility that the Commission Decision may yet be vindicated as creating a further risk of conflict which engages the duty of sincere co operation. Before considering these submissions, it is appropriate to consider what precisely was decided in the judgment of the GCEU. In the view of the GCEU, the ICSID Tribunal in the Award had confined itself to determining the exact damage suffered by the Claimants on the basis of the repeal of EGO 24 and calculated the amount of damages corresponding to a right to compensation which arose at the time of the infringements committed by Romania in 2005 (para 74). The right to receive the compensation awarded arose prior to Romanias accession to the EU on 1 January 2007. The Award was simply the recognition of that right and payments made in 2014 merely represented the enforcement of that right which arose in 2005 (para 78). EU law was not applicable in Romania before its accession and it was only from Romanias accession that the Commission acquired the competence enabling it to review Romanias actions pursuant to article 108 TFEU (para 79). As the EGO 24 incentives were repealed in 2005, the Commission was by no means competent to assess their alleged unlawfulness in the light of EU law, at least with regard to the period predating accession (para 86). The GCEU noted that, as the compensation awarded was calculated from the repeal of EGO 24 on 22 February 2005 until its scheduled expiry on 1 April 2009, that period covered 27 months during which Romania was a member of the EU (para 89). The amounts awarded as compensation for the pre accession period could not constitute State aid in EU law and the Commission had exercised its powers retroactively in relation to a situation predating Romanias accession to the European Union, at least with regard to those amounts (para 90). With regard to the award of compensation in respect of the post accession period, even assuming that the payment of compensation relating to that period could be classified as incompatible aid, given that the Commission did not draw a distinction between the periods of compensation for the damage suffered by the applicants before or after accession, the Commission has, in any event, exceeded its powers in the area of State aid review. (para 91) The GCEU then addressed the classification by the Commission of the Award as an advantage and a State aid within the meaning of article 107 TFEU and concluded as follows: 107. the Commission is not competent and EU law is not applicable to the EGO scheme, to its revocation or to the compensation for that revocation, because the arbitral award, which found that there was a right to compensation in 2013, did not have the effect of triggering the applicability of EU law and the Commissions competence to the earlier EGO tax incentives and, accordingly, to the compensation at issue which resulted therefrom. 108. Therefore, as the compensation at issue covered, at least in part, a period predating accession (from 22 February 2005 to 1 January 2007) and as the Commission did not draw a distinction, among the amounts to be recovered, between those falling within the period predating accession and those falling within the period subsequent to accession, the decision by which it classified the entirety of the compensation as aid is necessarily unlawful. 109. It follows that the contested decision is unlawful in so far as it classified as an advantage and aid within the meaning of article 107 TFEU the award, by the arbitral tribunal, of compensation intended to compensate for the damage resulting from the withdrawal of the tax incentives, at least in respect of the period predating the entry into force of EU law in Romania. In summary, the GCEU held that the Commission had exceeded its competence to the extent that it had applied its State aid powers retroactively to events predating Romanias accession and the Commission Decision was unlawful to the extent that it classified as an advantage or aid compensation relating to the period prior to Romanias accession to the EU. As the Commission had not distinguished between the pre and post accession periods, the Commission Decision as a whole was annulled. Initiating decision and injunction decision Romania and the Commission submit that the effect of that relief is that the position prior to the Commission Decision is restored. They submit that the injunction decision and the initiating decision commencing the formal investigation into State aid arising from the Award are distinct from the annulled Commission Decision and are unchallenged. (The Claimants did, in fact, challenge the injunction decision before the GCEU but they later withdrew that action: Micula v European Commission (Case T 646/14) EU:T:2016:135. The initiating decision has never been challenged.) The result, Romania and the Commission therefore submit, is that the Commissions investigation into Romanias implementation of the Award is reopened and that both the injunction decision and the initiating decision are restored. The Commission submits that the reopening of the investigation means that the investigation must be closed, either by a successful appeal to the CJEU reinstating the Commission Decision, or by the Commission adopting a new final decision. The Commission also points to the fact that the initiating decision recalls Romanias obligations under the standstill provision in article 108(3) TFEU which provides that the member state concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision. The case law of the Court of Justice establishes that annulment of an EU measure does not necessarily affect the preparatory acts (R v Ministry of Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023, para 34; Kingdom of Spain v Commission of the European Communities (Case C 415/96) [1998] ECR I 7008, para 32). In certain circumstances, therefore, it may be possible to resume the procedure for replacing a measure at the point at which the illegality occurred. In the present case, Romania and the Commission, relying on ArcelorMittal Tubular Products Ostrava v Commission (Case T 364/16) EU:T:2018:696, para 64, maintain that the prior acts adopted in the context of the investigation, the injunction decision and the initiating decision, are separate acts unaffected by the judgment of the GCEU and must therefore be presumed to be lawful. On that basis they rely on Deutsche Lufthansa AG (Case C 284/12) which establishes that where the Commission has initiated a formal investigation procedure under article 108(2) TFEU with regard to a State measure which has not been notified and is being implemented, a national court is required, pursuant to the duty of sincere co operation, to adopt all the necessary measures with a view to drawing the appropriate conclusions from an infringement of the obligation to suspend the implementation of that measure. (See also European Commission v Hansestadt Lbeck (Case C 524/14 P) EU:C:2016:971, paras 29, 30 where this was endorsed by the Grand Chamber of the Court of Justice.) Moreover, Deutsche Lufthansa also establishes that where a national court, in these circumstances, entertains doubts as to whether the measure at issue constitutes State aid within article 107(1) TFEU, or as to the validity of interpretation of the decision to initiate the formal examination procedure, the appropriate course is for it to seek clarification from the Commission or to refer a question to the Court of Justice for a preliminary ruling. In response the Claimants submit that the injunction decision and the initiating decision are tainted by the same illegality as the Commission Decision which has been annulled by the GCEU. Relying on Asteris AE v Commission of the European Communities (Joined Cases 97/86, 193/86, 99/86 and 215/86) [1988] ECR 2181, paras 27 29, they submit that the Commission is under an obligation by virtue of article 266 TFEU to comply not only with the operative part of the judgment but also with its reasoning. In Asteris the Greek government had secured the annulment of a regulation fixing aid for the production of tomato concentrates for the 1983/84 marketing year. While that case had been pending before the Court of Justice the Commission had made the same error in relation to regulations adopted in relation to subsequent marketing years. The Court of Justice held that the Commission was bound to have regard not only to the operative part of the judgment but also to the grounds which led to the judgment and constitute its essential basis, in so far as they are necessary to determine the exact meaning of what is stated in the operative part (para 27) and concluded: However, by virtue of the retroactive effect of judgments by which measures are annulled, the finding of illegality takes effect from the date on which the annulled measure entered into force. It follows that in the present case the institution concerned is also under an obligation to eliminate from the regulations already adopted when the annulling judgment was delivered and governing marketing years after 1983/84 any provisions with the same effect as the provision held to be illegal. (para 30) On behalf of the Claimants, Ms Demetriou QC submits that the injunction decision and the initiating decision are vitiated by the same legal errors which resulted in the annulment of the Commission Decision and that it is, therefore, not open to the Commission to rely on the preceding decisions as giving rise to a duty of sincere co operation on the part of national courts. In determining the effect of the annulment of an EU measure on a preparatory measure, it is necessary, in each case, to identify the precise provision held to be illegal and the specific reasons which underlie the finding of illegality and which the institution concerned must take into account when replacing the annulled measure (Asteris, para 27; Kingdom of Spain v Commission of the European Communities, para 31). As stated above, the Commission Decision was flawed because the Commission exceeded its competence by applying its State aid powers retroactively to events predating Romanias accession and because the Commission Decision classified as an advantage or aid compensation relating to the period prior to Romanias accession to the EU. The failure to distinguish between pre and post accession periods led to the annulment of the whole Commission Decision. These errors also characterise the injunction decision and the initiating decision. The initiating decision (C (2014) 6848), while expressly stating in the preamble, para (57) that the obligation not to put into effect any aid measure only applies to aid measures put into effect after the entry into force of the Romanian Treaty of Accession on 1 January 2007, continues: (58) The Commission considers that executing the Award would amount to new aid in the sense of article 1(c) of Regulation (CE) No 659/1999 of 22 March 1999, as the decision to execute the Award would take place after the entry into force of the Treaty for Romania. (59) It does not matter that the revocation of the EGO 24 facilities occurred before the entry into force of the Treaty for Romania or that the amount granted or to be granted would correspond, at least partially, to the operating expenses incurred by the claimants before the entry into force of the Treaty for Romania. For the purposes of State aid law it does not matter at which time these expenses were incurred; rather, the decisive point in time is the moment at which the State decides to relieve the undertaking of the economic burden that those expenses constitute. Similarly, at para (34) the Commission states that implementation of the Award would grant to the Claimants an amount corresponding to the advantages foreseen under the abolished EGO 24 scheme from the moment it was repealed (22 February 2005) until the scheduled expiry (1 April 2009) and that this constitutes an economic advantage within article 107(1) TFEU. In the same way the preamble to the injunction decision states at para 23 that by implementing the award Romania is reinstating the EGO incentives and will grant to the Claimants the advantages foreseen under the abolished EGO 24 from its repeal until its scheduled expiry. These preliminary decisions are, therefore, subject to the same flaws as the Commission Decision. Nevertheless, we are not persuaded that these errors in the preparatory decisions prevent the Commission from relying on the initiating decision as giving rise to a duty of sincere co operation on the part of national courts. The judgment of the GCEU leaves in existence an extant Commission investigation into State aid. In the absence of a final decision of the Commission closing the formal investigation procedure, the effects of that initiating decision subsist (European Commission v Hansestadt Lbeck (Case C 524/14 P), para 31). This necessarily imposes a duty of sincere co operation on the part of the United Kingdom. Whereas in Asteris the reasoning of the Court of Justice totally undermined the legality of the regulations in respect of subsequent years, it may well be open to the Commission to reconfigure the investigation in the present case so as to avoid the errors which resulted in the annulment of the Decision. Thus, for example, it may be open to the Commission to reframe its investigation so that it is limited to the post accession period. Similarly, we note that the reasoning of the GCEU judgment does not address the Commissions case, founded on the terms of Romanias accession agreement (L 157/203, 21.6.2005; Annex V, section 2, para 5) which exceptionally permits the Commission to object to any aid measure granted in the pre accession period from 1 September 2004 and to initiate a formal investigation procedure in relation to it and which empowers the Commission to decide thereafter that Romania shall take all necessary measures to recover the aid from the beneficiary. It may be open to the Commission to reconfigure its investigation on this basis. In any event, courts in this jurisdiction cannot be confident that the judgment of the GCEU rules out such possibilities. For these reasons, we consider that the subsisting initiating decision continues to engage the duty of sincere co operation owed by national courts, notwithstanding the failure of the Commission to apply to suspend the effect of the GCEU decision or to seek an interim order from the CJEU. With regard to the injunction decision, the Claimants object that on its construction it cannot have any application in the present circumstances. The operative part of the decision provides that Romania shall immediately suspend any action which may lead to the execution or implementation of the Award until the Commission has taken a final decision on the compatibility of that State aid with the internal market. The Claimants submit that this created only an interim prohibition until the Commission took a final decision, that that final decision was taken on 31 March 2015 and that at that point this injunction ceased to apply. Whether the injunction may have revived as a result of the annulment of the Commission Decision, as suggested by the Commission, was a point not fully argued before us. In any event, it is not necessary to reach a concluded view on this point in the light of the conclusions to which we have come on the parties other submissions. The pending appeal The decision of the GCEU is currently under appeal to the CJEU. Romania and the Commission submit that, as a result, the duty of sincere co operation continues to apply. They observe that it has not been suggested that the Commissions appeal has no realistic prospect of success and they point to a risk of conflict between the EU courts and courts in this jurisdiction if the GCEU judgment does not stand and the Commission Decision is vindicated. In Masterfoods (Case C 344/98) the Irish High Court had granted HB a permanent injunction restraining Masterfoods from inducing retailers to store Masterfoods products in freezers belonging to HB, in breach of an exclusivity clause, thereby rejecting Masterfoods case that the clause and HBs conduct infringed EC competition rules. In parallel proceedings before the Commission, the Commission ruled that the exclusivity provision infringed article 85(1) of the Treaty establishing the European Community (EC) and that HBs inducement to retailers in Ireland to enter into freezer cabinet agreements subject to a condition of exclusivity infringed article 86 EC. The Irish Supreme Court made a preliminary reference to the Court of Justice in which it asked whether the obligation of sincere co operation required the Supreme Court to stay the proceedings pending the disposal of the appeal to the Court of First Instance against the decision of the Commission and any subsequent appeal to the Court of Justice. The Court of Justice expressed the duty on a national court in such circumstances in the following terms: When the outcome of the dispute before the national court depends on the validity of the Commission decision, it follows from the obligation of sincere co operation that the national court should, in order to avoid reaching a decision that runs counter to that of the Commission, stay its proceedings pending final judgment in the action for annulment by the Community Courts, unless it considers that, in the circumstances of the case, a reference to the Court of Justice for a preliminary ruling on the validity of the Commission decision is warranted. (para 57) On behalf of the Claimants, Ms Demetriou seeks to distinguish Masterfoods on two grounds. First, she points to the fact that the decision by the Commission in that case was valid and subsisting whereas the Commission Decision with which we are concerned has been annulled. Secondly, she submits that in Masterfoods the national court was seized with precisely the same issue of law as had been decided by the Commission in its decision, namely the application of the same competition provisions to the same agreements, and that accordingly the Court of Justice was concerned to avoid a direct conflict which would have infringed the principle of legal certainty. By contrast, she submits, there is no such risk in the present case. In these proceedings the court is not asked to determine whether the award or any part of it constitutes State aid, so there is no risk of conflicting judgments on that point or on EU law more generally. In the absence of a stay of the national proceedings, the award could be enforced which might result in Romania paying compensation to the Claimants. Should the Court of Justice allow the Commissions appeal, she submits, that would oblige Romania to recover the payments of compensation which would not be a conflict but, at most, a possible practical inconvenience. Moreover, that possibility would be remote because if the Commission were to succeed on appeal before the Court of Justice it would be necessary for the matter to be remitted to the GCEU to resolve the other grounds for annulment not yet ruled on by that court. The first suggested ground of distinction may be dealt with very briefly. The judgment of the Court of Justice in Masterfoods makes clear that the duty of sincere co operation (and therefore the obligation to stay national proceedings) continues pending final judgment in the action for annulment by the Community Courts (paras 57, 59). We are also unable to accept the second suggested ground of distinction. The duty of sincere co operation is intended to preserve the effectiveness of actions taken by EU bodies with relevant competence. While it is true that the present state of legal proceedings before the EU courts and in this jurisdiction does not present the stark direct conflict apparent in Masterfoods, we are concerned with potentially contradictory decisions on the same subject matter between the same parties (cf Crehan v Inntrepreneur Pub Co [2007] 1 AC 333, per Lord Bingham of Cornhill, at para 11). Ms Demetriou minimises unduly the risk of conflict which the duty of sincere co operation is intended to avoid. It is only where there is scarcely any risk of a conflict between decisions of domestic and EU institutions that national authorities should proceed (Delimitis v Henninger Brau AG (Case C 234/89) at para 50; Emerald Supplies Ltd v British Airways plc (Nos 1 & 2) (CA) [2016] Bus LR 145, para 70). Moreover, it appears by analogy with Kernkraftwerke Lippe Ems GmbH v Hauptzollamt Osnabruck (Case C 5/14) EU:C:2015:354 at para 33, that national institutions should defer even if the impediment to the full effectiveness of EU law is only temporary. Subject to the other grounds of appeal considered below, it is not possible to conclude that there is scarcely any risk of conflict. On the contrary, the risk of the consequences to which Ms Demetriou points would amount to a substantial impediment to the operation of EU law. Accordingly, the existence of a pending appeal to the Court of Justice with a real prospect of success is, in itself, sufficient to trigger the duty of cooperation and, subject to the further grounds of appeal considered below, requires the grant of a stay so as not to undermine the effect of the Commission Decision, should it be upheld. For these reasons, we would dismiss this ground of appeal. Cross Appeal Original Ground 1: Under the ICSID Convention and the 1966 Act there is no power to stay Cross Appeal Original Ground 2: The stay is incompatible with the ICSID Convention in any event and serves no useful purpose Grounds 1 and 2 may conveniently be considered together. There are currently 154 State parties to the ICSID Convention. Both the United Kingdom and Romania are Contracting States. The United Kingdom became a party in 1966, prior to its accession to the EEC in 1973. Romania became a party in 1975, prior to its accession to the EU in 2007. The EU is not a party to the ICSID Convention. Section 6 of Chapter IV of the ICSID Convention provides for the recognition and enforcement of awards. Article 53 provides in relevant part: (1) The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention. Article 54 provides in relevant part: Article 53 Article 54 (1) Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. (2) A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary General. Each Contracting State shall notify the Secretary General of the designation of the competent court or other authority for this purpose and of any subsequent change in such designation. (3) Execution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought. Article 55 provides that nothing in article 54 shall be construed as derogating from the law in force in any Contracting State relating to immunity of that State or of any foreign State from execution. Article 53(1) prohibits any appeal or any other remedy except those provided for in this Convention. The exception is a reference to the provisions in section 5 of Chapter IV of the Convention. Article 50 provides for any dispute between the parties as to the meaning or scope of an award to be decided by a Tribunal. Article 51 provides for revision of an award by a Tribunal on the ground of the discovery of some fact which decisively affects the award. Article 52 provides for the annulment of an award by an ad hoc Committee on the grounds that the Tribunal was not properly constituted, that it has manifestly exceeded its powers, that there was corruption on the part of a member of the Tribunal, that there has been a serious departure from a fundamental rule of procedure, or that the award has failed to state the reasons on which it is based. In each case the Tribunal or Committee concerned may stay enforcement of the award pending its decision. The Arbitration (International Investment Disputes) Act 1966 implements the ICSID Convention in the domestic law of the United Kingdom. Section 1(2) provides that a person seeking recognition or enforcement of an ICSID award shall be entitled to have the award registered in the High Court. Section 2 provides: 2. Effect of registration. (1) Subject to the provisions of this Act, an award registered under section 1 above shall, as respects the pecuniary obligations which it imposes, be of the same force and effect for the purposes of execution as if it had been a judgment of the High Court given when the award was rendered pursuant to the Convention and entered on the date of registration under this Act, and, so far as relates to such pecuniary obligations (a) proceedings may be taken on the award, (b) the sum for which the award is registered shall carry interest, (c) over the execution of the award, the High Court shall have the same control as if the award had been such a judgment of the High Court. (2) Rules of court under section 84 of the Senior Courts Act 1981 may contain provisions requiring the court on proof of the prescribed matters to stay execution of any award registered under this Act so as to take account of cases where enforcement of the award has been stayed (whether provisionally or otherwise) pursuant to the Convention, and may provide for the provisional stay of execution of the award where an application is made pursuant to the Convention which, if granted, might result in a stay of enforcement of the award. A rule of court, CPR 62.21(5), provides with regard to registration under the 1966 Act: Where, on granting permission to register an award or an application made by the judgment debtor after an award has been registered, the court considers (a) that the enforcement of the award has been stayed (whether provisionally or otherwise) under the Convention; or (b) that an application has been made under the Convention which, if granted, might result in a stay of the enforcement of the award, the court may stay the enforcement of the award for such time as it considers appropriate. At first instance, Blair J dismissed the application by Romania to set aside the order of Burton J registering the award. In Blair Js view, registration of the award would not place Romania in breach of the Commission Decision. However, he stayed enforcement of the award pending the resolution of the annulment proceedings in the GCEU on the basis that under the ICSID Convention and under section 2 of the 1966 Act an arbitral award was to be equated for the purposes of enforcement with a judgment of the High Court. As the High Court would not enforce a domestic judgment which conflicted with a decision of the Commission, it could not enforce the Award pending the outcome of the annulment proceedings. Accordingly, article 351 TFEU (set out at para 90, below) did not apply because there was no conflict between the obligations of the United Kingdom under the ICSID Convention and the EU Treaties. The Court of Appeal unanimously dismissed the appeal against the order for a stay. The majority (Arden and Leggatt LJJ) held that while section 2(1) of the 1966 Act did not have the effect of making an ICSID award registered under section 1 equivalent for all purposes to an ordinary domestic judgment, the domestic court could grant a stay of execution if in the circumstances of the case it was just to do so, provided the stay was temporary and consistent with the purposes of the ICSID Convention. Hamblen LJ (dissenting on this point) held that the ICSID Convention and the 1966 Act conferred on a registered award the same status as a final domestic judgment. Since such a judgment would not be enforced where inconsistent with EU law, there was no inconsistency with the ICSID Convention or the 1966 Act in not enforcing an award where inconsistent with EU law. On behalf of the Claimants it is submitted that Blair J and the Court of Appeal were in error in granting a stay because the ICSID Convention and the 1966 Act do not permit a stay in such circumstances. Distinguishing between enforcement and execution, they submit that a stay of enforcement may only be granted pursuant to articles 50 52 of the ICSID Convention. Article 54 imposes a duty on national courts to enforce awards and does not permit a national court to refuse enforcement where it would refuse to enforce a domestic judgment. They accept that the national court has control over the execution of an award, including power to grant a temporary stay; however, this is strictly for procedural (not substantive) reasons and only where no inconsistency arises with the duties to recognise and enforce the award. They submit that the stay granted in these proceedings was not a stay of execution but a stay of enforcement pending the determination of the GCEU proceedings, which the Court had no power to order. The provisions of the 1966 Act must be interpreted in the context of the ICSID Convention and it should be presumed that Parliament, in enacting that legislation, intended that it should conform with the United Kingdoms treaty obligations. It is a notable feature of the scheme of the ICSID Convention that once the authenticity of an award is established, a domestic court before which recognition is sought may not re examine the award on its merits. Similarly, a domestic court may not refuse to enforce an authenticated ICSID award on grounds of national or international public policy. In this respect, the ICSID Convention differs significantly from the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. The position is stated in this way by Professor Schreuer in his commentary on article 54(1): The system of review under the Convention is self contained and does not permit any external review. This principle also extends to the stage of recognition and enforcement of ICSID awards. A domestic court or authority before which recognition and enforcement is sought is restricted to ascertaining the awards authenticity. It may not re examine the ICSID tribunals jurisdiction. It may not re examine the award on the merits. Nor may it examine the fairness and propriety of the proceedings before the ICSID tribunal. This is in contrast to non ICSID awards, including Additional Facility awards, which may be reviewed under domestic law and applicable treaties. In particular, the New York Convention gives a detailed list of grounds on which recognition and enforcement may be refused (Christoph H Schreuer, The ICSID Convention: A Commentary, 2nd ed (2009), p 1139, para 81) The Conventions drafting history shows that domestic authorities charged with recognition and enforcement have no discretion to review the award once its authenticity has been established. Not even the ordre public (public policy) of the forum may furnish a ground for refusal. The finality of awards would also exclude any examination of their compliance with international public policy or international law in general. The observance of international law is the task of the arbitral tribunal in application of article 42 of the Convention subject to a possible control by an ad hoc committee Nor would there be any room for the application of the Act of State doctrine in connection with the recognition and enforcement of an ICSID award (Schreuer, pp 1140 1141, para 85) Contracting States may not refuse recognition or enforcement of an award on grounds covered by the challenge provisions in the Convention itself (articles 50 52). Nor may they do so on grounds based on any general doctrine of ordre public, since in the drafting process the decision was taken not to follow the model of the New York Convention. However, although it is recognised that this is the general position under the Convention, it is arguable that article 54(1), by framing the relevant obligation as to enforcement as an obligation to treat an award under the Convention as if it were a final judgment of a local court, allows certain other defences to enforcement which are available in local law in relation to such a final judgment to be raised. The principle that arbitration awards under the ICSID Convention should be enforceable in the courts of all Contracting States and with the same status as a final judgment of the local courts in those States, as eventually set out in article 54(1), was a feature from an early stage in the drafting of the Convention. Mr Aron Broches, General Counsel of the World Bank at the time who chaired the regional consultative meetings (the Regional Consultative Meetings) that occurred as part of the Conventions drafting, explained to delegates that by virtue of this formula Contracting States would be entitled to apply their local law of sovereign or state immunity with regard to the enforcement of awards, and thereby avoid or minimise possible embarrassment at having to enforce awards against other friendly Contracting States. Accordingly, it was made clear that article 54(1) had the substantive effect of introducing to some degree a principle of equivalence between a Convention award and a local final judgment as regards the possibility of applying defences in respect of enforcement. See ICSID, History of the ICSID Convention (Washington DC, 1968) vol II 1: Doc 22 (20 September 1963) Memorandum of the discussion by the Executive Directors, September 10, 1963, Discussion of the First Preliminary Draft Convention, p 177); Doc 25, (30 April 1964) Summary Record of Proceedings, Addis Ababa Consultative Meetings of Legal Experts, December 16 20, 1963, p 242; Doc 31 (20 July 1964) Summary Record of Proceedings, Bangkok Consultative Meetings of Legal Experts, April 27 May 1, 1964, p 520. In his report on the Regional Consultative Meetings, Mr Broches referred to certain comments that had dealt with the effect of what was then draft section 15 (which became article 54(1)) on existing law with respect to sovereign immunity. Mr Broches explained that the drafters had no intention to change that law. By providing that the award could be enforced as if it were a final judgment of a local court, section 15 implicitly imported the limitation on enforcement which in most countries existed with respect to enforcement of court decisions against Sovereigns. However, this point might be made explicit in order to allay the fears expressed by several delegations (History, vol II 1: Doc 33 (9 July 1964) Chairmans Report on the Regional Consultative Meetings of Legal Experts, p 575; and see Doc 27 (12 June 1964) Summary Record of Proceedings, Santiago Consultative Meetings of Legal Experts, February 3 7, 1964, pp 342 et seq, where Mr Broches again indicated that this was the intended effect of what became article 54(1), but that it could be made completely clear to allay concerns). Accordingly, the provision which eventually became article 55 was included in what was designated as the First Draft of the Convention and was retained in the final version of the Convention (History, vol I, 254; vol II 1, Doc 43 (11 September 1964) Draft Convention: Working Paper for the Legal Committee, p 636). The official Report of the Executive Directors on the Convention confirmed that this provision was introduced for the avoidance of doubt (as its text indicates): see ICSID, Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington DC, 1965), para 43; Mr Broches made the same point in his Memorandum to the Executive Directors (History, vol II 2, Doc 128 (19 January 1965) Memorandum from the General Counsel and Draft Report of the Executive Directors to accompany the Convention, paras 43 44). The law of State immunity varies from State to State, and the Convention made no attempt to harmonise it. As Professor Schreuer points out in his commentary on article 54, persons seeking to enforce arbitration awards made pursuant to the Convention will tend to choose to do so in those jurisdictions which have the least generous rules of State immunity for the protection of the assets of other Contracting States (Schreuer, p 1124, para 27). The fact that the specific qualification of the obligation to enforce an award like a final court judgment relating to state immunity was expressly dealt with in article 55 for the avoidance of doubt indicates that article 54(1) was itself understood to have the effect of allowing the possibility of certain other defences to enforcement if national law recognised them in respect of final judgments of local courts. The travaux prparatoires also indicate that it was accepted that further defences available in national law in relation to enforcement of court judgments could be available in exceptional circumstances by virtue of the formulation of the obligation in article 54(1). Mr Broches pointed out that the First Draft went further than the Secretariat draft since treating awards in the same way as court judgments implied that exceptional grounds only could be invoked to prevent recognition and enforcement (Aron Broches, Awards Rendered Pursuant to the ICSID Convention: Binding Force, Finality, Recognition, Enforcement, Execution, (1987) ICSID Rev 287, 312). But he also resisted a proposal by the Austrian representative to delete the words (in what became article 54(1)) requiring an award to be enforced as if it were a final judgment [of a local court], so as to make the obligation in that provision an unqualified one, since the Austrian representative noted that there were several possibilities for annuling [sic] judgments even after they had been declared final (History, vol II 2, Doc 120 (11 January 1965) Summary Proceedings of the Legal Committee meeting, December 11, morning, p 901). Mr Broches stated that in his opinion by making an award the equivalent of a final judgment one had reached the maximum obtainable (that is to say, in practical terms, given the issues raised in the drafting meetings) (Broches, p 314). So, for example, there was discussion of the possibility in English law of applying to have a final judgment of a national court set aside on the grounds that it was obtained by fraud, and Mr Broches confirmed that this would also be applicable in relation to a Convention award: see History, vol II 2, Doc 113 (11 January 1965) Summary Proceedings of the Legal Committee meeting, December 10, afternoon, p 889 (If a final judgment against a sovereign State could not be executed, then an award could not be executed either; and in the same way, if a final judgment was open to some extraordinary remedy in the case of fraud or similar occurrence, that would be true for the award as well.). Later, Mr Broches resisted a suggestion that what is now article 55 should be expanded so as also to cover the cases where there were laws which, although not related to immunities, might limit the execution of the award against the State, on the grounds that he thought this was unnecessary because full recognition had been given to the laws of the State in article [54] and [article 55] dealt with one specific problem on which certain delegations had expressed concern (History, vol II 2, Doc 120, p 905). In his commentary on article 54, Professor Schreuer observes that at the stage of recognition and enforcement of awards [t]he otherwise self contained nature of the Convention does not apply (p 1120, para 10). At, pp 1142 1143, para 91 he says (omitting references): The fact that article 54(1) assimilates ICSID awards to final judgments of domestic courts implies that enforcement may be resisted in countries where national rules provide for an exceptional refusal to enforce a final judgment. Though this possibility was already acknowledged during the drafting of the Convention, it has not yet been relied upon in practice in order to defy recognition and enforcement of ICSID awards. Instead, past attempts to resist enforcement of awards have relied upon immunity from execution. Article 54(3) of the Convention is concerned with execution of awards. Its effect is that the available processes of execution will be those in the law of the State where enforcement is sought. It does not require that State to make available any other processes of execution. This provision does not limit the obligation on Contracting States to enforce awards. Once again, the matter is explained by Professor Schreuer in his commentary: having regard to all the authentic language versions of the Convention, no distinction is to be drawn between enforcement and execution (p 1134, para 64). He observes in his commentary on article 54(3): The drafting history and the context of article 54(3) make it clear that the laws of the enforcing State that govern execution of an ICSID award are of a procedural nature only. Article 54(3) does not detract from the obligation of every State party to the Convention to enforce awards. In particular, the laws of the enforcing State may not serve as a standard for the review of awards. Article 54(3) does not affect the finality and non reviewability of awards (p 1149, para 112) Articles 50(2), 51(4) and 52(5) make specific provision for staying enforcement of an award in certain specific situations, none of which applies here. Section 2(2) of the 1966 Act and CPR 62.21(5) make corresponding provision in domestic law for the grant of a stay in such situations. These stays pursuant to the Convention are available only in the context of interpretation, revision and annulment of awards addressed by those articles. In the present case, Romania has already exercised and exhausted its right under article 52 of ICSID to seek annulment of the Award. The ICSID ad hoc Committee upheld the Award on 26 February 2016. However, in light of the wording of articles 54(1) and 55 and the travaux prparatoires reviewed above, it is arguable that there is scope for some additional defences against enforcement, in certain exceptional or extraordinary circumstances which are not defined, if national law recognises them in respect of final judgments of national courts and they do not directly overlap with those grounds of challenge to an award which are specifically allocated to Convention organs under articles 50 to 52 of the Convention. Mr Broches proposed at the drafting meeting on 11 December 1964 referred to above that representatives should consciously accept something that was of necessity not precise, which each country in good faith would seek to translate into appropriate local law. He thought that it was necessary to leave some freedom to the Contracting States to interpret in good faith the principal concept laid down in the Convention (ie the obligation in article 54(1)) (History, vol II 2, Doc 120, 903). In the Court of Appeal Hamblen LJ accepted Romanias submission that the relevant obligation of the United Kingdom under article 54(1) was one of equivalence. He considered that, while there will be different national rules and procedures relating to enforcement, provided the same rules and procedures are applied to registered awards as to final court judgments in the State concerned article 54 will be complied with. In his view, the effect of section 2(1) of the 1966 Act was to make an ICSID award registered under section 1 of the Act equivalent for all purposes to a judgment of the High Court given in ordinary domestic proceedings. As a result, in his view, if the present award had been a final decision of the English court there could be little doubt that the English court would stay enforcement because payment was prohibited by a subsequent Commission decision. On that basis, he considered that enforcement of the Award had to be stayed. The courts have general powers under the CPR to order a stay where that would be appropriate outside the specific situations dealt with in CPR 62.21: see in particular CPR 3.1(2)(f), CPR 40.8A and CPR 83.7(4). Hamblen LJs view on the general question whether article 54(1) operates on the basis of a principle of equivalence gains some support from the points set out above and the travaux prparatoires referred to. But as appears below, even if he is right on that point, consideration of the effect of article 351 TFEU means that it does not follow that Romania succeeds in showing that the enforcement of the Commission Award should be refused under the ICSID Convention and the 1966 Act. On the other hand, it might be said that this reading of the obligation of each Contracting State under article 54(1) to enforce the pecuniary obligations imposed by an ICSID award as if it were a final judgment of a court in that State fails to take proper account of the scheme of the ICSID Convention as described above. It is arguable that there is countervailing force in the view of Arden and Leggatt LJJ in the Court of Appeal that it would be inconsistent with that scheme for a national court to refuse to enforce an award on the ground that, if it had been an ordinary domestic judgment, giving effect to it would be contrary to a provision of national law and that the only circumstances in which the validity or enforceability of an ICSID award can be challenged are those set out in the ICSID Convention itself. It is arguable that the words as if it were a final judgment of a court in that State in article 54(1) should not be read as referring to the circumstances in which an award is enforceable in the State concerned or as importing national standards as a requirement of enforceability. Rather it is arguable that, as Leggatt LJ put it (at para 258), albeit without consideration of the travaux prparatoires, the purpose of equating an award with a final judgment of a court in the state where enforcement is sought is to give legal force to an award for the purpose of executing it and to provide machinery for that purpose. If that is right, then section 2(1) of the 1966 Act, which implements article 54(1), would not entitle courts in this jurisdiction to refuse to enforce an award on grounds that would justify staying enforcement of a domestic judgment. On this view, article 54(1) simply provides a legal basis for execution. If anything, this might be said to emerge even more clearly from section 2(1) which provides that an award shall be of the same force and effect for the purposes of execution (emphasis added) as a domestic judgment (although clearly that provision should be read so as to conform with article 54(1), to which it is intended to give effect). Nevertheless, despite the view they took about the effect of article 54(1), Arden and Leggatt LJJ came to the conclusion that it was open to the court to grant a stay. In their view article 54(3) gave the national court control over the process of execution which includes its manner and timing and that was reflected in section 2(1)(c) of the 1966 Act. Rules of court, CPR 40.8A and CPR 83.7(4), confer wide discretionary powers to stay the execution of a final judgment. Accordingly, it was open to courts in this jurisdiction to grant a stay of execution if in the particular circumstances of the case it was just to do so, provided that the stay was temporary and consistent with the purposes of the ICSID Convention (Arden LJ at paras 122 126; Leggatt LJ at paras 260 262). Both emphasised, however, that this power could not extend to declining to enforce an award because of a substantive objection to it or staying enforcement of an award permanently or indefinitely (at paras 125, 262). The difference between Hamblen LJ on the one hand and Arden and Leggatt LJJ on the other regarding the proper interpretation of article 54(1) of the ICSID Convention is something which ultimately could only be authoritatively resolved by the International Court of Justice. There are valid arguments on both sides. It is perhaps not altogether surprising that there is some doubt about the true meaning and effect of article 54, given that the work on drafting that provision was carried out under great time pressure and is described by Broches as being characterized by great fluidity, sometimes bordering on confusion (Schreuer, p 1135, para 66). However, the important point for present purposes is that whichever view is correct, it does not assist Romania in this case. We first address the position which arises on the interpretation of article 54(1) preferred by Arden and Leggatt LJJ. We agree with them that courts in this jurisdiction have the power to stay execution of an ICSID award in the limited circumstances which they describe. However, we consider that in granting a stay of execution of the Award in the present case pending the determination of the annulment proceedings in the GCEU (or further order in the meantime) they exceeded the proper limits of that power. The grant of a stay in these circumstances was not consistent with the ICSID Convention, on their interpretation of it, under which the United Kingdom and its courts had a duty to recognise and enforce the Award. This was not a limited stay of execution on procedural grounds, but a prohibition on enforcement of the Award on substantive grounds until the GCEU had ruled on the apparent conflict between the ICSID Convention and the EU Treaties. Effect was given to the Commission Decision until such time as the GCEU might pronounce upon it. The logic of the position adopted by Arden and Leggatt LJJ was that if the GCEU upheld the Commission Decision, the stay would continue indefinitely (and the same would be true if the CJEU allows the Commissions appeal against the decision of the GCEU). But the grounds of objection raised by the Commission, even if upheld before the EU courts, were not valid grounds of objection to the Award or its enforcement under the ICSID Convention, as interpreted by Arden and Leggatt LJJ. The principle laid down in article 53(1) that awards are binding on the parties and are not subject to any appeal or other remedy except those provided under the Convention and reflected in article 54 (on their interpretation of it) was disregarded. In substance, the Court of Appeal made use of powers to stay execution granted by domestic law in order to thwart enforcement of an award which had become enforceable under the ICSID Convention. On the other hand, if article 54(1) incorporates the principle of equivalence, in line with Hamblen LJs interpretation, it remains the case that Romanias submission in answer to the Claimants cross appeal cannot succeed. This is because article 351 TFEU has the effect that any obligation on the UK courts to give effect to a decision such as the Commission Decision pursuant to the duty of sincere co operation which might arise under the Treaties in other circumstances does not arise in this case. The discussion below of Original Ground 4 of the cross appeal, explains that the United Kingdom owes relevant obligations to non EU member states under the ICSID Convention, a treaty to which the United Kingdom was party before it became a member state. By virtue of article 351 TFEU this means that the obligations on the United Kingdom arising from the ICSID Convention are not affected by the provisions of the Treaties. Leaving aside the Treaties, in the circumstances of the present case the English courts are obliged under article 54(1) of the ICSID Convention to give effect to the Award in favour of the Claimants and this is not a case in which any of the exceptional possible types of defence to enforcement contemplated by Mr Broches and Professor Schreuer arise. Leaving the Treaties out of the analysis, if the Award were a final judgment of an English court it would be enforced without question. Similarly, on Hamblen LJs interpretation of article 54(1) involving the principle of equivalence, it must follow that the Award would be enforced in the same way. Article 351 TFEU means that this obligation cannot be affected by anything in the Treaties, which are the foundation for the legal effect of Commission rulings and for the obligation of sincere co operation on which Romania seeks to rely. Romanias attempt to pray in aid the obligation of sincere co operation is an attempt to pull itself up by its own bootstraps. It cannot make out the necessary foundation for its argument, since it cannot show that the obligation of sincere co operation has any application at all. Finally, in this regard, we should refer to the submission on behalf of Romania that to the extent that there is any uncertainty as to the meaning of the relevant provisions of the ICSID Convention and the 1966 Act, this court is bound by EU law to interpret them so far as possible in accordance with EU law in order to comply with the EU principle of effectiveness (seeking to gain support from van Munster v Rijksdienst voor Pensioenen (Case C 165/91) [1994] ECR I 4686, para 34; Budjovick Budvar nrodn podnik v Rudolf Ammersin GmbH (Case C 216/01) [2003] ECR I 13657, paras 168 169). This is another bootstraps argument on behalf of Romania. The first step in the analysis should be to ask whether the United Kingdom has relevant obligations arising from the ICSID Convention which, by operation of article 351 TFEU, preclude the application of the Treaties. As explained below in relation to Cross Appeal Original Ground 3 (paras 101 108), on a proper interpretation of the ICSID Convention, the United Kingdom clearly does have such obligations. Therefore, the Treaties do not have any relevant effect and this court is not bound by EU law to interpret the Convention in the manner for which Romania contends. In any event, the proper interpretation of the Convention is given by principles of international law applicable to all Contracting States and it cannot be affected by EU law. Cross Appeal Original Ground 3: The European Communities Act 1972 does not require the United Kingdom to breach its pre accession obligations under the ICSID Convention, as implemented by the 1966 Act On behalf of the First Claimant, Viorel Micula, Mr Patrick Green QC advances this ground of appeal, which the other Claimants adopt, on the basis that a conflict might be said to arise between the United Kingdoms obligations under the ICSID Convention and EU law. Mr Green submits that the UK Parliament, in enacting section 2(1) of the European Communities Act 1972, could not have intended to empower the EU to put the United Kingdom in breach of pre accession international obligations, with only EU institutions as arbiters of the lawfulness of doing so. He says this is so for two reasons. First, it undermines the scheme of the Convention and the express terms and purpose of the 1966 Act. Secondly, at the time Parliament enacted the 1972 Act there was before it a treaty which provided, in what has become article 351 TFEU, that it would not affect the pre accession international obligations of member states. The effect of the 1972 Act was to confer defined competences within limited fields and the limitations included the preservation of prior international obligations falling within what is now article 351 TFEU. In this regard he relies on the decision of the Court of Appeal in Shindler v Chancellor of the Duchy of Lancaster [2016] EWCA Civ 469; [2017] QB 226, in particular the observations of Elias LJ at paras 58 59, and the observations of Lord Mance in Pham v Secretary of State for the Home Department [2015] UKSC 19; [2015] 1 WLR 1591, para 82. The constitutional principles which underlie this submission are clearly correct. Under the UK constitution Parliament is sovereign and EU law has effect within the United Kingdom only to the extent that it has been given such effect by section 2(1) of the European Communities Act 1972 (R (Buckinghamshire County Council) v Secretary of State for Transport (HS2) [2014] UKSC 3; [2014] 1 WLR 324, para 79; Pham v Secretary of State for the Home Department [2015] 1 WLR 1591, paras 80, 90; R (Miller) v Secretary of State for Exiting the European Union [2017] UKSC 5; [2018] AC 61, paras 60, 61). It is for the UK courts to decide on the scope and effect of section 2(1) and, as Lord Reed observed in HS2 at para 79, if there is a conflict between a constitutional principle and EU law, that conflict has to be resolved by our courts as an issue arising under the constitutional law of the United Kingdom. However, by contrast with HS2, which concerned article 9 of the Bill of Rights, the present case concerns obligations arising under the ICSID Convention which are given effect by the 1966 Act, which is not a statute of fundamental constitutional importance. In these circumstances, there is no sound basis for concluding that the effect of section 2(1) of the European Communities Act 1972 was impliedly excluded so far as the 1966 Act is concerned. In any event, successive treaties which have been given effect in the domestic law of the United Kingdom by section 2(1) of the 1972 Act have included a provision equivalent to the current article 351 TFEU. As a result, the 1972 Act has already made provision for the effect of accession on pre accession treaties and, accordingly, this ground of appeal collapses into Original Ground 4 to which we now turn. Cross Appeal Original Ground 4: Article 351 TFEU (formerly article 307 EC) Article 351 TFEU provides: The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more member states on the one hand, and one or more third countries on the other, shall not be affected by the provisions of the Treaties. To the extent that such agreements are not compatible with the Treaties, the member state or States concerned shall take all appropriate steps to eliminate the incompatibilities established. member states shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude. In applying the agreements referred to in the first paragraph, member states shall take into account the fact that the advantages accorded under the Treaties by each member state form an integral part of the establishment of the Union and are thereby inseparably linked with the creation of common institutions, the conferring of powers upon them and the granting of the same advantages by all the other member states. At first instance Blair J held that article 351 TFEU did not apply because there was no conflict between the obligations of the United Kingdom under the ICSID Convention and the EU Treaties. In the Court of Appeal the majority (Hamblen and Leggatt LJJ) considered that the issue of whether there was a conflict between the United Kingdoms duties under EU law and under the ICSID Convention depended on the proper application of article 351 TFEU. That issue had been before the GCEU in the annulment proceedings, although not in precisely the same way, and Blair J had been entitled to stay the proceedings on the basis that without a stay, there would be a clear risk of conflicting decisions with the EU courts. There had been no appeal against his finding on that point. Leggatt LJ considered that while the point could be taken by the court of its own motion, it was inappropriate to do so. Arden LJ (dissenting on this point) considered that the interpretation of article 351 TFEU was a point which should be taken by the court of its own motion. It was for the UK courts to decide whether article 351 TFEU applied to the ICSID Convention. In view of her conclusion that a stay could be ordered consistently with the ICSID Convention, there was no need to reach a final decision on the article 351 TFEU point. However, she considered that there was little overlap between that issue and the proceedings in the GCEU. Before the Supreme Court, the parties have addressed this ground of cross appeal on the basis that it arises only if Blair J and the Court of Appeal erred in concluding that to stay the enforcement or execution of the award pending the annulment proceedings is consistent with the ICSID Convention. We agree that the matter should be approached on this basis. In those circumstances, Romania and the Commission submit that the EU duty of sincere co operation nevertheless requires the imposition of a stay, while the Claimants submit that the United Kingdoms obligations to recognise and enforce awards under the ICSID Convention are pre accession treaty obligations within article 351 TFEU and are therefore unaffected by EU obligations. Preliminary issue: permission to appeal A preliminary issue which arises under this ground of cross appeal is whether the Claimants should be given permission to appeal on this ground, the question of permission having been reserved to the full hearing. At first instance, the Claimants argued that article 351 TFEU applied with the result that the obligations of the United Kingdom arising from the pre accession ICSID Convention were not subject to the over riding effect of EU law. Blair J did not express any conclusion as to the United Kingdoms separate international law obligations under the ICSID Convention, but considered that article 351 TFEU was one of the grounds on which the Claimants asked the GCEU to annul the Commission Decision and that, even though those issues were not necessarily the same as those which arose in these proceedings, there was a risk of conflicting decisions if the court were to decide the effect of article 351 TFEU while the GCEU proceedings were pending (Blair J, Judgment of 20 January 2017 [2017] EWHC 31 (Comm); [2017] Bus LR 1147, para 152). In the Court of Appeal, Leggatt LJ (at para 265) and Hamblen LJ (at paras 160 164) agreed with that conclusion. The grounds of appeal of the Claimants before the Court of Appeal did not raise objection to the judges rejection of their arguments on article 351 TFEU. However, although the position is not entirely clear, it seems that they did seek to rely on article 351 TFEU in the course of argument without amending their grounds of appeal (see Arden LJ at para 172, cf Leggatt LJ at para 265). Romania now objects to the Supreme Court considering the submissions of the Claimants on article 351 TFEU, on the ground that the point was not appealed from Blair J to the Court of Appeal. We would grant permission to appeal on this ground. First, we agree with the observation of Arden LJ in the Court of Appeal (at para 173) that courts in this jurisdiction should normally, so far as the law allows, exercise their powers so as to ensure compliance with the international obligations of the United Kingdom. The article 351 TFEU issue as now presented to this court is concerned with seeking to identify what are the relevant international obligations of the United Kingdom and, in the event of a conflict, which obligations are to prevail. Furthermore, we are persuaded that this issue goes to the heart of the present dispute and that the parties cannot by their conduct withdraw it from the courts consideration. Secondly, the ground is a pure point of law and we are satisfied that Romania and the Commission have had ample time to enable them to meet the case which is now put against them. Article 351 TFEU Article 351 TFEU is an express provision of EU law regulating priority where there are potentially conflicting obligations. It is general in scope and applies to any international agreement, irrespective of subject matter, which is capable of affecting the application of the EU Treaties (Criminal proceedings against Levy (Case C 158/91) [1993] ECR I 4287, para 11). It applies to agreements concluded by the United Kingdom before its accession on 1 January 1973 (Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland (Open Skies) (Case C 466/98) [2003] 1 CMLR 6, para 25). Article 351 TFEU is intended to establish, in accordance with principles of international law, that the application of the EU Treaties does not affect the duty of a member state to respect the rights of non member states under a prior agreement and to perform its obligations thereunder (Commission of the European Economic Community v Government of the Italian Republic, In re Italian Customs Duties on Radio Valves (Case C 10/61) [1962] ECR 1; Attorney General v Burgoa (Case C 812/79) [1980] ECR 2787, para 8; Levy (Case C 158/91), para 11; R v Secretary of State for the Home Department, Ex p Evans Medical Ltd (Case C 324/93) EU:C:1995:84; [1995] All ER (EC) 481, para 27). It also implies a duty on the part of the EU institutions not to impede the performance of the obligations of the member states which stem from a prior agreement (Attorney General v Burgoa (Case C 812/79), para 9). The rule in article 351 TFEU is concerned with conflicting obligations. Accordingly, where an international agreement merely permits but does not require a member state to act in a manner contrary to EU law, the member state must refrain from such conduct (Evans Medical (Case C 324/93), para 32). Moreover, article 351 TFEU does not apply to the obligations of a member state under a pre accession agreement where the rights of non member states are not involved. If the only obligations in play are those owed to other member states, the matter is regarded as an intra EU matter and EU law prevails over obligations under pre accession agreements (Commission v Italy, In re Italian Customs Duties on Radio Valves (Case C 10/61) [1962] ECR 1, 10; Radio Telefis Eireann v Commission of the European Communities (RTE) (Joined Cases C 241/91 P and C 242/91 P) [1995] All ER (EC) 416, para 84). Determining the scope of obligations under pre accession agreements In order to determine whether a rule of EU law may be deprived of effect by a pre accession international agreement, it is necessary to consider whether that agreement imposes on the member state concerned obligations the performance of which may still be required by non member states which are parties to it (Levy (Case C 158/91), para 13; Evans Medical (Case C 324/93), para 28). In Levy the Court of Justice considered a submission that an International Labour Organization Convention, ratified by France prior to the entry into force of the Treaty of Rome, was inconsistent with a Council Directive. The Court of Justice held: [I]n proceedings for a preliminary ruling, it is not for this Court but for the national court to determine which obligations are imposed by an earlier international agreement on the member state concerned and to ascertain their ambit so as to be able to determine the extent to which they constitute an obstacle to the application of the directive. (para 21) [See also Office national de lemploi v Minne (Case C 13/93) [1994] ECR I 371, para 18.] Similarly, in Evans Medical (Case C 324/93) the Court of Justice held (paras 29 30) that it was not for that court but for the national court to determine which obligations were imposed by the Single Convention on Narcotic Drugs, a treaty concluded by the United Kingdom before its accession, and to ascertain their ambit so as to be able to determine the extent to which they thwarted the application of Community law. The authorities cited by Romania on this point cast no doubt on the principle stated in Levy and Evans Medical. In Budjovick Budvar nrodn podnik v Rudolf Ammersin GmbH (Case C 216/01) [2003] ECR I 13657, the obligation owed under the prior bilateral treaty was common ground (para 147). In T Port GmbH & Co v Hauptzollamt Hamburg Jonas (Joined Cases C 364/95 and C 365/95) [1998] ECR I 1023 the Court of Justice merely held that what is now article 351 TFEU did not apply in a case involving imports from a third country which was not at the relevant time a party to a prior international agreement concluded by member states (paras 61 65). Both Levy and Evans Medical were concerned with proceedings for a preliminary ruling. As Advocate General Lenz explained in Evans Medical (at EU:C:1994:357, para 39), what is now article 267 TFEU empowers the Court of Justice to give preliminary rulings on EU law. It does not confer any power to interpret agreements in international law which member states concluded with non member states before the entry into force of the Treaties or prior to their own accession. Accordingly, it would not be possible for the Supreme Court to make a preliminary reference to the CJEU on this issue in the present case. While it may well be open to the Court of Justice to rule on the extent of a member states prior treaty obligations in other circumstances for example in infringement proceedings (see Evans Medical per Advocate General Lenz at para 44; European Commission v Slovak Republic (Case C 264/09) [2011] ECR I 8065, paras 32 40) or in direct actions (RTE (Joined Cases C 241/91 P and C 242/91 P)), Levy and Evans Medical make clear that this is not a question of EU law and that there can be no objection to the courts of a member state deciding the issue. Furthermore, as this is a matter of the interpretation of the prior agreement in international law, EU courts are no better placed to determine the scope of obligations under a pre accession agreement than the courts of the member state concerned or, indeed, a court or tribunal which has jurisdiction to rule on its meaning under the prior agreement itself. On behalf of Romania, Mr ODonoghue QC submits that in applying article 351 TFEU it is necessary to distinguish between two questions. The first is whether there is a relevant prior international obligation in play at all. The second is whether, even if as a matter of international or domestic law the obligation is in some sense owed to all parties to the prior agreement, the effect of that is that the case does not only involve intra Community relations for the purposes of article 351 TFEU. His formulation of the second limb, however, mis states the effect of the authorities. While it is correct that in order for article 351 TFEU to apply relevant obligations under the prior treaty must be owed to a non member state, that does not impose an additional requirement that the particular dispute before the court must relate to extra EU activities or transactions. The decisions of the Court of Justice demonstrate that the opposite is the case. Thus, Levy was concerned only with conduct within France. Similarly, Evans Medical concerned activities entirely within the EU the importation of drugs from the Netherlands to the United Kingdom but article 351 TFEU was nevertheless engaged. In both cases what mattered was that the relevant obligations under the prior treaties were owed to non member states. Thus, notwithstanding the fact that the United Kingdom, Sweden and Romania were at the material times all member states, if the relevant obligations under the ICSID Convention are owed to ICSID contracting States which are non member states, article 351 TFEU will be engaged. Does article 351 TFEU apply to the United Kingdoms relevant obligations under the ICSID Convention? It is not difficult to see that all States which are parties to the ICSID Convention have an interest in the effective operation of the Convention scheme for the enforcement of arbitral awards. However, article 351 TFEU is concerned with conflicting obligations and, accordingly, it is only if a relevant obligation under ICSID is owed by the United Kingdom to a non member state that the Claimants can succeed on this ground. We also accept the submission on behalf of Romania that we are not here concerned with the general question whether the United Kingdom owes obligations under the ICSID Convention to non member states, but with the question whether the specific obligation of the United Kingdom under the ICSID Convention to enforce this award is owed by the United Kingdom to non member states. Romanias case is that the only legal obligation of the United Kingdom which is in play is the obligation owed under the ICSID Convention to Sweden, which is an EU member state. It submits that Sweden is the only State with a direct interest in the enforcement of the award. The Claimants, on the other hand, identify as the relevant obligations of the United Kingdom articles 54 and 69 of the ICSID Convention. Article 54(1) provides that each contracting State shall recognise an award rendered pursuant to the Convention as binding and shall enforce the pecuniary obligations imposed by that award as if it were a final judgment of a court in that State. Article 69 provides that each Contracting State shall take such legislative or other measures as may be necessary for making the provisions of the ICSID Convention effective in its territories. The Claimants submit that these obligations are owed to all other parties to the ICSID Convention. Mr ODonoghue on behalf of Romania submits that if the Claimants are correct in their submission, this would apply equally to every significant obligation in every multilateral treaty with the result that every multilateral treaty involving some parties which are not EU member states would fall within article 351 TFEU. He submits that this clearly is not correct and points to decisions of the Court of Justice relating to other multilateral conventions where, he says, article 351 TFEU did not apply: Commission v Italy, In re Italian Customs Duties on Radio Valves (Case C 10/61); Ministere Public v Deserbais (Case C 286/86) [1988] ECR 4907; RTE (Joined Cases C 241/91 P and C 242/91 P). Thus, for example, he submits that in RTE (Joined Cases C 241/91 P and C 242/91 P), a direct action, the CJEU found that the rights of non member states under the Berne Convention were not involved, since the case involving the United Kingdom and Ireland only concerned the rights of EU member states, notwithstanding that the Berne Convention was a multilateral treaty involving multiple non member states. He relies in particular on para 84 of the judgment where the Court of Justice observed: It is, however, settled case law that the provisions of an agreement concluded prior to entry into force of the Treaty or prior to a member states accession cannot be relied on in intra Community relations if, as in the present case, the rights of non member countries are not involved (Emphasis added) We note, however, that since its decision in RTE, the Court of Justice has had occasion to consider the Berne Convention in Luksan v van der Let (Case C 277/10) EU:C:2012:65; [2013] ECDR 5, where it stated (para 58) that the Berne Convention displayed the characteristics of an international agreement for the purposes of article 351 TFEU, although it concluded (para 62) that article 351 TFEU was not engaged in that case because the relevant provision of the Convention allowed but did not require a member state to adopt a measure which appears to be contrary to EU law. There is, however, a shorter and more fundamental answer to this submission of Romania: it is founded on a non sequitur. In order to determine whether article 351 TFEU applies in any particular case it will be necessary to construe the prior agreement in question in order to ascertain whether any relevant obligations arising from it are owed to non member states. The authorities on which Romania relies can cast no light on the question whether obligations under articles 54 and 69 of the ICSID Convention are owed to all Contracting States. It is clear that the specific duties in articles 54 and 69 of the ICSID Convention are owed to all other Contracting States. The Convention scheme is one of mutual trust and confidence which depends on the participation and compliance of every Contracting State. The importance within this scheme of the effective recognition and enforcement of awards is apparent from the preamble which emphasises the requirement that any arbitral award be complied with. The structure of the ICSID Convention supports this interpretation. The Convention establishes the International Centre for Settlement of Investment Disputes to provide facilities for conciliation and arbitration of investment disputes between Contracting States and nationals of Contracting States (article 1). The Convention provides that in relation to such disputes any Contracting State or any national of a Contracting State can apply to a tribunal appointed pursuant to Chapter IV of the Convention. However, article 64 provides a separate route for resolution of disputes between Contracting States by permitting an aggrieved State to refer the matter to the International Court of Justice. This is required to provide a remedial mechanism in cases of infringement of direct obligations owed to other States. The obligations of Contracting States in articles 53, 54 and 69 are expressed in unqualified terms, without limit as to the persons to whom they are owed. Article 64 is expressed in entirely general terms which are apt to include disputes regarding the obligations set out in those articles. These features of the Convention regime provide a strong indication that a Contracting State which has obligations under the Convention in relation to an award owes those obligations to all other States party to the Convention as well as to any party to the award. Article 27(1) confirms that the obligation on a Contracting State against whom an arbitration award is made to comply with the award is not just owed to the other parties to the dispute, since it recognises that any Contracting State whose national is involved in the dispute may bring an international claim against the other Contracting State if it fails to comply with the award rendered. Professor Schreuer in his commentary on article 53 confirms that the obligation of compliance under article 53 is in fact owed to every other Contracting Party: p 1100, para 13 and p 1109, para 46. The same is true of the obligation under article 54, as Professor Schreuer confirms in his commentary on that provision at p 1125, para 28, (non compliance with article 54 would carry the usual consequences of state responsibility ). The Claimants identify four features of the scheme, which demonstrate that its purpose requires that the relevant obligations must be owed, not only to the State of nationality of the party seeking to enforce the award, but to all Contracting States. First, a key purpose of the Convention is to encourage investment by providing investors with reassurance that a monetary award can be enforced in the territories of all Contracting States. The failure of any Contracting State to enforce an award in accordance with article 54 would undermine the Convention scheme on which investors and Contracting States all rely. This points to a network of mutual enforcement obligations. Secondly, were a Contracting State, when implementing its Convention obligations into domestic law, to qualify them by providing that no award was to be recognised or enforced if illegal under domestic law or contrary to its public policy, that would represent a plain breach of duty owed to all other Contracting States of which they would all be entitled to complain, even before such legislation came to be applied in any particular case. Thirdly, if a Contracting State were to fail to enforce an award in accordance with the ICSID scheme the beneficiaries of the award would be compelled to seek enforcement elsewhere and the burden of enforcement would fall on other States involving expenditure of resources within their legal systems. Fourthly, in such situations attempts to enforce in an alternative forum might result in the party against which enforcement is sought reducing or withdrawing its commercial assets in that alternative forum to the detriment of the State concerned. The travaux prparatoires of the ICSID Convention also support the view that obligations to comply with the Convention scheme are owed to all Contracting States. Thus, at the Fifth Session held on 18 December 1963, responding to a suggestion by the representative of Dahomey that, by analogy with article 94 of the UN Charter, the Security Council be given power to enforce awards, the Chairman stated that he did not believe that any State which had acceded to the Convention would fail to fulfil its provisions but added: If it did, other Contracting States might take such action as might be appropriate. (History, vol II I, Doc 25 (30 April 1964) Summary Record of Proceedings, Addis Ababa Consultative Meetings of Legal Experts, December 16 20, 1963, p 273) Similarly, in the Sixth Session held on 20 February 1964 the Chairman acknowledged that a Contracting States duty to comply with an award was owed to all other Contracting States. Apart from legal sanctions based on the revival of the right of diplomatic protection of the investors State there would be even more serious indirect sanctions because a State which did not comply would fail to meet its obligations not only to the investor but also to the community of Contracting States which would presumably include capital exporting countries from which the losing State could expect assistance. (History, vol II I, Doc 29 (1 June 1964) Summary Record of Proceedings, Geneva Consultative Meetings of Legal Experts, February, 17 22, 1964, p 425) Although these statements were made in the context of compliance with awards, as opposed to recognition and enforcement, they are powerful indications that obligations under the ICSID Convention are owed by all Contracting States to the community of Contracting States. Accordingly, neither the Convention nor its travaux prparatoires provide any warrant for restricting the duties owed by a Contracting State under articles 54 and 69 so that they are owed only to the State of nationality of an award beneficiary. Does the article 351 TFEU issue give rise to a risk of conflict which requires the imposition of a stay pending the outcome of the proceedings before the EU courts? Romania and the Commission submit that this court is precluded from deciding the issue of the extent of the obligations of the United Kingdom and to whom those obligations are owed because there would be a risk of a conflict between such a ruling and a future ruling by an EU court in the present dispute. It is said that the duty of sincere co operation requires courts in this jurisdiction to impose a stay pending the resolution of the issue by the EU courts. Neither the EU courts nor domestic courts have competence to give an authoritative decision, binding as between States, as to the existence and extent of obligations under a prior multilateral convention. The convention itself will usually make provision for the resolution of disputes. In the case of the ICSID Convention that function is reserved to the International Court of Justice by article 64. However, both the EU courts (for example, in infringement proceedings or direct actions) and domestic courts (in national proceedings) have competence to consider and rule upon the effect of a multilateral treaty, insofar as it may bear upon the outcome of the proceedings before them. In the present case, the duty of sincere co operation does not require courts in this jurisdiction to decline to decide this issue pending its resolution by the EU courts, or otherwise to defer to the EU courts on this issue, for the following reasons. First, the case law of the Court of Justice makes clear that, as a matter of EU law, questions as to the existence and extent of obligations under prior treaties, in the context of article 351 TFEU, are not reserved to the EU courts. In Levy and Evans Medical the Court of Justice has accepted the appropriateness of national courts ruling on such issues. Such questions are not governed by EU law and the Court of Justice is in no better position than a national court to answer them. This is addressed at paras 98 99 above. Secondly, although the Claimants have raised an article 351 TFEU issue in the proceedings before the EU courts, it is not the same issue as that with which this court is seized. In the proceedings to annul the Commission Decision, the Claimants advanced eight pleas of law, one of which was that the Commission Decision was in breach of article 351 TFEU, because that provision affords primacy to Romanias pre existing international obligations under the BIT and the ICSID Convention. The GCEU did not rule on that plea and, accordingly, it is not the subject of the appeal to the CJEU by the Commission. Although the pleadings before the GCEU made references to article 54 of the ICSID Convention in conjunction with article 53, the essential article 351 TFEU issue raised by the Claimants in the annulment proceedings concerned Romanias obligation to abide by and comply with the award under article 53 of the ICSID Convention. By contrast, the issue with which we are concerned in these proceedings is the United Kingdoms obligations to implement the ICSID Convention and to recognise and enforce the award under articles 54 and 69 of the ICSID Convention. The extent of the United Kingdoms obligations under those articles has not been raised before the EU courts. There is, therefore, no congruence of the issues before the domestic courts and the EU courts. Thirdly, the prospect of an EU court addressing the applicability of article 351 TFEU to pre accession obligations under the ICSID Convention in the context of the present dispute is remote. Although the Claimants raised in the annulment proceedings the issue of Romanias obligations under the ICSID Convention, the GCEU did not rule on this issue. The pending appeal to the CJEU is limited to those grounds on which the GCEU decided the application. Accordingly, if the Commission fails on the appeal, the article 351 TFEU issue will not be addressed in those proceedings. If the Commission succeeds on the appeal, however, the matter will have to be remitted to the GCEU for consideration of the other pleas advanced by the Claimants and the article 351 TFEU issue, so far as concerns the obligations of Romania, may then be considered by the GCEU or on a further appeal by the CJEU. The preliminary reference to the CJEU made by the Belgian court does not raise any issue in relation to article 351 TFEU. Belgium was an original signatory of the Treaty of Rome and the entry into force of that treaty pre dated Belgiums ratification of the ICSID Convention. It is conceivable that if the United Kingdom courts were to conclude that no stay of enforcement is required, because article 351 TFEU secures pre accession obligations owed to non member states under articles 54 and 69 of the ICSID Convention, and if the United Kingdom were to enforce the award on that basis, the Commission might thereafter bring infringement proceedings against the United Kingdom in which that issue would be squarely raised. It is important to point out, however, that the Commission has given no indication that it is contemplating any such proceedings and the possibility is entirely speculative. There is no good answer to the Claimants submission that relevant duties are owed by the United Kingdom under articles 54 and 69 of the ICSID Convention to non member states, so it seems unlikely that the Commission could bring infringement proceedings on this basis. It would have no realistic prospect of success in disputing the existence of such obligations. Moreover, were it to seek to do so, the principle of comity and the two way application of the principle of sincere co operation would be likely to lead the Court of Justice to leave the interpretation of the Convention, to which the EU is not a party, to the domestic courts of the United Kingdom as a Contracting State. (In this regard see the observation of the Court of Justice in Commission v Slovak Republic (Case C 264/09), para 40.) In any event, it would not be appropriate for this court to stay enforcement in deference to the EU courts on this issue, which is not one of EU law, simply because of the speculative possibility of infringement proceedings in the future. (See, generally, Patmalneice v Secretary of State for Work and Pensions [2011] 1 WLR 783.) The possibility that the EU courts may consider this issue at some stage in the future is both contingent and remote. We cannot accept that in such circumstances the duty of sincere co operation requires the imposition of a stay on the enforcement of the award. Conclusion on the cross appeal For these reasons the duty of sincere co operation is not applicable in this case and there is no impediment to the lifting of the stay, which is an unlawful measure in international law and unjustified and unlawful in domestic law. We would therefore allow the cross appeal of the Claimants and lift the stay on enforcement of the award. The appeal In the light of our conclusion in relation to the cross appeal, it is no longer necessary to consider the appeal in relation to the provision of security. We would discharge the order for security. |
It is axiomatic that a judge or an arbitrator must be impartial; he or she must not be biased in favour of or against any party in a litigation or reference. A judge or arbitrator, who is not in fact subject to any bias, must also not give the appearance of bias: justice must be seen to be done. This appeal is not concerned with any deliberate wrongdoing or actual bias but with the circumstances in which an arbitrator in an international arbitration may appear to be biased. It raises important questions about the requirement that there be no apparent bias and the obligation of arbitrators in international arbitrations to make disclosure. The appeal concerns an arbitration under a Bermuda Form liability policy which arose out of the damage caused by the explosion and fire on the Deepwater Horizon drilling rig in the Gulf of Mexico in 2010 when a well was being plugged in the context of a temporary abandonment. That disaster gave rise to several arbitrations between insured parties and insurers. The principal issues which are raised in this appeal are: (i) whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to an appearance of bias, and (ii) whether and to what extent the arbitrator may do so without disclosure. I will therefore address first, the duty of impartiality in the context of arbitration, secondly, whether an arbitrator is under a legal duty to disclose particular matters, thirdly, how far the obligation to respect the privacy and confidentiality of an arbitration constrains his or her ability to make disclosure, and fourthly, whether a failure to disclose such matters demonstrates a lack of impartiality. I then address the times at which (a) the duty of disclosure and (b) the possibility of bias fall to be assessed. The appellants (Halliburton) entered into a Bermuda Form liability policy (the Policy) with ACE Bermuda Insurance Ltd, which is now called Chubb Bermuda Insurance Ltd (Chubb) in 1992 and the Policy was renewed annually. Chubb and the three arbitrators involved in the arbitration which I discuss below are the defendants in this action to remove one of the arbitrators. But Chubb alone defended the proceedings and appears as the respondent in this appeal. Because the appeal raises questions of law of general importance in the field of arbitration this court allowed and received written and oral representations from the International Court of Arbitration of the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA) and written submissions from the Chartered Institute of Arbitrators (CIArb), the London Maritime Arbitrators Association (LMAA) and the Grain and Feed Trade Association (GAFTA). The court is very grateful to the interveners for their contribution to the clarification of the wider issues raised by this appeal. At first instance, the names of the parties to, and the arbitrators in, the arbitrations referred to in these proceedings were anonymised. In the judgment handed down by the Court of Appeal, the names of the parties to the Halliburton/Chubb arbitration were revealed and only the names of the arbitrators were anonymised. During the hearing of this appeal, this court questioned the need for and appropriateness of such anonymity once the names of the parties to the arbitration had been disclosed and gave the parties to these proceedings, including the arbitrators, an opportunity to make submissions on the issue. Arbitration in the United Kingdom is as a norm a private form of dispute resolution and both the arbitration and the arbitral award are not generally a matter of public record. In England and Wales, the rules of procedure (CPR rule 62.10) empower the court to order that a claim under the Arbitration Act 1996 (the 1996 Act) or otherwise affecting arbitration proceedings or an arbitration agreement be heard in public or in private but create a norm that such claims are heard in private. The obligations of confidentiality which are usually imposed in arbitration agreements are designed to protect the privacy of the parties to the arbitration and the evidence led in arbitral hearings. But nobody has suggested any basis in the public interest for preserving the anonymity of the arbitrators themselves in a challenge of this nature. I am satisfied that the principle of open justice, which this court discussed in Dring (on behalf of the Asbestos Victims Support Group) v Cape Intermediate Holdings Ltd [2019] UKSC 38; [2020] AC 629, paras 41 43, points towards disclosure. This court has emphasised the importance of avoiding incremental exceptions to the principle of open justice: Khuja v Times Newspapers Ltd [2017] UKSC 49; [2019] AC 161, paras 12 14 per Lord Sumption; In re S (A Child) (Identification: Restrictions on Publication) [2004] UKHL 47; [2005] 1 AC 593, para 29 per Lord Steyn, endorsing the warning of Lord Woolf MR in R v Legal Aid Board, Ex p Kaim Todner [1999] QB 966, 977. The arbitrators in the Halliburton/Chubb arbitration were defendants in the action but understandably took no part in the proceedings. The arbitrator, whose decisions are challenged in these proceedings, Mr Kenneth Rokison QC has a long established reputation for integrity and impartiality. But the protection of that reputation is not a sufficient ground for anonymity, particularly when the courts below have founded on that reputation in their reasoning. In any event, the challenge in this case involves no assertion of actual bias but relies entirely on an assertion of an objective appearance of bias. I am satisfied that there are no good grounds for maintaining the anonymity of the arbitrators in this appeal. Factual background BP Exploration and Production Inc (BP) was the lessee of the Deepwater Horizon drilling rig. Transocean Holdings LLC (Transocean) owned the rig and had contracted with BP to provide crew and drilling teams. Halliburton provided cementing and well monitoring services to BP in relation to the temporary abandonment and the plugging of the well. The blow out of the well caused extensive damage and loss of life. It resulted in numerous legal claims by the US Government and corporate and individual claimants against BP, Halliburton and Transocean. The US Government claimed civil penalties under federal statutes and the private claims for damages were pursued through a Plaintiffs Steering Committee (PSC). After a trial to determine liability, the Federal Court for the Eastern District of Louisiana in a judgment handed down on 4 September 2014 (the Federal Judgment) apportioned blame between the defendants as follows: BP 67%, Transocean 30%, and Halliburton 3%. Before the Federal Judgment was handed down, Halliburton settled the PSC claims against it by paying approximately US$1.1 billion. Following that judgment, Transocean settled the PSC claims for about US$212m and paid civil penalties to the US Government of about US$1 billion. Halliburton claimed against Chubb under the Policy but Chubb refused to pay Halliburtons claim, contending among other things that Halliburtons settlement was not a reasonable settlement and that Chubb had acted reasonably in not consenting to the settlement. Transocean made similar claims against its liability insurers, including Chubb. Chubb contested Transoceans claim against it on substantially the same grounds. Both Transocean and Halliburton had purchased liability insurance from Chubb on the Bermuda Form. The Bermuda Form policy was created in the 1980s to provide high excess commercial general liability insurance to companies operating in the United States after the market for such insurance collapsed in that country. Bermuda Form policies usually contain a clause providing for disputes to be resolved by arbitration. Bermuda Form arbitrations are ad hoc arbitrations which are not subject to the rules of an arbitral institution. Transocean and Halliburton had arranged liability insurance in layers and both had obtained cover for the top layer from Chubb. It appears that the material policy terms were the same. The Policy was governed by the law of New York. The Policy contained a standard arbitration clause which provided for arbitration in London by a tribunal of three arbitrators, one appointed by each party and the third by the two arbitrators so chosen. If the party appointed arbitrators could not agree on the appointment of the third arbitrator, the High Court in London was to make the appointment. The arbitrators were to deliver the award within 90 days of the conclusion of the hearing. There was no right of appeal from the award. Halliburton invoked the arbitration clause of the Policy and nominated Professor William W Park, Professor of Law at Boston University, USA, who is a very experienced arbitrator, as its party appointed arbitrator on 27 January 2015. Chubb nominated Mr John D Cole, an accomplished US insurance executive, counsel and arbitrator as its party appointed arbitrator. The nominated arbitrators were not able to agree on the appointment of the third arbitrator as chairman. As a result, after a contested hearing in the High Court in which each side put forward several candidates, on 12 June 2015 Flaux J appointed Mr Rokison, who was one of the arbitrators whom Chubb had proposed to the court, as the third arbitrator. Halliburtons main objection to Chubbs candidates, including Mr Rokison, was that they were English lawyers and the Policy was governed by the law of New York but it also objected to the appointment of Mr Rokison as chair of the tribunal because insurers had a practice of repeatedly appointing retired judges or QCs known to them, such as Mr Rokison, as party appointed arbitrators. Nonetheless, Halliburton did not appeal against that order. I refer to this Halliburton/Chubb reference to arbitration as reference 1. Before he expressed his willingness to be appointed, Mr Rokison disclosed to Halliburton and the court that he had previously acted as an arbitrator in several arbitrations in which Chubb was a party, including as a party appointed arbitrator nominated by Chubb, and that he was currently appointed as arbitrator in two pending references in which Chubb was involved. The High Court did not treat these appointments as an impediment to his appointment in reference 1. Halliburton served its statement of claim in reference 1 on 18 September 2015. Chubb served its statement of defence on 11 December 2015. In December 2015 Mr Rokison accepted appointment as an arbitrator by Chubb in relation to an excess liability claim by Transocean arising out of the same incident (reference 2). The appointment was made on behalf of Chubb by Clyde & Co, who were also Chubbs solicitors in reference 1. Within Chubb, the same manager, Mr Trimarchi, was responsible for monitoring the claims made by both Halliburton and Transocean and took the decision to refuse the claims in each case. Before accepting appointment by Chubb in reference 2, Mr Rokison disclosed to Transocean his appointment in reference 1 and in the other Chubb arbitrations which he had disclosed to Halliburton. Transocean did not object. But in an omission which is central to the disclosure issue in this appeal, Mr Rokison did not disclose to Halliburton his proposed appointment by Chubb in reference 2. In August 2016 Mr Rokison accepted appointment in another arbitration arising out of the Deepwater Horizon incident as a substitute arbitrator on the joint nomination of the parties in a claim made by Transocean against a different insurer on the same layer of insurance as the claim in reference 2. I refer to this as reference 3. Nobody disclosed this proposed appointment to Halliburton. This further omission also is a ground of the non disclosure claim in this appeal but the submissions on this appeal have focused more on the non disclosure of the appointment in reference 2. In references 2 and 3 there was a preliminary issue which was potentially dispositive of the claims if the tribunal decided in favour of the insurers. The issue was whether the fines and penalties which Transocean had paid to the US Government should be taken into account in the exhaustion of both the underlying layers of insurance and Transoceans self insured retention. This issue involved the construction of the relevant insurance policy on undisputed facts. The preliminary issue was heard separately in each of those references during November 2016. On 10 November 2016 Halliburton discovered Mr Rokisons appointment in references 2 and 3. Mr Thomas Birsic, an attorney at K & L Gates, Halliburtons US lawyers, wrote to Mr Rokison on 29 November 2016 to raise its concerns. He referred to the International Bar Association Guidelines on Conflicts of Interest in International Arbitration (the IBA Guidelines), which, he stated, imposed on an arbitrator a continuing duty of disclosure of potential conflicts of interest in accordance with the Orange List in those guidelines, and asked for confirmation of the fact of the two later appointments and an explanation of the failure to make prior disclosure of those appointments. Mr Rokison responded by email on 5 December 2016. He explained how he had come to be appointed in the later references. He explained, and both parties have accepted his explanation as truthful, that he had not disclosed those appointments to Halliburton, because it had not occurred to him at the dates of those appointments that he was under any obligation to do so under the IBA Guidelines. He stated that he appreciated, with the benefit of hindsight, that it would have been prudent for him to have informed Halliburton through its lawyers and apologised for not having done so. He explained that while the three references all arose out of the Deepwater Horizon incident, the roles which Halliburton and Transocean had played had been very different. His involvement in the two Transocean arbitrations had been confined to two two day hearings on the construction of the policy in which the only evidence had been about the circumstances in which the parties entered into the relevant insurance contracts. He stated his commitment to remain independent and impartial and acknowledged the importance of both parties in an arbitration sharing confidence that their dispute would be determined fairly on the evidence and the law without bias. He concluded: I do not believe that any damage has been done but, if your clients remain concerned, I would be prepared to consider tendering my resignation from my appointment in the two Transocean cases if the results of the determination of the preliminary issues of construction, which are likely to be issued shortly, do not effectively bring them to an end. Halliburtons lawyer responded by repeating his concerns about Mr Rokisons impartiality and calling for him to resign. But Chubb would not agree to his resignation which, in its assessment, would cause the proposed hearing of evidence in the arbitration to be postponed and thereby cause wasted costs and delay. Mr Rokison responded in an email of 15 December 2016 in which he stated that he sought to take into account his duty to both parties. He repeated his view that he had not breached the IBA Guidelines by a failure to disclose the later appointments but referred to his earlier statement that with hindsight he accepted that it would have been prudent to have made disclosure to avoid any sense of lack of transparency on his part. He repeated that in references 2 and 3 he had not learned anything about the facts of the incident which was not public knowledge. But, recognising that it was fundamentally important that both parties should have confidence in the impartiality of the arbitral tribunal and in particular its chairman, he stated that, if he could decide the matter in accordance with his own self interest, he would resign. Nonetheless, he owed duties to both parties to complete the task and would be in breach of his duties if he resigned in the face of strong opposition from one party. He therefore proposed that the parties should concentrate on trying to agree upon a mutually acceptable replacement chairman who would be available before the hearing in the arbitration (which was scheduled to start towards the end of January 2017). If they could so agree, he would gladly resign. If they could not, he would have to continue and leave it to the court to decide whether he should be removed. Halliburton responded by issuing a Claim Form in the High Court on 21 December 2016 seeking an order under section 24(1)(a) of the 1996 Act that Mr Rokison be removed as an arbitrator. Halliburton then raised further questions about the overlap between the references, to which Mr Rokison responded by email on 4 January 2017, stating that he was not aware that there were any common issues. Halliburtons lawyers in an email of 5 January 2017 asked Mr Rokison whether he had seen any document in which Chubb or any other respondent in references 2 or 3 had set out similar defences to those pleaded in reference 1. Mr Rokison did not reply to that enquiry. But on 10 January 2017 Chubb released to Halliburton the pleadings in reference 2 which revealed the substantial similarity in its defences which I mentioned in para 10 above, which were challenges to the reasonableness of the settlement which Transocean had negotiated. In its pleaded defence in reference 2, Chubb had also advanced, as an additional defence, the issue of construction of the policy which was the subject matter of the preliminary issue determination. Mr Justice Popplewell heard Halliburtons application in the High Court on 12 January 2017, in which Halliburton sought to have Mr Rokison replaced by Sir Stephen Tomlinson who had just retired from the Court of Appeal, and delivered a judgment, which I discuss below, on 3 February 2017, dismissing the application. The hearing in reference 1, which included the adducing of evidence and the making of legal submissions, took place between 27 January and 6 February 2017. On 1 March 2017 the tribunals in references 2 and 3 issued awards on the preliminary issues of policy construction, deciding them in favour of Chubb and the other insurer. The tribunals held that because the fines did not count towards the exhaustion of Transoceans self insured retention, Transocean could not claim an indemnity under the relevant layer of insurance. The awards brought both references to an end, without either tribunal having to consider questions as to the reasonableness of Transoceans settlement. On 5 December 2017 the tribunal in reference 1 issued its Final Partial Award on the merits, deciding in Chubbs favour. The award was signed by all three arbitrators, although Professor Park, the arbitrator whom Halliburton had appointed, qualified his signature of the award in Separate Observations. Professor Park stated that he had signed the award to confirm his participation but that he was unable to join in the award as a result of his profound disquiet about the arbitrations fairness. He explained that: arbitrators who decide cases cannot ignore the basic fairness of proceedings in which they participate. One side secured appointment of its chosen candidate to chair this case, over protest from the other side. Without any disclosure, the side that secured the appointment then named the same individual as its party selected arbitrator in another dispute arising from the same events. The lack of disclosure, which causes special concern in the present fact pattern, cannot be squared with the parties shared ex ante expectations about impartiality and even handedness. The other arbitrators, Mr Rokison and Mr Cole, responded to the separate observations, stating that they did not regard them as being part of the tribunals award so as to render it a majority award. This was because those observations did not contain any opinion dissenting from any part of the award, which contained findings of fact, statements of applicable law, the process of reasoning and the final conclusions drawn from that reasoning. It appears from Chubbs written case and Mr Birsics second witness statement that Halliburton appointed Professor Park as its party appointed arbitrator in three references against different insurers in insurance claims arising out of the Deepwater Horizon disaster, without formal disclosure. But K & L Gates suggest, in Mr Birsics second witness statement, that their proposal, which they made when they requested the arbitration and nominated Professor Park, that the arbitrations be consolidated revealed the multiple nominations. Mr Birsic also suggests that the fact that Professor Park was a party appointed arbitrator rather than a chair or umpire is a significant distinction from Mr Rokisons position. I will return to the question whether that distinction is legally relevant in English law in my discussion below. Halliburtons pleaded case In its claim Halliburton sought the removal of Mr Rokison as arbitrator in reference 1 and the appointment of another arbitrator to chair the tribunal in his place. The grounds for the claim were that circumstances existed that gave rise to justifiable doubts as to his impartiality and in particular (i) his acceptance of the appointments by Clyde & Co in references 2 and 3 and his failure to notify Halliburton or give it the opportunity to object and (ii) his offer to resign from the tribunal in reference 1 but Chubbs refusal to permit him to do so. The judgments at first instance and in the Court of Appeal In his judgment of 3 February 2017 ([2017] EWHC 137 (Comm); [2017] 1 WLR 2280) Popplewell J addressed the three elements of Mr Rokisons conduct which were said to give rise to the appearance of bias. The first was his acceptance of the appointments in the Transocean arbitrations in references 2 and 3. The judge rejected the contention that the arbitrator would derive a secret benefit in the form of remuneration which he would receive from the arbitrations. In English law, arbitrators were under a duty to act independently and impartially and owed no allegiance to the party which appointed them. This principle was enshrined in section 33 of the 1996 Act. He also rejected the contention that the overlap between the references was a concern because the arbitrator would learn information in the Transocean references which was relevant to the issues in reference 1 and that information would be available to Chubb but not to Halliburton. He observed that it was a regular feature of international arbitration that the same underlying subject matter gives rise to more than one claim and more than one arbitration without identity of parties. It was common for arbitrators with the relevant expertise to sit in different arbitrations arising out of the same factual circumstances or subject matter. It was desirable that arbitrators be able to do so for three reasons. First, arbitration was a consensual process allowing parties to appoint their chosen arbitrators in accordance with the procedures set out in their contract. Secondly, the parties to an arbitration often wished their tribunal to have particular knowledge and expertise in the law and practices of the businesses and market in which the parties operated. Thirdly, the 1996 Act sought speedy finality, which was served when the tribunal was already familiar with the background to and uncontroversial aspects of the subject matter of the dispute. The judge considered that as a general rule the fact that an arbitrator may be involved in an arbitration between party A and party B, whose subject matter was identical to that in an arbitration between party B and party C did not preclude him or her from sitting on both tribunals. This was because an arbitrator in English law was required to decide the case by reference to the material available to the parties to the particular reference: section 33 of the 1996 Act. He concluded his consideration of element 1 in these terms (para 29): The informed and fair minded observer would not therefore regard [Mr Rokison] as unable to act impartially in the reference between [Halliburton] and [Chubb] merely by virtue of the fact that he might be an arbitrator in other references arising out of the incident, and might hear different evidence or argument advanced in another such reference. The objective and fair minded assessment would be that his experience and reputation for integrity would fully enable him to act in accordance with the usual practice of London arbitrators in fulfilling his duties under section 33 by approaching the evidence and argument in the [Halliburton] reference with an open mind; and in deciding the case, in conjunction with the other members of the tribunal, in accordance with such material, with which [Halliburton] will have a full and fair opportunity to engage. Popplewell J also rejected a submission that the chairman of a tribunal had an enhanced duty to maintain demonstrable impartiality as the ultimate guarantor of fairness and impartiality. This submission, he opined, misunderstood the English law of arbitration which required all arbitrators, including party appointed arbitrators, to maintain the same high standards of impartiality. The judge did not think that there was a risk of the tribunal in reference 1 having to address issues which arose in references 2 and 3 if the preliminary issues in the latter references were decided in the insurers favour. If the tribunals determinations of the preliminary issues in those references went against the insurers, there was very little risk of overlap because (i) the issue of the reasonableness of Halliburtons settlement was legally and factually distinct from that of Transoceans settlement as the two companies had played different roles on the rig, were alleged to have committed different breaches of duty and had reached different settlements and (ii) Mr Rokison had offered to resign from the Transocean references if the preliminary issue were resolved against the insurers. On element 2, which was the alleged failure to disclose the appointments to Halliburton, the judge held that, because of his conclusion on element 1 that the circumstances did not give rise to any justifiable concerns about the arbitrators impartiality, there was nothing which had to be disclosed. Even if the disclosure ought to have been made, the failure did not give rise to a real possibility of apparent bias against Halliburton because Mr Rokisons explanation in correspondence, which was not challenged, was that it did not occur to him that he was under a duty to do so. Even if that honest belief were mistaken, it did not raise a real possibility of apparent bias. The judge also rejected element 3, which was Mr Rokisons response to Halliburtons challenge to his impartiality. Popplewell J discussed and rejected each of the complaints about that response, commenting that Mr Rokison had dealt with the challenge, which the judge said had included a grossly offensive suggestion, in a courteous, temperate and fair way which demonstrated his even handedness. Halliburton sought and obtained permission to appeal from Popplewell J and renewed its challenge on appeal to the Court of Appeal in a hearing on 7 February 2018. The Court of Appeal (Sir Geoffrey Vos C, Simon and Hamblen LJJ) dismissed the appeal in a judgment dated 19 April 2018 ([2018] EWCA Civ 817; [2018] 1 WLR 3361). In the Court of Appeal Halliburton did not challenge Popplewell Js summary of the relevant legal principles in para 16 of his judgment but suggested, and the court accepted, that, in assessing whether there was a real possibility that the tribunal was biased, regard should be had to the risk of unconscious bias. The question for the Court of Appeal was the application of those principles to the facts of the case. The first issue which the Court of Appeal addressed was the same issue as issue 1 in this appeal, namely whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to the appearance of bias. The court recognised that the existence of appointments in such related arbitrations could cause the party which was not involved in the related arbitrations to be concerned and could be a good reason for a judge to decline to appoint a person as an arbitrator in the exercise of powers under section 18 of the 1996 Act in the face of an objection by that party. But the court held that the appointment of a common arbitrator did not justify the inference of apparent bias; something more of substance was required. Applying those conclusions to the facts of the case the Court of Appeal held that the degree of overlap between reference 1 and references 2 and 3 was in fact very limited. The latter references were decided on the preliminary issue. As a result, the question of the reasonableness of the settlement by Transocean and the reasonableness of the insurers withholding of consent to that settlement did not arise. In any event, the circumstances were different: Halliburton settled before the Federal Judgment and Transocean after that judgment had allocated responsibility for the incident between the three parties. The fact that an arbitrator obtained a financial benefit from appointment to an arbitral tribunal was not disqualifying; otherwise objection could be taken to every party appointed arbitrator. The second issue which the Court of Appeal addressed was to identify the circumstances in which an arbitrator should make disclosure of matters which may give rise to justifiable doubts as to his or her impartiality. The court, citing extensive case law in support, stated (para 56): Under the common law, judges should disclose facts or circumstances which would or might provide the basis for a reasonable apprehension of lack of impartiality. When a judge was aware of a matter which could arguably be said to give rise to a real possibility of bias and disclosed that matter, such disclosure enabled parties to consider the disclosure and decide whether there was no legitimate problem or to make submissions to the judge or to address the potential problem by waiver. The judge in turn could decide in the light of those submissions whether to withdraw from the case. The court stated that the test for apparent bias applied equally to arbitral tribunals and the practical advantages of early disclosure were just as important. The court held that the question whether there should be disclosure was to be decided prospectively, as it depended on the prevailing circumstances at that time when the disclosure should have been made. When deciding whether circumstances existed that would or might lead to the conclusion that there was a real possibility of bias, with the result that those circumstances needed to be disclosed, a court should not have regard to matters known only at a later stage. A failure to make disclosure when it should have been made was itself a factor which should be taken into account when considering whether there was a real possibility that the arbitrator was biased. But, the court held, non disclosure of a matter which should have been disclosed but did not on examination give rise to justifiable doubts as to the arbitrators impartiality could not in and of itself justify an inference of apparent bias; something more was required. Applying those conclusions to the facts of the case, the Court of Appeal recognised that in the context of international commercial arbitration it was good practice to make disclosure where a party had such concerns. That practice combined with the other factors, such as the degree of overlap between the references and the nature of other connections, might have been argued to combine to give a basis for a reasonable apprehension of lack of impartiality. On that basis, the court disagreed with the judge and held that Mr Rokison ought as a matter of law to have made disclosure to Halliburton at the time of his appointments in references 2 and 3. Nonetheless, the court agreed with the judges overall conclusion that the fair minded and informed observer, having considered the facts, would not conclude that there was a real possibility that Mr Rokison was biased. In reaching that conclusion the court took account of the following factors: (i) the non disclosed circumstance did not of itself justify an inference of apparent bias, (ii) the failure to disclose was accidental and not deliberate, (iii) there was only a limited degree of overlap between the references, (iv) mere oversight in such circumstances would not give rise to justifiable doubts as to impartiality, and (v) there was no substance in Halliburtons criticism of Mr Rokisons conduct after it challenged the non disclosure. The Court of Appeal therefore dismissed the appeal. Halliburtons case and the interventions Halliburton renews its challenges before this court and founds on concerns expressed by LCIA, ICC and CIArb that the Court of Appeals judgment is out of step with internationally accepted standards and practices. Halliburton in its written case confirms that it does not suggest that Mr Rokison was guilty of any deliberate wrongdoing or actual bias. Its case is one of apparent unconscious bias and it founds on five points: (i) he accepted the benefit of a paid appointment on Chubbs nomination when he was sitting on an arbitral tribunal in reference 1; (ii) in so doing, he gave Chubb the unfair advantage of being a common party to two related arbitrations with a joint arbitrator while Halliburton was ignorant of the proceedings in reference 2 and thus unaware whether and to what extent he would be influenced in reference 1 by the arguments and evidence in reference 2; (iii) Chubb would be able to communicate with him in reference 2, for example by its submissions and the evidence it led, on matters which might be relevant to reference 1 and would know of his responses to those communications while Halliburton would not even know that they had occurred; (iv) he failed to disclose his appointment to Halliburton and thereby prevented it from forming its own view as to whether it might lead to unfairness and from either making submissions to the tribunal in reference 1 or otherwise proposing or taking practical steps to mitigate the unfairness; and (v) he did not pay proper regard to Halliburtons interest in the fairness of the procedure. Under point (v) Halliburton also suggests that Mr Rokison had regard only to what he and Chubb both wanted, which was his appointment to sit as arbitrator in reference 2. In my view, the evidence before Popplewell J, which I have summarised above, clearly negatives that gloss but that negation does not wholly remove the force of point (v). Halliburton submits that English law does not require a party to an arbitration to have its disputes resolved by someone who has acted in this manner and argues that the fair minded and informed observer would see such conduct as giving rise to justifiable doubts as to the arbitrators impartiality. LCIA expresses concern that the tests set by the Court of Appeal were not sufficiently strict compared with international norms. The common law test of bias applies, but in applying it the court must take account of the context of the arbitration and the differences between arbitration and litigation. Depending on the facts of a particular arbitration, the circumstances described in the first issue in para 2 above (ie appointments in multiple references concerning the same or overlapping subject matter with only one common party) can give rise to the appearance of bias. It will all depend on the facts. A failure to disclose can give rise to that appearance even if the fact or circumstance which should have been disclosed would not of itself give rise to apparent bias. The arbitrator in considering what needs to be disclosed is under a duty to make reasonable enquiries whether there are circumstances which may give rise to doubts as to his or her impartiality. ICC also questions the approach of the Court of Appeal and submits that the fact of multiple overlapping appointments with only one or some common parties concerning the same or overlapping subject matter can, depending on the circumstances, give rise to reasonable doubts as to the arbitrators impartiality. On the second issue (disclosure) ICC opines that in English law a failure to disclose multiple appointments by a common party in overlapping references can of itself give rise to justifiable doubts as to the arbitrators impartiality. CIArb also submits (a) that a failure by an arbitrator to disclose any facts and circumstances which might give rise to justifiable doubts as to that arbitrators impartiality may in and of itself give rise to justifiable doubts as to his or her impartiality, and (b) that the acceptance by an arbitrator of multiple appointments in related references without full disclosure to all parties may, without more, give rise to justifiable doubts as to impartiality. CIArb also, unusually, expresses its views on the application of the tests to the facts of this case. The other interveners are GAFTA, which is concerned with agricultural commodities arbitration and which trains and certifies arbitrators who must have extensive practical experience in the relevant trades, and LMAA, which is an association of arbitrators concerned with shipping and trade arbitration and which produces arbitration terms and procedures widely used for maritime arbitration in London. GAFTA explains that disputes often arise in chain or string supply contracts and that arbitrations in such contracts, which often involve common issues of law or fact, are regularly referred to the same arbitrator or arbitrators. GAFTAs Rules and Code of Conduct for Qualified Arbitrators & Qualified Mediators and General Code of Conduct Applicable to All Members do not require its arbitrators to disclose multiple appointments in relation to the same event or issue, which are an intrinsic and necessary part of GAFTA arbitrations. GAFTA also provides with its submission a report from the Management Committee of ARIAS (UK), the Insurance and Reinsurance Arbitration Society, describing practice in treaty reinsurance arbitrations, which are conducted by a limited pool of specialist arbitrators and often involve multiple disputes about the same subject matter. ARIAS (UK) opines that practitioners in its field are well aware of the possibility of overlapping appointments and have not expected such appointments to be disclosed. LMAA similarly explains that multiple appointments are relatively common under their procedures because they frequently arise out of the same incident. Speed and simplicity are necessary because of the tight limitation periods in maritime claims. There is a relatively small pool of specialist arbitrators whom parties use repeatedly. LMAA terms give arbitral tribunals the power to order concurrent hearings where two or more arbitrations raise common issues of fact or law without requiring the consent of the parties. Disclosure of multiple appointments should be required only when it is arguable that the matters to be disclosed give rise to the appearance of bias. LMAA points out that the IBA Guidelines recognise that in certain types of arbitration no disclosure of multiple appointments is required if parties are familiar with such custom and practice (see para 133 below). GAFTA and LMAA submit that in their fields of activity the mere fact of appointment in arbitrations with overlapping subject matter but without identity of parties does not give rise to any appearance of bias and is a feature of arbitrations which parties in their fields of operation accept. They submit that the court should respect such party autonomy and that there is no need to impose an obligation of disclosure in their fields of operation. Chubb defends the judgments of the courts below. But Chubb also argues that the Court of Appeal was wrong to conclude that Mr Rokison was under a legal duty to disclose his appointments in references 2 and 3 because it submits that an arbitrator is only obliged to disclose circumstances which the fair minded and informed observer would regard as giving rise to a real possibility of bias. The disclosure of circumstances which might give rise to the possibility of bias was good practice but was not an obligation in law. A failure to disclose in accordance with good practice will be a factor to which the fair minded and informed observer will have regard in determining whether there is justifiable doubt as to an arbitrators impartiality. Discussion The 1996 Act is based on the principle of party autonomy and aims to limit the role of the courts to the protection of the public interest. Section 1 of the 1996 Act provides that the provisions of Part I (sections 1 84): are founded on the following principles, and shall be construed accordingly (a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; (c) in matters governed by this Part the court should not intervene except as provided by this Part. The 1996 Act is not a complete code of the law of arbitration but allows the judges to develop the common law in areas which the Act does not address. Against that background, it is necessary to consider, first, the duty of impartiality in the context of arbitration before addressing, secondly, whether an arbitrator is under a legal duty to disclose particular matters, thirdly, how far the obligation to respect the privacy and confidentiality of an arbitration constrains his or her ability to make disclosure, and fourthly, whether a failure to disclose such matters demonstrates a lack of impartiality. I also address the times at which (a) the duty of disclosure and (b) the possibility of bias fall to be assessed. (i) The duty of impartiality Impartiality has always been a cardinal duty of a judge and an arbitrator. Thus, the first of the principles set out in section 1 of the 1996 Act is that disputes should be resolved fairly by an impartial tribunal. The duty is now enshrined within section 33 of the 1996 Act, which provides: (1) The tribunal shall (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. (2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it. Principle (c) in section 1 of the 1996 Act (para 47 above) seeks to limit the intervention of the court in arbitral proceedings. One such power of intervention arises in section 24(1) of the 1996 Act which provides (so far as relevant): A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the following grounds: that circumstances exist that give rise to (a) justifiable doubts as to his impartiality; that he has refused or failed (d) (i) properly to conduct the proceedings, and that substantial injustice has been or will be caused to the applicant. I will return to consider section 24(1)(a) later in this judgment but note at this stage (i) that by the use of the present tense of the verb exist the court is directed to the circumstances as they exist at the time at which it hears the application for removal of the arbitrator and (ii) that, in contrast with section 24(1)(d), the applicant does not have to show that substantial injustice has been or will be caused to it. A party to arbitral proceedings is also empowered by section 68 of the 1996 Act to challenge an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award and such serious irregularity includes a failure by the tribunal to comply with section 33 of the Act. In this appeal the court is concerned with an allegation of apparent bias. We are not concerned with any disqualifying interest in the outcome of the arbitration nor are we required to make windows into mens souls in search of an animus against a party or any other actual bias, whether conscious or unconscious. No such allegation is made against Mr Rokison. We are concerned only with how things appear objectively. There is no disagreement as to the relevant test. As Lord Hope of Craighead stated in Porter v Magill [2001] UKHL 67; [2002] 2 AC 357, para 103: The question is whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased. The courts have given further guidance on the nature of this judicial construct, the fair minded and informed observer (to whom in this judgment I also refer as the objective observer). Thus, in Helow v Secretary of State for the Home Department [2008] UKHL 62; [2008] 1 WLR 2416, Lord Hope (paras 1 3) explained that the epithet fair minded means that the observer does not reach a judgment on any point before acquiring a full understanding of both sides of the argument. The conclusions which the observer reaches must be justified objectively and the real possibility test ensures the exercise of a detached judgment. He continued: Then there is the attribute that the observer is informed. It makes the point that, before she takes a balanced approach to any information she is given, she will take the trouble to inform herself on all matters that are relevant. She is the sort of person who takes the trouble to read the text of an article as well as the headlines. She is able to put whatever she has read or seen into its overall social, political or geographic context. She is fair minded, so she will appreciate that the context forms an important part of the material which she must consider before passing judgment. (Emphasis added) I have added the emphasis in this citation because the context in which the test falls to be applied in this appeal is of particular importance. Finally, in my consideration of the characteristics of the objective observer, I adopt Kirby Js neat phrase in Johnson v Johnson (2000) 201 CLR 488, para 53, which members of the House of Lords approved in Helow (above, Lord Hope para 2, Lord Mance para 39) that the fair minded and informed observer is neither complacent nor unduly sensitive or suspicious. This objective test of the appearance of bias is similar to the test of justifiable doubts which is adopted in the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 1985 (as amended in 2006) article 12(2) (the UNCITRAL Model Law), the IBA Guidelines (General Standard 2(c)) and article 10.1 of the LCIA Arbitration Rules (2014). It is not necessary to determine whether the tests as to the nature of the doubts in the UNCITRAL Model Law, the IBA Guidelines and the LCIA Rules are precisely the same as those of English law. The important point is that the test in English law, involving the fair minded and informed observer, requires objectivity and detachment in relation to the appearance of bias. The objective test of the fair minded and informed observer applies equally to judges and all arbitrators. There is no difference between the test in section 24(1)(a) of the 1996 Act, which speaks of the existence of circumstances that give rise to justifiable doubts as to [the arbitrators] impartiality and the common law test above. But in applying the test to arbitrators it is important to bear in mind the differences in nature and circumstances between judicial determination of disputes and arbitral determination of disputes. First, judges resolve civil disputes in courts which are, as a general rule, open to the public; by contrast arbitration is a consensual form of dispute resolution which is generally conducted in private and of which there is very limited public oversight. A person who is not a party to an arbitration may know nothing about the arbitration and may have no ready means of discovering its existence, the evidence adduced and the legal arguments advanced at it, or the award made. Arbitrators and the parties to an arbitration are generally under a duty of privacy and confidentiality which militates against such discovery, in the absence of disclosure. That puts a premium on frank disclosure. Russell (1880) 14 Ch D 471, 474, Sir George Jessel MR said of arbitration: As a rule, persons enter into these contracts with the express view of keeping their quarrels from the public eyes, and of avoiding that discussion in public, which must be a painful one, and which might be an injury even to the successful party to the litigation, and most surely would be to the unsuccessful. In English law arbitration is, as a general rule, a private process. In Russell v It is because arbitrations are private that arbitrators have no power to order concurrent hearings without the consent of the parties: Oxford Shipping Co Ltd v Nippon Yusen Kaisha: The Eastern Saga [1984] 2 Lloyds Rep 373; [1984] 3 All ER 835. The 1996 Act says nothing about privacy or confidentiality. But that was a deliberate omission. In its report on the Arbitration Bill (February 1996), paras 10 17, the Departmental Advisory Committee on Arbitration Law (the DAC) recorded that users of commercial arbitration in England place much importance on privacy and confidentiality as essential features of English arbitrations but, recognising that there was uncertainty as to the breadth and existence of certain exceptions to those principles, recommended that there be no statutory formulation of those principles but that the courts should be left to develop the law on a pragmatic case by case basis. I will consider the principles of privacy and confidentiality further when I discuss the duty of disclosure in paras 70 116 below. Secondly, unlike a judge who decides issues of fact and law at first instance and from whose decisions the parties usually have a right of appeal, an arbitrator is not subject to appeals on issues of fact and often not on issues of law. By contrast with a first instance judge, there are very limited powers of review of the decision of an arbitral tribunal. Thirdly, a judge is the holder of a public office, is funded by general taxation and has a high degree of security of tenure of office and therefore of remuneration. An arbitrator is nominated to act by one or both of the parties to the arbitration either directly or by submitting names to the appointing body, whether an institution or the court, for appointment. The arbitrator is remunerated by the parties to the arbitration in accordance with the terms set out in the reference, and often is ultimately funded by the losing party. He or she is appointed only for the particular reference and, if arbitral work is a significant part of the arbitrators professional practice, he or she has a financial interest in obtaining further appointments as arbitrator. Nomination as an arbitrator gives the arbitrator a financial benefit. There are many practitioners whose livelihood depends to a significant degree on acting as arbitrators. This may give an arbitrator an interest in avoiding action which would alienate the parties to an arbitration, for example by assertive case management against the wishes of the legal teams who are presenting their clients cases. It also may give those legal teams an incentive to be more assertive of their sides interests in the conduct of the arbitration than might be the case in a commercial court. Fourthly, people who are appointed as arbitrators include lawyers and also other professionals and experts in a wide range of business activities, and trades. Some, like the arbitrators in this case, may have very extensive experience of arbitration practice while others may have very limited involvement in and experience of arbitration. Moreover, arbitrators in international arbitration come from many jurisdictions and legal traditions and may have divergent views on what constitutes ethically acceptable conduct. Fifthly, it follows from the private nature of most arbitrations that where there are multiple references concerning the same or overlapping subject matter in which the same arbitrator is a member of the tribunal, the party which is not common to the various arbitrations has no means of informing itself of the evidence led before and legal submissions made to the tribunal (including the common arbitrator) or of that arbitrators response to that evidence and those submissions in the arbitrations in which it is not a party. It is not unusual in commercial litigation for an interested party to instruct its lawyer to sit in on a court case involving other parties which may have a bearing on its interests in a separate action. Such an expedient is generally not available in arbitration. Sixthly, in the field of international arbitration there are differing understandings of the role and obligations of the party appointed arbitrator. There has been a lively debate as to the justification for party appointed arbitrators and their role. See, for example, the concerns about partisanship expressed by Professor Jan Paulsson, Moral Hazard in International Dispute Resolution (2010) 25 ICSID Review, Foreign Investment Law Journal, p 339 and Professor Albert Jan van den Berg, Dissenting Opinions by Party Appointed Arbitrators in Investment Arbitration in Looking to the Future: Essays on International Law in Honor of W Michael Reisman, ed Mahnoush Arsanjani et al (Brill Academic 2010) and the defence of party appointed arbitrators by Judge Charles N Brower and Charles B Rosenberg, The Death of the Two Headed Nightingale: Why the Paulsson van den Berg Presumption that Party Appointed Arbitrators are Untrustworthy is Wrongheaded, (2013) Arbitration International, Vol 29 No 1, pp 7 44. Other experienced commentators have suggested that, without compromising his or her independence and impartiality, the party appointed arbitrators role involves a sensitivity to the appointing partys legal, cultural and commercial background and its position in the arbitration (Born, International Commercial Arbitration, 2nd ed (2014), p 1808) and making sure that the arbitral tribunal properly understands the case of the appointing party (Redfern and Hunter, Law and Practice of International Arbitration, 6th ed (2015), para 4.30). In his written case, Lord Grabiner, who appears on behalf of Halliburton, goes further and refers to the selection of an arbitrator by a party as forum shopping. He quotes from an article by Professor Martin Hunter, Ethics of the International Arbitrator, ASA Bulletin, Kluwer Law International 1986, Vol 4 Issue 4, pp 173 196, at p 189, in which the author draws a distinction between impartiality and neutrality and states: Indeed, when I am representing a client in an arbitration, what I am really looking for in a party nominated arbitrator is someone with the maximum predisposition towards my client, but with the minimum appearance of bias. In arbitrations where the parties have, or one party has, an expectation that the party nominated arbitrator will be pre disposed towards it, it is perceived that the person chairing the tribunal, whether appointed by the party nominated arbitrators jointly or by an appointing institution or the court, has a particular role in making sure that the tribunal acts fairly and impartially. Notwithstanding this perception of the reality in some quarters, a party appointed arbitrator in English law is expected to come up to precisely the same high standards of fairness and impartiality as the person chairing the tribunal. Popplewell J correctly summarised the position in English law, and I would venture to say also in Scots law, when he stated in his judgment (para 19): [T]he duty to act independently and impartially involves arbitrators owing no allegiance to the party appointing them. Once appointed they are entirely independent of their appointing party and bound to conduct and decide the case fairly and impartially. They are not in any sense a representative of the appointing party or in some way responsible for protecting or promoting that partys interests. As Popplewell J went on to state, the duty on all arbitrators to act fairly and impartially is enshrined in section 33 of the 1996 Act. Lord Grabiner submits that London is the premier seat for international arbitration. He points to a survey of international arbitration which Queen Mary University of London carried out in 2018 which reveals that the main reasons why parties in international arbitration choose to arbitrate in England are the reputation of London and that the English legal system guarantees neutrality and impartiality. It is therefore important that English law upholds rules which support the integrity of international arbitration. In applying the test of the fair minded and informed observer it would be wrong to have regard to the characteristics of the parties to the arbitration, including the fact that one or more were foreign parties, as Popplewell J stated in para 16(6) of his judgment, referring to the judgment of Flaux J in A v B [2011] EWHC 2345 (Comm); [2011] 2 Lloyds Rep 591, paras 23 24; see also ASM Shipping Ltd of India v TTMI Ltd of England [2005] EWHC 2238 (Comm); [2006] 1 Lloyds Rep 375, para 39(2) per Morison J. The requirement in English law that all arbitrators, whether party appointed or independently appointed, comply with the same high standards of impartiality, appears to be increasingly widely accepted as the legal norm internationally: see the article by the Chief Justice of Singapore, Sundaresh Menon, Adjudicator, advocate or something in between? Coming to terms with the role of the party appointed arbitrator, Arbitration 2017, 83(2), pp 185 202. But this does not negate the fact that in some quarters there are understandings of the arbitral process which appear not to accept that requirement. Further, some legal systems take a different view and accept the proposition that a party appointed arbitrator has a special role in relation to his or her appointing party. For example, in Certain Underwriting Members of Lloyds of London v Florida (2018) 892 F 3d 501; 2018 US App Lexis 15377 the United States Court of Appeals for the Second Circuit addressed a case in which a party sought to vacate an arbitral award on the ground of evident partiality because of a failure by a party appointed arbitrator on a tri partite panel to disclose close business relationships with directors and employees of the party appointing him. The court drew a distinction between party appointed arbitrators on the one hand and neutral arbitrators on the other. It held that in the case of a party appointed arbitrator, an undisclosed relationship with the appointing party constituted evident partiality only if the relationship violated the contractual requirement of disinterestedness or prejudicially affected the award. The court recognised that in insurance and reinsurance arbitrations the parties sought arbitral panels with expertise and that it was common to have repeat players who had connections with the industry. This understanding applied in relation to both party appointed arbitrators and neutral arbitrators or umpires. Beyond that, recognising that party appointed arbitrators were expected to espouse the view or perspective of the appointing party and serve as de facto advocates, it considered that party appointment involved various degrees of partiality in contrast with the neutral arbitrator. It is clear from the judgment (p 509) that several circuits draw this distinction between party appointed and neutral arbitrators. Closer to home, in this case Mr Birsic sought in his second witness statement to the High Court to distinguish Mr Rokisons obligations as the neutral chair of the tribunal and those of Professor Park as a party appointed arbitrator (para 27 above). When such ideas are in play the parties in reality put a particularly heavy responsibility on the arbitrator who is not a party appointee and who chairs the tribunal. The courts in applying the test of the fair minded and informed observer would credit that objective observer with the knowledge both that some, maybe many, parties and some, maybe many, arbitrators in international arbitrations have that understanding and that there is a debate within the arbitration community as to the precise role of the party appointed arbitrator and the compatibility of that role with the requirement of impartiality. To do so is not to measure apparent bias by reference to the subjective understanding of the parties to a particular arbitration and thereby to abandon the objective assessment which the fair minded and informed observer entails. Nor is it an acceptance that there is any difference in English law as to the obligation of impartiality owed by different types of arbitrator, for there is none. It is to recognise the context in which the objective observers judgement as to apparent bias is being made. The objective observer takes account of how some parties and their appointees conduct themselves in such arbitrations and of the debate within the arbitration community as to the role of the party appointed arbitrator when considering whether mixing and matching (as counsel put it) the roles as party appointee in one reference and chairman of an arbitral tribunal in a related reference would pose a risk to the arbitrators impartiality in either case. The fair minded and informed observer would also be aware that in international arbitration the parties to an arbitration and their legal advisers may often have only limited knowledge of the reputation and experience of a professional who is appointed by an institution or by the court to chair their arbitration. While many parties and their advisers who are engaged in high value international arbitrations devote considerable resources to researching the background of people who might be suitable for selection as party appointed arbitrators or as nominees for third party appointment, there is no basis for assuming that that practice is universal. The professional reputation and experience of an individual arbitrator is a relevant consideration for the objective observer when assessing whether there is apparent bias as an established reputation for integrity and wide experience in arbitration may make any doubts harder to justify. But the weight which the fair minded and informed observer should give to that consideration will depend upon the circumstances of the arbitration and whether, objectively and as a generality, one could expect people who enter into references of that nature to be informed about the experience and past performance of arbitrators. In the context of many international arbitrations, it is likely to be a factor of only limited weight. The weight of that consideration may also be reduced if the circumstances give rise to a material risk of unconscious bias on the part of a person of the utmost integrity: Almazeedi v Penner [2018] UKPC 3, para 1 per Lord Mance. On other hand, the objective observer is alive to the possibility of opportunistic or tactical challenges. Parties engage in arbitration to win. Their legal advisers present their cases to the best of their ability, and this pursuit can include making tactical objections or challenges in the hope of having their dispute determined by a tribunal which might, without any question of bias, be more predisposed towards their view or simply to delay an arbitral determination. The courts are alive to similar tactical objections in litigation. In Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, the Court of Appeal (Lord Bingham of Cornhill CJ, Lord Woolf MR and Sir Richard Scott V C) addressed the circumstances in which judicial office holders may be required to disqualify themselves from hearing a case. The court stated (para 25) that it would be dangerous and futile to attempt to define or list the factors which may or may not give rise to what we now describe as a real possibility of bias; [e]verything will depend on the facts, which may include the nature of the issue to be decided. The court stated (para 21): If objection is then made, it will be the duty of the judge to consider the objection and exercise his judgment upon it. He would be as wrong to yield to a tenuous or frivolous objection as he would to ignore an objection of substance. The court went on (para 22) to cite with approval dicta of Mason J in the High Court of Australia in In re JRL, Ex p CJL (1986) 161 CLR 342, 352: Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour. An arbitrator when deciding to accept a reference is not under the same obligation as a judge to hear a case but, having taken up the reference, the arbitrator may reasonably feel under an obligation to carry out the remit unless there are substantial grounds for self disqualification. Similarly, a court, when asked to remove an arbitrator, needs to be astute to see whether the ground of real possibility of bias is made out. Summarising the position so far, the English courts in addressing an allegation of apparent bias in an English seated arbitration will (i) apply the objective test of the fair minded and informed observer and (ii) have regard to the particular characteristics of international arbitration which I have discussed in paras 56 to 68. Those characteristics highlight the importance of proper disclosure as a means of maintaining the integrity of international arbitration, a topic to which I now turn. (ii) Disclosure a) The role of disclosure An arbitrator, like a judge, must always be alive to the possibility of apparent bias and of actual but unconscious bias. The possibility of unconscious bias on the part of a decision maker is known, but its occurrence in a particular case is not. The allegation, which is advanced in this case, of apparent unconscious bias is difficult to establish and to refute. One way in which an arbitrator can avoid the appearance of bias is by disclosing matters which could arguably be said to give rise to a real possibility of bias. Such disclosure allows the parties to consider the disclosed circumstances, obtain necessary advice, and decide whether there is a problem with the involvement of the arbitrator in the reference and, if so, whether to object or otherwise to act to mitigate or remove the problem: see Almazeedi (above) para 34; Davidson v Scottish Ministers (No 2) [2004] UKHL 34; 2005 1 SC (HL) 7. In the latter case, Lord Hope of Craighead stated (para 54): [T]he best safeguard against a challenge after the event, when the decision is known to be adverse to the litigant, lies in the opportunity of making a disclosure before the hearing starts. That is the proper time for testing the tribunals impartiality. Fairness requires that the quality of impartiality is there from the beginning, and a proper disclosure at the beginning is in itself a badge of impartiality. That statement mutatis mutandis applies to the arbitrator as much as to the judge. In Davidson (above, para 19) Lord Bingham of Cornhill spoke with approval of the practice of judges to disclose a previous activity or association which would or might provide a basis for a reasonable apprehension of lack of impartiality (emphasis added). When, on being asked to accept an appointment, an arbitrator knows of a matter which ought to be disclosed to the parties to the reference, prompt disclosure to those parties of that matter provides the safeguard as the quality of impartiality is shown to have been there from the beginning. But the obligation of impartiality continues throughout the reference and the emergence during the currency of the reference of matters which ought to be disclosed means that an arbitrators prompt disclosure of those matters can enable him or her to maintain what Lord Hope calls the badge of impartiality. The various arbitral codes to which we were referred address the need for proper disclosure in arbitrations. The IBA Guidelines 2014 set out good arbitral practice which is recognised internationally, and Popplewell J in setting out his uncontested principles in para 16 of his judgment in this case correctly stated that they can assist the court in identifying what is an unacceptable conflict of interest and what matters may require disclosure: para 16(7). But the IBA Guidelines do not of themselves give rise to legal obligations or override national law or the arbitral rules chosen by the parties: IBA Guidelines, Introduction para 6. By contrast, the submission to arbitration under arbitral rules can give rise to legal obligations. An agreement to submit to arbitration under the ICC Arbitration Rules 2017 is deemed to be a submission to those rules (article 6) and similar provision is made in the preamble to the LCIA Rules 2014 to give contractual effect to the relevant rules. Under those codes the arbitrator is required to make disclosure of facts and circumstances that may in the eyes of the parties give rise to doubts about the arbitrators independence and impartiality. Thus, in the IBA Guidelines, General Standard 3, the duty of disclosure is triggered by the existence of facts and circumstances that may, in the eyes of the parties, give rise to doubts as to the arbitrators impartiality or independence (emphasis added). It is clear from the explanation of General Standard 3 that under the IBA Guidelines the duty of disclosure arises out of the parties interest in being fully informed and a disclosure does not imply the existence of a conflict of interest. Article 11 of the ICC Arbitration Rules and article 5.4 of the LCIA Rules, relating to disclosure, have a similar focus on the perceptions of the parties to an arbitration. This subjective approach to the duty of disclosure in the IBA Guidelines and the rules of the arbitral institutions addresses the perception of the parties to an arbitration who are people or entities involved in a stressful and often expensive dispute. English law, by contrast, adopts an objective test by looking to the judgement of the fair minded and informed observer. The codes also use different expressions in describing the nature of the doubts. The IBA Guidelines (General Standard 3) speak simply of doubts while the ICC Rules (article 11) speak of reasonable doubts and the LCIA Rules (article 5.4) speak of justifiable doubts. But I do not think that there is a material difference between those formulations, as I do not construe the IBA Guidelines or the institutions rules as requiring disclosure when the only doubts to which the circumstances might give rise would be unreasonable or unjustified. It is also clear that an arbitrator may fail to make disclosure for entirely honourable reasons, such as forgetfulness, oversight, or a failure properly to recognise how matters would appear to the objective observer. But as Lord Bingham of Cornhill stated in Davidson (above, para 19), [h]owever understandable the reasons for it, the fact of non disclosure in a case which calls for it must inevitably colour the thinking of the observer. b) Whether there is a legal duty of disclosure? A question, on which Popplewell J and the Court of Appeal reached contradictory conclusions and which is material to this appeal, is whether disclosure is a legal duty in English law or merely good arbitral practice unless the parties submit their dispute to arbitration under arbitral rules which impose a legal obligation. The Court of Appeal held (para 71): the present position under English law to be that disclosure should be given of facts and circumstances known to the arbitrator which, in the language of section 24 of the Act, would or might give rise to justifiable doubts as to his impartiality. The court continued: Under English law this means facts or circumstances which would or might lead the fair minded and informed observer, having considered the facts, to conclude that there was a real possibility that the arbitrator was biased. (Emphasis added) The Court of Appeal held that this is a legal duty. In so holding, the Court of Appeal has developed the English law of arbitration. The question arises whether it was correct to do so. In my view the Court of Appeal was correct so to hold. An arbitrator is under the statutory duties, in section 33 of the 1996 Act, to act fairly and impartially in conducting arbitral proceedings, in decisions on matters of procedure and evidence and in the exercise of all powers conferred on him or her (para 49 above). Those statutory duties give rise to an implied term in the contract between the arbitrator and the parties that the arbitrator will so act. The arbitrator would not comply with that term if the arbitrator at and from the date of his or her appointment had such knowledge of undisclosed circumstances as would, unless the parties waived the obligation, render him or her liable to be removed under section 24 of the 1996 Act. Moving away from the circumstances of this appeal, if one supposes that an arbitrator has a close financial relationship with a party to the arbitration in which he or she is or is to be appointed, there can be little doubt that such a relationship could readily give rise to justifiable doubts as to the arbitrators impartiality. Indeed, if the arbitrator had a financial interest in the dispute he or she would be disqualified and the award would be voidable: Dimes v Proprietors of Grand Junction Canal (1852) 3 HL Cas 759; 10 ER 301. But absent disclosure, the other party to the arbitration would be unaware of that disqualifying interest. In such circumstances it would in my view be incumbent on the arbitrator to disclose the relationship in order to comply with his statutory duty of fairness under section 33 of the 1996 Act. The duty of fairness is engaged because it is necessary that the other party to the arbitration be aware of the arbitrators financial connection with the first party and so be able to form a judgment as to his or her suitability as an arbitrator. Unless there is disclosure, the parties may often be unaware of matters which could give rise to justifiable doubts about an arbitrators impartiality and entitle them to a remedy from the court under section 24 of the 1996 Act. Those remedies are necessary in the public interest. A legal obligation to disclose such matters is encompassed within the statutory obligation of fairness. It is also an essential corollary of the statutory obligation of impartiality: an arbitrator who knowingly fails to act in a way which fairness requires to the potential detriment of a party is guilty of partiality. Unless the parties have expressly or implicitly waived their right to disclosure, such disclosure is not just a question of best practice but is a matter of legal obligation. While the statutory duty on the arbitrator to act fairly and impartially arises on his or her appointment, there is a necessity for pre appointment disclosure if the arbitration system is to operate smoothly and the making of such disclosure is recognised as good practice. If an arbitrator waited until after appointment to make disclosure, the arbitrator might have to resign after appointment when a party objects to his or her appointment following disclosure. Unsurprisingly, there is an established practice of pre appointment disclosure by prospective arbitrators. It is striking that ICC, LCIA and CIArb, which have no financial interest in the outcome of this litigation but have an interest in the integrity and reputation of English seated arbitration, argue in favour of the recognition of such a legal duty. The existence of a legal duty promotes transparency in arbitration and is consistent with best practice as seen in the IBA Guidelines and in the requirements of institutional arbitrations such as those of ICC and LCIA. In summary, I would hold that there is a legal duty of disclosure in English law which is encompassed within the statutory duties of an arbitrator under section 33 of the 1996 Act and which underpins the integrity of English seated arbitrations. The relationship between disclosure and the duty of privacy and c) confidentiality In this appeal, which concerns the allegation that an arbitrator should have disclosed the existence of a related arbitration involving a common party, it is necessary to consider the obligation in English law on an arbitrator to uphold the privacy and confidentiality of an arbitration which has an English seat and the boundaries of that obligation. English seated arbitrations are both private and confidential, if the law governing the confidentiality of the arbitration is English law. The obligations on the parties to uphold the privacy and confidentiality of an arbitration have been characterised as implied obligations arising out of the nature of arbitration itself: Dolling Baker v Merrett [1990] 1 WLR 1205 (CA), 1213 per Parker LJ; Ali Shipping Corpn v Shipyard Trogir [1999] 1 WLR 314, 326 per Potter LJ. In the latter case Potter LJ stated, the parties have indicated their presumed intention simply by entering into a contract to which the court attributes particular characteristics. This analysis coincides with the view expressed by Sir Patrick Neill QC in his lecture, Confidentiality in Arbitration which he delivered in 1995, which is published in (1996) 12 Arb Int 287 318, and which the DAC cited with approval in their Report on the Arbitration Bill (para 12). In that lecture he described the privacy and confidentiality of arbitration proceedings as a fundamental characteristic of the agreement to arbitrate (p 316). In Department of Economics, Policy and Development of the City of Moscow v Bankers Trust Co [2004] EWCA Civ 314; [2005] QB 207, Mance LJ stated (para 2): Among features long assumed to be implicit in parties choice to arbitrate in England are privacy and confidentiality. Mance LJ went on to state (para 30) that the changes to the CPR in 1997 and 2002: rest clearly on the philosophy of party autonomy in modern arbitration law, combined with the assumption that parties value English arbitration for its privacy and confidentiality. Party autonomy requires the court so far as possible to respect the parties choice of arbitration. Their choice of private arbitration constitutes an election for an alternative system of dispute resolution to that provided by the public courts. The same philosophy limits court intervention to the minimum necessary in the public interest, which must include the public interest in ensuring not that arbitrators necessarily decide cases in a way which a court would regard as correct, but that they at least decide them in a fundamentally fair way: see section 1 of the 1996 Act. In his illuminating judgment in Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184; [2008] Bus LR 1361 Lawrence Collins LJ (para 84) described the fundamental characteristics of privacy and confidentiality in an agreement to arbitrate under English law as being really a rule of substantive law masquerading as an implied term. Arbitrators also must respect the private nature of the proceedings in which they are engaged: The Eastern Saga (para 57 above). They are bound to uphold the privacy and confidentiality of the arbitration, whether as a result of contract or in performance of an equitable duty because they have acquired the information in circumstances importing an obligation of confidence. The common law does not limit the obligation of privacy and confidentiality to information, such as a trade secret, which is inherently confidential but extends it to notes of evidence and other documents disclosed or generated in arbitration because of the implied agreement that such documents can only be used for the purpose of the arbitration. Further, privacy may be violated by the publication or dissemination of documents deployed in the arbitration or information relating to the conduct of the arbitration. See Emmott v Michael Wilson & Partners Ltd (above) Lawrence Collins LJ (paras 79 83), Thomas LJ (para 129(i) (iv)). What are the boundaries of the arbitrators obligation of privacy and confidentiality which would allow for or prevent disclosure? While there is broad agreement that the obligation is not absolute, its boundaries are unclear. The law in this area is developing. It is sufficient to quote Lawrence Collins LJs summary in Emmott (above) para 107 of the principal cases in which disclosure is permissible: In my judgment the content of the obligation may depend on the context in which it arises and on the nature of the information or documents at issue. The limits of that obligation are still in the process of development on a case by case basis. On the authorities as they now stand, the principal cases in which disclosure will be permissible are these: the first is where there is consent, express or implied; second where there is an order or leave of the court (but that does not mean that the court has a general discretion to lift the obligation of confidentiality); third, where it is reasonably necessary for the protection of the legitimate interests of an arbitrating party; fourth, where the interests of justice require disclosure, and also (perhaps) where the public interest requires disclosure. As I have stated (para 57 above), the DAC did not support legislative definition but left the task of developing the rules relating to the privacy and confidentiality of arbitrations, including the boundaries of and exceptions to those obligations, to the judiciary. Parliament enacted the 1996 Act against that background. In this appeal the court is not concerned with identifying an exception to the duty of privacy and confidentiality but seeks to discover the extent to which the parties have implicitly consented to disclosure. After the hearing of this appeal, it became clear that the court needed further assistance from the parties and interveners concerning arbitral practices in making disclosure. In particular, the court sought guidance on practice in relation to the disclosure of facts concerning a related arbitration or arbitrations without obtaining the express permission of the parties to the arbitration about which information was being disclosed, and what were the practical consequences of the recognition of a legal duty of disclosure in those circumstances. Both parties and each of the interveners prepared careful written submissions for which the court is very grateful. It is clear from the parties and interveners initial cases and from their further submissions that there is a variety of arbitral practices in relation to the disclosure of multiple appointments in different contexts. In this context I use the expression multiple appointments to cover the acceptance of appointments in multiple references concerning the same or overlapping subject matter with only one common party as described in issue 1 in para 2 above. What is appropriate for arbitration in which the parties have submitted to institutional rules, such as those of ICC and LCIA, differs from the practice in GAFTA and LMAA arbitrations. There are practices in maritime, sports and commodities arbitrations, as the IBA Guidelines recognise (para 133 below), in which engagement in multiple overlapping arbitrations does not need to be disclosed because it is not generally perceived as calling into question an arbitrators impartiality or giving rise to unfairness. Where the information which must be disclosed is subject to an arbitrators duty of privacy and confidentiality, disclosure can be made only if the parties to whom the obligations are owed give their consent. In such a circumstance, if a person seeking appointment as an arbitrator in a later arbitration does not obtain the consent of the parties to a prior related arbitration to make a necessary disclosure about it, or the parties to the later arbitration do not consent to the arbitrators disclosure of confidential matters relating to that prospective appointment to the parties to the earlier arbitration, the arbitrator will have to decline the second appointment. Such consent may be express or may be inferred from the arbitration agreement itself in the context of the custom and practice in the relevant field. Regard must be had to the relevant custom and practice to ascertain whether consent can be inferred. For example, in an Admiralty case concerning a Lloyds Open Forum (LOF) arbitration, Peter Gross QC (sitting as a deputy High Court judge) agreed with the parties that the implied term of confidentiality in LOF arbitration agreements is qualified by the custom and practice of awards being made available to LOF arbitrators and counsel in other LOF cases, with a view to promoting uniformity and consistency within the LOF system of arbitration: The Hamtun (owners) v The St John (owners) [1999] 1 All ER (Comm) 587, 611. By agreeing to arbitrate in accordance with the terms and practice of a particular arbitral institution the arbitrating parties implicitly consent to the qualification or limitation of the obligations of privacy and confidentiality. In arbitrations which are governed by institutional rules which require disclosure to the institution or the parties of matters which may include information about other arbitrations (such as the ICC Arbitration Rules, article 11(2), the LCIA Rules, article 5.4, and the ICSID Arbitration Rules, rule 6(2)), the incorporation of such rules into an arbitration (arbitration 1) provides a basis for the inference that the parties to that arbitration consent to disclosure of such information about that arbitration to the parties to a prospective arbitration (arbitration 2) under such rules. Similarly, one can readily infer from the submission of the parties in arbitration 2 to such rules that they have consented to such disclosure to the parties to arbitration 1. As GAFTA and LMAA have shown, it is an accepted feature of their arbitrations that arbitrators will act in multiple arbitrations, often arising out of the same events. Parties which refer their disputes to their arbitrations are taken to accede to this practice and to accept that such involvement by their arbitrators does not call into question their fairness or impartiality. In the absence of a requirement of disclosure of such multiple arbitrations, the question of the relationship between such disclosure and the duty of privacy and confidentiality does not arise. As I have said, there is evidence of similar practice in re insurance arbitrations: para 43 above. Where parties submit to an ad hoc arbitration, practice as to privacy, confidentiality and disclosure may differ. Such arbitrations may include those in which the parties maintain the confidentiality of the existence of the arbitration itself by prohibiting any disclosure whatsoever. In such a case, the consent of both parties to the arbitration would be required to enable an arbitrator to disclose its existence to the parties to another arbitration. Whether an arbitrator can make disclosure of an existing or prospective arbitration without first obtaining the express consent of all parties to the arbitration about which disclosure requires to be made will depend on the relevant arbitration agreement and the custom and practice in the relevant field. In this appeal the court is concerned with a Bermuda Form arbitration which is a specialist form of arbitration (para 11 above). It is not disputed that it is common practice for parties, and in particular insurance companies, to appoint arbitrators who have experience in interpreting the Bermuda Form policy on repeated occasions, including in arbitrations relating to the same occurrence. There are sound reasons for doing so because the Bermuda Form contains some unique provisions and there is an interest in obtaining consistency of interpretation of the policy in the absence of published reports of the awards which the arbitrators have made. As Popplewell J stated (in para 23 of his judgment) parties often wish their arbitral tribunal to have particular knowledge and expertise in the law and practices of the relevant business or market. It is not uncommon for arbitrators in Bermuda Form arbitrations to disclose their involvement in prior or current arbitrations involving a common party without disclosing the identity of the other party or details concerning the arbitration, as the circumstances of this case demonstrate. But in this appeal the parties disagree as to the practice of disclosure in Bermuda Form arbitrations. Halliburton asserts that there is both a practice and a legal requirement to disclose the minimum information necessary to achieve proper disclosure while Chubb says that there is no established practice of disclosure in Bermuda Form arbitrations. I will address that question in para 137 below after I have considered the content of the duty of disclosure. It is sufficient at this stage to state that I am satisfied that in English law such multiple appointments must be disclosed in the absence of contrary agreement. The question which is relevant at this stage is: does the arbitrator need to obtain the express consent of the parties to the arbitration about which disclosure is to be made before making such disclosure? The parties agree that the disclosures which, in accordance with common practice in England, Mr Rokison made to the court in reference 1 and to Transocean in reference 2 did not breach his obligation of confidentiality to the parties to the references which were disclosed. Other nominees for appointment by the court in reference 1 made similar disclosures without seeking consent. Mr Rokisons disclosure, which Clyde & Co passed on to Transocean on 23 December 2015, stated: I have acted as party appointed arbitrator and chairman in many Bermuda Form arbitrations, a number of which, not surprisingly, have involved [Chubb], who have appointed me as their nominated arbitrator on various occasions. I have also previously acted as chairman in two other arbitrations, in which [Chubb] was a party. Currently I have only three pending cases involving [Chubb]. In one, I am their appointee; in the second, I have been appointed as sole arbitrator by agreement between the parties; and, in the third, I have been appointed as third arbitrator by order of the London Commercial Court. The last of these also happens to involve what I understand is a different aspect of the Deepwater Horizon incident. I do not consider that the above matters affect my independence or impartiality, which I have always been at pains to maintain, but I nonetheless consider that these are matters which ought to be disclosed at this stage, rather than risking possible disruption of the arbitral proceedings after they have got under way. It is not disputed that the duty of privacy and confidentiality is not absolute, that the parties to an arbitration can determine as a matter of contract the extent to which they wish matters to be treated as confidential, or that there is a common practice for arbitrators in English seated arbitrations to make such high level disclosure of their involvement in other relevant arbitrations without obtaining the express consent of the parties to the arbitrations about which disclosure is being made. Halliburtons position is that the arbitrators duty of confidentiality does not prevent the disclosure of the names of the parties to the disclosed arbitration. Chubbs position is that the arbitrators duty of confidentiality covers the identity of the parties but that the information which Mr Rokison disclosed to Transocean, which did not include the identity of the parties other than Chubb itself, which was the common party who proposed his appointment, or the issues in the disclosed arbitrations, was confidential to Chubb alone and the disclosure was made on Chubbs behalf. The needed consent can therefore be inferred. There also appears to be broad agreement between ICC, LCIA and CIArb that as a general rule, in the context of a proposed appointment by a common party, an arbitrator can disclose the existence of a current or past arbitration involving a common party and the identity of the common party (but not the identity of the other party or parties) without obtaining the express consent of the parties to that arbitration, unless the parties to that arbitration have agreed to prohibit such disclosure. The arbitrator may similarly disclose the proposal for his or her engagement in a proposed arbitration and the identity of the common party who is seeking to make the appointment or nomination. The widespread arbitral practice in English seated arbitrations, which those institutions describe, supports the view that an arbitrator can do so on a confidential basis without breaching his or her obligation of privacy and confidentiality. This current practice of arbitrators in English seated arbitrations vouches two things. First, as a general rule the duty of privacy and confidentiality is not understood to prohibit all forms of disclosure of the existence of a related arbitration in the absence of express consent. Secondly, the duty of disclosure does not give an arbitrator carte blanche to disclose whatever is necessary to persuade a party that there is no justification for doubts about his or her impartiality. There will be many matters which cannot be disclosed without the express consent of the parties to that arbitration. As I discuss further in para 146 below, the information that can be disclosed in this context without having to obtain the express consent of the parties to the disclosed arbitration is limited. In many cases such a limited disclosure may satisfy the recipient, as Transoceans response to Mr Rokisons disclosures shows. If an arbitrator needs to disclose more detail about another arbitration in order to comply with the duty of disclosure, the arbitrator or proposed arbitrator must obtain the consent of the parties to the arbitration or proposed arbitration about which he or she is making a disclosure. It is clear from the responses to the courts further questions that participants in arbitration understand that the information which is disclosed can be used by its recipients only for the purpose of judging the impartiality and suitability of the arbitrator making the disclosure. The legal basis for this expectation or practice is that there is an equitable duty on the recipient to confine the use of the information to the purpose for which it was disclosed because (a) the information about the related arbitration is of a confidential nature and (b) it is imparted in circumstances importing an obligation of confidence: Coco v A N Clark (Engineers) Ltd [1969] RPC 41, 47 per Megarry J. The first of these criteria is met because of the general rule that English seated arbitrations are private matters. The second is met because the recipients of the disclosure know that the information which is the subject of the disclosure has been given to the arbitrator in the context of a confidential relationship between the arbitrator and the parties to the arbitration or prospective arbitration whose existence is being disclosed. In my view, the law can and should recognise the realities of accepted commercial and arbitral practice as a guide both in the formulation of legal rules and in the interpretation of the parties contracts when the practice operates in the public interest. In this case it should do so. In the 18th century, Lord Mansfield as Chief Justice of the Kings Bench used honest commercial practices and informal rulings on the lex mercatoria to shape the common law in relation to commercial matters. More recently, Lord Goff of Chieveley in an extra judicial writing (Commercial Contracts and the Commercial Court [1984] LMCLQ 382, 391) described the role of a judge to assist honest businesspeople in these terms: We are there to give effect to their transactions, not to frustrate them: we are there to oil the wheels of commerce, not to put a spanner in the works, or even grit in the oil. There is a public interest in upholding the integrity of arbitration as a system of alternative dispute resolution by ensuring that there is proper disclosure of an arbitrators involvement in related arbitrations in a field of arbitration in which repeated appointments occur but in which there is no common understanding that disclosure is not required. There is also a strong public interest in giving greater certainty as to the legal standing of established arbitral practice and the relationship between the duty of disclosure and an arbitrators duty to respect the privacy and confidentiality of an arbitration. In short, this court should hold that in Bermuda Form arbitrations an arbitrator may, in the absence of agreement to the contrary by the parties to the relevant arbitration, make disclosure of the existence of that arbitration and the identity of the common party in accordance with the practice which I have described without obtaining the express consent of the relevant parties. The consent of the common party can be inferred from its action in seeking to nominate or to appoint the arbitrator. The consent of the other party is not required for such limited disclosure. In legal analysis, the contract or contracts under which the arbitrator has been appointed in an existing or past arbitration is to be interpreted in the light of the custom and practice in the relevant field of arbitration and the party or parties to whom the relevant duty of confidence is owed are taken to have consented to such disclosure on a confidential basis. The common law obligation of confidence owed by a candidate for appointment to a prospective arbitration is to be understood in the same way. It appears from the submissions of ICC, LCIA and CIArb that the practice in English seated arbitrations of making a confidential disclosure of involvement in an arbitration involving a common party without obtaining the express consent of the parties to that arbitration is, unsurprisingly, not confined to Bermuda Form arbitrations. Nonetheless, how far this ruling on consent, which relates to Bermuda Form arbitrations, can be applied by analogy to other arbitrations will depend on their particular characteristics and circumstances and custom and practice in their field. d) The risk of further challenges? For completeness, I also address the suggestion by Chubb that the recognition of a legal duty of disclosure will tend to increase the number of challenges to appointment and to awards and possibly give rise to personal claims against arbitrators. Halliburton, ICC, LCIA and CIArb do not agree and none of the respondents to the courts questions are able to assist the court with empirical evidence on the matter. There is some empirical evidence that, in the years immediately after the IBA Guidelines were adopted in 2004, there was an increase in challenges to arbitrators as a result of disclosures. But three points may be made. First, this increase was not a consequence of making disclosure a legal duty but may have been the result of more extensive disclosure which followed the formulation of good practice. Secondly, that statement of good practice exists and is influential internationally whether or not a jurisdiction has a legal duty of disclosure. Thirdly, the challenges have rarely succeeded. Further, research carried out within the court in relation to jurisdictions which impose a legal duty of disclosure found very little evidence of personal claims against arbitrators. I respectfully question whether there is a basis in English law for a claim for damages relating to disclosure or non disclosure, in the absence of bad faith, where the legal duty is a component of the statutory duties of fairness and impartiality which do not support such claims. In any event, section 29 of the 1996 Act will protect arbitrators against personal claims for non disclosure in most circumstances so long as the arbitrator has not acted in bad faith. The LCIA Arbitration Rules (article 31) and the ICC Arbitration Rules (article 41) contain exclusion provisions and parties, arbitrators and institutions, who have not already done so, can adapt their contracts or rules to confer a wider immunity against personal claims in the light of this ruling. e) What is the content of the duty? I also agree with the Court of Appeals formulation of the duty of disclosure (para 74 above) subject to one qualification, which concerns the words known to the arbitrator. An arbitrator can disclose only what he or she knows and is, as a generality, not required to search for facts or circumstances to disclose. But I do not rule out the possibility of circumstances occurring in which an arbitrator would be under a duty to make reasonable enquiries in order to comply with the duty of disclosure. For example, if a would be arbitrator had a business relationship with a person (A), which, because of a financial interest, would have prevented him from being an arbitrator in a reference in which A was a party, he or she, if offered an appointment in an arbitration in which B was a party, might be under an obligation to make enquiry if he or she had grounds to think that B might a business partner of A. Mr Kimmins, on behalf of LCIA, referred the court to the IBA Guidelines, Part I, General Standard 7(d), and submitted that an arbitrator is under a duty to make reasonable enquiries as to whether there are facts or circumstances which might lead the fair minded and informed observer to conclude that there was a real possibility of bias. It is not necessary in the context of this appeal to express a concluded view on whether this statement of good practice is also an accurate statement of English law, but I do not rule out that it might be. What is meant by the Court of Appeals formulation of the duty, and in particular the words would or might? Counsel hardly touched on this issue. It is not central to the dispute but it must be addressed. It appears to me that if some matter would give rise to justifiable doubts as to an arbitrators impartiality, the disclosure of that matter would not as a general rule remove the difficulty. The correct course for the arbitrator would usually be not to take up or, if the matter arose later, to withdraw from the reference. On the other hand, to require disclosure of some matter which was trivial and could not materially support a conclusion that there was a real possibility of bias, would be to risk causing the parties unnecessary concerns about an arbitrators impartiality and also to encourage vexatious challenges by a party to the arbitrators position. As Lord Mance stated in Helow (above, para 58): [T]o take two opposite extremes, disclosure could not avoid an objection to a judge who in the light of the matter disclosed clearly ought not to hear the case; and non disclosure could not be relevant, if a fair minded and informed observer would not have thought that there was anything even to consider disclosing. An obligation to disclose a matter which might give rise to justifiable doubts arises only where the matter might reasonably give rise to such doubts. There will be matters between the two extremes of which Lord Mance spoke. There will be matters which, if left unexplained, would give rise to justifiable doubts as to an arbitrators impartiality. They must be disclosed and neutralised by explanation. Similarly, there will be matters, which are more than trivial, which an arbitrator ought to recognise could by themselves or in combination with other circumstances (including a failure to disclose those matters) give rise to such justifiable doubts, if later discovered. Commentators have sought to express the requirement in different ways. Redfern and Hunter (above, paras 4.79 4.80) suggest that the arbitrator should disclose all of the facts that could reasonably be considered to be grounds for disqualification and also that there should be immediate disclosure if new circumstances arise that might give cause for any doubt as to the arbitrators impartiality. Merkin and Flannery on the Arbitration Act 1996, 6th ed (2019), pp 286 287, advise that an arbitrator should disclose any fact or circumstance which in his or her mind would or might (once disclosed) give rise to justifiable doubts as to his or her impartiality. The authors draw on the case of Almazeedi (above) and suggest that the purpose of disclosure may often go beyond legitimate concerns about independence and impartiality which would (subject to waiver) require the arbitrator to recuse himself or herself because such disclosure enables the parties to address whether there is a problem and if so how to tackle it. They advise disclosure in cases where the arbitrator might not be sure whether the truth, if disclosed, would give rise to justifiable doubts, but would (or ought to) know that the truth might do so. D Sutton et al, Russell on Arbitration, 24th ed (2015), para 4 131 state that an arbitrator should disclose a prior interest that might raise doubts about his impartiality but go on to suggest that the only legal obligation is to disclose matters which would amount to bias. Like the Court of Appeal, I am not persuaded that the legal obligation is limited as the authors of Russell suggest in their second statement. It has been suggested that the breach of a legal obligation to disclose a matter which might, but on examination after the event did not, give rise to a real possibility of bias would be a legal wrong for which there was no legal sanction. I do not agree for two reasons. First, in a case in which the matter is close to the margin, in the sense that one would readily conclude that there is apparent bias in the absence of further explanation, the non disclosure itself could justify the removal of the arbitrator on the basis of justifiable doubts as to his or her impartiality: paras 117 118 below. Secondly, in cases where the matter is serious but the non disclosure of that matter, on later examination, does not support the conclusion that there is apparent bias, the arbitrator might, depending on the circumstances, face an order to meet some or all of the costs of the unsuccessful challenger or to bear the costs of his or her own defence. The existence of such a duty provides support to the fairness and impartiality of arbitral proceedings under English law by allowing non disclosure to carry greater weight in the basket of factors to be assessed under section 24(1)(a) of the 1996 Act than a mere deviation from best practice. The development of the common law to impose such a duty is consistent with developments in other jurisdictions. In Scotland, there was no express authority but legal commentators on arbitration had long suggested that an arbiter is subject to a duty to disclose to the parties any factor of which he is aware which might provide a basis for a challenge: F Davidson, Arbitration, 1st ed (2000), para 6.20 and the commentaries which he there cites. More recently, the Scottish Parliament has enacted a mandatory rule in the Arbitration (Scotland) Act 2010, which draws on the UNCITRAL Model Law. This rule (Schedule 1, rule 8) imposes a duty on an arbitrator or anyone asked to become an arbitrator to disclose any conflicts of interest. It provides that the individual must without delay make disclosure of: any circumstances known to the individual (or which become known to the individual before the arbitration ends) which might reasonably be considered relevant when considering whether the individual is impartial and independent. Professor Davidson in the second edition of his book (in 2012) (paras 7.29 7.30) observes that this is an objective test and suggests that the factors listed in the Red and Orange Lists of the IBA Guidelines will usually provide useful guidance. Several jurisdictions have adopted the UNCITRAL Model Law which provides in article 12(1): When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties (Emphasis added) The word likely in the UNCITRAL Model Law must be interpreted in the context of the Model Law itself, which appears to suggest that the obligation to disclose arises if the circumstances could reasonably give rise to justifiable doubts. This is because the wording of article 12(1) is in contrast with article 12(2) which provides that an arbitrator may be challenged if circumstances exist that give rise to justifiable doubts (emphasis added). Provisions to substantially the same effect have been adopted in jurisdictions which have adopted the UNCITRAL Model Law, including Germany (section 1036 of Book 10 of the Zivilprozessordnung), Canada (article 12 of Schedule 1 to the Canadian Commercial Arbitration Act, RSC 1985), Belgium (article 1686(1) of the Belgian Judicial Code), Sweden (sections 8 and 9 of the Swedish Arbitration Act 1999) and Austria (section 588 of the Austrian Arbitration Act 2006). In Switzerland, although the rule is not part of a statutory regime, the Swiss Chambers Arbitration Institution has adopted the UNCITRAL Model Laws approach in article 9(2) of its Swiss Rules of International Arbitration. It is consistent with these international comparators for English common law in relation to the obligation of disclosure of an arbitrator to develop as the Court of Appeal has found. f) Summary on disclosure In summary, the arbitrators legal obligation of disclosure imposes an objective test. This differs from the rules of many arbitral institutions which look to the perceptions of the parties to the particular arbitration and ask whether they might have justifiable doubts as to the arbitrators impartiality. The legal obligation can arise when the matters to be disclosed fall short of matters which would cause the informed observer to conclude that there was a real possibility of a lack of impartiality. It is sufficient that the matters are such that they are relevant and material to such an assessment of the arbitrators impartiality and could reasonably lead to such an adverse conclusion. Whether and to what extent an arbitrator may disclose the existence of a related arbitration without obtaining the express consent of the parties to that arbitration depends upon whether the information to be disclosed is within the arbitrators obligation of privacy and confidentiality and, if it is, whether the consent of the relevant party or parties can be inferred from their contract having regard to the customs and practices of arbitration in their field. (iii) Whether a failure to make disclosure can demonstrate a lack of impartiality Is disclosure relevant to apparent bias? Mr Michael Crane QC on behalf of Chubb correctly makes the point that the inequality of knowledge, which Halliburton lists as one of the principal concerns arising from multiple references concerning overlapping subject matter with only one common party, raises a question of the fairness of the arbitral proceedings, which can be dealt with under section 24(1)(d)(i) of the 1996 Act if there is proof of substantial injustice. That is so; but a failure of that arbitrator to disclose the other references could give rise to justifiable doubts as to his or her impartiality. I agree with the dicta of Cockerill J in PAO Tatneft v Ukraine [2019] EWHC 3740 (Ch), para 57 that: the obligation of disclosure extends to matters which may not ultimately prove to be sufficient to establish justifiable doubts as to the arbitrators impartiality. However, a failure of disclosure may then be a factor in the latter exercise. Where an arbitrator has accepted an appointment in such multiple references in circumstances which might reasonably give rise to justifiable doubts as to his or her impartiality, or is aware of other matters which might reasonably give rise to those doubts, a failure in his or her duty to disclose those matters to the party who is not the common party to the references deprives that party of the opportunity to address and perhaps resolve the matters which should have been disclosed. The failure to disclose may demonstrate a lack of regard to the interests of the non common party and may in certain circumstances amount to apparent bias. (iv) The time of the assessment of the need for disclosure The Court of Appeal (para 70) held that, as disclosure was required of circumstances that might lead to a conclusion of apparent bias, the question of what is to be disclosed is to be considered prospectively. A court when later assessing whether there should have been disclosure must have regard to the circumstances prevailing at the time when the arbitrator acquired the requisite knowledge of those circumstances and disregard matters of which the arbitrator could not have known at that time. I agree with that conclusion. A determination as to whether an arbitrator has failed to perform a duty to disclose can only be made by reference to the circumstances at the time the duty arose and during the period in which the duty subsisted. The question whether there should have been disclosure should not be answered retrospectively by reference to matters known to the fair minded and informed observer only at a later date. The duty of disclosure is a continuing duty and circumstances may change before there is disclosure. Those circumstances may aggravate an existing failure to disclose a matter or, while not expunging such a failure, may render any continuing failure a less potent factor in an assessment of justifiable doubts as to impartiality. For example a scenario might be that (i) an arbitrator accepts an appointment in a reference between A and B; (ii) the arbitrator accepts an appointment in an overlapping reference to which A is not a party but B is, without disclosing the appointment to A in circumstances in which the arbitrator should have disclosed it; (iii) the arbitrator makes an interim determination in the first reference which causes A to question his or her impartiality; (iv) the second reference then does not proceed. The failures to disclose at stages (ii) and (iii) would not be negated by the termination of the second reference, but in assessing the significance of the continuing failures to disclose after stage (iv) to the question of justifiable doubts, the court would have regard to the fact that the second arbitration did not proceed. (v) The time of assessment of the possibility of bias What is the time by reference to which the court must assess the question of the possibility of bias? This question is, in my view, of central importance to the outcome of this appeal. As we have seen, section 24(1)(a) empowers the court to remove an arbitrator on the ground that circumstances exist that give rise to justifiable doubts as to his impartiality. The use of the present tense (exist) directs the court to assess the circumstances as they exist at the date of the hearing of the application to remove the arbitrator by asking whether the fair minded and informed observer, having considered the facts then available to him or her, would conclude that there is a possibility that the arbitrator is biased. There is support for this view in the case law concerning the application of the test in other circumstances. In R v Gough [1993] AC 646, Lord Goff of Chieveley stated (p 670E) that the court had to ascertain the relevant circumstances from the available evidence, knowledge of which would not necessarily be available to an observer in court at the relevant time. In AT & T Corpn v Saudi Cable Co [2000] 2 Lloyds Rep 127, the Court of Appeal (Lord Woolf MR, Potter and May LJJ) dealt with an application for the removal of an arbitrator as chairman of an ICC Tribunal on the ground of apparent bias. Lord Woolf in para 42 of his judgment described the courts task in this way: The court considers on all the material which is placed before it whether there is any real danger of unconscious bias on the part of the decision maker. This is the case irrespective of whether it is a judge or an arbitrator who is the subject of the allegation of bias. (Emphasis added) Lord Woolfs formulation of the test pre dated the refinement of Lord Goffs formulation by Lord Hope in Porter v Magill but that refinement is not material to the point for which I cite this passage. In R (Condron) v National Assembly for Wales [2006] EWCA Civ 1573; [2007] LGR 87 the Court of Appeal (Ward, Wall and Richards LJJ) addressed a challenge to a decision to allow a planning application taken by the Planning Decision Committee of the Assembly on the basis of apparent bias arising from a remark made by a member of the committee to an objector on the day before the decision. After the decision, the objectors to the application complained to the Commissioner for Standards who produced a report several months later which stated that he found no evidence of bias in the members consideration of the application. The judge disregarded evidence of the Commissioners assessment of what had occurred at the meeting of the committee, because it would not have been available to the objectors or the hypothetical observer at the time of the decision. Richards LJ, with whom the other Lord Justices agreed, disagreed with the judges approach and stated (para 50): The court must look at all the circumstances as they appear from the material before it, not just at the facts known to the objectors or available to the hypothetical observer at the time of the decision. At para 63 of AT & T Corpn Potter LJ in his concurring judgment described the courts task as embodying the standards of the informed observer viewing the matter at the relevant time, which is of course the time when the matter comes before the court. In the present appeal the Court of Appeal was correct in para 95 of its judgment to apply the test for apparent bias by asking whether at the time of the hearing to remove the circumstances would have led the fair minded and informed observer to conclude that there was in fact a real possibility of bias. I turn then to the two principal issues in this appeal. (vi) The issues Issue 1 a) The first issue is whether and to what extent an arbitrator may accept appointments in multiple references concerning the same or overlapping subject matter with only one common party without thereby giving rise to an appearance of bias. Arbitration involves the conferral of jurisdiction by contract, through the consensus of the parties to the reference. As it is a contract based jurisdiction, the degree of the independence of the arbitrators from the parties and the extent of their prior knowledge of the circumstances of an event giving rise to the arbitration or the market in which the arbitrating parties operate may, subject to the requirements of the 1996 Act, be determined by the agreement of the parties, express or implied. The 1996 Act contains no provision which directly addresses the arbitrators independence and prior knowledge, but it imposes the centrally important obligations of fairness and impartiality. Therefore, an arbitrator would be in breach of the requirements of the 1996 Act if his or her lack of independence compromised the duties of fairness and impartiality. In the absence of a statutory provision which directly addresses the question of overlapping appointments, the fair minded and informed observer will have regard to the terms of the contract or contracts giving rise to the arbitration and the factual matrix in addressing the issue. In considering the factual matrix, the objective observer will take account both of the differing perceptions of the role of the party appointed arbitrator and the fact that in certain subject matter fields of arbitration there are different expectations as to the degree of independence of an arbitrator and as to the benefits to be gained by having an arbitrator who is involved in multiple related arbitrations. The objective observer will appreciate that there are differences between, on the one hand, arbitrations, in which there is an established expectation that a person before accepting an offer of appointment in a reference will disclose earlier relevant appointments to the parties and is expected similarly to disclose subsequent appointments occurring in the course of a reference, and, on the other hand, arbitrations in which, as a result of relevant custom and practice in an industry, those expectations would not normally arise. The objective observer will consider whether in the circumstances of the arbitration in question it would be reasonable to expect the arbitrator not to have the knowledge or connection with the common party which the multiple references would give him or her. It is clear that interrelated arbitrations meeting the description of issue 1 are rarer in some circumstances than in others. Mr Constantine Partasides QC, who appears on behalf of ICC, represents to the court that such interrelated arbitrations are not common in ICC arbitrations and therefore such circumstances may more readily give rise to an appearance of bias. GAFTA and LMAA explain that multiple appointments are common in their fields of operation: see paras 43 and 44 above. There is also evidence from ARIAS (UK) of such practice in reinsurance arbitrations: para 43 above. It appears that it is not uncommon for a number of arbitrations involving claims against different insurers arising out of the same incident to commence at around the same time and for the same arbitrator to be appointed in respect of several or all of those arbitrations: see for example, Jacobs, Masters and Stanley, Liability Insurance in International Arbitration. The Bermuda Form, 2nd ed (2011), para 14.32. It is of note that both Halliburton and Chubb made such appointments in relation to the Deepwater Horizon disaster. It does not appear that this practice is inherently problematic so long as the arbitrator can approach each individual arbitration objectively and with an open mind; it depends on the facts of the individual case: see, in analogous judicial proceedings, Locabail (UK) Ltd (above), para 25 (p 480G H); Stubbs v The Queen [2018] UKPC 30; [2019] AC 868, para 16. Mr Crane also cited many arbitral appeals in which courts or arbitral bodies have rejected challenges to an arbitrators impartiality based on his or her participation in prior or contemporaneous related arbitrations. Different practices in differing fields are recognised in the IBA Guidelines. As the LMAA points out, the IBA Guidelines describe the Orange List as a non exhaustive list of specific situations that, depending on the facts of a given case, may, in the eyes of the parties, give rise to doubts as to the arbitrators impartiality or independence (emphasis added). The IBA Guidelines impose a higher test for the duty to decline an appointment than for the duty of disclosure. The former requires the existence of justifiable doubts (General Standard 2; para 54 above) and the latter merely the possibility of such doubts (General Standard 3; para 72 above). The Court of Appeal in para 53 of its judgment agreed with the judge that the mere fact that an arbitrator accepts appointments in multiple references concerning the same or overlapping subject matter with only one common party does not of itself give rise to an appearance of bias. The court referred to the judgment of Dyson LJ in AMEC Capital Projects Ltd v Whitefriars City Estates Ltd [2004] EWCA Civ 1418; [2005] 1 All ER 723, paras 20 and 21, in support of the view that something more, which was something of substance, was required. I do not interpret the Court of Appeal as saying that the acceptance of multiple appointments can never be sufficient of itself to give rise to the appearance of bias. But if that is what the court meant, I would respectfully disagree, especially because the inequality of knowledge between the common party and the other party or parties has the potential to confer an unfair advantage of which an arbitrator ought to be aware. It must depend on the circumstances of the particular arbitration, including the custom and practice in arbitrations in the relevant field, which should be examined closely. I therefore agree with the submission of LCIA that where an arbitrator accepts appointments in multiple references concerning the same or overlapping subject matter with only one common party, this may, depending on the relevant custom and practice, give rise to an appearance of bias. b) Issue 2 The second issue is whether and to what extent an arbitrator may accept the multiple references described in the first issue without making disclosure to the party who is not the common party. In English law it is not necessary that the facts or circumstances which are to be disclosed would cause the fair minded and informed observer to conclude that there was a real possibility that the arbitrator was biased. It is sufficient that they might reasonably cause the objective observer to reach that conclusion: see paras 108 and 118 above. It follows that the obligation to disclose can arise in circumstances in which the objective observer, informed of the facts at the date when the decision whether to disclose is or should have been made (the disclosure date), might reasonably conclude that there was a real possibility of bias, even if at a later date, with the benefit of information which was not available at the disclosure date, the objective observer would conclude that there was not such a real possibility. The failure of the arbitrator to disclose such facts and circumstances is itself a factor to which the fair minded and informed observer would have regard in reaching a conclusion as to whether there was a real possibility of bias. Whether there needs to be such a disclosure depends on the distinctive customs and practices of the arbitration in question. The Orange List in the IBA Guidelines includes the circumstance of an arbitrator having been appointed as arbitrator on two or more occasions within the past three years by one of the parties or its affiliate (para 3.1.3 of Part II (Practical Application of the General Standards)). However, footnote 5 to para 3.1.3 states: It may be the practice in certain types of arbitration, such as maritime, sports or commodities arbitration, to draw arbitrators from a smaller or specialised pool of individuals. If in such fields it is the custom and practice for parties to frequently appoint the same arbitrator in different cases, no disclosure of this fact is required, where all parties in the arbitration should be familiar with such custom and practice. Para 3.1.5 of that Part also lists as a circumstance which might require disclosure: The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties, or an affiliate of one of the parties. There will be cases where the custom and practice of the type of arbitration have created expectations which would negative the need for disclosure. There may also be cases where the failure to disclose would carry little or no weight as in Helow v Secretary of State for the Home Department (above), para 58 per Lord Mance. But an arbitrator cannot be wholly equated with a judge: see paras 56 68 above. There will therefore be circumstances in which an arbitrator is under a duty to make disclosure when a judge would not. There may be many circumstances in which the combination of multiple references as described in the first issue and a failure by the arbitrator to disclose such references to the party who is not a common party would give rise to the appearance of bias. That would require the arbitrator to extricate himself or herself from one or more of the relevant arbitrations or to face removal by the court. There may also be circumstances in which because of the custom and practice of specialist arbitrators in specific fields, such as maritime, sports and commodities and maybe others, such multiple appointments are a part of the process which is known to and accepted by the participants. In such circumstances no duty of disclosure would arise. But rather than having disputes about the existence or absence of such a duty by proof of a general custom and practice in a particular field of arbitration, there may be merit in putting the matter beyond doubt by express statement in the rules or guidance of the relevant institutions. And, in line with the principle of party autonomy, the parties to an arbitration can contract to limit the arbitrators obligation of disclosure. The answer to the second issue therefore is that, unless the parties to the arbitration otherwise agree, arbitrators have a legal duty to make disclosure of facts and circumstances which would or might reasonably give rise to the appearance of bias. The fact that an arbitrator has accepted appointments in multiple references concerning the same or overlapping subject matter with only one common party is a matter which may have to be disclosed, depending upon the customs and practice in the relevant field. In cases in which disclosure is called for, the acceptance of those appointments and the failure by the arbitrator to disclose the appointments taken in combination might well give rise to the appearance of bias. (vii) Must there be disclosure of multiple appointments in the context of Bermuda Form arbitrations? In my view under English law multiple appointments (as described in the first issue (para 2)) must be disclosed in the context of Bermuda Form arbitrations in the absence of an agreement to the contrary between the parties to whom disclosure would otherwise be made. Unlike in GAFTA and LMAA arbitrations, it has not been shown that there is an established custom or practice in Bermuda Form arbitrations by which parties have accepted that an arbitrator may take on such multiple appointments without disclosure. This is unsurprising as the claimant in such an arbitration may often not be a repeat player while an insurance company is much more likely to be. The need for disclosure can be illustrated by the circumstances of this case which I discuss more fully in the next section. In summary, on appointment as arbitrator in reference 1, Mr Rokison became subject to the statutory duties in section 33 of the 1996 Act, to act fairly and impartially in conducting arbitral proceedings, in decisions on matters of procedure and evidence and in the exercise of all powers conferred on him (para 49 above). Those duties were owed to both Halliburton and Chubb. One of Halliburtons complaints (para 41 above) is that relevant information and the opportunity for communication with the common arbitrator were available to Chubb in reference 2 which were not available to Halliburton. Being unaware of the appointment in reference 2, Halliburton was not able to assess whether and to what extent this involved unfairness and how to respond to that appointment. The appointment in reference 2 had the potential to give rise to unfairness, which Halliburton had no opportunity to address. The failure to give a party to an arbitration that opportunity, Halliburton argues, might amount to apparent bias. I agree. (viii) Application to the facts Before accepting his appointment by the High Court, Mr Rokison disclosed his prior involvement in arbitrations involving Chubb, including those in which he was appointed by Chubb. The High Court appointed him to reference 1 against the wishes of Halliburton but as one of the nominees of Chubb. The courts decision to appoint Mr Rokison, which was not challenged, means that Halliburtons wish to have another person to be the chair of the arbitral tribunal is of little if any relevance to the objective assessment of Halliburtons claim of appearance of bias. When Mr Rokison was offered the appointments by Chubb as party appointed arbitrator on references 2 and 3, he disclosed his appointment in reference 1 to the parties to those arbitrations. Transocean did not object. The appointment in reference 2 was made approximately six months after Flaux J appointed him as the third arbitrator in reference 1 and the appointment in reference 3 was over one year after that court appointment. Other things being equal, the objective observer at the time of each of the later appointments would expect that the substantive hearing in reference 1 would precede those in references 2 and 3. Each of the references arose out of the Deepwater Horizon disaster and concerned the liability of an insurer to indemnify a party involved in the disaster which had settled claims. It is not clear that at the date of his acceptance of appointment in reference 2 in December 2015, Mr Rokison would have known of the degree of overlap which might arise between reference 1 and reference 2. Most of the background circumstances of the disaster would be uncontroversial but it is not clear whether the different circumstances of the two settlements, including the fact that one pre dated and the other post dated the Federal Judgment, would have been apparent. Even if such information was then available, there is no suggestion that, at the date of appointment in reference 2, the preliminary issue which undermined Transoceans claims for indemnity had been identified as a feature that distinguished reference 2 from reference 1. The possibility that the common party to two overlapping references might obtain an advantage over its opponent in one or the other arbitration by having access to information about the common arbitrators responses to the evidence led or the arguments advanced in the arbitration which was the first to be heard can readily be seen as a cause of concern to the other party in the arbitration in which the evidence and legal submissions are heard later. That is why, in an application under section 18 of the 1996 Act, Leggatt J declined to appoint as the third arbitrator in two related arbitrations a person who had been appointed the third arbitrator in a prior overlapping arbitration, holding that there would be a legitimate concern that he would be influenced by arguments and evidence in the earlier arbitration: Guidant LLC v Swiss, In re International SE [2016] EWHC 1201 (Comm); [2016] 1 CLC 767. In the present case, the existence of possibly overlapping arbitrations with only one common party would not necessarily cause the fair minded and informed arbitrator to conclude that there was a real possibility of bias, when assessed at the date when the appointment to reference 2 was made. But if Halliburton had been aware of the appointment in reference 2, it might have had concerns about the fairness of its arbitration because of the inequality of knowledge and opportunities to communicate with the arbitrator set out in para 41 above. Such circumstances might reasonably cause the objective observer considering the matter at that time to conclude that there was a real possibility of bias. The circumstances were both relevant and material to that assessment. I recorded in para 27 above the fact that Halliburton had not formally disclosed their appointment of Professor Park in three arbitrations arising out of the Deepwater Horizon incident and the suggestion that the fact that Professor Park was a party appointed arbitrator rather than a chair or umpire is a significant distinction from Mr Rokisons position. As I have said, that is not a distinction which English law would recognise as a basis for a party appointee avoiding the obligation of disclosure. The disagreement among people involved in international arbitration as to the role of the party appointed arbitrator is a circumstance which points to the disclosure of such multiple nominations; it does not provide a ground for non disclosure. I am persuaded that Mr Rokison was under a legal duty to disclose his appointment in reference 2 to Halliburton because at the time of that appointment the existence of potentially overlapping arbitrations with only one common party was a circumstance which might reasonably give rise to the real possibility of bias. In my view the disclosure in such circumstances ought to have included (i) the identity of the common party who was seeking the appointment of the arbitrator in the second reference (ii) whether the proposed appointment in the second reference by the common party was to be a party appointment or a nomination for appointment by a court or a third party, and (iii) a statement of the fact that the second reference arose out of the same incident. The disclosure of this information would impinge upon the privacy of the second reference to the extent that the identity of the common party and the prospect of its involvement in a related arbitration were disclosed, but an arbitrators duty of privacy and confidentiality would not prevent such disclosure because one can infer consent for such limited disclosure: see paras 78 98 above. A high level statement as to whether similar issues were likely to arise, such as Mr Rokison gave to Transocean when he made a proper disclosure of his prior involvement in arbitrations involving Chubb including in an arbitration concerning the Deepwater Horizon incident (para 98 above), would also involve no breach of the arbitrators duty of privacy and confidentiality. If further information had to be imparted to achieve proper disclosure or to satisfy Halliburton that the appointment in reference 2 was not a problem, Mr Rokison would have had to obtain the express consent of both parties to the second reference to that disclosure. Mr Rokisons failure to disclose his appointment in reference 2, which was a potentially overlapping arbitration with only one common party, was a breach of his legal duty of disclosure. Without the further information which I discuss below, I am of the view that the fair minded and informed observer, if he or she had considered the question at or around the date of his acceptance of appointment in reference 2, may well have concluded that there was a real possibility of bias. But it is not necessary to express a concluded view on this as that is not the correct time to ask the question. By the date of the hearing for removal in January 2017 Mr Rokison had given an explanation of his failure to disclose the appointments in references 2 and 3. Halliburtons lawyers accepted that his explanation of oversight was genuine and they did not challenge his statement that he believed that there was not a material overlap between the references. Chubb also points out that reference 2 followed about six months behind reference 1 and suggests it is more likely that Transocean rather than Halliburton would have cause for concern about one arbitration being a dress rehearsal for the later arbitration. Having regard to the circumstances known to the court at the date of the hearing at first instance, I am not persuaded that the fair minded and informed observer would infer from the oversight that there was a real possibility of unconscious bias on Mr Rokisons part. First, there appears to have been a lack of clarity in English case law as to whether there was a legal duty of disclosure and whether disclosure was needed; that can be seen from the judgment at first instance of the able and experienced commercial judge. Secondly, the time sequence of the three references may explain why Mr Rokison saw the need to disclose reference 1 to Transocean but did not identify the need to tell Halliburton about reference 2. Thirdly, his measured response to Halliburtons robust challenge disclosed that it was likely that references 2 and 3 would be resolved by the preliminary issue and that there would not be any overlap in evidence or legal submissions between them and reference 1. As the arbitral tribunal had held hearings on the preliminary issues in November 2016, Mr Rokison would have been aware of its likely decision when he corresponded with K & L Gates in December 2016 and January 2017 (paras 19 22 above). Indeed, the awards handed down on 1 March 2017 revealed that his discreet prediction was correct. If that had not been the outcome of the preliminary issues, he had also offered to consider resigning from his appointments in references 2 and 3. As a result of Mr Rokisons response, there was no likelihood of Chubb gaining any advantage by reason of the overlapping references. Fourthly, there is no question of Mr Rokison having received any secret financial benefit in this case; if that objection were valid it would mean that every party appointed arbitrator receives a disqualifying benefit. In this regard I agree with the Court of Appeal in para 82 of its judgment and with Popplewell J in para 20 of his judgment. Fifthly, I am satisfied that there is no basis for inferring unconscious bias in the form of subconscious ill will in response to the robustness of the challenge which K & L Gates mounted on behalf of Halliburton. As Popplewell J stated (in para 56 of his judgment), he responded in a courteous, temperate and fair way and there is no evidence that he bore any animus towards Halliburton as a result. Therefore, for reasons which differ in part from the courts below, I am satisfied that Popplewell J and the Court of Appeal were correct to hold that the fair minded and informed observer, looking at the facts and circumstances which would be known to him or her at the date of the hearing in January 2017, would not conclude that there was a real possibility of bias or, in the words of section 24(1)(a) of the 1996 Act, that circumstances existed that gave rise to justifiable doubts about Mr Rokisons impartiality. The appeal therefore fails. Summary of the law The obligation of impartiality is a core principle of arbitration law and in English law the duty of impartiality applies equally to party appointed arbitrators and arbitrators appointed by the agreement of party appointed arbitrators, by an arbitral institution, or by the court. (paras 49 and 63) The assessment of the fair minded and informed observer of whether there is a real possibility of bias is an objective assessment which has regard to the realities of international arbitration which I have discussed in paras 56 68 above and the customs and practices of the relevant field of arbitration. There may be circumstances in which the acceptance of appointments in multiple references concerning the same or overlapping subject matter with only one common party might reasonably cause the objective observer to conclude that there is a real possibility of bias. Whether the objective observer would reach that conclusion will depend on the facts of the particular case and especially upon the custom and practice in the relevant field of arbitration. (paras 127 131) Where, as in the context of a Bermuda Form arbitration, such circumstances might reasonably give rise to a conclusion by the objective observer that there was a real possibility of bias, the arbitrator is under a legal duty to disclose such appointments, unless the parties to the arbitration have agreed otherwise. (paras 76 81, 132 136) That legal duty of disclosure, which is a component of the arbitrators statutory duty to act fairly and impartially, does not override the arbitrators duty of privacy and confidentiality in English law; but, absent a contract restricting or prohibiting disclosure or binding rules which have different effect, the disclosure of information of the nature described at para 146 above may be made without obtaining the express consent of the parties to the relevant arbitration where the needed consent is inferred. Such consent may be inferred from the arbitration agreement itself in the context of the practice in the relevant field. (paras 76 81, 88 104, 146) A failure of an arbitrator to make disclosure in the circumstances described in para 153 above is a factor for the fair minded and informed observer to take into account in assessing whether there is a real possibility of bias. (paras 117 118) The fair minded and informed observer in assessing whether an arbitrator has failed in a duty to make disclosure must have regard to the facts and circumstances as at and from the date when the duty arose. (paras 119 120) The fair minded and informed observer assesses whether there is a real possibility that an arbitrator is biased by reference to the facts and circumstances known at the date of the hearing to remove the arbitrator. (paras 121 123) Conclusion I would dismiss the appeal. LADY ARDEN: The parties and the interveners have provided such a considerable body of submissions and material, containing a wealth of learning, that it is hardly possible for a single judgment, or even more than one, to capture all the points that could be made. I agree with the judgment of Lord Hodge but there are a few further points I wish to make which seem to me to reinforce the overall conclusions which this court has reached, or in paras 164, 171, 185 and 188 below to qualify them. Disclosure: secondary obligation arising from the primary impartiality duty In my consideration of the issues I have found it useful to dissect the particular characteristics of the duty of disclosure. It is not an unconditional duty, or a duty in the usual sense of the word, but a part of a bigger picture. The duty is not the primary duty. The primary duty is to act fairly and impartially as arbitrator (section 33 of the Arbitration Act 1996 (the 1996 Act), set out in para 49 above). An arbitrator who acts with actual or apparent bias does not act impartially. As hereafter explained, to remove any doubt about apparent bias, an arbitrator may wish to disclose matters to the parties. It is from that consequence of the impartiality duty that a duty of disclosure can be said to arise, but it is not an independent, self contained duty. The Court of Appeal described the duty as a legal duty and Lord Hodge has made it clear that it is a legal duty because it is implied (if not express) into the contract between all the parties to an arbitration when an arbitrator is appointed. There is scope for debate as to whether it is a duty at all in the strict sense. The duty only arises if the arbitrator wants to take a further appointment in a different arbitration. The question whether there is then a duty in the strict sense or not is analogous to the debate in the law of fiduciaries as to whether a fiduciary is subject to a duty not to have a conflict of interest or merely under a disability so that the transaction into which he or she enters while he or she has a conflict of interest is liable to be set aside and he or she becomes accountable for any profit which he thereby makes. Lord Hodge and I, as fellow Law Commissioners, drew attention to this debate in the context of company directors (Company Directors: Regulating Conflicts of Interest and Formulating a Statement of Duties (1998) (Law Commission Consultation Paper No 153; Scottish Law Commission Paper No 105, para 11.13)). But Sir Robert Megarry V C in Tito v Waddell [1977] Ch 106, 248 and others regarded this problem as essentially one of classification and indeed the Law Commissions went on to recommend that Parliament should enact a statement of duties. Parliament enacted a statement which includes a duty to avoid conflicts of interest and a duty to disclose interests of which a director is aware in proposed contracts in sections 175 and 177 of the Companies Act 2006. So, I too am content to refer to it as a duty to disclose (with the special characteristics already mentioned). As regards the duty to disclose, it is of some interest that section 177(5) of the Companies Act 2006 provides that a director should be treated as being aware of matters of which he ought reasonably to be aware. While I agree with Lord Hodge (para 107 above) that this court should leave open the question of what enquiries an arbitrator should make about conflict of interests, the formulation in this subsection seems to me to be unexceptionable in principle, and it may be helpful guidance to arbitrators. I would add that the conclusion that as a matter of the law of England and Wales an arbitrator is to be treated as aware of a conflict of interest of which he is not actually aware would on the face of it take English and Wales beyond Scots law, which appears to require actual awareness (see para 112 above). That may confirm the wisdom of Parliament when it enacted the 1996 Act in leaving issues such as these to judicial development of the law rather than codifying them in legislation. By leaving them to judicial development, the common law of England and Wales can keep pace with change. It can take account of developing standards and expectations in international commercial arbitration in particular. The debate to which I have referred may account for any reticence in English arbitration law to referring to a duty to disclose but I have no doubt that the law of England and Wales is rigorous in its approach to arbitrator bias and conflicts of interest. Ensuring impartiality is a key principle of our arbitration law. Indeed, as there is force in the view expressed by Professor McKendrick and others that the courts must be especially mindful of the these issues in relation to arbitration where the proceedings take place in private and subject to strict obligations of confidentiality (Ewan McKendrick, chapter 4: Arbitrations, Multiple References and Apparent Bias: A Case Study of Halliburton Co v Chubb Bermuda Insurance Ltd (2018), in Axel Calissendorff and Patrik Schldstrom (eds), Stockholm Arbitration Yearbook 2019, Stockholm Arbitration Yearbook Series, Volume 1 (Kluwer Law International; Kluwer Law International (2019), pp 55 68, see further Paul Stanley QC, Haliburton v Chubb, 9 May 2018 at pp 4 6 and see Julia Dias QC Resignation in the Face of Confidentiality? (2020) TDM 2). I would urge caution in relation to the conclusion of the Court of Appeal (judgment para 77) that the mere acceptance of a multiple appointment in the sense described above did not give rise to an objective appearance of apparent bias. The Court of Appeal considered that, although there was a risk that an arbitrator might acquire inside information in the new arbitration, something more, which had to be something of substance, was required to establish apparent bias. In their judgment, an arbitrator could be trusted to decide a case solely on the evidence or other material before him in the reference in question (judgment, paras 51, 86). In my judgment, unless the arbitration is one in which there is an accepted practice of dispensing with any need to obtain parties consent to further appointments, an arbitrator should proceed on the basis that a proposal to take on a further appointment involving a common party and overlapping subject matter (in that it arises out of the same event) is likely to require disclosure of a potential conflict of interest. The fact that an arbitrator is to be trusted to decide the case on the evidence is not a complete answer to the objections based on inequality of arms and material asymmetry of information that have been raised by Halliburton (see paras 41 and 142 above). Moreover, as Paul Stanley QC points out at p 18 of the article already cited, this trust may not translate easily for the many parties to arbitrations who are familiar with different legal systems. The fact that section 24 of the 1996 Act (set out in para 50 above) requires the question of removal to be assessed at the date of the hearing (by when the materiality of the non disclosure may have changed) is to be attributed to the legislatures desire to hold the balance between the parties and to ensure that removal with all its consequences occurs only where the non disclosure has been material. It is understandable that the legislator would not wish section 24 to give rise to satellite litigation to upset awards that had been duly made. The balance struck in section 24 may also help to mitigate the risk of any shortage of experienced arbitrators of the parties choice due to difficulties in disclosing proposed appointments, but in fact there is no evidence that there is such a shortage. The balancing exercise is to be performed with commercial realities in mind, including the fact that parties who use arbitration must expect arbitrators to take further appointments to acquire the experience needed. On the other hand, those further appointments must be consistent with the arbitrators obligations in current arbitrations. Like Lord Hodge, I also attach considerable importance to the principles set out in section 1 of the 1996 Act (set out at para 47 above). It is unusual for Parliament to set out principles in this way. They are expressed to be foundational principles (The provisions of this Part of the Act are founded on the following principles ). (The provisions of the 1996 Act other than Part I contain a limited number of provisions, for example for the protection of consumers and enforcement, to which it would be inappropriate to apply the section 1 principles.) The section 1 principles must, therefore, guide the development of arbitration law. The second and third principles reinforce party autonomy in arbitration, which is an important, though naturally not unlimited, principle. Disclosure: rooted in both the contract of appointment and section 33 I agree with Lord Hodge in basing the duty of disclosure in both the contract of appointment and section 33 of the 1996 Act. In my judgment, while section 33 must inform the terms of appointment of the arbitrator, this duty is also an implied term of his appointment (if indeed it is not express). An arbitrator on accepting appointment comes under a duty to all the parties to the arbitration to observe this duty throughout his or her appointment. In addition, in my judgment, in the possibly unlikely circumstance that he or she has not been asked for some express assurance prior to being appointed, it is to be implied into the appointment of an arbitrator that the arbitrator has no conflict of duty at the date of his appointment which either prevents him from acting at all, or renders him liable to be removed, in the latter case unless the parties have agreed to waive this conflict. Waiver requires properly informed consent, and thus disclosure of the conflict of interest. The contract of appointment gives rise to a contract with all the parties to the arbitration. By rooting the duty in both section 33 and the contract of appointment, there is a clear legal basis for Lord Hodges conclusion, with which I also agree, that the parties can agree to waive any objection to a conflict of interest. In theory at least they can also lay down the scope for the arbitrator to accept further arbitrations and the procedure which is to apply if he or she wishes to do so. The contract based approach also overcomes the problem, which the parties drew to our attention, that section 33 in terms applies only to the tribunal and not a proposing arbitrator. The term will thus apply to a person who accepts appointment in respect of interests that he or she acquired before appointment as well as to those he or she acquires later. I need not address the case of a person who is offered an appointment but does not subsequently take it up for whatever reason because the issues in this appeal are not concerned with that situation. There is a concern that the duty of disclosure carries no sanction if an application is made to the court about a non disclosure by the arbitrator and fails (see para 111 above). I think this misses the point. It would still be a breach of the terms of appointment with such consequences, if any, as the law of contract prescribes. In addition, a person may commit a breach of contract but incur no liability as a result, and the situation postulated falls into that category. Disclosure: not available with incompatible conflicts of interest I emphasise a point which Lord Hodge makes (see para 108 above) that disclosure is only an option if the conflict of interest is not one which would prevent the arbitrator from discharging his or her duty of impartiality in the current arbitration and therefore from acting altogether. Clearly, having accepted the first arbitration, he or she cannot then go on to accept a further arbitration in these circumstances. We are concerned with a situation in which he or she wishes to accept a further appointment but, as a matter of good practice and caution, wishes to place the possibility before the parties in case they considered that it created a conflict of interest which they were not prepared to waive (Lord Hodge makes a similar point at para 79 above). By parties, I mean the parties to the current arbitration and the parties to the proposed arbitration. Disclosure where more than one form of arbitration involved As a corollary, I would point out that the arbitrations that give rise to the potential conflict may be of different kinds. The current arbitration may be a Bermuda Form arbitration, but the second may be an ad hoc arbitration of a different kind. Differing from Lord Hodge, I find it difficult, therefore, to limit what is said in this case to Bermuda Form arbitrations (see, for example, para 104 above), as opposed to other ad hoc arbitrations or arbitrations held under institutional rules which make no relevant provision. Arbitrations under institutional rules, such as the rules of the LCIA, may involve their own rules as to disclosure of interests making it unnecessary to consider the position under the general law, and so for convenience and without underestimating their important role in international commercial arbitration I leave them on one side at this point. Disclosure of multiple appointments Like Lord Hodge I am considering only conflicts of interest which arise because an arbitrator is proposed to be appointed to a further arbitration in which one of the parties in the current arbitration is also a party and which arises out of the same event with the likelihood that the issues will be the same or similar (see, for example, para 61 above). Such an appointment is likely to give rise to a potential inequality of arms and material asymmetry of information. In principle the parties to both the current and proposed arbitration should be given a chance to object to the arbitrator accepting the new appointment. And if there is more than one current arbitration in which the conflict arises, there must if there is to be disclosure be disclosure to the parties in those arbitrations too. Confidentiality an important implied term There is an implied term as to confidentiality in an arbitration agreement which binds an arbitrator: see Ali Shipping Corpn v Shipyard Trogir [1999] 1 WLR 314 and cf Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184; [2008] Bus LR 1361, cited by Lord Hodge in para 83 above. Confidentiality is of great importance to the parties since it enables them to resolve their dispute without the glare of potentially commercially damaging publicity, which makes arbitration an attractive process of dispute resolution to commercial parties (see paras 57 and 83 above). The parties may even bolster the obligations to keep information confidential in the terms of the orders which they ask the arbitrators to make and in the arbitration agreement itself. Institutional rules applying to the arbitration may also make further provision as to the responsibilities of the parties and arbitrators in arbitrations governed by such rules. The Departmental Advisory Committees report (see para 57 above) emphasised the importance of confidentiality, and, to bring matters up to date, it is also emphasised in the submissions before us. Thus, for instance, the LMAA states: The LMAA believes that users of ad hoc maritime arbitration particularly value confidentiality. Any new general rule of English law requiring disclosure of confidential information against parties wishes runs a serious risk of undermining the attractiveness of London as the preeminent seat for maritime arbitration. (para 22) The implied term as to confidentiality is independent of the implied term that the arbitrator should comply with his impartiality duty. It is truly a self standing term so much so that the parties submissions at the hearing of this appeal did not include submissions as to the effect of disclosure on confidentiality obligations. Those submissions only came later when the parties and interveners helpfully provided further written submissions at the courts request. Not all information about an arbitration is confidential. Some information may, for instance, already be in the public domain. The principle of confidentiality was not codified in the 1996 Act (see para 85 above). This was because it was too difficult to reach a statutory formulation in the light of the myriad exceptions and the qualifications that would have to follow: see Department of Economics, Policy and Development of the City of Moscow v Bankers Trust Co [2004] EWCA Civ 314; [2005] QB 207, para 3. In those circumstances, the Departmental Advisory Committee concluded that the courts should continue to be left to work out the implications on a pragmatic case by case basis. The Court of Appeal considered that the disclosure which the arbitrator had to make had to be: regarded as being an exception to that duty, a duty which is recognised not to be absolute. (para 91) It is not clear whether the Court of Appeal were referring here to an existing exception or were creating a new exception. The current exceptions to confidentiality are most conveniently set out in the judgment of Lawrence Collins LJ, as he then was, with whom Carnwath and Thomas LJJ (as they then were) agreed in the Michael Wilson & Partners Ltd case. Lord Hodge sets out the relevant passage at para 85 of his judgment and so I need not set it out again. I am only concerned with the question of confidentiality of the high level disclosure described by Lord Hodge at para 146 above. That disclosure does not in my judgment fall within any of the existing exceptions to confidentiality listed by Lawrence Collins LJ. The disclosure of information arises to a material extent from the voluntary decision of the arbitrator to pursue a further appointment (see para 160 above), and, as a result of that, I do not consider that such disclosure can fall within the protection of legitimate interests. The LCIA suggests in parenthesis that the exceptions available to an arbitrating party extend by logical extension to the arbitrator but that would appear to be on the basis of the legitimate interests exception. There is no consent, no court order, and there is no public interest mandating disclosure because disclosure is driven by the arbitrators wish to take the further appointment. Moreover, neither the Court of Appeal nor the judge found that there was any custom as to what might be disclosed by an arbitrator or proposing arbitrator without the parties consent (as to what must be proved to show a custom, see generally Baker v Black Sea & Baltic General Insurance Co Ltd [1998] 1 WLR 974). So far as a practice which falls short of a custom is concerned, this would necessarily have to be incorporated into the terms on which the arbitrator agrees to act expressly or by implication. I, therefore, leave aside GAFTA and LMAA arbitrations as in those arbitrations there is said to be an accepted practice under which arbitrators may accept multiple appointments without the consent of the parties to existing arbitrations. Further, where the information is disclosed by a party on his behalf, then in the usual case that party may be taken to have consented to the disclosure of the information and to waive any confidentiality obligation owed to itself. That party cannot waive confidentiality obligations owed to the other parties. So, in my judgment, there is in general no need, as the Court of Appeal considered, to search for, or create, an exception to confidentiality for the information in the numbered list in para 146 above. The basic reason is that the other parties, who have not been asked to consent to the disclosure, have not been named. This conclusion is supported by commentaries cited by the parties (see, for example, Derains & Schwartz, A Guide to the ICC Rules of Arbitration, 2nd ed (2005), pp 135 136 n70 (Derains/Schwartz) It is generally possible, however, for arbitrators to disclose relationships relating to other arbitration proceedings in such a manner as to avoid infringing any obligations of confidentiality that may be owed to the parties in respect of the same.) Jeffrey Waincymer, Part II: The Process of an Arbitration, chapter 5: Selection, Challenge and Change of Arbitrators in Procedure and Evidence in International Arbitration at 313 (In most such cases a careful description of the nature of the previous event without identification of the parties ought to be enough to meet both obligations [disclosure and confidentiality] concurrently.). Mauro Rubino Sammartano, chapter 11 The Arbitrator in International Arbitration Law and Practice 3rd ed (2014), p 508 (citing in support Prodim, Court of Appeal, Reims, January 31, 2012, Lettre dinfo, Versailles, July 2012). In the first sentence of the preceding paragraph, I use the words in general. My reason is that there may be exceptional cases where the other parties (that is the parties other than the proposing appointor) can be identified even without being named, and in those circumstances their consent will be required to the making even of the high level disclosure. But it is not suggested that this qualification is relevant in this case. As to the high level disclosure, para 146 addresses the matters that might be included in disclosure to the parties to the first arbitration about a proposed appointment in a further arbitration without breaching confidentiality obligations owed to the parties in the second arbitration. It may be adapted for the converse situation. Paragraph 146 does not state that disclosure of the matters itemised in that paragraph will necessarily of itself be enough to discharge the duty of disclosure, only that such matters may be included without breaching a confidentiality obligation, or as I would say, as I have explained, may in general be included without breaching such obligation. On this basis, therefore, there is no question of the other parties confidentiality being eroded by the decision on this appeal. As Lord Hodge explains, if more information is required (or, I would add, at least if it is reasonably required), it cannot be disclosed without the relevant parties consent. If consent is not forthcoming, the arbitrator will have to decline the proposed appointment (see, for example, Derains/Schwartz at the passage cited). As Lord Hodge holds, the extent of the required disclosure will depend on the facts (see para 129 above, citing the IBA Guidelines). The parties to whom the high level disclosure is made may well ask for further information to enable them to assess whether they should agree to the arbitrator taking the further appointment. Julia Dias QC gives some assistance in her article cited above on the range of disclosure by explaining what she considers would be needed: whether there is in fact a real possibility of bias depends on matters such as the identity of the parties to the two arbitrations, the nature of the subject matter, the degree of overlap between the issues and the type of evidence adduced. The problem is that none of this can be explored without disclosing in the first arbitration matters relating to the second arbitration which in principle should be confidential to that arbitration. Indeed, it is impossible to see how the confidentiality of the second arbitration would not be compromised by the need to investigate whether there is an overlap between the two references in relation to subject matter, issues etc. (p 12) Conclusion In conclusion, with and subject to these further points I agree with the judgment of Lord Hodge. |
FA is an Iraqi national who was born on 21 October 1991. He arrived in the United Kingdom on 21 August 2007 when he was 15 years old. He was not accompanied. He applied for asylum. On 9 October 2007 the Secretary of State refused the application. The evidence that FA had supplied in support of his claim was deemed not to be credible. Having refused FA asylum, the Secretary of State then considered whether he qualified for humanitarian protection and/or discretionary leave to remain in the United Kingdom. Humanitarian protection in this context is the domestic means of providing the subsidiary protection which Council Directive 2004/83/EC of 29 April 2004 (the Qualification Directive) requires to be given to certain third country nationals or stateless persons. It was decided that FA did not qualify for humanitarian protection. He was granted discretionary leave to remain, however, limited in time until he was seventeen years and six months old. As he was entitled to under section 83(2) of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act), FA appealed to the Asylum and Immigration Tribunal (AIT) against the refusal of his claim for asylum. Included in the grounds of appeal, however, were claims that FAs rights under articles 2, 3 and 5 of the European Convention on Human Rights and Fundamental Freedoms would be contravened if he was removed from the United Kingdom to Iraq. It was also averred that he might suffer serious harm as defined in the Qualification Directive. FAs appeal was dismissed by Immigration Judge (IJ) Jhirad. The dismissal was said to be on asylum grounds and humanitarian protection grounds. FA applied to AIT for a reconsideration of his appeal. Senior Immigration Judge (SIJ) Mather ordered that there should not be reconsideration of his appeal on asylum grounds but that the issue of whether there would be a serious and individual threat to his life by reason of indiscriminate violence during internal armed conflict should be reconsidered. SIJ Mather felt that IJ Jhirad may not have considered whether there was a risk of serious harm under the Qualification Directive and para 339 of the Immigration Rules which incorporates into domestic law the subsidiary protection provisions of the Qualification Directive. When the reconsideration application came on for hearing, AIT (IJs Lobo and Cohen) held that the original appeal before IJ Jhirad should have been confined to the refusal of the asylum claim. In their view, no appeal was available to FA in relation to human rights claims or humanitarian protection grounds under section 83 of the 2002 Act. That section provided for an appeal against the refusal of the application for asylum only. On that account, AIT substituted IJ Jhirads decision with a dismissal of the original appeal on asylum grounds only. The focus of FAs appeal against the decision of AIT to the Court of Appeal was initially on the construction of sections 82 to 84 of the 2002 Act and the question whether the decision of AIT deprived him of an effective judicial remedy against an adverse act of the administration, contrary to general principles of European Union law. Shortly before the hearing of the appeal, a supplementary written submission was presented which developed the argument that the principle of equivalence (a general principle of EU law) required that claims based on EU law must not be subject to rules which are less favourable than those based on claims which have national law as their source. It is this argument that principally preoccupied the Court of Appeal and it held centre stage in the appeal before this court. Section 82 lists a number of immigration decisions from which, by virtue of section 82 (1), an appeal will lie. Among these are a refusal to vary a persons leave to enter or remain (section 82 (2) (d)) and a decision that a person be removed from the United Kingdom pursuant to various directions (section 82 (2) (g)). FA could not have recourse to these because there had not been a relevant refusal to vary the leave to remain that he had been given and there had not been, at the time that the matter came before AIT (or for that matter the Court of Appeal), a decision to remove him. None of the other decisions listed in section 82 (2) was relevant to his situation. (As it happens on 11 January 2011, the Secretary of State rejected FA's application for an extension of his discretionary leave so that he now has a right of appeal under section 82(1) of the 2002 Act.) Section 83 of the Act gives a specific right of appeal against a refusal of asylum to a person who, like FA, has been granted leave to enter or remain for a period exceeding one year. It was this right of appeal that FA had exercised in appealing to AIT. Before the Court of Appeal Mr Raza Husain QC, for FA, had argued that, by resort to normal canons of construction, section 83 could and should be interpreted as including a right of appeal against a humanitarian protection decision, particularly in light of the definition of asylum claim in section 113 of the 2002 Act. That argument was rejected by the Court of Appeal and it has not been renewed before this court. The Court of Appeal held that, although a section 83 appeal was a status appeal (i.e. one that depended on the status of the person making the appeal as opposed to the species of decision appealed against) it was nevertheless restricted to a particular class of persons, namely those who have been given leave to remain for at least twelve months. Moreover, by virtue of section 84 (3) of the 2002 Act, the only grounds on which the appeal could be taken were that removal of the person appealing would breach the United Kingdoms obligation under the Refugee Convention. These considerations meant that section 83 could not be construed on any conventional basis of interpretation as extending to an appeal against a humanitarian protection decision. Mr Husains alternative submission was accepted, however. In broad terms it was to the effect that the principle of equivalence required that a right of appeal against the humanitarian protection decision be recognised since the lack of an appeal would mean that this claim, based as it was on EU law, was being subjected to rules which were less favourable than those which applied to the asylum claim, such a claim being based on national law. The Court of Appeal held that the definition section (113 (1) of the 2002 Act,) which provides that asylum claim means a claim made by a person that to remove him from or require him to leave the United Kingdom would breach the United Kingdom's obligations under the Refugee Convention would have to have the words and/or the Qualification Directive 2004/83/EC added to it. A similar addition to section 84 (3) was required so as to enlarge the grounds on which the appeal might be brought. The Secretary of State appeals against this decision on the ground that there is no purely domestic measure against which a comparison of the rules applicable to claims for humanitarian protection can be made. It is argued that such claims have far closer similarities to those that are made under the Human Rights Act 1998. The Secretary of State further contends that the mooted comparators (the asylum claim and the humanitarian protection claims) both have their origin in Chapter VII of the Qualification Directive. Both therefore are rooted in EU law. They do not spring from different sources and since that is the essential requirement for the activation of the equivalence principle, it cannot be prayed in aid in this instance. The procedural autonomy of member states In the absence of EU law stipulating a particular form of remedy to ensure protection of EU rights, it is for member states to decide which courts or tribunals will have jurisdiction to give effect to those rights and to prescribe the procedural conditions necessary for their enforcement article 19(1) of the Treaty on (TEU), Case 33/76 Rewe Zentralfinanz eG v European Union Landwirtschaftskammer fr das Saarland (Rewe I) [1976] ECR 1989, Case 45/76 Comet BV v Produktschap voor Siergewassen [1976] ECR 2043 and Preston v Wolverhampton Healthcare NHS Trust (No 2) [2001] UKHL 5, [2001] 2 AC 455. This is known as the procedural autonomy of member states. Procedural autonomy is subject to two qualifications. National rules may not render the exercise of rights conferred by EU law virtually impossible to achieve or excessively difficult to access. This is known as the principle of effectiveness. Nor must national rules be less favourable than those governing comparable domestic actions. This is the principle of equivalence. The equivalence principle It is no longer suggested in this appeal that FA does not have effective access to his humanitarian protection or subsidiary rights. The effectiveness principle is no longer in issue. The critical question now is whether the equivalence principle requires, as the Court of Appeal decided it did, that a right of appeal must be available against the decision to dismiss FAs application for humanitarian protection. This, in turn, depends on whether FA can demonstrate that there is a comparable domestic right which is subject to more favourable rules than is his humanitarian protection right. In the particular circumstances of this case, this means that he must show that his asylum claim is a legitimate comparator with his claim for humanitarian protection. If he is able to demonstrate this, it is clear that the humanitarian protection claim is subject to less favourable rules than the asylum claim. The latter brings with it a status appeal. The humanitarian protection claim does not. FA must do more than show that there is a difference between the two claims in terms of the availability of a right of appeal, of course. He must also establish that the proper basis of comparison exists. It is on this particular point that crucial issue is joined between the parties. The issue has a number of aspects. Must the claim to asylum, in order to qualify as an effective comparator, be based exclusively on domestic or national law? Or is it sufficient that it partake partly of a national law and partly of EU law? If it is a measure that is given effect in domestic law in the fulfilment of a member states obligations under a treaty, does this affect its status as a potential comparator? How similar must the rights under domestic and Community law be? If there is a more marked similarity between the Community right and a human rights claim, how does this affect the application of the principle of equivalence? Must the comparator with the Community law claim be a purely domestic measure? The nature of the required comparison exercise was described in the judgment of the Court of Justice of the European Union in Rewe I in the following passage, [1976] ECR 1989, para 5: Applying the principle of cooperation laid down in Article 5 of the Treaty, it is the national courts which are entrusted with ensuring the legal protection which citizens derive from the direct effect of the provisions of Community law. Accordingly, in the absence of Community rules on this subject, it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which citizens have from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature. This formulation recognises the primacy of the role of the domestic legal system in providing the necessary protection for Community rights, with what has become known as the principle of equivalence being a qualification on that autonomy. Its purpose is to ensure that there is no dilution of the adequacy of the protection of the relevant rights and in that sense it is complementary to the principle of effectiveness. The principle of equivalence received somewhat fuller consideration by the Court of Justice in the case of Case C 326/96 Levez v T. H. Jennings (Harlow Pools) Ltd [1998] ECR I 7835. One of the questions referred to the Court of Justice by the Employment Appeals Tribunal in that case sought guidance on how the expression similar domestic actions should be interpreted in the field of equal pay legislation. Advocate General Lger described the aim of the principle of equivalence in para 26 of his opinion: The aim of this principle is that domestic law remedies should safeguard Community law without discrimination that is to say, exercise of a Community right before the national courts must not be subject to conditions which are more strict (for example, in terms of limitation periods, conditions for recovering undue payment, rules of evidence) than those governing the exercise of similar rights derived wholly from domestic law. In the present appeal, the Secretary of State draws particular attention to the phrase similar rights derived wholly from domestic law. It is suggested that this conveys clearly the notion that the proposed comparable right must originate exclusively from a domestic source. Similar expressions can be found in earlier jurisprudence of the Court of Justice. In Joined Cases 205 to 215/82 Deutsche Milchkontor GmbH v Federal Republic of Germany [1983] ECR 2633, para 19 the court said that national legislation must be applied in a manner which is not discriminatory compared to procedures for deciding similar but purely national disputes. (emphasis supplied). The expression purely internal in relation to the national measure was also used in the later case of Case C 34/02 Pasquini v Istituto Nazionale della Previdenza Sociale, judgment of 19 June 2003. The respondent to the present appeal has drawn attention, however, to the fact that neither purely domestic nor purely internal are used in the latest decisions of the Court of Justice in cases involving the principle of equivalence. A large number of cases have been cited by the respondent to support this proposition. They include Joined Cases C 222/05 to C 225/05 Van der Weerd v Minister van Landbouw, Natuur en Voedselkwaliteit [2007] ECR I 4233; Case C 268/06 Impact v Minister for Agriculture and Food [2009] All ER (EC) 306; Case C 445/06 Danske Slagterier v Bundesrepublik Deutschland, 24 March 2009; Case C 118/08, Transportes Urbanos y Services Generales SAL v Adminisracin del Estado, 26 January 2010; Case C 542/08, Barth v Bundesministerium fr Wissenschaft und Forschung, 15 April 2010; Joined Cases C 145/08 and C 149/08, Club Hotel Loutraki AE v Ethniko Simvoulio Radiotileorasis, 6 May 2010; Case C 246/09 Bulicke v Deutsche Bro Service GmbH, 8 July 2010; and Case C 429/09 Gnter Fu v Stadt Halle, 25 November 2010; Case C 568/08 Combinatie Spijker Infrabouw/De Jonge Konstruktie, v Provincie Drenthe, 9 December 2010. It is noteworthy (and, in the context of this particular debate, significant) that in none of these decisions of the Court of Justice has the expression purely domestic been expressly disavowed. Notwithstanding this, the respondent confidently asserts that the Court of Justice has not definitively pronounced on the question whether the national measure that is proffered as a comparator must be purely domestic. Moreover, it is claimed that it would be unwieldy and impractical to require the national court, as a condition of applying the principle of equivalence, to inquire in every case whether a particular procedure was designed exclusively for the protection of national rights. It is also argued that an insistence on the compared right being uniquely domestic would give rise to anomalies in that a right based on national law that would qualify as a comparator might lose that status if subsumed under an EU measure. This issue has not been expressly addressed in any of the decisions of the Court of Justice to which this court has been referred. One can acknowledge the strength of the arguments on either side. On the one hand, there is a consistent line of authority (which has not been renounced) to the effect that the domestic measure must be precisely what the term suggests a purely domestic provision. If comparison with another Community law provision was possible, much of the underlying purpose of the principle, it is argued, would be diverted. After all, the essential reason for the development of the principle was that a Community law right should not suffer disadvantageous treatment vis vis national rights which lie outside the field of Community law. On the other hand, the aim of the principle is the elimination of discrimination and it would be, it is suggested, anomalous if comparison with another right was precluded because it could be branded as deriving partly form a Community law source. Viewed as a complement to the principle of effectiveness, the principle of equivalence should not be thwarted by the imposition of what might arguably be said to be the artificial or technical requirement of a comparison between a Community law right and one which is distinctively and exclusively domestic. What is required in order that the compared measures may be regarded as sufficiently similar? On the separate question of what is required in terms of similarity between the Community law right and the domestic law right, at para 43 of its judgment in Levez the Court of Justice said: In order to determine whether the principle of equivalence has been complied with in the present case, the national court which alone has direct knowledge of the procedural rules governing actions in the field of employment law must consider both the purpose and the essential characteristics of allegedly similar domestic actions (see Palmisani, paragraphs 34 to 38) [Palmisani v Istituto Nazionale della Previdenza Sociale (Case C 261/95) [1997] ECR I 4025] The court went on to point out (in para 44) that it was for the national court to examine the part played by the (avowedly similar) domestic measure in the procedure as a whole, and to take account of any special features of that procedure. The theme of the need for close similarity between the Community law right and the domestic law right was taken up again in Case C 231/96 Edilizia Industriale Siderurgica Srl (Edis) v Ministero delle Finanze [1998] ECR I 4951. At para 36 of its judgment the Court of Justice said: Observance of the principle of equivalence implies, for its part, that the procedural rule at issue applies without distinction to actions alleging infringements of Community law and to those alleging infringements of national law, with respect to the same kind of charges or dues (see, to that effect, Joined Cases 66/79, 127/79 and 128/79 Amministrazione delle Finanze dello Stato v Salumi [1980] ECR 1237, para 21). That principle cannot, however, be interpreted as obliging a Member State to extend its most favourable rules governing recovery under national law to all actions for repayment of charges or dues levied in breach of Community law. (emphasis supplied) On the basis of these statements, the Secretary of State argues that simply because there is some similarity between the rights claimed, or because the rights are of the same generic type, it does not follow that the principle of equivalence comes into play. The juristic structure of the two rights under comparison must be the same. In advancing this argument the Secretary of State relies on two domestic authorities. The first of these is Matra Communications SAS v Home Office [1999] 1 WLR 1646 where at 1658H Buxton LJ said: the principle of equivalence really does mean what it says. The domestic court, in applying the principle, must look not merely for a domestic action that is similar to the claim asserting Community rights, but for one that is in juristic structure very close to the Community claim. It does that, in the words of the Court of Justice in Levez vs T H. Jennings (Harlow Pools) Ltd. (Case C 326/96 ) [1999] I.C.R. 521, 545, para. 43, by considering the purpose and the essential characteristics, of allegedly similar domestic actions. The second domestic case on which the Secretary of State relies is Preston v Wolverhampton Healthcare NHS Trust (No 2)[2001] UKHL 5, [2001] 2 AC 455. In that case the majority expressed doubts about the view favoured by Lord Slynn of Hadley in his speech that a broad view of the exercise of comparing the domestic right with the Community law claim was permissible. Lord Slynn had accepted that one should be careful not to accept superficial similarity as being sufficient. He also accepted that it was not enough to say that both sets of claims arose (as they did in that case) in the field of employment law. Nevertheless, he considered that claims under the Equal Pay Act 1970 (which by virtue of article 119 of the Treaty and Council Directive (75/117/EEC) were Community law claims) bore a sufficient resemblance to claims for breach of contract against an employer so as to permit the possible application of the principle of equivalence. Lord Clyde, with whom Lord Goff of Chieveley and Lord Nolan agreed, thought that this conclusion was difficult to sustain. The appellants claim under Community law was concerned not with arrears of pay or other remuneration but with retroactive membership for the applicants of an occupational pension scheme (para 43). In effect this required something to be added to the contract, rather than being a claim for breach of contract. Lord Clyde thought that it was extremely difficult to conclude that as between these two actions one would be comparing like with like. The Secretary of State relies on the Matra and Preston decisions as authority for what is described as a cautious approach to the question of the recognition of one form of action as a true comparator of a Community law claim. It is argued that where there is a far more readily comparable action to the Community law claim such as a human rights claim, the allegedly domestic law refugee claim had even less to commend it as a proper comparator. There are, says the Secretary of State, significant structural and substantive reasons why section 83 is not sufficiently close in its juristic structure to serve as an appropriate comparator. The purpose and the essential characteristics of the alleged domestic action are quite different. The Preamble to the Qualification Directive ([14]) and the 1951 Refugee Convention make clear that the recognition of refugee status is a declaratory act of a pre existing right and, as a result, there is no discretion on the part of the decision maker in the Member State. By contrast, subsidiary protection status is a status which has been created by the Qualification Directive and only arises upon a decision to grant such status. Furthermore, subsidiary protection is only intended to be complementary and additional to the refugee protection enshrined in the Geneva Convention (preamble [24]) and is only available to those who do not qualify as a refugee. As a result, the Secretary of State argues, the two are mutually exclusive. The respondent disputes the claim that there is any significant or relevant difference between the claim to refugee status and the claim for subsidiary protection. It is argued that recognition as a person eligible for subsidiary protection carries with it an entitlement to subsidiary protection status akin to the refugee status that an applicant for asylum acquires. Moreover, the grant of that status carries with it certain benefits while the human rights claim (which the Secretary of State suggests is a more suitable comparator) does no more than prevent removal. At a fundamental level, both refugee status and subsidiary protection exist to protect individuals from return to serious harm. As to the effect of Matra and Preston the respondent counters the Secretary of States claims by reference to more recent authority, particularly Byrne v Motor Insurers Bureau [2009] QB 66 and Revenue and Customs Comrs v Stringer & Ors [2009] ICR 985. In Byrne, the respondent claims, the Court of Appeal rejected the narrow approach advanced by the defendant and found a sufficient similarity between a claim for compensation against the Motor Insurers Bureau and an action in tort. Mr Husain relied particularly on an observation by Carnwath LJ in para 27 of his judgment alluding to Buxton LJs statement in Matra that there should be a close relationship between the juristic structures of the Community law right and the domestic measure. Carnwath LJ said that he did not find it helpful to argue in the present case that the claim against the MIB has a different juristic structure to a claim in tort. I do not construe this as a rejection of the juristic structure approach to the question, however. Carnwath LJs comment must be seen in its context. In Byrne the court was dealing with a claim that the scheme for compensation for victims of uninsured drivers should not be any less favourable than the system whereby victims of drivers who were insured could claim compensation. It was also, incidentally, confronted by a decision of the Court of Justice to the effect that the protection provided by the national scheme must be equivalent to and as effective as the protection available under the national legal system to victims of insured drivers Evans v Secretary of State for the Environment, Transport and the Regions (Case C 63/01) [2005] All ER (EC) 763; [2004] RTR 534; [2003] ECR I 14447, ECJ. Against that background a technical argument that the juristic structure of a claim in tort differed from that of a claim whose purpose was to require the MIB to meet its contractual obligations (and that, on that account, the principle of equivalence did not apply) was unlikely to prevail. It does not necessarily follow that the comparison of the juristic structures of mooted comparators in other, more appropriate, contexts will not be a relevant means of assessing their claimed similarity. In Revenue and Customs Comrs v Stringer & Ors the comparison was between the statutory right to paid annual leave (based on the EC Working Time Directive 93/104/EC) and a contractual right to holidays with pay. The House of Lords concluded both that the two claims were sufficiently similar for equivalence purposes, and that the different limitation periods applicable to each amounted to less favourable treatment of the Community law right. The respondent in this appeal argued that this betokened a broader approach than had hitherto been taken to the question of similarity between rights for the purposes of equivalence. For reasons that I will shortly state, I question that claim. The Working Time Directive has as its foundation concern for health and welfare. The House of Lords did not consider that this feature made it dissimilar to a contractual right to paid leave. After commenting in not unfavourable terms to Lord Slynns admonition in Preston that one should be careful not to accept superficial similarity as sufficient, Lord Walker of Gestingthorpe, who delivered the principal speech said, at para 62: In these appeals, however, the parallel between the statutory right to paid annual leave and a contractual right to holidays with pay is to my mind much clearer and closer. It is not less close because of the Working Time Directive's emphasis on health and safety at work. Similar thinking has for many years informed the approach of responsible employers in framing contractual terms of employment. Moreover in each case the remedy would be an order for payment of the liquidated sum due. Lord Walker did not propound a different approach from that of the majority in Preston. He merely commented that the two rights in the Stringer case had a much more obvious connection than did the rights that were involved in the earlier case. Indeed, his reference to health and safety considerations informing contractual terms of employment illustrates Lord Walkers acceptance that something more than mere superficial similarity was required. A similar stance can be detected from the opinion of Lord Neuberger of Abbotsbury. At para 71 he said that the purpose of a holiday from work is, at least in part, the psychological and social well being of the employee. But of perhaps greater consequence is the interesting and, in relation to the issues that arise in this case, highly pertinent observation that Lord Neuberger made in para 88 to the effect that the question of similarity, in the context of the principle of equivalence, has to be considered by reference to the context in which the principle is being invoked. Various formulae have been employed to describe the nature of the similarity that is required. For instance, whether the purpose and essential characteristics of the two measures are the same Palmisani, paras 34 to 38. Or whether the role played by the provision in the procedure as a whole, as well as the operation and any special features of that procedure before different national courts, sustain or detract from the claim to equivalence Levez para 44. Another criterion suggested is that the purpose and cause of action should be similar para 41 of Levez. The latter part of this formulation prompted the statement by Buxton LJ that the juristic structure of the two measures should be closely related. It is not clear, however, whether any or all of these criteria are indispensable requirements. As Lord Clyde observed in Preston the requirement of similarity or comparability is an inexact one (para 41). It is unlikely that juristic structures of exactly similar type are required if by that term it is implied that the means of securing the right should be the same or directly analogous. If the essential characteristics of the rights claimed are identical or closely similar, it would be a curious result that equivalence should be denied simply because the legal means of obtaining vindication of the right asserted differed. On the other hand, if the juristic structures are the same, this might well be a good indicator that the principle of equivalence applies. On the whole therefore there is much to be said for Lord Neubergers view that the question of the required similarity and the criteria necessary to establish it in an individual case will depend on the context in which the application of the principle of equivalence is canvassed. It does not appear, however, that this issue has been directly considered by the Court of Justice and on that account alone a reference is required. The source of procedural rights of the asylum applicant At para 47 of the Court of Appeals judgment, Pill LJ stated that the rights of a refugee, as now provided in national law, and the rights of a person with subsidiary protection status, as provided by the Directive are in many respects similar. The Secretary of State contends that this clearly implied that the court had concluded that the source of FAs rights in relation to his asylum application was exclusively national law. It is submitted that such a conclusion was plainly incorrect. It is common case between the parties that by virtue of article 4 of the Treaty on the Functioning of the European Union (TFEU) the area of freedom, security and justice in Community law is one of shared competence between the EU and member states. It is also agreed that EUs competence in this area is defined by article 78 of TFEU. And both parties have referred to the requirement in article 2 (2) of TFEU that member states shall exercise their competence to the extent that the EU has not exercised its competence or to the extent that the Union has decided to cease exercising its competence. Mr Eicke for the Secretary of State submits that the EU has exercised its competence under article 78 to define, among other things, the requirements for qualification as a refugee; the grant and content of refugee status; and the procedures, including the appeals procedure in relation to the grant and withdrawal of refugee status. The last of these found expression in domestic law through sections 82, 83 and 83A of the 2002 Act. In consequence, it is argued, the purported comparators (sections 82 83A) are not domestic measures at all. Since, it is said, they are not eligible for that role, the principle of equivalence cannot be invoked. Indeed, the appellant argues, the substantive content of both rights (i.e. the right to refugee status and the right to humanitarian protection) is derived from the same EU law instrument and, in fact, the same chapter within that EU law instrument: namely Chapter VII of the Qualification Directive. It is claimed, therefore, that there can be no question of comparison with a domestic law right. For the respondent Mr Husain emphasises that the United Kingdom is not prevented by the Qualification Directive from adopting and maintaining purely domestic legislation in the field of refugee law. He points out that the Qualification Directive is a minimum standards instrument. In stark contrast to Art 1A of the Refugee Convention, which applies the term refugee to any person who comes within the definition set out in Art 1A(1) and 1A(2), the Qualification Directive applies only to third country nationals. Moreover, domestic legislation even transposing instruments has continued to define a claim to asylum by reference to the Refugee Convention rather than the Qualification Directive. While these arguments are indisputable at a theoretical level, it is questionable that they have any relevance to the issues joined between the parties. It is not a matter of dispute that the asylum claim is based on provisions that were enacted on foot of the United Kingdoms obligations under the Qualification Directive. True it is that they mirror requirements set out in the Refugee Convention and that this may have been the original source of many of the provisions of the Qualification Directive. But this does not answer the essential question of whether the claim to refugee status can qualify as a valid comparator either because it can be described as having a mixed source i.e. it is based on both EU and domestic law or because the Refugee Convention is the original source of the relevant claim to refugee status and its provisions shaped those contained in the Qualification Directive. Again, it does not appear that these questions have been addressed directly in the case law of the Court of Justice and for that reason also a reference is required. Conclusions For the reasons given in this judgment a number of issues have arisen on this appeal which, in the opinion of this court, require a preliminary ruling by the Court of Justice of the European Union under article 267 of the Treaty on the Functioning of the European Union. The parties are therefore invited to make submissions in writing within 28 days on the questions to be referred to the Court of Justice. |
These appeals arise out of the decision of the government to promote the high speed rail link from London to the north known as HS2. The decision was announced in a command paper, High Speed Rail: Investing in Britain's Future Decisions and Next Steps (Cm 8247, 10 January 2012). (It has been referred to in the proceedings as the DNS.) The main issues, in summary, are, first, whether it should have been preceded by strategic environmental assessment, under the relevant European Directive, and, secondly, whether the hybrid bill procedure, as currently proposed, will comply with the procedural requirements of European law. The Court of Appeal decided both issues against the appellants, the first by a majority (Sullivan LJ dissenting). We also need to consider the possibility of referring either question to the European court (CJEU). The appellants In the first appeal, the HS2 Action Alliance is a not for profit organisation working with over 90 affiliated action groups and residents' associations in opposition to the HS2 scheme. The appellants in the Hillingdon appeal are local authorities along the proposed route of Phase 1 of HS2. They are all members of the 51M group, a group of local authorities which joined together in a national campaign to oppose the HS2 rail proposals. In the third appeal, Heathrow Hub Limited (HHL) has for many years promoted the concept of a multi modal transport hub at Heathrow Airport, integrating Heathrow with road, conventional mainline railway and high speed rail services. Factual background In January 2009, the previous government established a company called High Speed Two Limited (HS2 Ltd) to advise on proposals for a new railway from London to the West Midlands and potentially beyond. In December 2009 HS2 Ltd reported to the Secretary of State. The options for routes north of Birmingham include what became the preferred Y shaped network and two others known as the reverse S and the reverse E configurations. On 15 December 2009, the Secretary of State made a statement to Parliament setting out his proposed next steps, including a White Paper by the end of March 2010, followed by a full public consultation in the autumn of 2010, leading to preparation of a hybrid Bill. On 11 March 2010, the Department for Transport published a Command Paper entitled High Speed Rail (Cm 7827), along with HS2 Ltd's report and other technical reports. The initial core high speed network would link London to Birmingham, Manchester, the East Midlands, Sheffield and Leeds, and be capable of carrying trains at up to 250 miles per hour. It would take the form of a Y shaped network of around 335 miles. The paper explained the governments reasons in the light of the HS2 Ltd studies for preferring it to the reverse S and reverse E configurations. The studies had shown that as a first step a high speed line from London to Birmingham would offer high value for money. There would be connections to existing tracks to allow direct high speed train services to destinations further north. The capacity so released would be used to expand commuter, regional and freight service on existing lines. The first phase would run from a rebuilt Euston Station to a new Birmingham City Centre Station. Following further work by HS2 Ltd, formal public consultation would begin in the autumn. At the same time detailed planning work would begin on the routes from Birmingham to Manchester and Leeds, with a view to public consultation in early 2012. High speed access to Heathrow would be provided by a link with Crossrail and the Heathrow Express, but the government had appointed Lord Mawhinney to assess the options for a potential station at Heathrow. As to the procedure it was stated, at p 9, point 17: That powers to deliver this proposed high speed rail network should be secured by means of a single Hybrid Bill, to be introduced subject to public consultation, environmental impact assessment and further detailed work on funding and costs to feed into decisions to be taken in the next Spending Review. Depending on Parliamentary timescales and approval, this could allow construction to begin after the completion of London's Crossrail line, opening from 2017, with the high speed network opening in phases from 2026. Following the general election in May 2010, the proposals were adopted by the new Coalition Government, but it was indicated that due to financial constraints it would be achieved in phases. In June 2010 Lord Macwhinney reported that there was no compelling case for a direct high speed link to Heathrow. In October 2010, following further work by HS2 Ltd, the Secretary of State announced the preferred option for north of Birmingham involving two separate corridors, one via Manchester and the other via the East Midlands (the Y network). In December the Secretary of State published details of the proposed route for Phase 1 between London and Birmingham. The proposed route included provision for a spur link to Heathrow Airport, to be built later at the same time as the lines to Leeds and Manchester. In February 2011, the government opened formal public consultation on the high speed rail proposals, including the proposed Y network, and the preferred route for Phase 1 from London to the West Midlands. There was a consultation report entitled High Speed Rail: Investing In Britain's Future, accompanied by an Appraisal of Sustainability, and other economic and technical studies. The Secretary of States foreword described the consultation as one of the largest and most wide ranging ever undertaken by Government. The government would announce the result of the consultation and final decisions on its strategy for high speed rail before the end of 2011. Among other responses, the 51M group submitted an extensive consultation response objecting to the principle of HS2, challenging the governments case on business and capacity grounds, expressing concerns over the environmental impact, and arguing that the Appraisal of Sustainability had not been properly carried out or consulted upon with regard to other alternatives. In particular it submitted that any necessary increase in capacity could be provided more cost effectively by an alternative proposal, known as the optimised alternative, based on improving existing lines and services. Camden Council submitted a separate response raising concerns about the impact on the community and infrastructure around Euston. HHL contended that the mainline of HS2 should run via Heathrow. On 10 January 2012, the Department for Transport published the DNS. It included confirmation of the government's high speed rail strategy and a summary of its decisions, a review of the consultation responses, and statement of the next steps. With regard to alternatives, it was noted that relatively few responses had discussed the merits of the proposed Y network, but so far as alternatives were put forward the government remained of the view for the reasons given previously that its proposal offered the most effective approach. Under the heading Alternatives to high speed rail, the paper considered options for upgrading the existing network, including the optimised alternative proposed by the 51M group. It was concluded that the approach of upgrading the existing network would be incapable of matching the scale of the benefits that could be provided by a new high speed rail line, although it accepted that such alternatives would be expected to have some advantages, such as lower sustainability impacts than entirely new lines, including smaller impacts on noise, landscape and townscape. The overall conclusion was that any sustainability and cost advantages are outweighed by the substantial disbenefits of enhancing existing lines (paras 3.77 3.92). The DNS set out the process by which the government intended to obtain development consent for HS2, namely through two Hybrid Bills in Parliament, the first for Phase 1 and the second for Phase 2. The DNS also stated that following consultation safeguarding directions would be issued under the planning laws to safeguard the Phase 1 route corridor adopted by the DNS from incompatible development. Consultation on safeguarding was started in October 2012 and completed in January 2013. On 9 July 2013, the Safeguarding Direction was made. The effect is that the Secretary of State will be notified if a local planning authority is minded to grant planning permission for any development which HS2 Ltd considers would conflict with the Phase 1 route corridor, and the Secretary of State has power to give directions restricting the grant of planning permission, either indefinitely or during such a period as may be specified. The making of the Safeguarding Direction also triggered the statutory blight procedures. Eligible property owners within the safeguarded area may serve a blight notice asking the Secretary of State to buy their property prior to it being needed for construction. A High Speed Rail (Preparation) Bill was introduced into the House of Commons on 13 May 2013 and received Royal Assent on 21 November 2013. It was described as a paving bill to enable the Secretary of State to incur essential expenditure on preparatory works to allow the construction programme to proceed as quickly as possible following Royal Assent for the main bill. Meanwhile, work on Phase 2 continued. Public consultation on the detailed route for Phase 2 of the Y network began on 17 July 2013. It took the form of a consultation paper (Consultation on the route from the West Midlands to Manchester, Leeds and beyond), with supporting documents. The proposals for Phase 2 were broadly in accordance with the Government's High Speed Rail Strategy as set out in the DNS. The paper states that the current intention is to bring forward a hybrid Bill for Phase 2 in the next Parliament, following the May 2015 General Election. Judicial Review The present proceedings were commenced in April 2012. Following a ten day hearing in December 2012, Ouseley J gave judgment on 15 March 2013. The judgment is a tour de force running to 844 paragraphs, and dealing with a wide range of issues, most of which happily are no longer in dispute. He upheld the claim in relation to certain aspects of the consultation process, but dismissed it on the issues relevant to the present appeal. The Court of Appeal (Lord Dyson MR, Richards and Sullivan LJJ) following a hearing in June 2013, gave judgment dismissing the appeal on 24 July 2013. I will need to return to the reasoning of the judgments below when considering the submissions before the Supreme Court. The issues before this court can be summarised as follows: i) SEA whether the DNS in the circumstances of HS2 is a plan or programme which sets the framework for development consent and was required by administrative provisions within the meaning of articles 2 3 of Directive 2001/42/EC (the SEA Directive). ii) Aarhus whether if the interpretation of the majority in the Court of Appeal is correct, article 3(2)(a) of the SEA Directive is inconsistent with article 7 of the Aarhus Convention, and if so with what consequences. iii) EIA/Hybrid Bill whether the Hybrid Bill procedure as proposed meets the requirements of Directive 2011/92/EU (the EIA Directive), taking account in particular that (a) issues of principle will be excluded from the Select Committee stage, and (b) the debate on the Bill at Second and Third Reading will be subject to a Government whip. iv) Timing whether the court should intervene at this stage, or whether the court should wait until the Parliamentary process is completed; v) CJEU reference whether any of the above questions raise uncertain issues of European law on which a reference should be made to the European court. Since the hearing the hybrid bill for Phase 1 has been introduced to Parliament and received its first reading on 25 November 2013. The issues relating to the parliamentary process (iii) and (iv) will be discussed by Lord Reed, with whose reasoning and conclusions I agree. The SEA Directive The relevant provisions of the directive and extracts from the authorities are quoted at length in the judgment of the Master of the Rolls. I can therefore be more selective. At issue is the interpretation of article 3 which provides: 1. An environmental assessment, in accordance with Articles 4 to 9, shall be carried out for plans and programmes referred to in paragraphs 2 to 4 which are likely to have significant environmental effects. 2. Subject to paragraph 3, an environmental assessment shall be carried out for all plans and programmes, (a) which are prepared for agriculture, forestry, fisheries, energy, industry, transport, waste management, water management, telecommunications, tourism, town and country planning or land use and which set the framework for future development consent of projects listed in Annexes I and II to [the EIA Directive] . HS2 is such a transport project. By article 2(a) plans and programmes means plans and programmes which are subject to preparation and/or adoption by an authority at national, regional or local level or which are prepared by an authority for adoption, through a legislative procedure by Parliament or Government, and which are required by legislative, regulatory or administrative provisions. Although not directly applicable, attention should be drawn also to articles 3.4 and 3.5, by which member states are required to determine whether plans and programmes, other than those referred to in paragraph 2, which set the framework for future development consent of projects, are likely to have significant environmental effects. In making that determination on a case by case examination, they are required to take into account the criteria set out in Annex II. Those criteria include: The characteristics of plans and programmes, having regard, in particular, to the degree to which the plan or programme sets a framework for projects and other activities, either with regard to the location, nature, size and operating conditions or by allocating resources, the degree to which the plan or programme influences other plans and programmes including those in a hierarchy, . We were referred to three relevant European authorities on the interpretation of the definition: (i) Terre wallonne ASBL and Inter Environnement Wallonie ASBL v Rgion wallonne (Joined Cases C 105/09 and C 110/09) [2010] ECR I 5611 (Terre wallonne) (ii) Inter Environnement Bruxelles ASBL v Rgion de Bruxelles Capitale (Case C 567/10) [2012] 2 CMLR 909 (I E Bruxelles) (iii) Nomarchiaki Aftodioikisi Aitoloakarnanias Ipourgos v Perivallontos, Khorotaxias kai Dimosion Ergon (Case C 43/10) [2013] Env. L. R. 453 (Grand Chamber) (Nomarchiaki) The debate in this court has centred on two parts of the definition: required by administrative provisions and set the framework for future development consent Required by administrative provisions As explained by the CJEU, the word required in this context means no more than regulated: I E Bruxelles para 31. But it is less clear how that concept applies to administrative, as opposed to legislative or regulatory, provisions. In Walton v The Scottish Ministers [2012] UKSC 44; [2013] PTSR 51, at para 99, I said: There may be some uncertainty as to what in the definition is meant by 'administrative', as opposed to 'legislative or regulatory', provisions. However, it seems that some level of formality is needed: the administrative provisions must be such as to identify both the competent authorities and the procedure for preparation and adoption. The appellants submitted that the March 2010 Command Paper satisfied this part of the definition, since it determined the competent authority for adopting the plan and the procedure for preparing it. The majority in the Court of Appeal were inclined to agree, adopting a broad and purposive interpretation, but found it unnecessary to reach a decision on this point (para 71). Sullivan LJ held that this part of the definition was satisfied: although there were some changes to the procedure set out in the 2010 Command Paper, the process there described was in substance followed by the new government, and to that extent regulated the preparation and adoption of the DNS (paras 180 182). Mr Mould was disposed to accept that the 2010 Paper was at least arguably an administrative provision within this part of the definition, but not that it regulated the procedure in the formal sense. I am prepared to proceed on the assumption that Sullivan LJ was right on this point, or at least that there is a referable issue on the meaning of that part of the definition. I therefore turn to what emerged as the principal issue between the parties, that is the reference to a plan or programme which sets the framework for future development consent. Setting the framework The authorities Terre wallonne concerned an action programme adopted under article 5(1) of Directive 91/676 concerning the protection of waters against pollution caused by nitrates from agricultural sources. The issue was whether it fell within article 3(2)(a) of the SEA Directive on the basis that it set the framework for future development consent of intensive livestock installations (listed in Annexes I and II to the EIA Directive). As Advocate General Kokott explained (paras 60 67), the main issue for the court was how strongly the requirements of the plans or programmes must influence individual projects in order to come within the definition. This was against the background of arguments by certain member states that the framework must determine the location, nature or size (her emphasis) of projects requiring environmental assessment. She rejected that view as too narrow. She concluded: 67. To summarise, it can therefore be said that a plan or programme sets a framework in so far as decisions are taken which influence any subsequent development consent of projects, in particular with regard to location, nature, size and operating conditions or by allocating resources. In deciding that the definition did apply to the instant case she noted that under article 8 of the EIA Directive consideration must be given not only to direct effects of the planned works, but also to effects on the environment arising from their use, including in this case the effects on water quality resulting from intensive lifestock installations, and that therefore disposal of manure arising had to be considered (para 80). She concluded: In the context of such consideration, the framework set by the action programme has at least the effect that it must be possible for the installation to be operated in accordance with the provisions of the programme. At the same time, however, development consent can hardly be refused on grounds of the pollution of waters by nitrate from agriculture if the project complies with the rules of the programme. Certain alternatives, which are harmful to the environment as gauged by the objectives of the action programme, are thus excluded and others, which possibly afford water greater protection, do not have to be examined and taken into consideration. (para 82 emphasis added) As I read her opinion, the references to influence in the earlier paragraphs were to indicate that something less than a specific determination of the nature of the project would suffice. On the other hand, the latter paragraph shows that influence as such might not be enough; the critical factor was that consideration of certain environmental effects would in practice be excluded altogether. The court (paras 52 54) agreed with her as to the relevance of article 8 of the EIA Directive, and noted that under article 5(4) of Directive 91/676 action programmes must provide for a set of measures compliance with which can be a requirement for issue of the consent, including requirements for storage of livestock manure. It concluded: 54. In such a situation, the existence and scope of which it is nevertheless for the national court to assess in the light of the action programme concerned, it must be held that the action programme is to be regarded, in respect of those measures, as setting the framework for future development consent of projects listed in Annexes I and II of Directive 85/337 within the meaning of Article 3(2)(a) to Directive 2001/42. Accordingly, in answer to the relevant question, it held that an action programme adopted pursuant to article 5(1) of Directive 91/676 was in principle a plan or programme covered by article 3(2)(a) since it constituted a plan or programme within the meaning of article 2(a) and contains measures compliance with which is a requirement for issue of the consent that may be granted for carrying out projects listed in Annexes I and II to Council Directive 85/337. In I E Bruxelles, the court held that the repeal of a land use plan was capable of falling within the scope of the SEA Directive, even in the absence of any specific reference in its text to repeal (as opposed to modification). The court rejected a narrow interpretation as contrary to the objective of the directive to provide for a high level of protection of the environment (para 30): That interpretation would thus run counter to the directive's aim of establishing a procedure for scrutinising measures likely to have significant effects on the environment, which define the criteria and the detailed rules for the development of land and normally concern a multiplicity of projects whose implementation is subject to compliance with the rules and procedures provided for by those measures. (emphasis added) The same formula (emphasised in the above quotation) was adopted by the Grand Chamber in Nomarchiaki. The case concerned a controversial project for the diversion of the River Acheloos in western Greece, to serve the irrigation and energy needs of the region of Thessaly. One of many issues was whether it should be regarded as a plan or programme within the meaning of the SEA Directive. Differing from the Advocate General, the court said no, and dealt with the issue very briefly (para 95): It is not evident that the project concerned constitutes a measure which defines criteria and detailed rules for the development of land and which subjects implementation of one or more projects to rules and procedures for scrutiny (see, to that effect, [Inter Environnement Bruxelles and Others (Case C 567/10) [2012] CMLR 909, para 30)]. (emphasis added) The Court of Appeal In the Court of Appeal a joint judgment was given by the Master of the Rolls and Richards LJ. Having referred to the paradigm case of a statutory development plan, and building on the Advocate Generals discussion in Terre wallone, they spoke of the different degrees of influence which a plan might have: At one end of the spectrum is the plan or programme which conclusively determines whether consent is given and all material conditions. Such a plan or programme clearly sets the framework. It is an example of legal influence of highest order. At the other end of the spectrum is the plan or programme which identifies various development options, but which states that the decision maker is free to accept or reject all or any of the options. (para 54) In their view, however, it was not necessary for the plan to be legally binding: We would not rule out the possibility that a plan or programme may set the framework where it has sufficiently potent factual influence, but (as we shall explain) not where the decision maker is Parliament. If it is clear that the decision maker will follow the recommendations contained in a plan or programme and the measures are likely to have significant effects on the environment, then the mere fact that the decision maker is not legally obliged to make a decision in accordance with the plan or programme might not be a sufficient reason for holding that the plan or programme does not set the framework. But in our view, there must at least be cogent evidence that there is a real likelihood that a plan or programme will influence the decision if it is to be regarded as setting the framework (para 50, emphasis added) Applying the test as set out in the italicised words, they agreed with Ouseley J that the DNS was not within the definition. The DNS would have no legal influence on Parliament, which was not obliged to comply with it or even to have regard to it in reaching its decision. Nor was it appropriate or possible for the court to assess the degree of influence the DNS was likely to have as a matter of fact on Parliament's decision making process: Parliament is constitutionally sovereign and free to accept or reject statements of Government policy as it sees fit, and the court should not seek to second guess what Parliament will do. Moreover the decision whether to give consent to the project as outlined in the DNS is very controversial and politically sensitive. No final decision has yet been taken as to the form or length of debate that is to take place in Parliament. (para 56) Sullivan LJ was concerned that the majoritys interpretation would leave an undesirable gap in strategic environmental protection; governments would be able to avoid the need for strategic environmental assessment by promoting specific acts of legislation (paras 154 7). He applied the same test as the majority but disagreed as to the result. He considered that there was cogent evidence of a real likelihood that the DNS would influence Parliaments decision. In the present context (by contrast with that of the conventional development control process), he rejected as unrealistic a distinction between the role of the government as promoter of the scheme and its role in the Parliamentary decision making process: When considering the status of the DNS in the hybrid Bill procedure it must be recognised that the Government has a dual role. Having devised the plan the Government is not merely the promoter of the project, it will actively participate in the decision making process under the hybrid Bill procedure. Parliament is constitutionally distinct from the executive, but members of the Government are members of ParliamentThe well established collective ministerial responsibility will ensure that the plan prepared by the Government (the DNS) will in fact have a very significant influence on Parliament's decision making process in respect of a Government Bill. (para 173) convention of Drawing a parallel with the purposive approach of the CJEU to legislative decisions in the context of the EIA, he thought that the court should look at the substance and not simply the constitutional formality of the entire decision making process (para 174). The arguments in this court have broadly followed those summarised in the judgments of the Court of Appeal, and reflected in the respective views of the majority and minority. They have been developed at considerable length in the written and oral submissions to this court. I hope I will be forgiven for not attempting to summarise them further in this judgment. The difference between the parties in the end comes down to a relatively short point of construction of the directive and its application to the special facts of this case. Discussion Introductory comments In Lord Reeds judgment in Walton v Scottish Ministers [2013] PTSR 51, para 10ff, there is a detailed discussion of the evolution and general purpose of the relevant directives. It is unnecessary to repeat it here. He cited in particular (para 12 of that judgment) the helpful discussion by Advocate General Kokott (in Terre wallone, points 31 32) of the evolution of the SEA Directive to fill a perceived gap in the EIA regime: The application of the EIA Directive revealed that, at the time of the assessment of projects, major effects on the environment are already established on the basis of earlier planning measures Whilst it is true that those effects can thus be examined during the environmental impact assessment, they cannot be taken fully into account when development consent is given for the project. It is therefore appropriate for such effects on the environment to be examined at the time of preparatory measures and taken into account in that context. He referred also (para 14 of that judgment) to an extract from the European Commissions first report on the application of the SEA Directive ((COM(2009) 469 final, para 4.1): The two Directives are to a large extent complementary: the SEA is 'up stream' and identifies the best options at an early planning stage, and the EIA is 'down stream' and refers to the projects that are coming through at a later stage. In theory, an overlap of the two processes is unlikely to occur. However, different areas of potential overlaps in the application of the two Directives have been identified. In particular, the boundaries between what constitutes a plan, a programme or a project are not always clear, and there may be some doubts as to whether the 'subject' of the assessment meets the criteria of either or both of the Directives. It should be borne in mind also that, although the expression strategic is commonly used in shorthand descriptions of the directive, it is not a word that appears in the text. The correct title is Directive on the assessment of the effects of certain plans and programmes on the environment. It is not therefore to be assumed, as some of Mr Elvins submissions seemed to imply, that because a project is strategic in nature (as HS2 undoubtedly is) the presumption must be in favour of assessment under this directive. The purpose is more specific, that is to prevent major effects on the environment being predetermined by earlier planning measures before the EIA stage is reached. Against that background, and unaided by more specific authority, I would have regarded the concept embodied in article 3.2 as reasonably clear. One is looking for something which does not simply define the project, or describe its merits, but which sets the criteria by which it is to be determined by the authority responsible for approving it. The purpose is to ensure that the decision on development consent is not constrained by earlier plans which have not themselves been assessed for likely significant environmental effects. That approach is to my mind strongly supported by the approach of the Advocate General and the court to the facts of Terre wallone and by the formula enunciated in I E Bruxelles and adopted by the Grand Chamber in Nomarchiaki. In relation to an ordinary planning proposal, the development plan is an obvious example of such a plan or programme. That is common ground. Even if as in the UK it is not prescriptive, it nonetheless defines the criteria by which the application is to be determined, and thus sets the framework for the grant of consent. No doubt the application itself will have been accompanied by plans and other supporting material designed to persuade the authority of its merits. In one sense that material might be said to set the framework for the authoritys consideration, in that the nature of the application limits the scope of the debate. However, no one would for that reason regard the application as a plan or programme falling within the definition. In principle, in my view, the same reasoning should apply to the DNS, albeit on a much larger scale. It is a very elaborate description of the HS2 project, including the thinking behind it and the governments reasons for rejecting alternatives. In one sense, it might be seen as helping to set the framework for the subsequent debate, and it is intended to influence its result. But it does not in any way constrain the decision making process of the authority responsible, which in this case is Parliament. As Ouseley J said: 96. The very concept of a framework, rules, criteria or policy, which guide the outcome of an application for development consent, as a plan which requires SEA even before development project EIA, presupposes that the plan will have an effect on the approach which has to be considered at the development consent stage, and that that effect will be more than merely persuasive by its quality and detail, but guiding and telling because of its stated role in the hierarchy of relevant considerations. That simply is not the case here. With respect to Sullivan LJ, I do not think that position is materially changed by what he called the dual role of government. Formally, and in reality, Parliament is autonomous, and not bound by any criteria contained in previous government statements. I have noted that the majority and the minority in the Court of Appeal adopted the same test, turning on the likelihood that the plan or programme would influence the decision. The majority referred to the possibility of the plan having a sufficiently potent factual influence (para 55). Although Mr Mould generally supported the reasoning of the majority, he submitted that influence in the ordinary sense was not enough. The influence, he submitted, must be such as to constrain subsequent consideration, and to prevent appropriate account from being taken of all the environmental effects which might otherwise be relevant. In my view he was right to make that qualification. A test based on the potency of the influence could have the paradoxical result that the stronger the case made in favour of a proposal, the greater the need for strategic assessment. Setting a framework implies more than mere influence, a word which is not used by the court in any of the judgments to which we have been referred. It appears in annex II of the directive, but only in the different context of one plan influencing another. In Terre wallone Advocate General Kokott spoke of influence, but, as already noted, that was by way of contrast with the submissions before her which suggested the need for the plan to be determinative. Finally, Mr Elvin pointed to the fact that the DNS had specific legal consequences, notably in the safeguarding direction, and the consequent application of the related blight provisions, and also in providing the basis for the paving Bill, and for the allocation of resources under it. I accept that these points provide an arguably material distinction from the supporting material for a conventional planning application. However, they do not imply any further constraint on Parliaments consideration of the environmental impacts of the project as a whole, under the hybrid Bill procedure. Practical consequences Sullivan LJ was concerned that the majoritys interpretation would leave a gap in the environmental protection provided by the directives. It is helpful to consider this concern in the context of the facts of the present case. The governments case from the beginning has been that the SEA Directive has no application because neither the DNS, nor anything which preceded it, was a plan or programme as there defined. They accept however that as a project within the meaning of the EIA Directive it must be subject to environmental assessment in a modified form adapted to the proposed legislative procedure (as discussed by Lord Reed). It is common ground, as I understand it, that the difference between the two procedures is significant principally in relation to the treatment of alternatives. The respective requirements are: i) SEA Directive Article 5 provides that the environmental report must identif[y] describ[e] and evaluat[e] the likely significant effects on the environment of implementing both the plan or programme itself, and reasonable alternatives. Annex 1 sets out the information to be given, including an outline of the reasons for selecting the alternatives dealt with and a description of how the assessment was undertaken. ii) EIA Directive Article 5 requires the statement to include the information specified in annex IV, which includes simply an outline of the main alternatives studied by the developer and an indication of the main reasons for this choice, taking into account the environmental effects. The reasons for this difference are not obvious. It may simply reflect the different stages at which the two exercises are carried out. At the earlier stage of strategic assessment neither the proposed plan nor the alternatives will need to have been worked up to the same degree of detail as will be appropriate at the EIA stage. At the latter stage to require an equivalent degree of detail for the rejected alternatives may be seen as unduly burdensome. In any event, it was not in dispute between the parties that the treatment of alternatives required under the SEA Directive is more detailed than under the EIA, and that it was not satisfied in this case. It is also common ground that compliance with the SEA Directive at this stage would be possible, but that it would involve significant delay. Mr Mould on instructions, and without dissent, spoke of an added delay of six months to a year. There is also a measure of agreement as to what such additional consideration would involve. Ouseley J considered whether, in spite of the governments position that such treatment was unnecessary, substantial compliance had been achieved (paras 160 172). In a passage the reasoning of which has not been challenged before this court, he concluded that it had not been achieved, for reasons essentially related to the Y network and its alternatives, and the spurs to Heathrow. On the other hand, as Mr Mould emphasises, he took a different view in relation to Phase 1 in respect of which, viewed on its own, he would have found substantial compliance with the SEA Directive (para 168). Furthermore, in his view, even if the SEA Directive had applied, it would not have required more detailed consideration of alternative strategies based on improvements to the existing network, such as the optimised alternative: The Government concluded that alternative strategies for motorways or a new conventional or enhanced existing rail network were not capable of meeting the plan objectives set for high speed rail. It is obviously a contestable view as to whether those objectives should be met, or can be met to a large extent by means other than a new high speed rail network. These alternative strategies could not, however, have constituted reasonable alternatives to the plan for assessment in the SEA, since they are incapable by their very nature of meeting all the objectives for a new high speed rail network. The sifting process whereby a plan is arrived at does not require public consultation at each sift. This whole process has been set out in considerable detail in the many published documents for those who wished to pursue it, but it did not all have to be in an SEA. (para 162) On that view, which was not challenged before us, application of the SEA Directive would result in more detailed consideration of alternatives such as the reverse S and reverse E configurations, but not of the optimised alternative. Since the optimised alternative is the only one for which the parties before us have expressed any positive support, the SEA process as such may not meet their particular needs (save possibly in respect of HHLs interest in the Heathrow Spur alternatives, although we were told that that aspect is affected by the current study of future airport capacity under Sir Howard Davies). Miss Lieven suggested that the strategic significance of the optimised alternative might require reassessment in the light of more recent ministerial statements about the objectives of HS2. That cannot in my view affect our consideration of the present appeals, which are concerned with the procedural requirements for the DNS at the time it was made. On the other hand, nothing in the DNS prevents arguments and evidence relating to the governments present intentions being presented to Parliament within the current decision making process. This indeed illustrates the practical importance of the distinction, in the context of the SEA Directive, between merely influencing subsequent consideration, and setting limits on the scope of what can be considered. Until Parliament has reached its decision, the merits of all aspects of the HS2 project, on economic, environmental and other grounds, remain open to debate. Aarhus It is convenient at this point to deal briefly with Mr Elvins related argument under article 7 of the Aarhus Convention. That article requires provision to be made for the public to participate in the preparation of plans and programmes relating to the environment. It is to be noted that this article refers to plans and programmes in general, without the qualifications found in the SEA Directive definition. It is not suggested, having regard to the extent of public consultation which has already taken place on the HS2 project, that there has been any breach of this requirement taken on its own, even assuming the DNS to be a plan or programme within the meaning of this article. Instead the argument, as I understand it, is that the SEA Directive must be interpreted in such a way as to ensure conformity with the Convention, which in turn requires that any plans or programmes covered by article 7 are also subject to the SEA procedure. The majority of the Court of Appeal rejected this argument. They said (para 63): our conclusion that the DNS is not a plan or programme setting the framework for future development consent does not in our view involve any incompatibility with article 7. If a plan or programme does not set the framework, it is difficult to see how article 7 can have been intended to apply to it. In such a case, the requisite degree of public participation can be achieved through compliance with the requirements of the EIA Directive in the development consent procedure for a specific project. Sullivan LJ was unpersuaded by this reasoning. He thought that consultation under the EIA Directive was an inadequate response to article 7, because by that time strategic alternatives will have been foreclosed by the legislative process and the pass will have been sold. (para 178) To my mind there is a more fundamental objection to Mr Elvins argument. There is no reason to assume that article 7 and the SEA Directive are intended to cover exactly the same ground. The differences in wording are clear and must be assumed to be deliberate. Indeed the UNECE guidance on the Convention (The Aarhus Convention: An Implementation Guide 2nd Ed 2013 p 118 119) accepts that its reference to plans and programmes relating to the environment is broader than the equivalent definition in the SEA Directive. The SEA Directive must be interpreted and applied in its own terms. If this falls short of full compliance with the Aarhus Convention, it does not invalidate the directive so far as it goes. It simply means that a possible breach of the Convention may have to be considered as a separate and additional issue. In the present case the point is academic because no such breach is alleged. CJEU reference It will be apparent from what I have said that I do not find it necessary to make a reference to the CJEU in this case. I am conscious of the disagreement between the very experienced members of the Court of Appeal. However, they differed principally not on the formulation of the test, but on its application to the facts of the case, and in particular to the workings of the parliamentary process under domestic law. Although I have taken a rather different view of the appropriate legal test, that is because I have attached more importance to the guidance contained in the words of the court itself in the trilogy of cases to which I have referred. This seems to me the kind of case which Advocate General Jacobs had in mind when (in Case C 338/95 Wiener S.1. GmbH v Hauptzollamt Emmerich [1997] ECR I 6495, para 61) he referred to the emergence of a body of case law developed by the CJEU to which national courts and tribunals can resort in resolving new questions of Community law: Experience has shown that that case law now provides sufficient guidance to enable national courts and tribunals and in particular specialised courts and tribunals to decide many cases for themselves without the need for a reference . That approach is also reflected in the recommendation issued by the court in September 2012, to which Lord Sumption has referred. Conclusion For these reasons, and those given by Lord Reed on the issues covered in his judgment, I would dismiss the appeals. LORD REED (with whom Lord Neuberger, Lady Hale, Lord Mance, Lord Kerr, Lord Sumption and Lord Carnwath agree) Hybrid bill procedure and the EIA Directive As Lord Carnwath has explained, the appeal brought by the London Borough of Hillingdon and nine other local authorities raises the question whether the hybrid bill procedure, under which Parliament is being invited to authorise the HS2 project by Acts of Parliament, is compliant with the requirements of the Environmental Impact Assessment Directive (Directive 2011/92/EU, OJ 2012, L 26/1, the EIA Directive). In particular, the appellants seek the quashing of the Governments decision, announced in the DNS, to pursue a hybrid bill for each phase of the Y network, and to introduce a hybrid bill by the end of 2013 to provide the necessary powers to construct and operate Phase 1. The question is also raised, on behalf of the respondents, whether it is appropriate for the court to consider the compatibility of the Parliamentary procedure with the EIA Directive at the present stage, or whether that issue should be considered only after the Parliamentary procedure has been completed. It is convenient to consider those questions together, as they are to some extent inter related. Hybrid bill procedure It may be helpful at the outset to explain what is meant by hybrid bill procedure. A hybrid bill shares certain characteristics of a public bill and a private bill. The Speaker has defined a hybrid bill as "a public bill which affects a particular private interest in a manner different from the private interests of other persons or bodies of the same category or class" (Hansard (HC Debates), 10 December 1962, col 45). This hybrid character influences the Parliamentary procedure: a hybrid bill proceeds as a public bill, with a second reading, committee report and third reading, but with an additional select committee stage after the second reading in each House, at which objectors whose interests are directly and specifically affected by the bill (including local authorities) may petition against the bill and be heard. Parliamentary standing orders make provision for those persons who have standing to lodge a petition. It is for Parliament and not the Government to determine the Parliamentary procedure for a hybrid bill laid before it. It is however a matter of agreement between the parties that, in the case of the hybrid bill for Phase 1 of HS2, the principle of the bill will be set upon the bills receiving a second reading following debate, subject to the Government whip, in the House of Commons. It is expected that the principle of the bill will extend to a high speed rail line running between London, Birmingham and the West Midlands, with its central London terminus at Euston and a link to HS1 (ie the Channel Tunnel Rail Link). It is also common ground that the established convention is that a select committee for a hybrid bill cannot hear petitions which seek to challenge the principle of the bill, unless instructed to do so by the House at second reading (Erskine Mays Treatise on the Law, Privileges, Proceedings and Usage of Parliament, 24th ed (2011), ed Jack, p 656). Under the Parliamentary procedures as currently envisaged by the Government, matters that go to the principle of the bill will not be considered by the select committee. Such matters would be expected to include the business case for HS2, alternatives to the high speed rail project and alternative routes for Phase 1. The principle of the bill could in theory be re opened at third reading, but that debate also will be subject to the Government whip. The relevant standing orders In order to understand the arguments, it is also necessary to note the relevant Parliamentary standing orders (SOs). SO 27A for Private Business requires that a bill authorising the carrying out of works the nature and extent of which are specified in the bill must be accompanied by an environmental statement, which must be available for inspection and for sale at a reasonable price. The environmental statement must contain the information required by the Town and Country Planning (Environmental Impact Assessment) Regulations 2011 (SI 2011/1824), the 2011 Regulations), which transpose the requirements of the EIA Directive, so far as affecting applications for planning permission, into English law. SO 224A, which was introduced in June 2013 after the hearing of the appeal in the Court of Appeal, requires that upon the deposit of the bill a notice must be published stating that any person who wishes to make comments on the environmental statement should send those comments to the minister responsible for the bill. The minister must publish and deposit the comments received, and submit them to an independent assessor appointed by the Examiner of Petitions for Private Bills. The assessor is then to prepare a report summarising the issues raised by those comments. The report must be submitted to the House at least 14 days prior to second reading. At third reading the minister must set out the main reasons and considerations upon which Parliament is invited to consent to the project and the main measures to avoid, reduce and if possible offset the project's major adverse effects. A written statement must be laid before the House not less than seven days before third reading. The House of Lords has made corresponding arrangements under SO 83A. Finally, by way of introduction, it is necessary to consider the role of Government whips. In that regard, although the argument on behalf of the appellants was largely concerned with the implications, for the purposes of assessing compliance with the EIA Directive, of the fact that votes on the bill are intended to be subject to the Government whip, the court was not provided with any authoritative account of how the whip operates. In general terms, the Government whips are ministers responsible for fitting the Governments programme of business into the time available during the session. The Opposition parties also have whips, who are members of either House, appointed by their party in Parliament to help organise their partys contribution to Parliamentary business. The term is derived from hunting: a whipper in is a huntsmans assistant, who drives straying hounds back to the pack using a whip. One of the whips duties is to see that their parties are as fully represented as possible at important votes or divisions, and, in the Commons, to arrange pairs for members who wish to be absent (a pair being a member of the opposite party who also wishes to be absent). Each week they send a circular to their Members of Parliament or peers, detailing the forthcoming Parliamentary business. Items underlined once are considered routine and attendance is optional. Those underlined twice are more important and attendance is expected unless a pair has been arranged. Items underlined three times, such as second readings of significant bills, are highly important. The failure of Government backbenchers to attend a vote with a three line whip, or their voting contrary to Government policy on such an occasion, may have disadvantageous consequences for them within their party, including in extreme circumstances the possibility of suspension from the Parliamentary party. In that event the member keeps his seat but sits as an independent until the whip is restored. In practice, Members of Parliament have to consider a range of factors besides the guidance of the whips. For example, in relation to controversial developments affecting their constituencies, Members of Parliament have to consider the views of their constituents: if they fail to do so, they may lose their constituents support, and may in consequence be liable to lose their seat at the next election. Although Government backbenchers generally support Government policies, failures to vote in accordance with the whip are not infrequent. One recent study found that Members of Parliament on the Government benches had voted against the whip in 43% of divisions during the first 18 months of the current Government: P Cowley and M Stuart, A Coalition with Two Wobbly Wings: Backbench Dissent in the House of Commons, (2012) Political Insight, 3, pp 8 11. It also has to be borne in mind that the apprehension of backbench dissent may result in changes to proposed legislation, so as to ensure that the Government will not be defeated. A study of the Government elected in 2001 carried out by Professor Philip Cowley of the University of Nottingham, for example, concluded that the fact that it had never suffered a defeat on a whipped vote could hardly be seen as evidence of parliamentary impotence From the very beginning, the 2001 Parliament saw the Government give ground to its backbench critics on measure after measure, including on almost all major policy initiatives: Cowley, The Rebels: How Blair Mislaid His Majority (2005), pp 242 243. The same study commented that to focus on the weakness of Members of Parliament and the disciplinary power of the whips was a quite monumental failure to understand the realities of parliamentary life (op cit, p 48). In some circumstances, it may in any event be impractical for the Government to proceed with a project without the support of the Opposition, as well as that of its own backbenchers. That may be the position, for example, where the period of time over which substantial Government resources require to be committed will extend beyond the Parliament during which the necessary legislation is enacted. In such a situation, there may be little purpose in obtaining Parliamentary approval for a project unless there is confidence that a future government, even if of a different party, will continue to support the project as so approved. Whether the HS2 project might be in that position, as has been suggested in public debate on the issue, was not addressed in the submissions. In relation to voting in Parliament, it is also relevant to note the convention that members of the Government do not vote against Government legislation. If they do so, they are generally expected to resign, failing which they may be dismissed. Their loss of office does not affect their position as Members of Parliament. The appellants argument At the hearing of the appeal, which was held before the bill for Phase 1 was introduced into Parliament, the appellants argued as follows. The Government intends to seek development consent for HS2 through hybrid bills in Parliament, without going through all the procedures required by the EIA Directive. The Government relies on the exemption granted by article 1(4): This Directive shall not apply to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process. As construed by the Court of Justice, however, that provision applies only where the objectives of the Directive are fulfilled by the legislative process. In order to achieve the objectives of the EIA Directive, it is argued, the Parliamentary procedure must allow effective public participation, as required by article 6(4): The public concerned shall be given early and effective opportunities to participate in the environmental decision making procedures referred to in article 2(2) and shall for that purpose, be entitled to express comments and opinions when all options are open to the competent authority or authorities before the decision on the request for development consent is taken. The procedure must therefore permit the public to produce information demonstrating why the HS2 project should not proceed, and that information must be capable of influencing the outcome of the decision making process. In particular, these appellants must be able to provide information about their proposal for the optimised alternative, and Members of Parliament must be able to consider it and to be influenced by it. It is however not possible, it is argued, for there to be effective public participation under the procedure envisaged. The Government has already taken the critical decision to accept the economic case for HS2 and to reject the optimised alternative. The bill for Phase 1 will reflect that decision. Parliament will be asked to approve the principle of the bill at second reading. It will have available to it an environmental statement prepared on behalf of the Secretary of State. It will also have available to it the comments on the environmental statement and the assessors summary of those comments. The Secretary of State has however confirmed in correspondence that the vote at the conclusion of the debate will be subject to the whip. Ministers will face the alternatives of resignation or dismissal from office if they vote against the bill. Backbenchers will risk disciplinary sanctions. The effect of the whip and of collective ministerial responsibility, it is argued, is therefore that ministers and backbenchers will be unable to give proper consideration to the environmental information when examining or debating the bill. Both the imposition of the Government whip, and collective ministerial responsibility, are incompatible with the EIA Directive, since they necessarily render public participation ineffective. Furthermore, it is argued, the environmental information which will be provided to Parliament in respect of HS2 is so voluminous and complex that Members of Parliament cannot possibly consider it properly following the procedure envisaged. The draft environmental statement prepared on behalf of the Secretary of State extends to 27 volumes. The material produced by these appellants, relating to the optimised alternative, is also substantial and detailed. There is no requirement that Members of Parliament should read the environmental statement, the non technical summary which it contains, or the summary of consultation responses, before voting. It is implausible to suggest that all or even a majority of Members of Parliament who vote on the bill will have done so. A second reading debate will not in any event allow a proper examination of the material to take place. Such a debate is likely to last only one or two days. There is no requirement that Members of Parliament should be present in the Chamber during the debate, and it would be implausible to suggest that the majority of Members who vote on the bill will have been present. The subsequent examination of the bill by a select committee will not, it is argued, involve any consideration of the principle of the bill, and therefore will not involve consideration of alternatives to HS2 or of the economic case for the project. Any argument that the environmental impact as set out in the environmental statement should outweigh the need for HS2 will not be considered by the select committee. The final vote on the bill at third reading will again be subject to the whip. Put shortly, it is argued that the effect of (1) the whipping of the vote at second and third readings, (2) the limited opportunity which is provided by a debate in Parliament for the examination of the environmental information, and (3) the limited remit of the select committee following second reading, is to prevent effective public participation, contrary to article 6(4) of the EIA Directive. At the least, it is argued, the question whether the proposed procedure is compliant with the EIA Directive is not acte clair, and should therefore be the subject of a reference to the Court of Justice. It is argued that this is a matter on which the court should rule now. The critical decision which is subject to challenge is not any decision of Parliament, but the decision of the Government to promote a hybrid bill and to impose a whip upon its progress through Parliament. Although the Parliamentary procedure is capable of being changed, the Government has no intention of seeking any such change. It is in addition obligatory under article 6(2) of the EIA Directive that the public should be informed early in the decision making process of the procedure to be followed. That provision states: The public shall be informed, whether by public notices or by other appropriate means such as electronic media where available, of the following matters early in the environmental decision making procedures referred to in article 2(2) and, at the latest, as soon as information can reasonably be provided: (g) details of the arrangements for public participation made pursuant to paragraph 5 of this article. It is argued that it is in any event preferable, and consistent with the objectives of the Aarhus Convention, that this issue should be considered by the court before the substantial time and expense involved in the Parliamentary proceedings have been incurred by the appellants and others. Judicial scrutiny of the Parliamentary procedure cannot be avoided in the event that a bill is passed following the procedure proposed, since the courts cannot in that event avoid determining whether the requirements of the EIA Directive have been satisfied. That follows from article 11(1), which provides: Member states shall ensure that, in accordance with the relevant national legal system, members of the public concerned: (a) having a sufficient interest, or alternatively; (b) maintaining the impairment of a right, where administrative procedural law of a member state requires this as a precondition; have access to a review procedure before a court of law or another independent and impartial body established by law to challenge the substantive or procedural legality of decisions, acts or omissions subject to the public participation provisions of this Directive. The respondents argument On behalf of the respondents, it was contended that the court could not determine in advance whether the quality of the Parliamentary proceedings would meet the requirements of article 1(4) of the EIA Directive, as construed by the Court of Justice. In view of the requirements of SO 27A and SO 204A, the hybrid bill procedure was in principle capable of meeting those requirements. The appellants contentions to the contrary were based merely on assertion. Whether Members of Parliament had in fact given effective scrutiny to the bill and taken account of public representations and comments would fall to be considered by the court, if called upon to do so, after the legislation had been enacted, in the light of the Parliamentary debates. At the same time, if the court considered that there were inherent defects in the procedure currently contemplated, it would be helpful for it to say so. Constitutional issues The argument presented on behalf of the appellants as to the implications of the EIA Directive, if well founded, impinges upon long established constitutional principles governing the relationship between Parliament and the courts, as reflected for example in article 9 of the Bill of Rights 1689, in authorities concerned with judicial scrutiny of Parliamentary procedure, such as Edinburgh and Dalkeith Railway Co v Wauchope (1842) 8 Cl & F 710; 1 Bell 252, Lee v Bude and Torrington Junction Railway Co (1871) LR 6 CP 576, Pickin v British Railways Board [1974] AC 765 and Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816, and in other cases concerned with judicial scrutiny of decisions whether to introduce a bill in Parliament, such as R (Wheeler) v Office of the Prime Minister [2008] EWHC 1409 (Admin). Neither the Bill of Rights nor any of the authorities I have mentioned was however referred to in the parties printed cases; nor was this issue mentioned before us until it was raised by the court. Nevertheless, it follows that the appellants contentions potentially raise a question as to the extent, if any, to which these principles may have been implicitly qualified or abrogated by the European Communities Act 1972. Contrary to the submission made on behalf of the appellants, that question cannot be resolved simply by applying the doctrine developed by the Court of Justice of the supremacy of EU law, since the application of that doctrine in our law itself depends upon the 1972 Act. If there is a conflict between a constitutional principle, such as that embodied in article 9 of the Bill of Rights, and EU law, that conflict has to be resolved by our courts as an issue arising under the constitutional law of the United Kingdom. Nor can the issue be resolved, as was also suggested, by following the decision in R v Secretary of State for Transport, Ex p Factortame Ltd (No 2) [1991] 1 AC 603, since that case was not concerned with the compatibility with EU law of the process by which legislation is enacted in Parliament. In the event, for reasons which I shall explain, it is possible to determine the appeal without requiring to address these matters. National legislation and the EIA Directive The EIA Directive was adopted in its original form in 1985 (Directive 85/337/EEC, OJ 1985, L 175/40). Since then it has been significantly amended by further directives, including the Public Participation Directive (Directive 2003/35/EC, OJ 2003, L 156/17). I shall refer to the EIA Directive as codified in 2011 (Directive 2011/92/EU, OJ 2012, L 26/1). Article 1(4) of the EIA Directive (originally numbered 1(5)) has already been quoted, but it is convenient to remind oneself of its terms: This Directive shall not apply to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process. It might have been thought, in the light of that provision, that the Directive would not apply to the HS2 project if its details were adopted by a specific Act of Parliament. The Court of Justice has however given article 1(4) what might diplomatically be described as a purposive interpretation: in effect, since has been construed as meaning provided that. A Grand Chamber of the Court explained how article 1(4) was to be understood in Case C 43/10 Nomarchiaki Aftodioikisi Aitoloakarnanias and others [2013] Env LR 453. After quoting article 1(4), the court continued: 78. It follows from that provision that, where the objectives of Directive 85/337, including that of supplying information, are achieved through a legislative process, that directive does not apply to the project in question (see Case C 287/98 Linster [2000] ECR I 6917, para 51; Joined Cases C 128/09 to C 131/09, C 134/09 and C 135/09 Boxus and others [2011] ECR I 0000, [[2012] Env LR 320], para 36; and Case C 182/10 Solvay and others [2012] ECR I 0000, [[2012] Env LR 545], para 30). 79. That provision lays down two conditions for the exclusion of a project from the scope of Directive 85/337. The first requires the details of the project to be adopted by a specific legislative act. Under the second, the objectives of the directive, including that of supplying information, must be achieved through the legislative process (see Case C 435/97 WWF and others [1999] ECR I 5613, para 57; Boxus and others, para 37; and Solvay and others, para 31). In the present case, there is no dispute that the first of these conditions, as explained in greater detail by the court at paras 80 82 of its Nomarchiaki judgment, is capable of being satisfied through the proposed Parliamentary procedure. The appeal focuses upon the second condition. It is argued that the hybrid bill procedure is not capable of achieving the objectives of the EIA Directive. The Court of Justice has considered the second condition on a number of occasions, and in its judgments has often repeated the same paragraphs, with minor variations. The most recent exposition is contained in the Nomarchiaki judgment. In paragraph 83, the court identified the fundamental objective of the EIA Directive: 83. As regards the second condition, it is clear from article 2(1) of Directive 85/337 that the fundamental objective of the Directive is to ensure that projects likely to have significant effects on the environment by virtue, inter alia, of their nature, size or location are made subject to an assessment with regard to their environmental effects before consent is given (see Case C 287/98 Linster [2000] ECR I 6917, para 52; Joined Cases C 128/09 to C 131/09, C 134/09 and C 135/09 Boxus and others [2011] ECR I 0000, [[2012] Env LR 320], para 41; and Case C 182/10 Solvay and others [2012] ECR I 0000, [[2012] Env LR 545], para 35). The fundamental objective is thus the assessment of the environmental effects of projects before consent is given. assessment must be conducted: In paragraph 84, the court identified the basis upon which the 84. In addition, the sixth recital in the preamble to Directive 85/337 states that the assessment must be conducted on the basis of the appropriate information supplied by the developer, which may be supplemented by the authorities and by the people who may be concerned by the project in question (see Case C 435/97 WWF and others [1999] ECR I 5613, para 61; Linster, paragraph 53; Boxus and others, para 42; and Solvay and others, para 36). The assessment must therefore be based upon appropriate information. to national legislatures: In paragraphs 85 and 86, the court explained how that approach applied 85. Consequently, the national legislature must have sufficient information at its disposal at the time when the project is adopted. In accordance with article 5(3) of Directive 85/337 and Annex IV thereto, the minimum information to be supplied by the developer is to include a description of the project comprising information on the site, design and size of the project, a description of the measures envisaged in order to avoid, reduce and, if possible, remedy significant adverse effects, and the data required to identify and assess the main effects which the project is likely to have on the environment (see Boxus and others, para 43, and Solvay and others, para 37). 86. There is however nothing to prevent the national legislature, when adopting a project, from using information gathered as part of an earlier administrative procedure and the EIA produced in that connection, provided that the EIA is based on information and knowledge that are not out of date. The EIA, which must be carried out before the decision making process, involves an examination of the substance of the information gathered as well as a consideration of the expediency of supplementing it, if appropriate, with additional data (see Case C 50/09 Commission v Ireland [2011] ECR I [873], para 40). The legislature must therefore have appropriate information at its disposal at the time when the project is adopted. In paragraphs 88 and 89 the court made some additional observations: However, a legislative act which does no more than simply ratify a pre existing administrative act, by merely referring to overriding reasons in the public interest, without the prior initiation of a substantive legislative process enabling the conditions stated in paragraph 79 of this judgment to be fulfilled, cannot be regarded as a specific legislative act within the meaning of article 1(5) of Directive 85/337 and is not therefore sufficient to exclude a project from the scope of that directive (see Boxus and others, para 45, and Solvay and others, para 39). In particular, a legislative act adopted without the members of the legislative body having had available to them the information mentioned in paragraph 85 of this judgment cannot fall within the scope of article 1(5) of Directive 85/337 (see Boxus and others, para 46, and Solvay and others, para 40). The references in those paragraphs to article 1(5) refer to the provision in Directive 85/337 corresponding to article 1(4) of the codified EIA Directive. It is clear from paragraph 88 that article 1(4) requires a substantive legislative process, rather than the mere ratification of an administrative decision. In other words, the decision must in reality be that of the legislature: its role must not be merely formal. Paragraph 89 reiterates the requirement that appropriate information should be available to the members of the legislative body. 88. Finally, in relation to this judgment, the court made clear in paragraph 90, as it had in its previous judgments, the responsibility of national courts to apply these principles to the legislation passed by their national legislatures: It is for the national court to determine whether those conditions have been satisfied. For that purpose, it must take account of both the content of the legislative act adopted and the entire legislative process which led to its adoption, in particular the preparatory documents and parliamentary debates (see Boxus and others, para 47, and Solvay and others, para 41). It is therefore for national courts, not the Court of Justice, to determine whether the conditions laid down by the court in that judgment have been satisfied in a particular national context: in particular, in relation to the second condition, whether the decision to adopt the project was the outcome of a substantive legislative process, and whether appropriate information was available to the members of the legislature at the time when the project was adopted. 89. In relation to the requirement that there should be the possibility of review by the national court, it is also relevant to note the Grand Chamber judgment in Case C 135/09 Boxus and others [2011] ECR I 9711; [2012] Env LR 320. In its judgment, the court stated at para 50 that neither the EIA Directive nor the Aarhus Convention applied to projects adopted by a legislative act satisfying the two conditions laid down by the court. The obligation imposed by article 11 of the Directive applied to other projects: that is to say, those adopted either by an act which was not legislative in nature or by a legislative act which did not fulfil those conditions (para 51). It follows that the reliance placed by the appellants in the present case upon article 11 of the Directive begs the question whether the proposed procedure would be incompatible with article 1(4): it is only if it is incompatible with that provision that article 11 applies. 90. At the same time, the Court of Justice also made it clear in its Boxus judgment that there must be the possibility of review of whether the conditions laid down by the court are satisfied. In that regard, the court stated at paras 54 55: 54. The requirements flowing from article 9 of the Aarhus Convention and article 10a of Directive 85/337 presuppose in this regard that, when a project falling within the ambit of article 6 of the Aarhus Convention or of Directive 85/337 is adopted by a legislative act, the question whether that legislative act satisfies the conditions laid down in article 1(5) of that directive and set out in paragraph 37 of the present judgment must be amenable to review, under the national procedural rules, by a court of law or an independent and impartial body established by law. 55. If no review procedure of the nature and scope set out above were available in respect of such an act, any national court before which an action falling within its jurisdiction is brought would have the task of carrying out the review described in the previous paragraph and, as the case may be, drawing the necessary conclusions by disapplying that legislative act. Articles 1(5) and 10a of Directive 85/337 correspond to articles 1(4) and 11 respectively of the EIA Directive in its codified form. The acceptance by the Court of Justice in para 50 of its Boxus judgment that the EIA Directive does not apply to projects adopted by a legislative act satisfying the two conditions set by the court has important implications for the submissions made on behalf of the appellants in the present case. Those submissions took as their premise that Parliamentary procedure must comply with the requirements of the Directive, and in particular with the requirements of article 6. They appeared to overlook the fact that the whole point of article 1(4) is to exempt legislation falling within its scope from those requirements. Exemption from the requirements of the Directive cannot be conditional upon compliance with them: otherwise, there would be no exemption. In particular, article 6(4) cannot apply to projects which are exempted from its requirements by article 1(4). As Advocate General Sharpston explained in the case of Boxus at point 56 of her opinion: Where a decision is reached by a legislative process, however, such public participation already exists. The legislature itself is composed of democratically elected representatives of the public. When the decision making process takes place within such a body, it benefits from indirect, but nevertheless representative, public participation. Is the application premature? In my view it is appropriate to consider the appellants contentions at the present stage, rather than waiting until legislation may have been enacted. In taking that view, I do not however accept all the arguments advanced in that regard on behalf of the appellants: in particular, the arguments based on articles 6(2) and 11(1) of the EIA Directive. The principal advantages of considering the appellants contentions at the present stage are practical. It is not in dispute that the Parliamentary procedure will be costly and time consuming. It is plainly convenient to have the point of law as to the effect of the EIA Directive, as a matter of EU law, decided before further time and expense are incurred on the basis, if the appellants are correct, of a mistaken understanding by Government. I am mindful of the importance of refraining from trespassing upon the province of Parliament or, so far as possible, even appearing to do so. The court can however consider the effect of the Directive under EU law without in my opinion affecting or encroaching upon any of the powers of Parliament. The Parliamentary authorities have not thought it necessary to seek to intervene in these proceedings, although the court was told that they have been kept informed of the parties cases. No bill or draft bill has been placed before the court. Nothing the court does or says at this stage will affect the supremacy of Parliament in respect of any bill presented to it; nor will it affect the power of the Secretary of State, or any other Member of Parliament, to present to Parliament whatever bill he thinks fit. Nor is it necessary for the court to express any view, let alone take any action, concerning any decision to lay any bill before Parliament or concerning Parliaments approving such a bill. The court can in my opinion resolve the issue raised by the appellants by performing its ordinary duty to interpret legislation. The only unusual feature is that the court is arguably doing so before any action falling within the ambit of that legislation has yet been taken. As was observed by Sir John Donaldson MR in R v HM Treasury, Ex p Smedley [1985] QB 657, 667, in relation to a challenge to a draft Order in Council: In many, and possibly most, circumstances the proper course would undoubtedly be for the courts to invite the applicant to renew his application if and when an order was made, but in some circumstances an expression of view on questions of law which would arise for decision if Parliament were to approve a draft may be of service not only to the parties, but also to each House of Parliament itself. The present case is of course concerned with a proposal to seek Parliamentary approval of a bill rather than a draft Order in Council; and there is in consequence a prior constitutional question, as I have explained, as to whether the issues of law raised by the appellants would indeed arise for decision in the event that the bill were to be enacted. In that respect, this case is distinguishable from Ex p Smedley, and from the analogous case of R v Electricity Commissioners, Ex p London Electricity Joint Committee (1920) Ltd [1924] 1 KB 171. The approach adopted in those cases nevertheless has much to recommend it in the present circumstances. Adopting the words of Younger LJ in the case of the Electricity Commissioners at p 213, the interference of the court in such a case as this, and at this stage, so far from being even in the most diluted sense of the words a challenge to its supremacy, may be an assistance to Parliament. If, on the other hand, the appellants contentions were not considered until after legislation had been enacted, those contentions would necessarily be directed against the compatibility with the Directive of the proceedings in Parliament which had led to the enactment. In particular, the appellants arguments, if reflecting those which the court has heard in this appeal, would focus upon the adequacy of the consideration of the environmental information by Members of Parliament, and the factors which might have influenced the way in which they voted. Unless authorised by the legislation to undertake such scrutiny, the court would then have to consider the conflict between such contentions and long established constitutional principles before such an argument could even be entertained. That is not to say that the possibility of a future challenge can be foreclosed, since the compatibility with the Directive of Parliamentary proceedings which have not yet been completed cannot be definitively determined in advance. Any future challenge could not however be based on contentions which had already been considered and rejected in the present proceedings. The compatibility of the procedure envisaged with the EIA Directive Turning then to the appellants contentions, there is no doubt that the procedure by which the Secretary of State proposes to seek Parliamentary authorisation for the HS2 project is a substantive legislative process. Parliaments role is not merely formal. It will be asked to give its consent to a bill which may undergo amendment during its passage through Parliament, and not merely to give formal ratification to a prior administrative decision. There is equally no reason to doubt at this stage that appropriate information will be available to the members of the legislature at the time when decisions are taken as to whether the project should be adopted: the procedures laid down in SOs 27A and 224A of the House of Commons, and in the corresponding standing orders of the House of Lords, are apt to ensure that such information is made available. In those circumstances, it is unnecessary for the purposes of this appeal to consider the question whether it can ever be constitutionally permissible for the courts to enquire into the adequacy of the information placed before Parliament during the passage of a bill. The appellants did not seek to argue that appropriate information could not be made available. As I have explained, their primary objection was to the fact that the decision whether to approve the principal elements of the project would be subject to the whip and thus to party oversight. Although this was not spelled out, the implication of their argument is that a decision by Parliament would be compatible with the EIA Directive only if Members of Parliament were allowed a free vote, regardless of their party allegiance or of their membership of the Government. There is however nothing in the case law of the Court of Justice to suggest that the influence of Parliamentary parties, or of Government, over voting in national legislatures is incompatible with article 1(4). As I have explained, the court has identified the two conditions that must be satisfied in order for the exemption conferred by article 1(4) to apply, and has left it to national courts to judge whether those conditions are met in particular circumstances. As I have explained in paras 98 and 99 above, there is no reason to doubt that those conditions are capable of being met in the present case. One of the ideas underlying the submissions on behalf of the appellants appears to be that members of the legislature must act independently and impartially when voting on whether to approve a project falling within the scope of article 1(4) of the EIA Directive, rather than being influenced by Parliamentary party politics. That idea appears to me however to be based on a misunderstanding of the constitutional role of the legislature. In that regard, there may be some value in referring to domestic cases where analogous issues have been considered. The case of Franklin v Minister of Town and Country Planning [1948] AC 87, for example, concerned the decision of a government minister to confirm a draft new town order following a public local inquiry. One of the grounds on which the decision was challenged was that the minister could not consider the report and the objections without a pre disposition to favour the confirmation of the draft order, since it took forward a government policy to which he was necessarily committed. That argument was rejected. The ministers decision making function was not of a judicial or quasi judicial character: the purpose of the report was to provide him with information, and the only question was whether he had genuinely considered the report and the objections when they were submitted to him. As Lord Thankerton explained, there is no universal rule requiring that decision makers must possess the independence and impartiality required of a court or tribunal: it is necessary to take account of the constitutional position of the decision maker, and of the nature of the decision. A similar approach can be seen in more recent cases concerned with the role of government policy in decisions concerned with infrastructure projects and development control, such as Bushell v Secretary of State for the Environment [1981] AC 75 and R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295. In the latter case, for example, Lord Hoffmann explained that in a democratic country, decisions as to what the general interest requires are made by democratically elected bodies or persons accountable to them (para 69), and that such a decision is not a judicial or quasi judicial act, but is the exercise of a power delegated by the people as a whole to decide what the public interest requires (para 74). The interpretation of the EIA Directive is of course a question of EU law, and cannot be determined by principles of our domestic law. EU law nevertheless draws inspiration from the constitutional traditions of the member states; and the observations in these decisions reflect constitutional principles which apply in other member states besides the United Kingdom. Furthermore, Parliamentary parties are recognised as playing a legitimate role in democratic decision making in other member states besides the United Kingdom (see, for example, article 53a of the German Basic Law, and the Federal Constitutional Courts judgment of 10 May 1977 on the Weapons Act 1972, BVerfGE 44, 308, paras 35 37). Their role at European level is expressly recognised in article 10(4) of the Treaty on European Union, which provides that political parties at European level contribute to forming European political awareness and to expressing the will of citizens of the Union. Article 12(2) of the Charter of Fundamental Rights of the European Union is in similar terms. The role of political parties in democratic decision making at national level is no less important. It would be surprising if the EIA Directive required the adoption of a radically different approach. The fundamental objective of the Directive is, as the Court of Justice has explained, to ensure that the environmental effects of projects are assessed before consent is given. The achievement of that objective requires that appropriate environmental information should be available for consideration before consent is given. It does not require that the decision whether to give consent should be influenced solely or decisively by that information. In particular, the question whether it is in the public interest to proceed with a project of national importance, such as HS2, may be a matter of national political significance. It is partly for that reason that such decisions may be considered appropriate for determination by the national legislature rather than by the ordinary processes of development control. The national legislatures of the member states are of course political institutions, whose decisions are likely to be influenced, possibly decisively, by the policy of the dominant Parliamentary party or parties. Article 1(4) of the EIA Directive is nevertheless based on the premise that the objectives of the Directive can be achieved where the decision is made by a body of that kind. That is not difficult to understand: the influence of party and governmental policy does not prevent the members of national legislatures from giving careful and responsible consideration to the information, including environmental information, which is relevant to the matters that they have to decide. The contention that the procedure currently envisaged by the Government will not permit an adequate examination of the environmental information to take place appears to me to be equally unpersuasive. I observe in the first place that there is nothing either in the text of article 1(4) of the EIA Directive, or in the exegesis of that text by the Court of Justice, to suggest that national courts are required not only to confirm that there has been a substantive legislative process and that the appropriate information was made available to the members of the legislature, but must in addition review the adequacy of the legislatures consideration of that information, for example by assessing the quality of the debate and examining the extent to which members participated in it. These are not matters which are apt for judicial supervision. Nor is there anything to suggest the inevitable corollary: that national courts should strike down legislation if they conclude that the legislatures consideration of the information was inadequate. There is a further difficulty with the contention that EU law requires the internal proceedings of national legislatures to be subject to judicial oversight of this nature. The separation of powers is a fundamental aspect of most if not all of the constitutions of the member states. The precise form in which the separation of powers finds expression in their constitutions varies; but the appellants contentions might pose a difficulty in any member state in which it would be considered inappropriate for the courts to supervise the internal proceedings of the national legislature, at least in the absence of the breach of a constitutional guarantee. Against this background, it appears unlikely that the Court of Justice intended to require national courts to exercise a supervisory jurisdiction over the internal proceedings of national legislatures of the nature for which the appellants contend. There is in addition much to be said for the view, advanced by the German Federal Constitutional Court in its judgment of 24 April 2013 on the Counter Terrorism Database Act, 1 BvR 1215/07, para 91, that as part of a co operative relationship, a decision of the Court of Justice should not be read by a national court in a way that places in question the identity of the national constitutional order (Im Sinne eines kooperativen Miteinanders zwischen dem Bundesverfassungsgericht und dem Europischen Gerichtshof . darf dieser Entscheidung keine Lesart unterlegt werden, nach der diese offensichtlich als Ultra vires Akt zu beurteilen wre oder Schutz und Durchsetzung der mitgliedstaatlichen Grundrechte in einer Weise gefhrdete . , dass dies die Identitt der durch das Grundgesetz errichteten Verfassungsordnung in Frage stellte). Counsel for the appellants relied however upon a statement made by Advocate General Sharpston in the Boxus case at point 84: In my view, in order to assess whether that has happened in any particular case, the national court will need to examine the following aspects (b) process: was the appropriate procedure respected and was the preparation time and discussion time sufficient for it to be plausible to conclude that the people's elected representatives were able properly to examine and debate the proposed project? Similarly in the Nomarchiaki case Advocate General Kokott referred at points 136 137 to a requirement that the legislature performs its democratic function correctly and effectively, and to the need to clarify whether the legislature was able properly to examine and debate the environmental effects of the project. I observe however, first, that those statements were not endorsed by the Court of Justice, and secondly, that their focus is upon the ability of the legislature to examine and debate the proposed project, rather than upon a qualitative assessment of the legislatures actual consideration of the proposal. In the present case, there is in any event no reason to suppose that Members of Parliament will be unable properly to examine and debate the proposed project. Although the environmental statement made available to Members of Parliament may be of a size which reflects the scale of the project and the complexity of its impact upon the environment, it can be expected to include a non technical summary of the information, in accordance with the 2011 Regulations (which transpose, in this respect, Annex IV to the EIA Directive). That can be expected to include information about the reasons for choosing HS2 rather than the main alternatives, as required by Annex IV to the Directive. Members of Parliament can also be expected to be provided with a summary of the comments received on the environmental statement, prepared by an independent assessor, in accordance with SO 224A. That summary can be expected to encompass any comments made by the appellants which advance the case for their optimised alternative. Members of Parliament can be expected to have that information well in advance of the second reading debate on the bill: as I have explained, the summary of the comments received must be submitted to the House at least 14 days prior to the bills receiving its second reading; and it is implicit in SO 224A that the environmental statement must itself have been submitted at least three months or so earlier (since the public must be allowed a period of at least 56 days to comment on the statement, and the assessor must be allowed at least 28 days to prepare the summary). It is in any event unrealistic for the appellants to focus solely upon the second reading debate, as if it were the only opportunity for Members of Parliament to consider the environmental information. Active political debate on the HS2 project, including its environmental impact, has already been under way for some time, and it is reasonable to expect that Members of Parliament have been, and will continue to be, contacted about it by their constituents and lobbied by interested organisations, such as the appellants. As the bill proceeds through Parliament, and political interest in the project becomes more intense, Members of Parliament will have even more reason to be, and to wish to be, well informed about the project. As counsel for the respondents observed in relation to the opportunities for Members of Parliament to consider and discuss the proposal, the second reading debate is in reality the tip of the iceberg. Without therefore considering the fundamental constitutional objection to this line of argument that the court would be presuming to evaluate the quality of Parliaments consideration of the relevant issues, during the legislative process leading up to the enactment of a statute I conclude that the argument is based on an incorrect interpretation of the EIA Directive, and is in addition unsupported by the evidence as to the procedure which might be followed. I do not consider that the court is under any obligation to make a preliminary reference to the Court of Justice before reaching a decision on this matter. The Court of Justice has already given a clear account of the relevant principles: the passages which I have cited from its Nomarchiaki judgment have been repeated time and again, in judgments which include two given by a Grand Chamber of the court (in Nomarchiaki itself, and in the earlier case of Boxus and others [2011] ECR I 9711, [2012] Env LR 320). The court has made it clear that it expects national courts to apply the principles which were established in those judgments in the context of their own national systems. Conclusion For these reasons, and those given by Lord Carnwath and Lord Sumption, I would dismiss the appeals. I wish also to express my agreement with the additional observations of Lord Neuberger and Lord Mance. LORD SUMPTION (with whom Lord Neuberger, Lord Mance, Lord Kerr and Lord Reed agree) I agree that this appeal should be dismissed for all the reasons given by Lord Carnwath and Lord Reed. I also agree with the additional observations of Lord Neuberger and Lord Mance. My purpose in adding yet another judgment is to explain why, like Lord Carnwath, I regard the proposition that the Governments command paper falls outside the scope of the SEA Directive as acte clair and as such unsuitable for a preliminary reference to the Court of Justice of the European Union. The starting point is that the SEA Directive plainly does not require an environmental assessment to be carried out for all plans or programmes whose implementation would have a major impact on the environment. Even on the footing that a plan or programme is required (or regulated) by legislative, regulatory or administrative provisions within Article 2(a) and has a significant environmental effect within Article 3.1, an environmental assessment is still not required unless the plan or programme in question set[s] the framework for future development consent within Article 3.2(a). The rationale for this is straightforward. It is common for development consent for specific projects to be affected by modern schemes of development control at different levels of generality. For example, in England planning policies may currently be laid down by the National Planning Policy Framework or local development plans or by national policy statements for nationally significant infrastructure projects. Areas may be zoned for more or less intensive standards of planning control, or for particular types of development or none, or for the application by planning authorities of special criteria in defined areas. The legal effect of these general policies may be weaker or stronger. In some cases development consent must be given or refused in accordance with the policy subject to limited exceptions, while in others the obligation of the planning authority is only to have regard to or take account of it. Similar approaches to planning policy can be found in other European countries. The effect of the EIA Directive is that subject to limited exceptions an environmental impact assessment is required before development consent can be granted for any specific project of a kind specified in the Annexes which is likely to have a significant environmental impact. The effect of the SEA Directive is that where the grant or refusal of development consent for a specific project is governed by a policy framework regulated by legislative, regulatory or administrative provisions, the policy framework must itself be subject to an environmental assessment. The object is to deal with cases where the environmental impact assessment prepared under the EIA Directive at the stage when development consent is granted is wholly or partly pre empted, because some relevant factor is governed by a framework of planning policy adopted at an earlier stage. None of this means that the only policy framework which counts is one which is determinative of the application for development consent, or of some question relevant to the application for development consent. What it means is that the policy framework must operate as a constraint on the discretion of the authority charged with making the subsequent decision about development consent. It must at least limit the range of discretionary factors which can be taken into account in making that decision, or affect the weight to be attached to them. Thus a development plan may set the framework for future development consent although the only obligation of the planning authority in dealing with development consent is to take account of it. In that sense the development plan may be described as influential rather than determinative. But it cannot be enough that a statement or rule is influential in some broader sense, for example because it presents a highly persuasive view of the merits of the project which the decision maker is perfectly free to ignore but likely in practice to accept. Nor can it be enough that it comes from a source such as a governmental proposal or a ministerial press statement, or a resolution at a party conference, or an editorial in a mass circulation newspaper which the decision maker is at liberty to ignore but may in practice be reluctant to offend. All of this is inherent in the concept of a framework and in the purpose of the Directive. It is consistent with the requirement of Article 2(a) that the plan or programme must be regulated by legislative, regulatory or administrative provisions, for whatever may precisely be meant by that, it clearly indicates a degree of prescription. It corresponds to the test adopted by the CJEU in Terre Wallonne ASBL and Inter Environnement Wallonie ASBL v Rgion Wallonne (Joined Cases C 105/09 and C 110/09) [2010] ECR I 5611 at para 55 (contains measures compliance with which is a requirement for issue of the consent); in Inter Environnement Bruxelles ASBL v Rgion de Bruxelles Capital (Case C 567/10) [2012] 2 CMLR 909 at para 30 (define the criteria and the detailed rules for the development of land and normally concern a multiplicity of projects whose implementation is subject to compliance with the rules and procedures provided for by those measures). That test was adopted and restated by the Grand Chamber in Nomarchiaki Aftodioikisi Aitoloakarnanias v Ipourgos Perivallontos Khorotaxias kai Dimosion Ergon (Case C 43/10) [2013] Env. LR 2 453, at para 95 (defines criteria and detailed rules for the development of land and which subjects implementation of one or more projects to rules and procedures for scrutiny). The two last named cases considered the point in the context of an issue about the definition of plans and programmes in Article 2(a). But the required content of a plan or programme was clearly relevant to that definition, and it was to this that the Court was referring. These statements echo the language of the Commissions Guidance paper, Implementation of Directive 2001/42 on the assessment of the effects of certain plans and programmes on the environment (2001) at paras 3.5 and 3.6, where Article 3.2(a) is described, at para 3.23, as referring to a plan or programme which: contains criteria or conditions which guide the way the consenting authority decides an application for development consent. Such criteria could place limits on the type of activity or development which is to be permitted in a given area; or they could contain conditions which must be met by the applicant if permission is to be granted; or they could be designed to preserve certain characteristics of the area concerned (such as the mixture of land uses which promotes the economic vitality of the area). The main reason why the command paper cannot require an environmental assessment under the SEA Directive is that it is nothing more than a proposal. Naturally, the fact that it is a government proposal and appears in a command paper makes it influential in the broader sense that I have mentioned above. It means it is politically more likely to be accepted. But the command paper does not operate as a constraint on the discretion of Parliament. None of the factors which bear on the ultimate decision whether to pass the hybrid bill into law have been pre empted, even partially. I accept that this means that governments may in some cases be able to avoid the need for an environmental assessment by promoting specific legislation authorising development. But that is not because the SEA Directive has no application to projects authorised in that way. It is because (i) the SEA Directive does not require member states to have plans or programmes which set the framework for future development consent, but only regulates the consequences if they do; (ii) where development consent is granted by specific legislation there are usually no plans or programmes which set the framework for that consent; and (iii) legislative grants of development consent are exempt from the EIA Directive by virtue of Article 1(4), subject to conditions which replicate some of the benefits of a requirement for an environmental impact assessment, and which like every other member of the Court, I consider to be satisfied by the proposed hybrid bill procedure. We have not heard argument on the possibility floated by Lady Hale that the hybrid bill itself, if passed, might set the framework for future development consent. It is not an issue on this appeal and it would be premature to raise it at a stage when the bill has only recently been published and the final form of any legislation is not known. I therefore express no final view on the point. But as at present advised, I think it clear that the bill if passed will not set the framework for future development consent. Clause 19 deems planning permission to be granted and authorises the development. An Act in these terms would not be part of the process by which the development consent is granted. It would be the ultimate decision. It would not set the framework for future development consent, because it would itself be the development consent. The decision whether to make a preliminary reference under Article 267 of the Treaty on the Functioning of the European Union is for the national court alone. As the court of final appeal for the United Kingdom, the Supreme Court must make a reference unless the correct application of Community law [is] so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved: Srl CILFIT v Ministry of Health [1982] ECR 3415 at para 16. A proposition may be obvious because on a question of interpretation the meaning of the text is beyond reasonable dispute, or because the CJEU has decided the question. In formal Recommendations issued following upon the adoption of new rules of procedure in September 2012 (OJ C338/1, 6.11.2012), the Court of Justice put the matter in this way: 12. However, courts or tribunals against whose decisions there is no judicial remedy under national law must bring such a request before the Court, unless the Court has already ruled on the point (and there is no new context that raises any serious doubt as to whether that case law may be applied in that instance), or unless the correct interpretation of the rule of law in question is obvious. 13. Thus, a national court or tribunal may, in particular when it considers that sufficient guidance is given by the case law of the Court of Justice, itself decide on the correct interpretation of European Union law and its application to the factual situation before it. However, a reference for a preliminary ruling may prove particularly useful when there is a new question of interpretation of general interest for the uniform application of European Union law, or where the existing case law does not appear to be applicable to a new set of facts. The question whether the command paper is within the scope of the SEA Directive is in my view wholly unsuitable for a preliminary reference to the CJEU. In the first place, although there may be room for argument about what constitutes a plan or programme required by legislative, regulatory or administrative provisions, article 3.2(a) of the SEA Directive is couched in plain, untechnical language. The concept of setting a framework for future development consent is perfectly straightforward against the undisputed background that modern systems of development control commonly lay down criteria for granting development consent for specific projects. Second, in two recent decisions, one being by a Grand Chamber, the CJEU has ruled that the Directive covers measures which define the criteria and detailed rules for development. It is now for national courts to apply the law as the CJEU has declared it. The relevant statements of principle are brief, as they commonly are in judgments of the CJEU. But there is nothing unclear about them, and nothing in the context of the command paper which makes the application of the test uncertain or problematical. No purpose would be served by referring to the CJEU the question whether they really meant it. Third, even if we were to refer that question, the nature and status of a command paper of this kind is a question of national law and practice. The outcome of such a reference would be determined by our finding that the command paper was no more than a proposal and not a framework for decision making. On the question whether to refer the question of the application of the EIA Directive to the hybrid bill procedure. I am content like the rest of the Court to adopt the observations of Lord Reed. LADY HALE I have not found this an easy case. HS2 will be the largest infrastructure project carried out in this country since the development of the railways in the 19th century. Whatever the economic and social benefits it may bring, it will undoubtedly have a major impact upon the environment. There has never been a full environmental assessment of HS2 as against the alternative ways of developing the railway system, including ways which do not involve constructing new railway lines capable of carrying trains travelling at 250 miles per hour, such as the so called optimised alternative favoured by the 51M, the body to which the local authorities involved in this case (and others) belong. One might have thought that it was the object of Directive 2001/42/EC, commonly called the Strategic Environmental Assessment Directive (the SEA Directive), but actually entitled on the assessment of the effects of certain plans and programmes on the environment, to ensure that such an assessment took place. Recitals (4) and (5) to the SEA Directive say this: (4) Environmental assessment is an important tool for integrating environmental considerations into the preparation and adoption of certain plans and programmes which are likely to have significant effects on the environment in the Member States, because it ensures that such effects of implementing plans and programmes are taken into account during their preparation and before their adoption. (5) The adoption of environmental assessment procedures at the planning and programming level should benefit undertakings by providing a more consistent framework in which to operate by the inclusion of the relevant environmental information into decision making. The inclusion of a wider set of factors in decision making should contribute to more sustainable and effective solutions. As Advocate General Kokott explained in her opinion in Terre wallonne ASBL and Inter Environnement Wallonie ASBL v Rgion Wallonie (Joined Cases C 105/09 and C 110/09) [2010] I ECR 5611, the environmental assessment for which the SEA Directive provides is carried out as part of decision making procedures which precede the procedures for granting consent for individual projects, but may affect them (para 2). Experience with Directive 85/337/EEC, the Environmental Impact Assessment Directive (the EIA Directive), had shown that, at the time when projects came to be assessed, major effects upon the environment had already been established on the basis of earlier planning measures. It was therefore appropriate for such effects on the environment to be examined at the time of preparatory measures and taken into account in that context (para 32). She gave this example, which has a clear resonance with this case (para 33): is An abstract routing plan, for example, may stipulate that a road is to be built in a certain corridor. The question whether alternatives outside that corridor would have less impact on the environment therefore possibly not assessed when development consent is subsequently granted for a specific road construction project. For this reason, it should be considered, even as the corridor is being specified, what effects the restriction of the route will have on the environment and whether alternatives should be included. If a strategic environmental assessment is required, the SEA Directive stipulates a report in which the likely significant effects on the environment of implementing the plan or programme, and reasonable alternatives taking into account the objectives and the geographical scope of the plan or programme, are identified, described and evaluated (article 5). This has to be carried out during the preparation of the plan or programme and before its adoption (article 4). This evaluation of alternatives is of a different order from that required for projects covered by the EIA Directive, which only requires an outline of the main alternatives studied by the developer and an indication of the main reasons for the choice. Ouseley J decided that, if an SEA was required for the HS2 scheme as a whole, it has not yet been done, and the Court of Appeal agreed. This is now common ground between the parties. However, Ouseley J also decided that such a report would not have to cover non high speed alternatives as well as alternative high speed routes and that decision is not under appeal. It would appear, therefore, that even if successful, this litigation would not succeed in achieving what the parties really want. It is clear that the Directive does not require a strategic environmental assessment for all schemes which are likely to have significant effects upon the environment before they are formally adopted. It would have been so much simpler if it did. But, as its title and recital (4) say, it only applies to certain plans and programmes. Two requirements are relevant for our purposes. First, the scheme must fall within the definition of plans and programmes in article 2(a). As far as relevant to this case, this reads: plans and programmes shall mean plans and programmes. as well as any modifications to them which are subject to preparation and/or adoption by an authority at national, regional or local level or which are prepared by an authority for adoption, through a legislative procedure by Parliament or Government, and which are required by legislative, regulatory or administrative provisions; (emphasis supplied) Secondly, the relevant provision requiring an environmental assessment is that contained in article 3(2)(a): . an environmental assessment shall be carried out for all plans and programmes (a) which are prepared for . transport . and which set the framework for future development consent of projects listed in Annexes I and II to Directive 85/337/EEC. (emphasis supplied) Construction of lines for long distance railway traffic is one of the projects listed in Annex I to Directive 85/337/EEC, now consolidated in Directive 2011/92/EU. This litigation is only concerned with the Governments command paper, High Speed Rail: Investing in Britains Future Decisions and Next Steps (2012, Cm 8247) (the DNS). The appellants argue that it was a plan or a programme and that it set the framework for future development consent of a project for the construction of lines for long distance railway traffic. However, the DNS is only one part of a long and complex process and it is entirely possible that no part of that process constitutes a plan or programme within the meaning of the Directive. For our purposes, the process began with the Command Paper, High Speed Rail (2010, Cm 7827), published by the Labour Government in March 2010. This set out the twin goals of new capacity and improved connectivity, to be achieved sustainably, without unacceptable environmental impacts; declared that high speed rail is the most effective way to achieve these goals, offering a balance of capacity, connectivity and sustainability benefits unmatched by any other option; and announced a Y shaped network, linking London to Birmingham, Manchester, the East Midlands, Sheffield and Leeds, connecting onto existing tracks going further north. Formal public consultation on the detailed recommendations for the first phase, from London to Birmingham, on the strategic case for high speed rail, and on the core scheme, would begin in the autumn of 2010. A further consultation would take place in 2012 on the detailed proposals for phase 2. Only after both consultations were completed would the Government make its final decisions, with a view to promoting a hybrid bill to cover the whole of the Y shaped network. When the coalition Government came into power following the general election in May 2010, it declared that it was committed to taking forward high speed rail, but that this would have to be achieved in stages. Formal public consultation on the matters proposed in the March 2010 command paper was opened in February 2011. The Government promised to announce the outcome and its final decisions on its strategy for high speed rail before the end of 2011. The DNS was in fact published in January 2012. This reported the Governments conclusions, both as to the high speed rail strategy and as to the detailed proposals for phase 1 of the route. But instead of a single hybrid bill covering the whole of the core network, it was now proposed to have two bills, the first for phase 1 and the second for phase 2. Steps would also be taken to safeguard the phase 1 route from incompatible development by a Direction under article 25 of the Town and Country Planning (Development Management Procedure) (England) Order 2010 (SI 2010/2184). Following consultation, this was done in July 2013. Public consultation on the preferred route for phase 2 also began in July 2013. The proposals are broadly in line with the strategy set out in the DNS. A hybrid bill for phase 2 is proposed to follow the general election in May 2015. The hybrid bill for phase 1 received its first reading in the House of Commons on 25 November 2013. As expected, it does three main things. First, it gives legal authority to carry out the works, which are described in detail in schedule 1. Second, it gives the necessary planning consents to carry out the development, subject to a few details which are left to local planning authorities. And third, it authorises the Secretary of State compulsorily to purchase or acquire other rights over the land needed to complete the works, modifying the usual procedures for doing so. The bill is accompanied by a massive environmental statement (apparently designed to comply with the requirements of the EIA Directive, should this be necessary). We are being asked in this case to consider whether there should have been an SEA before the DNS was adopted. This raises two questions. First, was the DNS required by legislative, regulatory or administrative provisions within the meaning of article 2(a)? Second, did it set the framework for future development consent of a project for the construction of lines for long distance railway travel, within the meaning of article 3(2)(a)? In Inter Environnement Bruxelles ASBL & Others v Rgion de Bruxelles Capitale (Case C 567/10) [2012] 2 CMLR 909, the European Court of Justice (4th Chamber) held that required included plans and programmes whose adoption is regulated by national legislative or regulatory provisions, which determine the competent authorities for adopting them and the procedure for preparing them (para 31). As Lord Neuberger and Lord Mance point out, this was an expansive interpretation of a phrase which had been introduced to limit the scope of the plans and programmes covered by the obligation. But I do not find either word, required or regulated, easy to apply to the situation we have here. A massive scheme such as this cannot take place without comprehensive authorisation of the works, the land development they entail, and the compulsory purchase and other measures which will be required to do them. It is obviously completely impracticable to undertake such a scheme depending upon multiple individual applications for planning and related consents, together with the use of ordinary compulsory purchase powers. As Sullivan LJ pointed out in the Court of Appeal, development consent for a nationally important project such as HS2 could have been sought by way of the development consent procedure for nationally significant infrastructure projects under the Planning Act 2008, or by way of an order for a scheme of national significance under the Transport and Works Act 1992. As he also observed, the Government accepted that if either of these procedures had been adopted, the DNS would have set the framework because it would have been a material consideration which the decision maker under the 2008 Act or the 1992 Act would have been under a legal obligation to take into account (para 151). He found it difficult to accept that the fact that the Government has chosen instead to adopt the hybrid bill procedure makes all the difference. I have considerable sympathy with him. Can it be said that the command paper which preceded the Bill was required or regulated by our administrative provisions? It is, of course, how one would expect such a scheme to proceed with a succession of government proposals, consultations and conclusions. A complex Bill like this does not suddenly spring onto the Parliamentary stage without any prior consultation with the public. Formal consultations such as this are governed by the Governments Code of Practice on Consultation. The 2010 command paper, High Speed Rail, promised formal consultations on each phase, followed by decisions and a hybrid bill. The only change since then has been to split the scheme into two phases. In that sense, the 2010 command paper did determine the competent authorities for adopting them and the procedure for preparing them, but of course it did not do so in any legally binding sense. In the Court of Appeal, both the majority and the minority judgments regarded the two questions as inter linked. Both agreed that, if the DNS did indeed set the framework within the meaning of article 3(2)(a), it would be difficult to say that it was not required by administrative provisions for the purpose of article 2(a): [2013] EWCA Civ 920; [2013] PTSR 1194, paras 71 and 180. This is akin to the process of reasoning adopted by the CJEU adopted in Inter Environnement Bruxelles ASBL v Bruxelles: because the Court regarded the measure as setting the framework, they reasoned backwards that it was regulated even if not legally required and thus fell within article 2(a). But in any event did the DNS set the framework? It is clear from the Terre wallonne case, that a scheme adopted by national legislation can indeed be a plan or a programme within the meaning of article 2(a). The debate in that case was about how binding its provisions had to be upon subsequent planning decisions. Advocate General Kokott pointed out that plans and programmes may, however, influence the development consent of individual projects in very different ways and, in so doing, prevent appropriate account from being taken of environmental effects. Consequently the SEA Directive is based on a very broad concept of framework (para 64). The term had to be construed flexibly. It does not require any conclusive determinations, but also covers forms of influence that leave room for some discretion (para 65). She concluded: To summarise, it can therefore be said that a plan or programme sets a framework in so far as decisions are taken which influence any subsequent development consent of projects, in particular with regard to location, nature, size and operating conditions or by allocating resources (para 67). In Walton v Scottish Ministers [2012] UKSC 44, [2013] PTSR 51, para 17, Lord Reed quoted paragraphs 64 and 65 of Advocate General Kokotts opinion. He also pointed out that, in cases where an SEA is not automatically required by article 3(2)(a), but may be required by article 3(3) or 3(4), Member States are required by article 3(5) to take into account the criteria set out in Annex II. These include the degree to which the plan or programme sets a framework for projects and other activities, either with regard to the location, nature, size and operating conditions or by allocating resources. It is implicit in this, he observed, that a framework can be set without the location, nature, or size of the projects being determined. This supports the view that influence will do. The actual question in Terre wallonne was whether action programmes required by Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates from agricultural sources were plans and programmes for the purpose of the SEA Directive. Neither the Advocate General nor the Court of Justice had any difficulty in deciding that they were. Hence the Court did not address itself to the degree of influence upon later decisions which the plan or programme had to have. It answered the question thus: . an action programme adopted pursuant to article 5(1) of Directive 91/676 is in principle a plan or programme covered by article 3(2)(a) of Directive 2001/42 since it constitutes a plan or programme within the meaning of article 2(a) of the latter directive and contains measures compliance with which is a requirement for issue of the consent that may be granted for carrying out projects listed in Annexes I and II to Directive 85/337 (para 55) (emphasis supplied). Nor did the Grand Chamber answer the question directly in Nomarchiaki Aftodioikisi Aitoloakarnanias & Others (Case C 43/10) [2013] Env LR 453. It quoted a phrase used by the Court in Inter Environnement Bruxelles ASBL v Bruxelles, when rejecting the submissions of the Belgian, Czech and UK Governments that the Directive did not apply to measures which were not required by rules of law: That interpretation would thus run counter to the Directives aim of establishing a procedure for scrutinising measures likely to have significant effects on the environment, which define the criteria and the detailed rules for the development of land and normally concern a multiplicity of projects whose implementation is subject to compliance with the rules and procedures provided for by those measures (para 30). (emphasis supplied) Thus in Nomarchiarcki, the Grand Chamber stated that: It is not evident that the project concerned constitutes a measure which defines criteria and detailed rules for the development of land and which subjects implementation of one or more projects to rules and procedures for scrutiny (para 95) (emphasis supplied). It is, however, obvious that both the Chamber in Inter Environnement Bruxelles and the Grand Chamber in Nomarchiaki were addressing the question of whether the project fell within the definition of a plan and programme in article 2(a). They were not directly addressing the further question of whether it set the framework within the meaning of article 3(2)(a) at all. Rather, the Court in Inter Environnement Bruxelles was reasoning that certain plans and programmes which clearly did set the framework for the purpose of article 3(2)(a) in the sense described would be excluded if a narrow view were taken of required for the purpose of article 2(a). The upshot, it seems to me, is that the Court has not yet adopted the expansive view of setting the framework proposed by Advocate General Kokott in Terre wallonne. But neither has it expressly rejected it, because the question simply did not arise in that case. Nevertheless, it could be said that the words used in Nomarkchiaki are consistent with what the Court did say in Terre wallonne, when addressing the framework question (emphasised at para 147 above). It could also be said that, when the Grand Chamber referred in Nomarchiaki to the Directives aim it must have been referring to recitals (10) and (11), each of which refers to setting a framework for future development consent of projects. This lends support to the view, so cogently explained by Lord Sumption, that the framework has to be one which those granting such consent must at the very least take into account. But even if we do regard the emphasised words in both cases as an exhaustive definition, I originally found it hard to see how they would not apply to the hybrid Bill. Once passed, it would be at the end of the spectrum, referred to by the Court of Appeal in the passage quoted by Lord Carnwath at para 29 above, where the plan or programme conclusively determines whether consent is given and all material conditions (their para 54). Article 2(a) expressly contemplates that a plan or programme may not only be prepared and adopted by a national, regional or local authority, but may be prepared by an authority for adoption through a legislative procedure by Parliament or Government. In Terre wallonne, Advocate General Kokott explained that this did not mean that every possible law should be subject to an environmental assessment. The requirement that it be required meant that freely taken political decisions on legislative proposals are not therefore subject to the obligation to carry out assessments (para 41). But that requirement is at least arguably fulfilled in our case. This litigation is solely about the DNS. We have not heard any argument about the Bill itself. There may be answers to the question of the Bill, as there so often are when issues are exposed to the glaring light of adversarial argument. The most obvious one is that the Act will do more than set the framework: it will grant the necessary planning consents, and a great deal more, itself. It may well be, therefore, that we leap straight from a mere Government proposal in the DNS to the full blown development consent in the Act without anything which sets the framework in between. Hence I have considerable sympathy with Sullivan LJ: An interpretation of framework in article 3(2)(a) which would enable the governments of member states to carve out an exemption from the SEA Directive for those projects for which they choose to obtain development consent by specific acts of national legislation would be contrary to the purposive approach to the interpretation of the Directive adopted by the Court of Justice in the Terre wallonne and Inter Environement Bruxelles cases. (para 164) I also think that the disagreement in the Court of Appeal was more properly characterised by him as a disagreement as to whether the fact that a member state chooses to adopt a process of granting development consent for a major project which will have a significant environmental effect by way of an act of national legislation is sufficient, of itself, to place the Governments adoption of its plan or programme outwith the scope of the European wide strategic environmental protection conferred by the SEA Directive (para 188). I was therefore attracted to the suggestion that we should refer a question along the following lines to the CJEU: are plans and programmes which set the framework for the purpose of article 3(2(a) of the SEA Directive limited to those which define criteria and detailed rules for the development of land or may they include measures which will have a powerful but not necessarily constraining or determinative effect upon the ultimate decision maker? This is not the same as asking the CJEU whether the DNS is such a plan or programme. I entirely agree that that is a matter for us. The question is what test we should adopt when considering it. I have, however, been persuaded that such a reference is unnecessary, for four main reasons. First and foremost, however briefly, the Grand Chamber in Nomarchiaki has adopted a definition which is consistent with the aims of the Directive as set out in the Recitals. Secondly, the aim of the Directive is not to ensure that all development proposals which will have major environmental effects are preceded by a strategic environmental assessment; rather, it is to ensure that future development consent for projects is not constrained by decisions which have been taken upstream without such assessment, thus pre empting the environmental assessment to be made at project level. Thirdly, it is by no means clear that quashing the DNS would de rail the Bill process, at least now that the Bill has received its first reading; we have no power to prevent Parliament from considering it; it is a matter for Parliament whether there is a sufficient risk that the Act itself would fall within the Directive to justify taking the precautionary step of commissioning a strategic environmental assessment at this stage (we are told that it would take six to 12 months to complete). Fourthly, however, it has been decided that such an assessment need not do what many, if not all, of the parties and the objectors would wish it to do, which is to compare the environmental effects of HS2 with those of the alternative methods of increasing capacity and connectivity on our railways. Mere delay is not a good reason for making a reference (although some might think it a good reason for asking for one). I have not, however, entertained similar doubts in relation to the EIA Directive. In that respect I am in full agreement with the judgment of Lord Reed. But the conclusion is that I, too, would dismiss these appeals. Lord Neuberger and Lord Mance (with whom Lady Hale, Lord Kerr, Lord Sumption, Lord Reed and Lord Carnwath agree) We agree that these appeals should be dismissed. The issues arising under the Directives However, the issues that have had to be addressed only arise as a result of decisions of the European Court of Justice, which we have found problematic and which call for some further observations. The first decision concerns the word required in the phrase required by legislative, regulatory or administrative provisions in article 2(a) of the SEA Directive. The Fourth Chamber of the Court of Justice has on 22 March 2012 held, disagreeing with Advocate General Kokotts Opinion, that required means, not required, but regulated (Inter Environnement Bruxelles Asbl v Rgion de Bruxelles Capitale Case C 567/10, [2012] 2 CMLR 909). The second set of decisions concerns the exclusion in article 1(5) of the Directive 85/337/EC (amended by Directive 2003/35/EC) the predecessor of article 1(4) of the EIA Directive of projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process. The Court has held that this word since means, in effect provided that so that the exclusion only operates subject to satisfaction of a condition that the objectives of the Directive, including that of supplying information, must be achieved through the legislative purpose (World Wildlife Fund (WWF) v Autonome Provinz Bozen Case C 435/97, [1999] ECR I 5613, para 57, Nomarchiaki Aftodioikisi Aitoloakarnanias Case C 43/10 [2013] Env LR 453, para 79) and only applies where the legislative process has enabled the objectives pursued by the Directive . to be achieved (State of the Grand Duchy of Luxembourg v Linster Case C 287/98 [2000] ECR I 6917, para 59). We return to the implications below. The constitutional basis of European Union legislation Under the European Treaties, the Council of Ministers, now acting jointly with the European Parliament, serves as the European legislator; the Commission proposes legislative measures and oversees the application of European law; and the Court of Justice is charged to ensure that, in the interpretation and application of the Treaties, the law is observed and to give rulings on the interpretation of Union law as well as the validity of acts adopted by the European institutions: articles 220 and 234 of the pre Lisbon EC Treaty and now articles 16 and 19(1) TEU and article 267 TFEU. The Council of Ministers is composed of representatives of the elected national governments of Europe, and the European Parliament adds an additional democratic element to the enactment of European legislation. It was and is at the heart of the Community and now Unions legitimacy that decisions reached by the Council of Ministers, in conjunction with the European Parliament, are given effect. The principle of legal certainty is also a fundamental principle of European law: Edward and Lane on European Union Law, para 6.134, citing R (International Association of Independent Tanker Owners (Intertanko)) v Secretary of State for Transport Case C 308/06 [2008] 2 Lloyds Rep 260, para 69 where the Court said: The general principle of legal certainty, which is a fundamental principle of Community law, requires, in particular, that rules should be clear and precise, so that individuals may ascertain unequivocally what their rights and obligations are and may take steps accordingly (see [Belgium v Commission (Case C 110/03) [2005] ECR I 2801, para 30, and IATA and ELFAA (Case C 344/04) [2006] ECR I 403, para 68]). The principle is part of the legal order of the Community, now the Union, as the Court said in Deutsche MilchKontor GmbH v Federal Republic of Germany Joined Cases 205 215/82 [1983] ECR 2633, para 30. Union citizens and others need to know and are entitled to expect that the legislation enacted by their European legislator will be given its intended effect. That does not exclude the vital role of case law in interpreting legislation. But interpretation is only necessary when legislation, construed in the light of its language, context and objectives, is unclear. A national court is required under European law to refer to the Court of Justice any question of interpretation unless it reaches the conclusion that the answer is so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved( CILFIT Srl v Ministry of Health (Case 283/81) [1982] ECR 3415, para 16). The well known principles are stated in CILFIT and were reiterated in Junk v Khnel (Case C 188/03) [2005] ECR I 885. The Court of Justice warned national courts in CILFIT that: (i). before coming to such a conclusion, the national court or tribunal must be convinced that the matter is equally obvious to the courts of the other Member States and to the Court of Justice (para 16), (ii). the existence of such a possibility must be assessed on the basis of the characteristic features of Community law and the particular difficulties to which its interpretation gives rise (para 17), (iii). To begin with, it must be borne in mind that Community legislation is drafted in several languages and that the different language versions are all equally authentic. An interpretation of a provision of Community law thus involves a comparison of the different language versions (para 18), (iv). It must also be borne in mind, even where the different language versions are entirely in accord with one another, that Community law uses terminology which is peculiar to it. Furthermore, it must be emphasized that legal concepts do not necessarily have the same meaning in Community law and in the law of the various Member States (para 19). The Court concluded with a more general observation about the principles according to which it will interpret European legislation: Finally, every provision of Community law must be placed in its context and interpreted in the light of the provisions of Community law as a whole, regard being had to the objectives thereof and to its state of evolution at the date on which the provision in question is to be applied. (para 20) In Edward and Lane on European Union Law, 3rd Ed (2013), the authors, after setting out the passages quoted in paras 167(iii) and (iv) above, continue as follows: In the event of discrepancy, real or apprehended, the court will therefore have recourse to all versions, within the context of the purpose and general scheme of the rules of which they form part, in order to determine their correct (and uniform) meaning. To assist it will also have recourse to travaux prparatoires (of legislation none exists for the Treaties) to a much greater extent than is normally the case in national law. For these reasons, a literal interpretation of Union law texts is inappropriate. (para 6.24) The starting point in interpretation is therefore the different language versions of the text, to understand their purpose and scheme. But regard must be had to the objectives of the relevant provisions of Union law as a whole and its state of evolution, and recourse to the travaux prparatoires may be an important aid to identification of the correct meaning. It is a common place in legislation that objectives may not be fully achievable or achieved. Compromises or concessions have to be made if legislators are to achieve the enactment of particular provisions. This is perhaps especially so at the international European level, in the case of measures agreed by the Council of Ministers where different Member States may only have been prepared to go part of the way with a Commission proposal (or Parliamentary proposal for amendment) and qualifications may have to be introduced to arrive at any agreement. The structure of the European Union involves a balance of interests which must be respected if the structure is to be stable. When reading or interpreting legislation, it can never therefore be assumed that particular objectives have been achieved to the fullest possible degree. Limitations on the scope or application of a legislative measure may have been necessary to achieve agreement. There may also have been good reasons for limitations, of which courts are unaware or are not the best judge. Where the legislature has agreed a clearly expressed measure, reflecting the legislators choices and compromises in order to achieve agreement, it is not for courts to rewrite the legislation, to extend or improve it in respects which the legislator clearly did not intend. There are important practical consequences, if citizens and other users of the law cannot be confident that European legislation will be given its intended and obvious effect. First, there is a risk of loss of confidence at national level in European Union law, and a risk of impairment of the all important dialogue between national courts and the Court of Justice, with its vital role of interpreting and consolidating the role of European law. Second, national courts will find it much more difficult to decide whether a point of EU law is acte clair or not. This would lead to the risk of the Court of Justices already heavy caseload becoming over loaded with references, and many more cases where the parties have to face the delay and expense of a reference. Third, it will make more difficult the drafting of Directives and Regulations, and, still more importantly, make it more difficult in future to achieve agreement upon such measures. Where a member state has, like the United Kingdom in some areas, the right not to opt into a measure, unpredictability about the meaning which might be attached to it may also encourage caution about opting in. The SEA Directive In Inter Environnement Bruxelles Asbl v Rgion de Bruxelles Capitale Case C 567/10, [2012] 2 CMLR 909, the Opinion prepared by Advocate General Kokott contains a careful analysis of the different language versions of the SEA Directive, of the legislative history and travaux prparatoires and of the legislative intent [AG14 AG30]. On that basis, she concluded that the word required meant what it says, that is that it covers only plans or projects which are based on a legal obligation. She also cited logical reasons for the Council of Ministers decision to that effect. She was supported in her conclusion by all three Governments (Belgian, Czech and United Kingdom) represented before the Court, as well as by the European Commission: see the Courts judgment, paras 26 and 27. Far from casting any doubt on the literal and natural meaning of the word required, all the factors discussed by the Advocate General provide strong one would have thought conclusive confirmation of its clear meaning: based on a legal obligation. It would be unhelpful fully to repeat or to try to improve on the Advocate Generals logical and impeccable analysis. As she noted, all the language versions with one exception are unequivocal (exigs par des dispositions lgislatives, rglementaires ou administratives; que sean exigidos por disposiciones legales, reglamentarias o administrativas; die aufgrund von Rechts oder Verwaltungsvorschriften erstellt werden mssen; die door wettelijke of bestuursrechtelijke bepalingen zijn voorgeschreven. etc). The one possible exception is Italian (che sono previsti da disposizioni legislative, regolamentari o amministrative). But previsti is quite capable of being understood as meaning required, and, as Advocate General Kokott concluded, it must in the context of the other language versions and of the legislative history be so understood. The legislative history is particularly striking. Advocate General Kokott summarised it as follows: AG18 Neither the original Commission proposal [COM(96) 511 final, December 4, 1996] nor an amended version of it [COM(1999) 73 final, February 22, 1999] included the condition that the plans and programmes covered must be required by law. After the proposal proved unsuccessful in this regard, the Commission, supported by Belgium and Denmark, proposed that the directive should at least apply to plans and programmes which are provided for in legislation or based on regulatory or administrative provisions. [Council document 13800/99, December 8 1999, p.5]. The legislature did not take up those proposals either, however. AG19 Instead, the Council explained the rules that were eventually adopted, to which the Parliament did not object . With this elucidation, the matter came before the Fourth Chamber of the Court. The Chamber recited that the applicants (seeking to annul certain provisions of a Belgian planning code) had argued that a mere literal interpretation of the relevant phrase in article 2(a) would entail the dual risk of not requiring the assessment procedure for land development plans which normally have major effects on the territory concerned and of not ensuring uniform application of the directive in the Member States various legal orders, given the differences in the formulation of the relevant national rules (para 25). The Fourth Chamber went on to recite that various Governments had on the other hand submitted that both the language of article 2(a) and the travaux prparatoires showed that required meant required (para 26) and that the Commission also considered that the test of being required was met where an authority was subject to a legal obligation (para 27). The Chamber then simply said that It must be stated that an interpretation which would exclude from the scope of the SEA Directive plans and programmes regulated by rules of law in the various national legal systems, solely because their adoption was not compulsory in all circumstances, cannot be upheld (para 28). The Chamber no doubt used the phrase in all circumstances because the position, under the relevant national law, was that in certain cases (among them the case before the Chamber) the municipal authority might refuse to prepare a specific land use plan (para 18). Cases in which the authority had no option but to prepare such a plan would on any view obviously fall within the word required. However that may be, the Chamber concluded that required means regulated, so as to catch even cases where no plan was required to be prepared. The only reasons it gave were that to read required as meaning required would have the consequence of restricting considerably the scope of the scrutiny (para 29) or compromise, in part, the practical effect of the directive, having regard to its objective, which consists in providing a high level of protection of the environment and thus run counter to the directives aim of establishing a procedure for scrutinising measures likely to have significant effects on the environment . (para 30). If, instead of required, one must read the word regulated, the question arises what it means. Is it sufficient that legislative, regulatory or administrative provisions grant powers to some authority wide enough to permit a plan or programme to be prepared? Or must such provisions actually refer to a possibility that such a plan or programme will be prepared? Or must they specify points and/or conditions that such a plan or programme, if prepared, must address and/or fulfil? The Chamber referred to provisions which determine the competent authorities for adopting them [i.e. the relevant plan or programme] and the procedure for preparing them (para 31). If this is what is meant by regulated, then not all plans and programmes can on any view be covered by the SEA Directive, and the desire for comprehensive regulation of plans and programmes likely to have significant effects on the environment cannot be met. In any event, it follows from the fact that the SEA Directive only applies to plans and programmes which set the framework for future development consent of projects, that it is not exhaustive and does not cover every form of plan and programme simply because it could be said to be likely to have significant environmental effects: see Lord Carnwath and Lord Reeds judgments. The SEA Directive and its terms must be read as a whole. Any condition attached to the scope or application of a legislative measure is capable of affecting its impact. As we have already noted, legislators cannot always agree everything that the most ardent supporters of its general objectives would like them to have achieved. On the Courts own approach, the SEA Directive cannot and does not cover all plans and programmes. They must be regulated by legislative, regulatory or administrative provisions. Had the meaning of article 2(a) come before the Supreme Court without there being any European Court of Justice decision to assist, we would unhesitatingly have reached the same conclusion as Advocate General Kokott, and for the reasons she (as well as the Governments and the Commission represented before the Fourth Chamber) so convincingly gave. We would, like her, have concluded that that the legislature clearly did not intend plans and programmes not based on a legal obligation to require an environmental assessment, even though they might have significant effects on the environment [AG20]. We would also have regarded this as clear to the point where no reference under the CILFIT principles was required. The reasons given by the Fourth Chamber of the Court of Justice would not have persuaded us to the contrary. While they allude, in the briefest of terms, to the fact that the Governments made submissions based on the clear language of article 2(a) and on the legislative history, they do not actually address or answer them or any other aspect of Advocate General Kokotts reasoning. In the result, a national court is faced with a clear legislative provision, to which the Fourth Chamber of the European Court of Justice has, in the interests of a more complete regulation of environmental developments, given a meaning which the European legislature clearly did not intend. For this reason, we would, had it been necessary, have wished to have the matter referred back to the European Court of Justice for it to reconsider, hopefully in a fully reasoned judgment of the Grand Chamber, the correctness of its previous decision. The EIA Directive We turn to the exclusion in article 1(4) of the EIA Directive (formerly article 1(5) of Directive 85/337/EC) of projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process. Again, one might have thought that the language of the Directive was clear enough. The Court of Justice has however read the word since as if it said provided that; and has treated article 1(5), the predecessor of article 1(4), as subject to a pre condition that the legislative process must have enabled the objectives pursued by the Directive to be achieved. The case law has on this basis developed a set of detailed requirements which any national legislature must satisfy. The following propositions emerge: (i). The legislature must have available to it information equivalent to that which would be submitted to the competent authority in an ordinary [planning] procedure meaning that the minimum information to be supplied must be in accordance with article 5(2) of Directive 85/337/EC and Annex III thereto (after the amendments made by Directive 2003/35/EC, these provisions became article 5(3) and Annex IV): Luxembourg v Linster, at paras 54 and 55, Boxus v Rgion Wallonne Cases C 128/09 C 131/09, C 134/09 and C 135/09, [2012] Env L R 320, at paras 41 43, Solvay v Rgion Wallonne Case C 182/10, [2012] Env L R, 545, at para 37, Nomarchiaki at para 85. (ii). [T]he legislative act adopting a project must include, like a development consent all the elements of the project relevant to the environmental impact assessment: Boxus, [39], Solvay, [57], Nomarchiaki, [81]. (iii). The national court must be able to verify that such conditions have been satisfied, taking account both of the content of the legislative act adopted and of the entire legislative process, which led to its adoption, in particular the preparatory documents and parliamentary debates: Boxus, [at paras 47and 48, Solvay, at para 59, Nomarchiaki, at para 90. (iv). According to the Fourth Chamber in Solvay, at paras 53 and 59 61, it follows that all the reasons for [the] adoption of the relevant legislative act must either be contained in it or communicated separately. Lord Reed has quoted substantial passages from Nomarchiaki, the Courts most recent decision in the field. The case law was decided under Directive 85/337/EC, the language of which is the same in material respects as that of the EIA Directive. Directive 85/337/EC reads: [5] Whereas general principles for the assessment of environmental effects should be introduced with a view to supplementing and coordinating development consent procedures governing public and private projects likely to have a major effect on the environment; [6] Whereas development consent for public and private projects which are likely to have significant effects on the environment should be granted only after prior assessment of the likely significant environmental effects of these projects has been carried out; whereas this assessment must be conducted on the basis of the appropriate information supplied by the developer, which may be supplemented by the authorities and by the people who may be concerned by the project in question; [7] Whereas the principles of the assessment of environmental effects should be harmonized, in particular with reference to the projects which should be subject to assessment, the main obligations of the developers and the content of the assessment; [8] Whereas projects belonging to certain types have significant effects on the environment and these projects must as a rule be subject to systematic assessment; . [11] Whereas, however, this Directive should not be applied to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process; [12] Whereas, furthermore, it may be appropriate in exceptional cases to exempt a specific project from the assessment procedures laid down by this Directive, subject to appropriate information being supplied to the Commission, . Article 1 1. This Directive shall apply to the assessment of the environmental effects of those public and private projects which are likely to have significant effects on the environment. 5. This Directive shall not apply to projects the details of which are adopted by a specific act of national legislation, since the objectives of this Directive, including that of supplying information, are achieved through the legislative process. Article 2 3. Member States may, in exceptional cases, exempt a specific project in whole or in part from the provisions laid down in this Directive. Article 1(5) gives effect to the eleventh and article 2(3) to the twelfth recital. A materially identical position exists under the EIA Directive, in which article 1(4) gives effect to recital (22), while article 2(4) gives effect to recital (23). Looking back over the case law, it is possible to see how the Court in Luxembourg v Linster, at paras 53 and 54, sought to justify its conclusion that the exclusion in article 1(5) only applied where the legislature had available to it information equivalent to that which would be submitted to the competent planning authority in an ordinary procedure. It did so by reference to the sixth recital of Directive 85/337/EC. But the Court failed in this connection to address recital (para 11), now (para 22), recording expressly that the Directive as a whole was not to apply to projects the details of which were adopted by a specific act of national legislation. It was not until twelve years later, when the Court came to consider the Directive once again in Boxus v Rgion Wallone that Advocate General Sharpston analysed article 1(5) and recognised some of the difficulties which different readings might present. She identified as alternatives that it connoted (a) an automatic presumption that the adoption by specific act of national legislation process met the Directives objectives or (b) a disapplication of the Directive provided that the legislative process achieved such objectives, and went on: AG62 Neither reading is without its drawbacks. The first might unduly widen the scope of the legislative exclusion from a directive which aims to ensure better decision making in environmental matters. The consequence might be that, even where an administrative project was clothed in the flimsiest of legislative cloaks, the exclusion would none the less apply. The second interpretation might involve a degree of judicial activism which could lead to confusion as to the exact duties of the legislature in environmental cases. In its most extreme form, it might render the exclusion itself virtually meaningless by requiring the legislature to meet all the same procedural requirements as an administrative authority. It was only after examining the cases of World Wildlife Fund v Autonome Provinz Bozen and Luxembourg v Linster that she concluded [AG72] that they, appear[ed] clearly to favour construing article 1(5) as containing a prior condition that the objectives of the EIA Directive must be achieved by the legislative process, rather than a presumption that they are so achieved. The Court in its Grand Chamber in Boxus endorsed this without further discussion, feeding in the express requirement of judicial review of the entire legislative process (paras 37 48). The most recent decision, Solvay v Rgion Wallone, reiterates this position. The case law does not identify any textual or contextual basis for the conclusions reached in respect of article 1(5) (now 1(4)). Its reasoning was based exclusively on the objectives of the Directive. But the extent to which the European legislature concluded that these general objectives could and should be met, must be gathered from the Directive. On its face, the word since explains why specific legislative acts are excluded. It does not introduce a condition to their exclusion. In the light of the representation of the governments of Europe in the Council of Ministers and the mutual trust between them upon which Europe is founded, it is difficult to see why it should be supposed that the Council of Ministers as the European legislator intended a condition, or intended the word since to have anything other than its ordinary meaning. As it stands, the European Court of Justices case law in respect of article 1(5) (now 1(4)), raises the question what is meant by the condition that the legislative process must have enabled the objectives pursued by the Directive to be achieved. As Lord Reed has observed, the appellants treat the condition as if the Court had in effect read back into the Directive in relation to specific legislative acts the provisions of the Directive governing projects subject to the ordinary planning process. There is some support for this in the Courts own invocation of, and insistence on compliance with, the information requirements of article 5(2) and Annex III of Directive 85/337/EC: para 191(i) and (ii) above. The statement in Solvay (para 191(iv) above) that all the reasons for the adoption of the relevant legislative act must be contained in it or communicated separately finds inspiration in article 9 of Directive 85/337/EC. The basis for requiring a possibility of judicial review of the entire legislative process is article 10a of Directive 85/335/EC as inserted by Directive 2003/35/EC, or now article 11 of the EIA Directive. In Solvay (para 59) reference was also made to a passage in R (Mellor) v Secretary of State for Communities and Local Government Case C 75/08 [2009] ECR I 3799, [59] under Directive 85/335/EC as amended, which repeats a passage from Union Nationale des Entraineurs v Heylens Case 222/86 [1987] ECR 4097, (para 15), on the general right to judicial review of decisions for their legality: Effective judicial review, which must be able to cover the legality of the reasons for the contested decision, presupposes in general that the court to which the matter is referred may require the competent authority to notify its reasons. In Boxus Advocate General Sharpston thought that it followed that a court must not only assess whether the legislature had before it sufficiently detailed and informative information, but must also consider whether the legislative process respected the appropriate procedure and allowed [sufficient] preparation and discussion time for it to be plausible to conclude that the peoples elected representatives were able properly to examine and debate the proposed project [AG84]. Advocate General Kokott in Nomarchiaki took this up and said that it had made clear that the EIA Directive is not about formalism, but is concerned with providing effective EIAs for all major projects, and that it must therefore be clarified in the main proceedings whether the legislature . was able properly to examine and debate the environmental effects of the project [AG136 137]. Not perhaps surprisingly in the light of the above, the present appellants have argued that it is for the Supreme Court now not only to consider the adequacy of the information placed before members of both Houses of Parliament, but also to take the step of scrutinising the likely adequacy or otherwise of their procedures and debates, including the extent to which individual members are likely to direct attention to and understand, and apply an independent mind to, any issue falling for decision by the legislature within article 1(4) of the EIA Directive. We have as a result had to give careful consideration to where European law has gone and might yet go, and whether in particular it is necessary for us to make a reference to Luxembourg in order for us to decide the issues which are before us under the EIA Directive. We have however come to the conclusion that this is not necessary. The European Court of Justice was itself careful to use a general formulation, invoking the objectives of the Directive, when it re interpreted since to mean provided that in article 1(5). It did not say that the Directive or its provisions applied to a specific legislative act. It said that it was a condition of their disapplication that their objectives were met by the legislative process. The Court was careful not to endorse the very wide formulae, used by the two Advocates General in Boxus and Nomarchiaki, which suggested close scrutiny by national judges of the legislative process to see whether the peoples elected representatives had been able properly to examine and debate the proposal or had perform[ed] their democratic function correctly and effectively. There was good general reason for this. Whatever other adjustments in meaning it might make by way of interpretation, the Court was here concerned with the fundamental institutions of national democracy in Europe. It was concerned with a provision which deliberately distinguished projects approved by legislative process from projects approved by the ordinary planning process. It is not conceivable, and it would not be consistent with the principle of mutual trust which underpins the Union, that the Council of Ministers should, when legislating, have envisaged the close scrutiny of the operations of Parliamentary democracy suggested by the words used by Advocates General Sharpston and Kokott. The Court will also have been well aware of the principles of separation of powers and mutual internal respect which govern the relations between different branches of modern democracies (as to which see, in the United Kingdom context, R (Jackson) v Attorney General [2005] UKHL 56; [2006] 1 AC 262, (para 125, per Lord Hope of Craighead). The Court cannot have overlooked or intended to destabilise these. In a not so dissimilar context, the German Federal Constitutional Court noted in its judgment of 24 April 2013 1 BvR 1215/07, (para 91) that decisions of the European Court of Justice must be understood in the context of the cooperative relationship (Im Sinne eines kooperativen Miteinanders) which exists between that Court and a national constitutional court such as the Bundesverfassungsgericht or a supreme court like this Court. In the case of the United Kingdom, the approach suggested by the two Advocates General would raise a particular issue of a kind which article 1(4) (formerly 1(5)) was no doubt intended to avoid. It is, we recognise, one that may be specific to the United Kingdom. Article 9 of the Bills of Rights, one of the pillars of constitutional settlement which established the rule of law in England in the 17th century, precludes the impeaching or questioning in any court of debates or proceedings in Parliament. Article 9 was described by Lord Browne Wilkinson in the House of Lords in Pepper v Hart [1993] AC 593, 638, as a provision of the highest constitutional importance which should not be narrowly construed. More recently, in the Supreme Court case of R v Chaytor and others [2011] 1 AC 684, para 110, Lord Rodger of Earlsferry said this: [I]n his Commentaries on the Laws of England, 17th ed (1814), vol 1, Bk 1, chap 2, p 175, under reference to Cokes Institutes, Blackstone says that the whole of the law and custom of Parliament has its original from this one maxim: that whatever matter arises concerning either House of Parliament, ought to be examined, discussed, and adjudged in that house to which it relates, and not elsewhere. The principle enshrined in article 9 is recognised and buttressed by a series of constitutional cases which Lord Reed has mentioned in his para 78 above. To take just one example, in Edinburgh and Dalkeith Railway Co v Wauchope (1842) 8 Cl & F 710, the trial judge had suggested that a statute was inoperative if, in breach of the rules of Parliament, no notice had been given to the defendant. Lord Campbell (in observations echoed by Lord Cottenham and Lord Brougham) said, at p 725, that: I cannot but express my surprise that such a notion should ever have prevailed. There is no foundation whatever for it. All that a Court of Justice can do is to look to the Parliamentary roll: if from that it should appear that a bill has passed both Houses and received the Royal assent, no Court of Justice can inquire into the mode in which it was introduced into Parliament, nor into what was done previous to its introduction, or what passed in Parliament during its progress in its various stages It may well be that it would involve no breach of this well established principle for the courts to inquire into the information which the executive collects and places before Parliament in connection with a Bill falling within the ambit of Article 1(4) of the EIA Directive see for instance Bank Mellat v Her Majestys Treasury (No 2) [2013] 3 WLR 179, (paras 38 49), per Lord Sumption. However, even in that connection, we note that Bank Mellat was not concerned with primary legislation, but with a statutory instrument where different considerations apply. For present purposes, and in the light of Lord Reeds conclusions as to the adequacy of the information which will be put before Parliament, it is unnecessary to go further into that particular aspect. impeaching (i.e. condemning) Parliaments Under the European Communities Act 1972, United Kingdom courts have also acknowledged that European law requires them to treat domestic statutes, whether passed before or after the 1972 Act, as invalid if and to the extent that they cannot be interpreted consistently with European law: R v Secretary of State, Ex p Factortame Ltd (No 2) [1991] 1 AC 603. That was a significant development, recognising the special status of the 1972 Act and of European law and the importance attaching to the United Kingdom and its courts fulfilling the commitment to give loyal effect to European law. But it is difficult to see how an English court could fully comply with the approach suggested by the two Advocates General without addressing its apparent conflict with other principles hitherto also regarded as fundamental and enshrined in the Bill of Rights. Scrutiny of the workings of Parliament and whether they satisfy externally imposed criteria clearly involves questioning and potentially internal proceedings, and would go a considerable step further than any United Kingdom court has ever gone. The United Kingdom has no written constitution, but we have a number of constitutional instruments. They include Magna Carta, the Petition of Right 1628, the Bill of Rights and (in Scotland) the Claim of Rights Act 1689, the Act of Settlement 1701 and the Act of Union 1707. The European Communities Act 1972, the Human Rights Act 1998 and the Constitutional Reform Act 2005 may now be added to this list. The common law itself also recognises certain principles as fundamental to the rule of law. It is, putting the point at its lowest, certainly arguable (and it is for United Kingdom law and courts to determine) that there may be fundamental principles, whether contained in other constitutional instruments or recognised at common law, of which Parliament when it enacted the European Communities Act 1972 did not either contemplate or authorise the abrogation. We are not expressing any view on whether or how far article 9 of the Bill of Rights would count among these, but the point is too important to pass without mention. We would wish to hear full argument upon it before expressing any concluded view. It is not a point upon which the parties before us proposed to make any submissions until it was raised by the Court. We were then told that the attention of the Parliamentary authorities (and we deliberately use a vague expression) had been drawn to this appeal, and they elected not to be represented. If and when the point does fall to be considered, the Parliamentary authorities may wish to reconsider whether they should be represented, and, particularly if they still regard that course as inappropriate, it may well be the sort of point on which the Attorney General should appear or be represented. Important insights into potential issues in this area are to be found in their penetrating discussion by Laws LJ in the Divisional Court in Thoburn v Sunderland City Council [2002] EWHC 195 (Admin), [2003] QB 151, (The Metric Martyrs case), especially paras 58 70, although the focus there was the possibility of conflict between an earlier constitutional and later ordinary statute, rather than, as here, between two constitutional instruments, which raises yet further considerations. As it is, however, we have come to the conclusion that the step mentioned in paras 200 and 206 above is one which the European legislature in this instance clearly provided by article 1(4) (formerly 1(5)) need not and should not be taken, and which the European Court of Justice has not endorsed. The Court of Justices more limited approach in this respect is also borne out by an examination of the objectives of the Directive. Nothing in the Directive suggests that it is aimed at excluding either political involvement or reasoning based on political policy decisions from planning decisions. On the contrary, the recognition that projects may legitimately be approved by specific legislative act constitutes express recognition of the legitimacy of such factors. The appellants case, that the Parliamentary process will be tainted by considerations such as whipping or collective ministerial responsibility or simply by party policy, amounts to challenging the whole legitimacy of Parliamentary democracy as it presently operates. There would doubtless be a similar problem in most, probably all, the democracies of the Union. Finally, we note that article 10 TEU itself recognises that, in a Union founded on representative democracy, whose citizens are directly represented in the European Parliament, [p]olitical parties at European level contribute to forming European political awareness and to expressing the will of citizens of the Union. This, though it may at present be largely aspirational in so far as it refers to pan European political parties, undermines any suggestion that the ordinary workings of political democracy can or should be seen as suspect under article 1(4) of the EIA Directive. In the upshot, there is, as Lord Reed concludes, no basis under the EIA Directive for the wide ranging review of Parliamentary process advocated by the appellants, whether this be to assess the quality of the consideration given in Parliament or the extent to which the members of either House will be free of party influence when deciding how to vote; and we further agree that this is clear to a point where is no need for a reference to the European Court of Justice. Conclusion It follows, as stated above, that the appeals should be dismissed under both Directives. |
Ben Belacum Makhlouf was born in Tunisia on 18 July 1971. On 4 June 1996 he married Ruth Henderson. She came from Northern Ireland and was a citizen of the United Kingdom. The marriage took place in Tunisia. On 13 November 1997, Mrs Makhlouf gave birth to their only child, a daughter called Sarah Jayne. She was born in Northern Ireland, to where Mrs Makhlouf had returned. Her husband joined her there on 19 November 1997, six days after the birth of their daughter. He has lived in Northern Ireland since then. He had come to the United Kingdom and to Northern Ireland in particular with leave to enter as the spouse of a person settled in the UK. The leave to enter was initially valid for one year but on 19 August 1999 he was given indefinite leave to remain. On 14 September 1999, Mrs Makhlouf informed the United Kingdom Border Agency (UKBA) that she and her husband had separated. She claimed that he had been violent to her. He disputes that claim. It has never been alleged that he was violent to his daughter. Indeed, Mr Makhlouf has said that, following the separation from his wife, he enjoyed regular weekly contact with Sarah Jayne. Differences arose between him and his wife concerning their daughters upbringing, he claims and as a result, Mrs Makhlouf refused to allow him to see Sarah Jayne since the beginning of 2003. Notwithstanding that they have not lived together since 1999, Mr and Mrs Makhlouf have never divorced. On 24 April 2003, while drunk, Mr Makhlouf attacked two men after an argument about a game of pitch and toss. He used an offensive weapon (in the form of a key ring which contained a blade). He claimed that he was provoked by the men, who, he said, were loyalist paramilitaries. He also alleged that they had victimised him because of his ethnic origin and skin colour. These claims are not accepted by the respondent and there is nothing in the trial judges sentencing remarks which specifically supports them. The judge did, however, describe the victims behaviour as shameful and the appellant as having taken the law into his own hands but it is not at all clear from the sentencing remarks that it was accepted that the appellant had been provoked because of his ethnic background. The appellant had been remanded in custody from the date of the offences until December 2004 when he was released on bail. He pleaded guilty to two offences of assault occasioning grievous bodily harm contrary to section 20 of the Offences against the Person Act 1861, having pleaded not guilty to the more serious offences under section 18 of the same statute, with which he had originally been charged. The pleas of guilty to the section 20 charges were made, it is claimed, at the earliest opportunity and the trial judge appears to have taken this into account when, on 18 April 2005, he imposed concurrent sentences of 39 and nine months imprisonment. That disposal meant that the appellant was not required to return to prison. In his evidence to the First tier Tribunal, during an appeal against a decision that he should be deported, the appellant said that he had formed a relationship with Charlene McManus after his release from prison and that she had given birth to their son on 12 May 2006. Mr Makhlouf has not been named on the childs birth certificate as his father but Ms McManus has not disputed that he is indeed the boys father. Unfortunately, his relationship with Ms McManus broke down shortly after the birth but Mr Makhlouf claimed that he had regular contact with his son until 2010. These arrangements ended, he claimed, when Ms McManus began to demand that he visit the boy at her flat and, at that time, he was unable to leave his own home because he was suffering from depression. In his evidence to the First tier Tribunal he said that he had been unable to work since 2006 or 2007 because of his depressive illness and had been in receipt of state benefit for this condition. In 2007 the appellant issued proceedings seeking contact with his daughter, Sarah Jayne. He was permitted indirect contact but his application for direct contact was refused. He appealed that decision but this appeal was dismissed by the Fermanagh Family Care Centre on 21 October 2008. He claimed that he had not attended the hearing of the appeal because he had gone to the wrong court. The First tier Tribunal was sceptical of this claim. It observed, If this was truly the reason why the order was made, we find it surprising that he has been unable to secure redress for the consequences of what he claims was a simple mistake. We are not persuaded that the order does not reflect other issues on the suitability of him having contact with Sarah Jayne at that time. On Mrs Makhloufs application, the court made an order under article 179(14) of the Children (Northern Ireland) Order 1995 (SI 1995/755 (NI 2)) which imposed a requirement that the appellant obtain the leave of the court before making any further applications in respect of Sarah Jayne. Between November 2008 and February 2010, the appellant was convicted of and sentenced for a series of offences as follows: On 3 November 2008 he was sentenced to six months imprisonment, suspended for two years, for breach of a non molestation order; On 2 March 2009 he was fined 350 for disorderly behaviour; On 22 February 2010 he was convicted of two sets of offences the first was for breach of a non molestation order on 12 October 2009 for which he was sentenced to three months imprisonment; the second set of offences related to breach of a non molestation order on 11 January 2009 for which he was sentenced to six months imprisonment, suspended for two years, assaulting a police officer and resisting a police officer on the same date for which he received equivalent concurrent sentences. On 14 October 2010 the respondent wrote to the appellant, informing him that she was considering his liability to deportation. She asked him to provide reasons that he should not be deported. She also asked for information about his relationships and about his children. The letter contained what is known as a one stop warning under section 120 of the Nationality, Immigration and Asylum Act 2002 and a questionnaire in which various inquiries were made about his circumstances, those of his children and how he came to the United Kingdom. The letter had been prompted by the respondents having obtained a certificate of the applicants conviction of the offences for which he had been sentenced on 18 April 2005. In a letter of 1 November 2010 the appellants solicitor stated that the offences arose out of an incident in which he had been provoked by loyalist paramilitaries who had targeted him because of his origins and skin colour. The solicitor objected to the delay in seeking his deportation on foot of these convictions. It was claimed that he had a settled life in Northern Ireland and wished to play a parenting role for his children and to support them in the future. Any decision to deport him would breach his rights under article 8 of the European Convention on Human Rights and Fundamental Freedoms (ECHR), the letter suggested. On 4 February 2011 the respondent wrote to the appellant again. She asked for further information about his two children and sought certain material from his solicitor, including passport details and evidence of his residence in the UK; documentary evidence relating to custody arrangements for the children; when he had stopped living with them; and how often he had contact with them. The solicitor was also asked to provide letters from the mothers of the appellants children detailing any support that he provided for the children. Information was also sought relating to medical treatment that he was receiving. No reply to these requests was forthcoming and a reminder was sent on 21 March 2011, asking for a reply by 1 April 2011. No such reply was received and on 28 June 2011 UKBA wrote, asking for evidence of the appellants relationship with any current partner and with his children. On 7 July 2011 the appellants solicitor wrote to ask for more time in which to reply and this was granted in a letter from UKBA of 16 August 2011 but a response within ten days was asked for. In due course the appellants solicitor did indeed reply on 26 August 2011, stating that the appellant was not in contact with his children and was not in a financial position to contribute to their maintenance. The letter claimed that he was being denied contact with his children by their mothers and that he had given instructions to issue legal proceedings so that he could re establish contact with them. In the meantime, Mr Makhlouf was convicted on 15 August 2011 of offences that arose from an incident on 2 April 2011 at the public inquiry office at Enniskillen Police Office. These included disorderly behaviour (for which he was sentenced to five months in prison); attempted criminal damage (for which he received a concurrent sentence of five months imprisonment); and resisting a police officer for which he received an equivalent concurrent sentence. On 12 April 2012 UKBA asked for an update in relation to the contact proceedings that had been mooted in the letter of 26 August 2011. The following day his solicitor replied saying that legal aid applications had been made in order to launch these proceedings but that these had not yet been dealt with by the Legal Aid Commission. No applications for contact had been lodged, therefore. On 30 May 2012 UKBA issued a liability to deportation notice on foot of Mr Makhloufs convictions in April 2005. In an accompanying letter they sought evidence of what were described as applicable circumstances. These included details of marriages or civil partnerships; relationships that could be said to be akin to these; evidence in relation to children or other dependents; and evidence of any medical condition from which he or any dependents suffered. The appellant was also asked for a formal statement setting out the reasons that he should be allowed to stay in the UK, why he wished to stay here and the grounds on which he relied in support of his claim that he should be permitted to do so. No response to this request was received. The appellant gave instructions to his present solicitors to make a further application for contact with Sarah Jayne. The Legal Services Commission refused to grant legal aid for this and it was not pursued. On 5 October 2012 the respondent decided to make a deportation order. Notice of that decision was given to the appellant. It stated: On 18 April 2005 at Belfast Crown Court, you were convicted of grievous bodily harm. In view of this conviction, the Secretary of State deems it to be conducive to the public good to make a deportation order against you. The Secretary of State has therefore decided to make an order by virtue of section 3(5)(a) of the Immigration Act 1971. You have claimed that your deportation from the United Kingdom would be a breach of your human rights under article 8 of the Human Rights Act 1998 on the grounds that you have established a family and/or private life in the United Kingdom. This claim does not meet the criteria as laid out in paragraph(s) 399/399A of the immigration rules and for the reasons given in the attached reasons for decision letter your claim is hereby refused. The letter which accompanied the notice of decision reviewed the various circumstances which were relevant to the appellants case. His several convictions, not merely those in 2005, were rehearsed. The fact that he was no longer in contact with either of his children and had not had any connection with them for some years was alluded to. The sentencing remarks of the judge in April 2005 were quoted. It was stated that specific regard had been had to para 396 of the Immigration Rules which provides that there is a presumption that the public interest requires the deportation of a person who is liable to deportation. It was acknowledged, however, that there was an obligation to consider whether that presumption would be outweighed by other factors, particularly whether the decision to take deportation action would place the United Kingdom in breach of any of its obligations under [ECHR]. The reasons for decision letter accepted that the appellants removal to Tunisia would interfere with his rights under article 8 and that it might not be in the best interests of his children. But it was stated that this interference was in accordance with the permissible aim of the prevention of disorder and crime and the protection of the rights and freedoms of others. The letter continued: In considering whether removal to Tunisia would result in a breach of your rights under article 8, the starting point for considering such a claim is the Immigration Rules. Paragraph 396 establishes that where a person is liable to deportation, the public interest requires it. Where the Secretary of State must make a deportation order in accordance with section 32 of the UK Borders Act 2007, it is also in the public interest to deport. The letter then dealt with the length of sentence imposed and the effect of this in applying the relevant immigration rules, in particular paras 398, 399 and 399A. Reference was made to the criteria in para 399A which must be satisfied in order for a parental relationship with a child to outweigh the public interest in deportation in line with article 8. These criteria were stated to reflect the duty in section 55 of the Borders, Citizenship and Immigration Act 2009 to have regard to the need to safeguard and promote the welfare of children who are in the United Kingdom as interpreted in recent case law, in particular ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166. There then followed a review of the para 399A criteria as they applied to the appellants children. It was noted that he was not in a genuine and subsisting relationship with his son, indeed that the appellant had provided no evidence of contact with the boy and that he was cared for by his mother. Likewise, the letter claimed, the appellant was not in a subsisting relationship with Sarah Jayne, had no current contact with her and that she was capable of being cared for by her mother. The appellants personal circumstances were then considered. It was noted that he was not in a relationship with a partner at the time; that discounting the time that he had spent in prison, he had been resident in the United Kingdom for a period of 15 years; and that he had ties to Tunisia to which he was to be deported. His parents lived there and that he had lived all his life in Tunisia until he came to the UK in 1997. It was concluded therefore that there were no exceptional circumstances which outweighed the public interest in having the appellant deported. The proceedings The appellant appealed the decision to deport him to the First tier Tribunal. On 5 December 2012 he made a statement setting out the circumstances on which he relied to advance his appeal. He explained that he had wished to make another application for contact with Sarah Jayne but had been unable to pursue this because legal aid for his application had been refused. He claimed that he had obtained legal aid to pursue an application for contact with his son and exhibited an application to the Family Proceedings Court. The appellants appeal was heard on 6 December and the decision was given on 8 January 2013. The tribunal concluded that the Secretary of State had properly applied the Immigration Rules. Indeed, no issue was taken on the application of the rules. The tribunal expressed some doubt as to the existence of the appellants son but concluded, in any event, that the appellant had not produced credible evidence of contact proceedings for either child or that he had any input into their lives. The appeal was dismissed. The appellant appealed to the Upper Tribunal on 1 July 2013. In the course of this appeal it was conceded on the appellants behalf that there were no ongoing contact proceedings in relation to either child. It was submitted that it was irrational for the Secretary of State to have taken into account the sentencing remarks of the trial judge because of the length of time that had elapsed between the trial and the decision to deport. By way of fairly radical alternative to that argument, it was also argued that the Secretary of State had referred to only some of the remarks and had not alluded to the observation of the sentencing judge that nothing would be achieved by sending the appellant back to prison. It was also argued that the Secretary of State had only considered the Immigration Rules and not article 8 proper (sic). It was accepted by the respondent before the Upper Tribunal that the First tier Tribunal had wrongly considered the appellants case as one of automatic deportation under section 32(5) of the UK Borders Act 2007 and that therefore the burden of proving that his deportation was not conducive to the public good fell on the appellant. But it was submitted that this should not affect the outcome of the appeal. The Upper Tribunal agreed. It also agreed with a submission that the panel had overstated the effect of the sentencing of the appellant for breach of a non molestation order. But it concluded that the outcome of the appeal would not have been different even if these errors had not been made. The decision of the Upper Tribunal was appealed to the Court of Appeal in Northern Ireland. On 26 November 2014 that court (Sir Declan Morgan LCJ, Coghlin LJ and Gillen LJ) dismissed the appeal. Morgan LCJ, delivering the judgment of the court, set out the issues raised in the appeal in para 1 of his judgment as follows: (1) Did the Secretary of State err in deciding to deport the appellant under the mandatory power conferred by section 32 of the UK Borders Act 2007 (the 2007 Act)? (2) Did the Upper Tribunal err in law in failing to find that the Secretary of State and First tier Tribunal had erred in law and in refusing to set aside the decision of the First tier Tribunal? (3) Did the Upper Tribunal err contrary to section 6 of the Human Rights Act in failing to set aside the decision to deport in the absence of any tangible evidence for any article 8(2) justification of the encroachment of the article 8 rights of the appellant's children in circumstances where the Tribunal had not been specifically asked to address this point by the parties? Leave to appeal on the first of these two issues had been granted by a different panel of the Court of Appeal at an earlier hearing on 31 March 2014. That court had decided to make no order in relation to the third issue, pending the decision on the first two. The appellant therefore renewed his application for leave to appeal on that point when the matter came on for hearing on the first two issues. On the first issue the Court of Appeal concluded that section 32 played no part in the Secretary of States decision. Had it done so, it would have been unnecessary to consider para 396 of the Immigration Rules and the decision letter had made it abundantly clear that this had been taken into account para 35 of the courts judgment. The first ground of appeal was therefore dismissed. On the second issue the appellant presented two arguments to the Court of Appeal. Firstly, it was submitted that the Secretary of State was wrong to conclude that it was conducive to the public good that the appellant should be deported because of his conviction in 2005. Secondly, it was argued that no proper investigation of the article 8 issues had been undertaken in particular, there had been no proper investigation of the interests of the children. Both arguments were rejected by the Court of Appeal. It considered that the factors outlined in the reasons for decision letter amply supported the conclusion of the Secretary of State that the appellants deportation was conducive to the public good. On the question of the delay in making the decision, the court accepted that this could be an important consideration but that two features of this case made this factor inconsequential. The first was that following the 2005 convictions, the appellant was engaged in a series of further criminal offences and the second was that, during the same period, contact with his son was lost and the complete lack of contact with his daughter which had predated his convictions in 2005 continued. On the issue of whether sufficient attention had been paid by the respondent to the interests of the appellants children, the Court of Appeal adverted to the Secretary of States reference to section 55 of the Border, Citizenship and Immigration Act 2009 and ZH (Tanzania). Although the reasons for decision letter had concentrated on the question whether the conditions contained in para 399A of the Immigration Rules had been fulfilled, there had been a sufficient inquiry into the welfare of the children by the Family Court. The court rejected the suggestion that there should have been further investigation of the impact that the deportation of the appellant might have on the lives of his children, observing that these children did not require the disruption of further investigation in circumstances where a court with appropriate jurisdiction had made important decisions in relation to their welfare. The Court of Appeal therefore rejected the appellants case on the second issue and refused leave to appeal on the third issue. The appeal before this court For the appellant, Ms Higgins QC submitted that the Secretary of State had not contended that the appellant posed any risk to the public. All the evidence suggested that he did not, she claimed. Relying on Keegan v Ireland (1994) 18 EHRR 342, para 48 and Pawandeep Singh v Entry Clearance Office, New Delhi [2005] QB 608, para 72, she submitted that, where the circumstances warrant it, article 8 protects a relationship that could potentially develop between parent and child. Exclusive concentration on the rights of the appellant was inappropriate. His childrens article 8 rights required to be recognised and independently investigated. Too often, Ms Higgins suggested, children were invisible as rights holders. Dealing with the circumstance that there had not been recent contact between the appellant and his children, Ms Higgins drew attention to Strasbourg jurisprudence to the effect that divorce and separation do not bring family life between the child and the absent parent to an end, even if the divorce leads to a significant period of loss of contact: Berrehab v Netherlands (1988) 11 EHRR 322. Where a parents contact has been denied or severely curtailed by the actions of the other, that other parent cannot rely upon reasons related to the effluxion of time to deny the parents ongoing article 8 rights: Ferrari v Romania [2015] 2 FLR 303, para 53. Effective respect for family life required that future family relations between parent and child are not determined by the passage of time alone: Sylvester v Austria (2003) 37 EHRR 17, para 69. In the domestic judicial sphere, courts, Ms Higgins argued, have been taking an increasingly firm line with parties responsible for parental alienation. There were two reasons for this. First, the growing awareness of the fundamental importance of a child having contact with both his or her parents. The second reason was that firmer case management was required lest the family care system itself should contribute to the failure to develop a relationship with both parents, thereby violating the childs article 8 rights: In re A (A Child) (intractable contact dispute) [2013] 3 FCR 257 and In re H B (Children) (Contact: Prohibition on Further Applications) [2015] 2 FCR 581. All of this contributed to the requirement to focus closely on the needs of the children, Ms Higgins said. These should not be assimilated with those of the parent seeking to advance his or her article 8 rights. Children, especially those who had dual or multi ethnic parentage, were entitled to have that ethnicity considered in any evaluation of the scope of their article 8 rights. In General Comment no 14 (2013) on the right of the child to have his or her best interests taken as a primary consideration (article 3 para 1) the United Nations Committee on the Rights of the Children (CRC) emphasises that the concept of the childs best interests is aimed at ensuring both the full and effective enjoyment of the rights recognised in the Convention and the holistic development of the child para 4; that the full application of the childs best interests required the development of a rights based approach para 5; and that whenever a decision was to be made that would affect a specific child, the decision making process must include an evaluation of the possible impact on the child concerned para 6. Paragraph 32 imposed an obligation on the legislator, the judge and the social or educational authority to make specific inquiry as to what the particular circumstances of an individual child demanded. Ms Higgins also drew attention to para 36 of CRC which explained how the best interests of the child were to be treated as a primary consideration. It provides that the words the best interests of a child shall be a primary consideration place a strong legal obligation on states. These words meant that states could not exercise discretion as to whether the best interests of the child were to be given a primary consideration. This was a positive requirement and it should be recognised, therefore, that the childs best interests could not be measured on the same level as all other considerations para 37. They had to be assessed and ascribed the proper weight as a primary consideration in any consideration in any action undertaken. The effect of all this, Ms Higgins said, was that there was a duty to investigate thoroughly the impact on the appellants children that would be occasioned by his deportation. The loss of a possible future relationship with their father with the consequence that this might have on their sense of cultural identity was not to be lightly dismissed. It required to be scrupulously assessed by obtaining social welfare reports. This was particularly necessary since the mother of the appellants son, on learning of his impending deportation, had intimated a change of heart about facilitating contact with him. Counsel contended that a sufficient article 8 inquiry had not been conducted. Article 8 issues had been viewed through the prism of the Immigration Rules which purported to be (but were plainly not) comprehensive of all the issues that arose on the question of the right to respect for family and private life. It was contended that the reality was that the best interests of the child, insofar as they were considered at all under the rules, were taken into account under the very compelling circumstances rubric in those rules see references to this passim my judgment in the associated case of Ali. To provide properly for the appropriate consideration of the best interests of the children, the rules would have required express provision that these interests be taken into account as a separate, stand alone factor. The template letter sent to the appellants solicitors demonstrated, Ms Higgins argued, that this had not taken place. Discussion Where a decision is taken about the deportation of a foreign criminal who has children residing in this country, separate consideration of their best interests is obviously required, especially if they do not converge with those of the parent to be deported. And I consider that Ms Higgins is right in her submission that in the case of a child with a dual ethnic background, that factor requires to be closely examined. She is also right in submitting that the childs interests must rank as a primary consideration see, in particular, ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166. The question whether sufficient consideration of the article 8 issues which arise in a particular case can take place through the application of the immigration rules has been thoroughly discussed in the associated case of Ali. But that is not an issue which requires to be revisited here because what is at stake is whether the Secretary of State was in fact provided with sufficient material on which to make a proper judgment on the article 8 rights of the appellant and his children. All the evidence on this issue leads unmistakably to the conclusion that the appellant did not enjoy any relationship with either of his children and that they had led lives which were wholly untouched by the circumstance that he was their father. While, of course, the possibility of such a relationship developing was a factor to be considered, in this instance, the material available to the Secretary of State could admit of no conclusion other than that it was unlikely in the extreme. The lately produced information that the mother of his son might re consider contact between them partakes of a last throw of a desperate dice and was not, in any event, provided to the Secretary of State before the decision was taken. The question of the risk of the appellants re offending was, of course, one of the factors to be considered but his criminal behaviour after the offences in 2005 did not augur well in that assessment. True it is that these were associated with disputes about contact with his children but, at the least, they spoke to his propensity to indulge in offending behaviour if he failed to get his way. I cannot accept, therefore, that the Secretary of State was obliged to make yet further inquiries in relation to the appellant and his children beyond those which had already taken place. As the Court of Appeal observed, these children did not require the disruption of further investigation in circumstances where a court with appropriate jurisdiction had made important decisions in relation to their welfare. Conclusion The appeal must be dismissed. LADY HALE: I agree entirely that this appeal must be dismissed for the reasons given by Lord Kerr. I add a few words only because the focus of the argument on behalf of the appellant was that the Secretary of State should have undertaken her own independent enquiries into the best interests of his two children before deciding to deport him. Ms Higgins is of course right to say that where children will be affected by a deportation or removal decision, their best interests must be treated as a primary consideration, and considered separately from those of the adults involved and from the public interest. This duty stems from two sources in domestic law. First, section 55 of the Borders, Citizenship and Immigration Act 2009 requires the Secretary of State to make arrangements for ensuring that her own functions in relation to immigration, asylum and nationality, and those of her immigration officers, are discharged having regard to the need to safeguard and promote the welfare of children who are in the United Kingdom. The aim was to reflect in United Kingdom law the effect of article 3.1 of the United Nations Convention on the Rights of the Child, which requires that in all actions concerning children, including those by administrative bodies, the best interests of the child shall be a primary consideration. But even without section 55, there is a second source of the obligation, in section 6(1) of the Human Rights Act 1998, which requires public authorities to act compatibly with the rights contained in the European Convention on Human Rights, including the right to respect for family life contained in article 8; this has been interpreted by the European Court of Human Rights to include the duty in article 3(1) of the United Nations Convention: see Neulinger v Switzerland (2010) 54 EHRR 1087 and ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4; [2011] 2 AC 166. So it is quite correct to say that children must be recognised as rights holders in their own right and not just as adjuncts to other peoples rights. But that does not mean that their rights are inevitably a passport to another persons rights. The problem in this case is that it is the appellant who is treating the children as a passport to his own rights, rather than as rights holders in their own right. His daughter was nearly 15 when the deportation order was made (and is now nearly 19). Her parents separated before she was two years old. Her contact with him ended when she was five. Legal proceedings when she was ten ended in an order for indirect contact only and a further order (which is not often made) that her father should not be able to make further applications about her upbringing without the permission of the court. It can be assumed, therefore, that there are good reasons for not requiring the mother to allow direct contact between father and daughter. Without a very good reason to the contrary, the Secretary of State is entitled to treat the orders of the family courts as reflecting what is indeed in the best interests of the children concerned. After all, a family court deciding the future of a child has to make the welfare of the child, not only a primary consideration, but its paramount consideration. Family courts are supposed to know about the best interests of children and they have appropriate investigative resources to make their own independent enquiries should they need to do so. The idea that the Secretary of State should make her own investigation of matters which have already been investigated by the family courts is not only completely unrealistic, it is also contrary to our understanding that the uncertainty and anxiety generated by repeated investigations and disputes about their future is usually bad for children. Of course it is good for children, especially children of mixed ethnicity, to have a relationship with both their parents. But is also good for them to have peace and stability. If Sarah Jayne wishes to establish a closer relationship with her father, she will be able to do this for herself, and it will make little difference to their indirect contact whether he is in the United Kingdom or in Tunisia. Tunisia has long been a popular holiday destination for people from this country and hopefully will become so again. The appellants son was aged six when the deportation order was made and is now ten. The relationship between his parents broke down shortly after his birth. The appellant claims to have had regular contact with his son until 2010, when the child was four, but it stopped because his mother wanted it to take place in their home. We do not know whether this had anything to do with his offending behaviour around that time. The appellant claims that he was unable to leave his own home because of depression. We do not know whether this was of a nature or degree to excuse or explain his failure to visit thereafter. He claimed that he had brought proceedings to try and obtain contact with his son, but in 2013 the First tier Tribunal found that he had not produced credible evidence of contact proceedings relating to either child or that he had any input into their lives, and in the Upper Tribunal it was conceded that there were no current contact proceedings. Nothing has been produced to suggest that the appellant has been making a meaningful contribution to his sons life. His son also requires peace and stability. He too can establish a relationship with his father in future should he wish to do so. In my view, the Secretary of States officials deserve credit for the patience and perseverance with which they conducted their inquiries into the appellants family circumstances, to which the response was neither as speedy or as helpful as it might have been. There was nothing which should have prompted them to make further enquiries as to the best interests of the children. There is nothing at all to suggest that the best interests of these children require that their father should remain in the United Kingdom. Of course there will be cases where fuller inquiries are warranted or where the best interests of children do outweigh the public interest in deportation or removal. This is emphatically not one of them. |
This appeal arises out of divisions which have arisen within a Sikh sect associated with three Gurdwaras (Sikh temples) in Bradford, Birmingham and High Wycombe. It raises two questions arising out of the trusts on which the Gurdwaras are held. The questions are (i) the extent to which it is open to trustees to alter, or restrict, the terms of the trusts upon which they hold property, and (ii) the extent to which the court can and should refuse to determine issues of religion or religious belief in legal proceedings. The Court of Appeal confined itself to issue (ii). They decided that the whole dispute was non justiciable and ordered a permanent stay of the entire proceedings, thus making it unnecessary to deal with issue (i). The factual background On 22 April 1987, fourteen men, all Sikhs living in or near Birmingham, attended a meeting at which certain decisions were passed unanimously according to a memorandum (the April 1987 memorandum). An unchallenged translation of the April 1987 memorandum records that it was decided that: under the guardianship of His Holiness Brahamgiani, revered 108 Sant Maharaj Baba Gian Singh Ji of Nirmal Kutia Johal, and on his orders, wishes and instructions, another Gurdwara be established in the Midlands area of England for the benefit and forever success of the Sikh faith, brotherhood and the devotee congregations . His Holiness there referred to was the then holder of the office of Holy Saint, and known for the purpose of these proceedings as the First Holy Saint. The First Holy Saint had succeeded the original Holy Saint (who had died in 1971), as the religious head of the abode of saints at Nirmal Kutia in the Indian village of Johal. The memorandum also recorded that it was decided that another large gathering be called on 17 May 1987. A meeting duly took place on 17 May 1987, which was attended by twenty eight men, and which resulted in decisions which were recorded in another memorandum (the May 1987 memorandum). This memorandum, again in an unchallenged translation, records a number of decisions. First, that, under the Supreme Authority of the First Holy Saint (referred to in the memorandum as His Holiness), a Gurdwara be established in the Midlands area, which was to be similar to a Gurdwara which had been acquired in Bradford in 1982. Secondly, that this Gurdwara be established in Birmingham under the discipline and headship of His Holiness. Thirdly, that the Gurdwara and all services shall always be conducted according to the orders and wishes of His Holiness. The fourth decision was that only adherents of Sikh faith could be a trustee or on the management committee. Fifthly, it was decided to look for a building for the Gurdwara and to purchase it according to orders from His Holiness. Finally, a committee of nineteen men was recorded as formed to serve. Meanwhile, donations were being collected from devotees, and a property at Oldbury, Birmingham (the Birmingham Gurdwara) was found and, on 17 September 1987, it was inspected by the First Holy Saint. According to a memorandum (the September 1987 memorandum) of that date, he gave his approval with delight to its purchase. The memorandum records that he gave the responsibility of managing [the Birmingham] Gurdwara to five men, of whom four, the first, second and third respondents and Tarlochan Singh (the original trustees) were described as trustees. The September 1987 memorandum also stated that only Maharaj Sri 108 Sant Maharaj Baba Gian Singh Ji Nirmal Kutia, Johlan will have the authority to change any trustee, management member and the whole management system of the Gurdwara Sahib in any form at any time. The Birmingham Gurdwara was then purchased with a combination of the donations collected from devotees and loans, which were subsequently discharged from further donations. The Birmingham Gurdwara was transferred to the original trustees by a transfer dated 19 November 1987 (the transfer). The transfer referred to the original trustees as Trustees of the Gurdwara Amrit Parchar Dharmik Diwan (UK) Birmingham (to whom we will refer generically as the Birmingham trustees), and to the property transferred as know[n] for identification only as an Office Block but which is to be known as a Sikh Temple. The transfer contained a covenant by the original trustees with the transferor that for ten years the property would not be used other than as a Temple, Synagogue or Church. On 15 January 1991, the original trustees executed a Deed of Trust (the 1991 Deed), under which they declared in clause 1 that they were the duly appointed trustees of the Gurdwara Amrit Parchar Dharmik Diwan (UK) Birmingham, which they defined as the Society (Amrit Parchar refers to a form of baptism). The Society was described in clause 1 as a religious organisation preaching and practising the Sikh faith, following the teachings of [the First Holy Saint] resident at Nirmal Kutia (the Saint) or his successor. Clause 2 referred to the Birmingham Gurdwara (defined as the property), and in clause 3 the original trustees declared that they held it as Trustees for the Society to be dealt with as may be directed in writing by the Saint or his successor. In Clause 4, the original trustees declared that the trust for sale on which the property was held would not be exercised without the consent in writing and the direction of the Saint or his successor. Clause 5 empowered the Saint or his successor at any time [to] remove the Birmingham trustees or any of them and appoint new trustees. Clause 7 provided that, in the event of the Society being wound up or ceasing to exist, the property and all other assets in the hands of the Birmingham trustees shall be held in trust for the Saint or his successor. At around this time, on 24 February 1991, the Constitution of the Society (the 1991 constitution) was drawn up and signed by a number of men including the first, second, third and fourth respondents. The 1991 constitution applied to the communities which worshipped at both the Bradford and the Birmingham Gurdwaras. It described the Societys aims and objects as including [t]o preach Sikhism, doctrine of Holy Shri Guru Granth Sahib and teachings of Ten Gurus from Guru Nanak Dev Ji to Guru Gobind Singh Ji, as well as others, including encouraging ceremonial baptism, discouraging the use of alcohol and smoking, encouraging Panjabi education, and establishing a Sikh information centre and libraries. Clause 10 of the 1991 constitution stated that changes in the Societys management committee could only be made by [the first Holy Saint] or his successor, and, at the end of the constitution there was added PS Word successor in the above text means Sant Harbhajan Singh Ji (Brakat), who was at that time the assistant to the first Holy Saint (hereinafter Sant Harbhajan Ji). On 20 September 1993, a property was acquired at High Wycombe (the Wycombe Gurdwara) with the assistance of donations and loans from devotees. The transfer was made to the sixth and eighth appellants and the fifth and sixth respondents (the Wycombe trustees), who were described as holding the property upon the trusts declared by a Deed of even date herewith. By that Deed, the Wycombe trustees declared that they held the Wycombe Gurdwara in accordance with [the Societys] constitution. At that time, or shortly afterwards, the 1991 constitution was replaced by a new constitution (the 1993 constitution) which applied to the communities which worshipped at the Bradford, Birmingham and Wycombe Gurdwaras (the three Gurdwaras). The 1993 constitution was in very similar terms to the 1991 constitution and, in particular, it included the same clause 10 and PS as the 1991 constitution. On 31 August 2001, the First Holy Saint appointed the third appellant as one of the Birmingham trustees in place of Tarlochan Singh. Three months later, the First Holy Saint died and was succeeded by Sant Harbhajan Ji, who died a few months later in March 2002. It is the appellants pleaded case that, on 20 March 2002, the ninth appellant, Saint Sant Jeet Singh Ji Maharaj (Sant Jeet Singh), was then recognised as the head of Nirmal Kutia Johal in India, and thereby became the Third Holy Saint, as confirmed by a formal written resolution signed by 24 saints and eleven dignitaries. On 13 July 2003, at a joint meeting of the management committees of the three Gurdwaras, Sant Jeet Singh was recognised as the Third Holy Saint, in a resolution signed by a number of men, including the first, second, third, fourth, fifth and sixth respondents. On 31 December 2003, a revised Constitution (the 2003 constitution) for the three Gurdwaras was agreed in Nirmal Kutia, and it was signed by various men, including the six respondents. This 2003 constitution was quite similar to the 1991 and 1993 constitutions, but it had somewhat more aims and a few further provisions. It referred to the consent of Sant Jeet Singh and his successor being required for certain changes in personnel, and contained a NOTE at the end stating that [t]he word successor means His Holiness Sant Baba Jaspal Singh . New trust deeds were prepared in respect of each of the Birmingham and Bradford Gurdwaras. That in respect of the Bradford Gurdwara was executed on 13 February 2004. However, the first, second and third respondents (as three of the four Birmingham trustees) refused to execute the new trust deed in respect of the Birmingham Gurdwara. By deeds executed on 8 June 2004 and 20 June 2006, Sant Jeet Singh purported to remove the first, second, third and fourth respondents as Birmingham trustees, and to replace them with the second, third, fourth and fifth appellants. By another deed dated 12 June 2008, Sant Jeet Singh purported to remove the fifth and sixth respondents as Wycombe trustees, and to replace them with the sixth, seventh and eighth appellants and two other men. On 8 October 2008, the first, second and third respondents (as the other three Birmingham trustees) purported to remove the third appellant as a trustee and to replace him with the fourth respondent. The procedural history On 25 June 2008, the appellants issued proceedings in the High Court seeking various heads of relief, including removal of the first, second, third and fourth respondents as Birmingham trustees, and as members of its management committee, and for connected relief (as well as for relief in connection with the Wycombe Gurdwara). Paras 3 6 of the particulars of claim explained that Birmingham Gurdwara was a place of Sikh worship, that Sikhism involves worshipping ten successive Gurus, that the Nirmalas are a sect of the Sikh religion founded by the tenth Guru, Gobind Singh Ji, that the original Holy Saint started preaching in about 1920, and that Nirmal Kutia is the abode of the saints of Nirmal, a sect which is distinguished by its adherence to baptism and strict adherence to Rehet Maryada, the Sikh code of conduct. In para 28, it was stated that the three Gurdwaras were religious endowments having the purpose of the advancement of tenets of the Holy Saints of Nirmal sect. Although the particulars of claim were rather long, the essence of the claim in relation to the trusteeship of the Birmingham Gurdwara was that Sant Jeet Singh, as the successor of the First Saint, had the right to remove and appoint trustees under the 1991 Deed, and that he had validly removed the first, second, third and fourth respondents as Birmingham trustees and as management committee members in June 2004. They sought similar relief in respect of the trusteeship and management committee of the Wycombe Gurdwara. The Defences of the respondents did not admit paras 3 5 and denied para 28, of the particulars of claim. More specifically, it was alleged in the Defences that the Second Holy Saint died in March 2002 without appointing a successor, and, in any event, the expression successor in the 1991 Deed only applied to the Second Holy Saint. The respondents contended that the 1991 Deed could not validly extend the power to remove or appoint trustees to anyone other than the First Holy Saint. The respondents also raised counterclaims, which included a claim for declarations that the first, second, third and fourth respondents were the Birmingham trustees, and that Sant Jeet Singh had no power of removal or appointment of Birmingham trustees or any other power in relation to the Birmingham Gurdwara or its management. The appellants wished to amend their particulars of claim, and the respondents not only opposed this on the ground that the claim had no realistic prospect of success, but sought to strike out the claim as it raised issues which were said to be unjusticiable. Those two issues came before His Honour Judge David Cooke, sitting as a judge of the High Court in the Birmingham District Registry. On 12 September 2011, he gave the appellants permission to amend their particulars of claim, and dismissed the respondents application to strike out the claim [2011] EWHC 2442 (Ch). He gave the respondents permission to appeal on the latter point. The amended particulars of claim were served a week later. The respondents appealed to the Court of Appeal on the issue of justiciability and also on the permission to amend (for which they obtained permission to appeal from the Court of Appeal). The Court of Appeal allowed their appeal for reasons contained in a judgment given by Mummery LJ (with whom Hooper and Pitchford LJJ agreed) [2012] PTSR 1697. He held that there were no judicial or manageable standards by which the issues could be judged, because they turned on the question who is the successor of the original founder of the temple trusts, which was an issue which depends on the religious beliefs and practices of Sikhs generally and the Nirmal Kutia Sikh institution in particular, and which is not justiciable by the English courts see para 77. The appellants now appeal to this Court. When considering the arguments, it is only necessary to deal with those which relate to the Birmingham Gurdwara and the Birmingham trustees, as there are no different arguments which relate to the Wycombe Gurdwara and the Wycombe trustees. The issues During the course of the argument before us, four issues emerged as likely to be in dispute, if this case were to go to trial on the basis that all issues were justiciable. It may be that there would be other issues, but, as far as this appeal is concerned, we should concentrate on the four issues. The first issue is whether the respondents are right in suggesting that the 1991 Deed was invalid if and in so far as it purported, by clause 5, to confer the power to appoint and dismiss trustees on anyone other than the First Holy Saint. The second issue, which only arises if the appellants are right on the first issue, is whether the reference to the successor of the First Holy Saint in the 1991 Deed is to be read as limited to Sant Harbhajan Ji, ie the anticipated, and actual, immediate successor to the First Holy Saint, as the respondents contend, or whether it extended to each subsequent successor, as the appellants argue. The third issue, which only arises if the appellants are right on the first and second issues, is whether Sant Jeet Singh is indeed a successor to the First Holy Saint ie whether he is indeed the Third Holy Saint as the appellants contend and the respondents deny. During argument, it appeared that the respondents wished to raise a fourth issue, albeit that it may be an aspect of the third issue, namely that Sant Jeet Singh has departed from the tenets of mainstream Sikhism and is on character grounds unfit to be the successor. It is regrettable that this issue, even if it is only relied on as an aspect of the third issue, should only have become apparent during the hearing of an appeal in the Supreme Court against a pre trial decision of the Court of Appeal based on the parties respective pleaded cases. We required the respondents to give written particulars of their case in connection with the fourth issue, to which the appellants responded, but that all had to take place after the hearing had concluded. Before considering these issues, it is right to say that it is very hard to see how the decision of the Court of Appeal to stay the proceedings generally could possibly have been justified in the light of the first two issues, especially as they should logically be considered first. The question whether the original trustees, who were apparently resident in England and held property in England, had the power to execute a document such as the 1991 Deed, turns solely on the English law of trusts, and cannot conceivably involve an unjusticiable issue. As to the second issue, it turns on a question of interpretation of the 1991 Deed, and it would be more than strange if a pure question of interpretation of a trust deed executed in England relating to property in England and clearly intended to be governed by English law, could not be resolved by an English court. If the respondents succeed on either of these two issues, the claim would fail. On the other hand, it is at least understandable why it might be said that the third and fourth issues are not justiciable. In those circumstances, the sensible approach to adopt is to deal with the first two issues in turn, then to deal with the principles of non justiciability, and decide whether the Court of Appeal was right at least in relation to those issues, and finally to mention two procedural points. The first issue: was clause 5 of the 1991 Deed invalid? The respondents case on the first issue relies on the points that the terms of the trust on which the Birmingham Gurdwara was acquired, and the basis upon which donations were sought and paid for the purpose of acquiring the Birmingham Gurdwara (and, no doubt, the basis upon which any further donations were paid to the original trustees until the 1991 Deed was executed) were those set out in the April 1987 memorandum, the May 1987 memorandum and the September 1987 memorandum (together the 1987 memoranda). In these circumstances, runs their argument, it was not open to the original trustees to vary the terms of the trust as they purported to do in clause 5 of the 1991 Deed by extending the right to appoint and dismiss trustees from the First Holy Saint to his successor . The appellants answer to this has two prongs. First, it is said that there is a general principle that, where money or other property is made over to trustees for somewhat indefinite charitable purposes, it is open to the trustees (indeed it may be incumbent on them) to ensure the preparation of a more formal and more specific document setting out the terms of the trust. Secondly, the appellants contend that the relevant respondents (ie those concerned with the Birmingham Gurdwara rather than the Wycombe Gurdwara), as trustees and/or as active management committee members, cannot challenge the validity of the 1991 Deed, especially as they have for many years acted as if they held office under its terms. In support of both arguments, Mr Mark Herbert QC relied on the reasoning of Sir Herbert Cozens Hardy MR in Attorney General v Mathieson [1907] 2 Ch 383. In that case, the Rev John Wilkinson, who appears to have run various charities in the Stoke Newington area of London, including the Mildmay Mission to the Jews, received 1350 from a lady, who lived in the area and suggested to him that the money might be used for a convalescent home. When he pointed out that the provision of a home and school for children was more pressing, she said Use it for that or any other way you like, and he then used it to purchase a property, Cromwell Lodge, in his own name, and without any declaration of trust. He then used the remainder of the money to fit out and equip Cromwell Lodge, which he then used as a school and home for Jewish children. A year later, in September 1885, a trust deed was executed conveying Cromwell Lodge, together with other property, to trustees (including Mr Wilkinson) on trust for the purposes of the Mission, namely to preach the Gospel to Jews in Great Britain and Ireland (and also in foreign parts if it is deemed desirable), employing in the prosecution of the work activities including homes for destitute children, agencies for procuring employment and assisting emigration, night schools , sewing classes, and for promoting the salvation of souls. The 1885 Deed contained various other provisions, relating to matters such as the trustees powers of sale, investment and appointment of a director (inevitably, Mr Wilkinson). The question before the Court of Appeal in Mathieson was whether the Attorney Generals consent to the proposed sale of Cromwell Lodge was required under the Charitable Trusts Act 1853, which turned on the question whether the 1885 Deed was binding on the trustees, or whether, as Kekewich J had held, the 1885 Deed made no difference to Mr Wilkinsons powers see at p 387. If the former view was correct then the trustees could not apply the proceeds of sale of Cromwell Lodge as income; if the latter view was right, they could do so only with the consent of the Attorney General. The Court of Appeal disagreed with Kekewich J, and held that the latter view was right. Sir Herbert Cozens Hardy MR said at p 394 that the trustees appointed under the 1885 Deed: do not, and cannot, challenge the validity of the trust deed under which they are acting, and it is plain that it would be a breach of trust to apply the proceeds of the sale of the house as income. Even if Mr Wilkinson could originally have done this, they are now bound to treat the proceeds of sale as capital, and invest it accordingly. Sir Herbert then continued: There is, moreover, a further difficulty in the way of the trustees. When money is given by charitable persons for somewhat indefinite purposes, a time comes when it is desirable, and indeed necessary, to prescribe accurately the terms of the charitable trust, and to prepare a scheme for that purpose. In the absence of evidence to the contrary, the individual or the committee entrusted with the money must be deemed to have implied authority for and on behalf of the donors to declare the trusts to which the sums contributed are to be subject. If the individual or the committee depart from the general objects of the original donors, any deed of trust thus transgressing reasonable limits might be set aside by proper proceedings instituted by the Attorney General, or possibly by one of the donors. But unless and until set aside or rectified, such a deed must be treated as in all respects decisive of the trusts which, by the authority of the donors, are to regulate the charity. And it is irrelevant to urge that the donors did not originally give any express directions on the subject Thus, there were two strands to the decision in Mathieson. The first is that trustees who have been appointed under the terms of a trust deed cannot challenge the validity of the deed. That would presumably be justified on the ground that the only basis upon which they have any title to involve themselves in the affairs of the trust is as trustees, and they cannot therefore impugn the very document under which they achieved that status. They would be almost tantamount to denying their own title. The second strand in the decision is that, where a charitable trust is initially created by donors in general or vague terms, it is open to the trustee to execute a more specific deed which limits the terms of the trust, provided it does not conflict with the terms on which the donors made their donations and that a challenge to any terms of the specific deed must be made by the Attorney General (or possibly by the donors). There does not appear to have been much discussion or development of the principles laid down in Mathieson, either in the textbooks or in the cases. Counsel have drawn our attention to two subsequent first instance decisions where the second strand of the decision was considered. In In re Orphan Working School and Alexandra Orphanages Contract [1912] 2 Ch 167, Parker J followed the second strand of the decision, although, as he said, the subsequent trust deed in his case widened rather than narrowed the trusts on which the property in question was held see at p 180. However, he upheld the validity of the deed on the ground that the committee of the charity concerned were the agents for declaring the trusts, and what they declare is prima facie to be considered as carrying out the intention of the donors. The second strand of the decision in Mathieson was also considered by Walton J in the unreported decision of Jeeves v Imperial Foods Ltd, Pension Scheme (unreported, 27 January 1986). As he explained, there may be many occasions in law in which a fund is held on trust, but at the particular point there is no final definitive trust deed. He went on to say that it may very well be that a person who had contributed to the fund in question would be in a position to object to some provision which was never contemplated, but which was put or attempted to be put into the final trust deed. On behalf of the respondents, Mr Mark Hill QC suggested that we could decide this first issue in the respondents favour, on two grounds namely (i) the 1991 Deed plainly went further than the donors would have envisaged, or the terms of the 1987 memoranda permitted, and (ii) the original trustees did not, as a matter of general trust law, have the ability to allocate the right to appoint or dismiss trustees in any event. We would reject the contention that we should accept ground (i), at any rate at this interlocutory stage. It is questionable whether the respondents, or at least those who were appointed as Birmingham trustees, can get round the first strand of the decision in Mathieson. It is true that they did not become trustees as a result of the 1991 Deed, as they became trustees when they purchased the Birmingham Gurdwara. But if that prevents the first strand in Mathieson applying, it would appear to mean that, in Mathieson itself, Mr Wilkinson could have impugned the 1885 Deed which he prepared and executed, as he had become a trustee when the money was handed over to him in 1884. It seems to us questionable whether the Master of the Rolls would have envisaged that Mr Wilkinson was in a different position in this connection from the other trustees. Like Mr Wilkinson, the first, second and third respondents declared that they were trustees of the relevant trust, and set out the terms of that trust, in the relevant Deed and signed it. As to the second strand in Mathieson, the precise status of the 1987 memoranda is not entirely clear, but, even assuming in the respondents favour that the 1987 memoranda do govern the terms of the trust as far as they go and that clause 5 goes further than those memoranda, it is not inconsistent with what is contained in them. On the respondents case, the 1987 memoranda limit the power of appointment and dismissal of trustees to the First Holy Saint and are silent as to that power after his death; if that is right, then according that power to his successors was merely an administrative extension of, and not inconsistent with, what was in the memoranda. Certainly, there is nothing in clause 5 which is, at least on the face of it, inconsistent with any provision of the 1987 memoranda, or which appears, in the words of the Master of the Rolls, to depart from the general objects of the original donors. Subject at any rate to Mr Hills ground (ii), clause 5 of 1991 Deed may well be the sort of provision which could have been perfectly properly included in a definitive deed of the type which Sir Herbert Cozens Hardy MR and Parker J respectively sanctioned in Mathieson and Orphan Working School respectively, namely to prescribe accurately the terms of the charitable trust. Quite apart from this, again subject to ground (ii), in view of what was said towards the end of the second passage quoted from Mathieson, we have considerable doubts whether anyone other than the Attorney General (or, conceivably, any of the original donors) would be entitled to raise the point. In any event, we note that the 1991 Deed has been expressly treated as valid at least on one occasion in August 2001 when a new trustee was appointed, and was not challenged for twelve years, and that may provide another difficulty for the respondents. Mr Hills ground (ii) is based on the proposition that the trust in this case was formed before 1991, namely (at the latest) when the Birmingham Gurdwara was transferred to the original trustees. On that basis, he contends that at that point the power to appoint (and dismiss) trustees was crystallised in accordance with section 36(1) of the Trustee Act 1925, which limits the power to: (a) the person or persons nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust; or (b) if there is no such person, or no such person able and willing to act, then the surviving or continuing trustees or trustee for the time being, or the personal representatives of the last surviving or continuing trustee. In these circumstances, runs the respondents argument, section 36(1)(a) applied so long as the First Holy Saint lived, and, when he had died, section 36(1)(b) came into effect, and it was not open to the trustees to delegate their power of appointment thereunder for the future to anybody else. It is true that the power of trustees of a fully constituted charitable trust do not include the right to delegate the power to dismiss or appoint trustees to a third party, unless of course the trust deed gives them that power see the discussion in Underhill and Hayton, Law of Trusts and Trustees (18th edition, 2010) paras 51(1)(b) and 51(11). However, where the principle in Mathieson applies, it seems to us that trustees must have the power to include new provisions in the trust deed which they would not normally have the power to impose in the case of a fully constituted trust. Accordingly, it is at least arguable that, where the terms of a trust are so sparse that the trustees have implied authority for and on behalf of the donors to declare the trusts to which the sums contributed are to be subject, that authority extends to including a provision such as clause 5 of the 1991 Deed. It is worth noting that the 1885 deed of trust in Mathieson provided that the trustees could delegate their management powers to a director, and that the first director, Mr Wilkinson, should have power to appoint his successor see at p 386. We have expressed our views on the various points raised by the first issue in an intentionally tentative basis, as we consider that, if the respondents wish to pursue this first issue at trial, they should be free to do so. It would not be right for us to decide any of the various points at this interlocutory stage, given that (i) the law in this area is surprisingly undeveloped, (ii) the issue, and the points to which it gives rise, have not been fully pleaded even now, (iii) the resolution of those issues is very likely indeed to be fact sensitive, (iv) the facts of this case are both unusual and unclear, (v) the arguments of the parties have changed as the proceedings have progressed, and (vi) the various points have not been considered by Judge Cooke or by the Court of Appeal. Mr Herbert did not press us to rule in the appellants favour on the issues: indeed, it was his case that we ought not to determine them. We think that that was a wise decision. The second issue: the meaning of successor The question is whether the reference in the 1991 Deed to his successor is to the Second Holy Saint, or whether it includes all subsequent Holy Saints. On the face of the 1991 Deed, it appears to us that, as a matter of language, his successor could be limited to the immediate next Holy Saint, or it could extend to each successive Holy Saint. It is true that it is expressed in the singular, but the effect of section 61(c) of the Law of Property Act 1925 provides that [i]n all deeds, unless the context otherwise requires, [t]he singular includes the plural and vice versa. Given that there is no indication that the trusts declared by the 1991 Deed were intended to be limited in time, and indeed the natural implication is very much the other way, we can see great difficulties for the respondents argument on this second issue. However, we do not think it right to resolve the second issue either. The factual matrix is always important when construing a document, and, while it by no means always justifies live evidence when an issue of interpretation of a document is contested, it does so in this case for reasons (iii) to (vi) set out in para 34 above. In addition, although the force of the point is blunted by the fact that even the earliest Constitution, the 1991 Constitution, was signed after the 1991 Deed, it is conceivable that the respondents may be able to derive some assistance from the PS at the end of the 1991 and 1993 Constitutions and the Note at the end of the 2003 Constitution. Those words may have been included not to limit the meaning of successor in the Constitutions, but merely to identify the current successor, or for some other reason, but their natural meaning could be to limit the meaning of successor in the 1991 and 1993 Constitutions to the Second Holy Saint, and in the 2003 Constitution to Sant Baba Jaspal Singh as successor to Sant Jeet Singh. However, the absence of any such PS or Note from the 1991 Deed could well prove a problem for the respondents as could the fact that a time limited constitution would seem to be a less implausible concept than a time limited charitable trust deed. The third and fourth issues: non justiciability generally The third and fourth issues raise the questions whether Sant Jeet Singh is indeed the third Holy Saint, and whether the doctrines to which he and the appellants subscribe and/or his personal qualities comply with the religious aims and purposes underlying the 1991 Deed. It was such issues which the Court of Appeal held were unjusticiable, and it is to the question of non justiciability to which we now turn. Mummery LJ took as his starting point the decision of the House of Lords in Buttes Gas and Oil Co. v Hammer (No 3) [1982] AC 888, which he described at para 26 as the clearest and most authoritative guidance that can be found in the authorities about the basis on which a line is drawn between justiciable and non justiciable issues. Buttes Gas arose out of an action for slander whose real object was to obtain a decision of the English court about the boundary between the territory of three Gulf states, a question upon which the validity of the parties off shore drilling rights depended. The House held that issue to be non justiciable, and struck out the proceedings. The single reasoned speech was delivered by Lord Wilberforce. The case is so well known that we may perhaps be forgiven for summarising his reasons quite shortly. Lord Wilberforce, with the support of the rest of the House, considered that there was a general principle in English law of judicial restraint or abstention that the courts will not adjudicate upon the transactions of foreign sovereign states. This was not, in his view, a principle of discretion but a principle of law inherent in the very nature of the judicial process (pp 931 932). Having summarised the allegations in the case before the House, Lord Wilberforce said this at p 938: Leaving aside all possibility of embarrassment in our foreign relations (which it can be said not to have been drawn to the attention of the court by the executive) there areto follow the Fifth Circuit Court of Appeals no judicial or manageable standards by which to judge these issues, or to adopt another phrase (from a passage not quoted), the court would be in a judicial no mans land: the court would be asked to review transactions in which four sovereign states were involved, which they had brought to a precarious settlement, after diplomacy and the use of force, and to say that at least part of these were unlawful under international law. Mummery LJ regarded this statement as authority for the proposition that in the absence of objective juridical standards (judicial or manageable standards) by which to decide an issue, a court must regard it as non justiciable. He put the present case in the same category because he considered that the same principle applied when the acts complained of were guided by religious beliefs whose justification was incapable of objective assessment. Even assuming that that is an accurate classification of the issues in this action, it seems to us that Mummery LJ misunderstood the reasoning of Buttes Gas. Lord Wilberforces reference to judicial and manageable standards was a quotation from the decision of the Fifth Circuit Court of Appeals in the United States litigation between the same parties upon substantially the same issues. That was in turn based on the celebrated decision of the United States Supreme Court in Underhill v Hernandez (1897) 168 US 250 about the act of state doctrine. The reason why the Fifth Circuit Court of Appeals regarded the issue as non justiciable was not that judges were incapable of deciding questions of international law. Nor was that why Lord Wilberforce agreed with them. Quite apart from the fact that he was himself an international lawyer of some distinction, he points out at p 926F that English courts had on a number of occasions decided issues about the international boundaries of sovereign states without difficulty. The issue was non justiciable because it was political. It was political for two reasons. One was that it trespassed on the proper province of the executive, as the organ of the state charged with the conduct of foreign relations. The lack of judicial or manageable standards was the other reason why it was political. Both points are made in the short passage from the Fifth Circuit Court of Appeals decision cited at p 936 of Lord Wilberforces speech. As can be seen from Lord Wilberforces summary of the facts at pp 922 925 and 937, this was because the dispute arose out of the way in which the four states concerned had settled the issue of international law by a mixture of diplomacy, political pressure and force in a manner adverse to the interests of Occidental Petroleum. Occidental wished to obtain a judicial decision that that settlement had been the result of an unlawful conspiracy. This involved assessing decisions and acts of sovereign states which had not been governed by law but by power politics. It is difficult to imagine that such a conclusion could have been reached in any other context than the political acts of sovereign states, for the acts of private parties, however political, are subject to law. The actors are answerable to municipal courts of law having jurisdiction over them and applying objective, external legal standards. There is a number of rules of English law which may result in an English court being unable to decide a disputed issue on its merits. Some of them, such as state immunity, confer immunity from jurisdiction. Some, such as the act of state doctrine, confer immunity from liability on certain persons in respect of certain acts. Some, such as the rule against the enforcement of foreign penal, revenue or public laws, or the much criticised rule against the determination by an English court of title to foreign land (now circumscribed by statute and by the Brussels Regulation and the Lugano Convention) are probably best regarded as depending on the territorial limits of the competence of the English courts or of the competence which they will recognise in foreign states. Properly speaking, the term non justiciability refers to something different. It refers to a case where an issue is said to be inherently unsuitable for judicial determination by reason only of its subject matter. Such cases generally fall into one of two categories. The first category comprises cases where the issue in question is beyond the constitutional competence assigned to the courts under our conception of the separation of powers. Cases in this category are rare, and rightly so, for they may result in a denial of justice which could only exceptionally be justified either at common law or under article 6 of the Human Rights Convention. The paradigm cases are the non justiciability of certain transactions of foreign states and of proceedings in Parliament. The first is based in part on the constitutional limits of the courts competence as against that of the executive in matters directly affecting the United Kingdoms relations with foreign states. So far as it was based on the separation of powers, Buttes Gas and Oil Co. v Hammer (No 3) [1982] AC 888, 935 937 is the leading case in this category, although the boundaries of the category of transactions of states which will engage the doctrine now are a good deal less clear today than they seemed to be forty years ago. The second is based on the constitutional limits of the courts competence as against that of Parliament: Prebble v Television New Zealand Ltd [1995] 1 AC 321. The distinctive feature of all these cases is that once the forbidden area is identified, the court may not adjudicate on the matters within it, even if it is necessary to do so in order to decide some other issue which is itself unquestionably justiciable. Where the non justiciable issue inhibits the defence of a claim, this may make it necessary to strike out an otherwise justiciable claim on the ground that it cannot fairly be tried: Hamilton v Al Fayed [2001] 1 AC 395. The basis of the second category of non justiciable cases is quite different. It comprises claims or defences which are based neither on private legal rights or obligations, nor on reviewable matters of public law. Examples include domestic disputes; transactions not intended by the participants to affect their legal relations; and issues of international law which engage no private right of the claimant or reviewable question of public law. Some issues might well be non justiciable in this sense if the court were asked to decide them in the abstract. But they must nevertheless be resolved if their resolution is necessary in order to decide some other issue which is in itself justiciable. The best known examples are in the domain of public law. Thus, when the court declines to adjudicate on the international acts of foreign sovereign states or to review the exercise of the Crowns prerogative in the conduct of foreign affairs, it normally refuses on the ground that no legal right of the citizen is engaged whether in public or private law: R (Campaign for Nuclear Disarmament) v Prime Minister [2002] EWHC 2777 (Admin); R (Al Haq) v Secretary of State for Foreign and Commonwealth Affairs [2009] EWHC 1910. As Cranston J put it in the latter case at para 60, there is no domestic foothold. But the court does adjudicate on these matters if a justiciable legitimate expectation or a Convention right depends on it: R (Abbasi) v Secretary of State for Foreign and Commonwealth Affairs [2003] UKHRR 76. The same would apply if a private law liability was asserted which depended on such a matter. As Lord Bingham of Cornhill observed in R (Gentle) v Prime Minister [2008] 1 AC 1356, para 8, there are issues which judicial tribunals have traditionally been very reluctant to entertain because they recognise their limitations as suitable bodies to resolve them. This is not to say that if the claimants have a legal right the courts cannot decide it. The defendants accept that if the claimants have a legal right it is justiciable in the courts, and they do not seek to demarcate areas into which the courts may not intrude. In Bruker v Marcovitz [2007] 3 SCR 607, the Supreme Court of Canada had to deal with very similar questions in the context of religious beliefs. A wife whose marriage had been dissolved by the courts of Quebec sued her ex husband for damages for refusing to give her a get. This would have enabled her to contract a second marriage which would be lawful as a matter of Jewish religious law. The parties had agreed at the time of their separation to appear before the rabbinical court to obtain a get when their civil divorce became final. The Court of Appeal had declined to decide the claim on the ground that the substance of this obligation was religious and moral in nature, and not justiciable. The Supreme Court disagreed. Citing Syndicat Northcrest vs Amselem, [2004] 2 S.C.R. 551, 2004 SCC 47 at para 50, they accepted that the courts should avoid judicially interpreting and thus determining, either explicitly or implicitly, the content of a subjective understanding of religious requirement, obligation, precept, commandment, custom or ritual. But this did not prevent them from giving effect to the civil consequences of religious acts. So, while a court could not enforce the husbands religious obligations as such, their religious nature was consistent with their being enforced as a civil contract. The court was divided, the minority (Deschamps and Charron JJ) taking the view that the wifes inability to obtain a purely religious benefit, namely the right to a religious remarriage, was incapable of giving rise to a claim for civil damages. But they accepted the essential position adopted by the majority, that a court is thus not barred from considering a question of a religious nature, provided that the claim is based on the violation of a rule recognized in positive law (para 122). The third and fourth issues: religious doctrine This distinction between a religious belief or practice and its civil consequences underlies the way that the English and Scottish courts have always, until recently, approached issues arising out of disputes within a religious community or with a religious basis. In both jurisdictions the courts do not adjudicate on the truth of religious beliefs or on the validity of particular rites. But where a claimant asks the court to enforce private rights and obligations which depend on religious issues, the judge may have to determine such religious issues as are capable of objective ascertainment. The court addresses questions of religious belief and practice where its jurisdiction is invoked either to enforce the contractual rights of members of a community against other members or its governing body or to ensure that property held on trust is used for the purposes of the trust. We consider each circumstance in turn. The law treats unincorporated religious communities as voluntary associations. It views the constitution of a voluntary religious association as a civil contract as it does the contract of association of a secular body: the contract by which members agree to be bound on joining an association sets out the rights and duties of both the members and its governing organs. The courts will not adjudicate on the decisions of an associations governing bodies unless there is a question of infringement of a civil right or interest. An obvious example of such a civil interest is the loss of a remunerated office. But disputes about doctrine or liturgy are non justiciable if they do not as a consequence engage civil rights or interests or reviewable questions of public law. The governing bodies of a religious voluntary association obtain their powers over its members by contract. They must act within the powers conferred by the associations contractual constitution. If a governing body of a religious community were to act ultra vires, for example by seeking a union with another religious body which its constitution did not allow, a member of the community could invoke the jurisdiction of the courts to restrain an unlawful union. See Barker v OGorman [1971] Ch 215, which concerned a challenge to a proposed union between the Methodist Church and the Church of England on the ground that the Methodist Conference had no power to vary the doctrinal standards of the former church. It is a case involving a private Act of Parliament (the Methodist Church Union Act 1929) rather than a contract. But the principles of ultra vires are the same. See also Long v Bishop of Cape Town (1863) 4 Searle 162 PC, 176 per Lord Kingsdown. Similarly, members of a religious association who are dismissed or otherwise subjected to disciplinary procedure may invoke the jurisdiction of the civil courts if the association acts ultra vires or breaches in a fundamental way the rules of fair procedure. The jurisdiction of the courts is not excluded because the cause of the disciplinary procedure is a dispute about theology or ecclesiology. The civil court does not resolve the religious dispute. Nor does it decide the merits of disciplinary action if that action is within the contractual powers of the relevant organ of the association: Dawkins v Antrobus [1879] 17 Ch D 615. Its role is more modest: it keeps the parties to their contract. In McDonald v Burns 1940 SC 376, Lord Justice Clerk Aitchison stated (at pp 383 384): In what circumstances, then, will the Courts entertain actions arising out of judgments of ecclesiastical bodies: Speaking generally, in either of two situations (first) where the religious association through its agencies has acted clearly and demonstrably beyond its own constitution, and in a manner calculated to affect the civil rights and patrimonial interests of any of its members, and (secondly) where, although acting within its constitution, the procedure of its judicial or quasi judicial tribunals has been marked by gross irregularity, such fundamental irregularity as would, in the case of an ordinary civil tribunal, be sufficient to vitiate the proceedings. But a mere irregularity in procedure is not enough. In short, the irregularity alleged must not be simply a point of form, or a departure from prescribed regulation, but must go to the honesty and integrity of the proceedings complained of. We turn to the courts enforcement of trusts. The courts have jurisdiction to determine disputes over the ownership, possession and control of property held on trusts for religious purposes. Where people set up a trust to govern the purposes for which property is to be acquired and held, they are performing a juridical act which creates interests that the civil law will protect. The courts have repeatedly exercised jurisdiction in disputes over the ownership of property which were caused by religious disagreements. Many of the cases date from the 19th century and are Scottish, because of the propensity towards schism of the Scottish Presbyterian churches at that time. But the same principles applied in English law and, subject to the statutory jurisdiction of the court to approve cy prs schemes, which we discuss below, they remain valid in both jurisdictions. In a series of cases in which, as a result of a schism, parties disputed who had the beneficial interest in property which was held in trust for a religious community, the rule was established that the civil courts would ascertain the foundational and essential tenets of a faith in order to identify who was entitled to the property. This rule replaced the former rule, which applied at least in Scotland, that the courts would not investigate the religious grounds of a schism but would give effect to the majority view within the religious community. In Craigdallie v Aikman (1813) 1 Dow 1, 14 16 Lord Eldon established the principle of both English law and Scots law that in the event of a division within a voluntary religious body, the property held for the purposes of the association will go to the part of the body that adheres to its fundamental religious principles, as identified in its contract of association. In the English case of Attorney General v Pearson (1817) 3 Mer 353, 400 401, 36 ER 136, 150) he stated [W]here a congregation become dissentient among themselves, the nature of the original institution must alone be looked to as the guide for the decision of the Court, and that to refer to any other criterion, as to the sense of the existing majority, would be to make a new institution, which is altogether beyond the reach, and inconsistent with the duties and character, of this Court. The House of Lords considered the matter again in General Assembly of the Free Church of Scotland v Overtoun [1904] AC 515 (1904 7 F (HL) 1). In that case a Bench of seven Law Lords confirmed the rule in Craigdallie v Aikman. That rule has been applied since then. Most recently, the Inner House of the Court of Session has applied the rule in Smith v Morrison 2011 SLT 1213. In that case, Lord Drummond Youngs opinion contains a careful historical analysis of development of the principle. We agree with his opinion (at para 101) that in every case it is the trust deed or other agreement that determines what are the fundamental principles on which the congregation associated. We also agree with his view (at paras 113 116) that the law looks to the fundamental principles and essential standards of the body rather than minor matters of administration and minor changes in doctrine in ascertaining the scope of the trust. Lord Drummond Young cited (at para 118) the opinion of Lord President Cooper in the unreported case of Mackay v Macleod (10 January 1952) in the context of a competition between two parties, each claiming to be the beneficiaries entitled to certain trust property. The Lord President stated: In such a case it is the duty of the Court to take cognisance of relevant matters of belief, doctrine and church government for the purpose, but only for the purpose, of informing themselves as to the essential and distinguishing tenets of the Church in question, and of discovering the differences, if any, which can be detected in the principles to which the competing claimants respectively profess adherence. (Our emphasis). This clear line of authority contradicts the idea that a court can treat a religious dispute as non justiciable where the determination of the dispute is necessary in order to decide a matter of disputed legal right. Again, as Lord Davey said in Free Church of Scotland v Overtoun (at pp 644 645) the civil courts do not have the right to discuss the truth or reasonableness of any of the doctrines of [a] religious association. He stated The more humble, but not useless, function of the civil Court is to determine whether the trusts imposed upon property by the founders of the trust are being duly observed. The principles established in the church cases apply equally to other religions. In Hasanali v Mansoorali (Privy Council Appeal No 79 of 1945) (unreported, 1 December 1947), the Board in an appeal from the High Court of Judicature at Nagpur was concerned with the right to the use of property belonging to members of a Muslim community of the Ismailia Shia sect in the Central Provinces in India. The dispute within the religious community was whether an earlier leader of the sect, who was the 46th Dai or missionary, had validly appointed his successor before he died in 1840 CE. The authority of the current Dai, who was the 51st Dai, depended upon the validity of the nomination of the 47th Dai and his successors. The method by which a Dai nominated his successor as leader of the sect was by Nas e Jali, a form of declaration by the Dai. The declaration gave his successor civil powers as head of the sect and as trustee of its property as well as ecclesiastical powers as religious leader. The Board examined the tenets of the sect and the surviving evidence of what had occurred on the day on which the former leader died, before concluding that the Dai had made a valid declaration marking out his successor. It also ruled on the question whether the current Dais excommunication of members of his community complied with the procedures in the constitution of the religious community. The immigrations of the 20th century have diversified the religious landscape of the United Kingdom and the principles of the church cases have been applied equally to other religious communities in this country. In Varsani v Jesani [1999] Ch 219, the Court of Appeal dealt with a dispute over the use of a temple in London which was held in trust for a Hindu sect. The original purpose of the charity was the promotion of the faith of Swaminarayan according to the teachings and tenets of Muktajivandasji. A schism occurred in the community when in 1984 allegations of misconduct were raised against the successor, whom Muktajivandasji had nominated before his death in 1979. The majority of the community accepted his authority. But a minority thought that he had disqualified himself by his behaviour from the office of successor. The Court of Appeal held that, but for the extension of the courts jurisdiction to make a scheme cy prs in section 13 of the Charities Act 1960, it would have had to apply the law laid down by the Craigdallie, AG v Pearson and Free Church cases. In both jurisdictions the court has power to make a scheme cy prs. Among the grounds on which the trust purposes of a charity may be reorganised is where the original purposes, in whole or in part, have since they were laid down, ceased to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift. (section 13(1)(e)(iii) of the Charities Act 1993). In Scotland, similar provision is made for the reorganisation of both non charity public trusts and also charitable trusts in section 9 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 and sections 39 42 of the Charities and Trustee Investment (Scotland) Act 2005 respectively. This power may provide a means of avoiding the judicial determination of a religious dispute. But if it is not available, the court cannot shirk its duty to determine a matter of civil right. The respondents referred to the judgments of Gray J in Blake v Associated Newspapers Ltd [2003] EWHC 1960 and Simon Brown J in R v Chief Rabbi of the United Hebrew Congregations of Great Britain and the Commonwealth, Ex p Wachmann [1992] 1 WLR 1036 in support of their contention that the dispute in this case was non justiciable. But neither case supports that contention. In the former case the court stayed an action for defamation by Mr Blake against the publisher of the Daily Mail for describing him as a self styled or imitation bishop. The claimant had relinquished his status as a priest within the Church of England and had established with a Mr Palmer an organisation called The Province for Open Episcopal Ministry and Jurisdiction. Mr Palmer had purported to consecrate him a bishop. The case raised questions of doctrine and ecclesiology: the question was whether he was a bishop or merely a self styled bishop. We do not think that the court was correct to refuse to adjudicate on that issue on the ground that it was non justiciable. The claim was a civil claim in tort and the court will enter into questions of disputed doctrine if it is necessary to do so in reference to civil interests. See also Forbes v Eden (1867) LR 1 Sc & Div 568 HL, Lord Cranworth (at pp 581 582), Lord Colonsay (at p 588). The problem that such defamation claims face, which will usually doom them to failure, is that they raise issues of religious opinion on which people may hold opposing views in good faith. The expression of such views without malice is likely to be protected by the defence of honest comment what used, until Joseph v Spiller [2011] 1 AC 852, to be called fair comment. The ratio of the judgment in Wachmann was that the Chief Rabbis decision that the applicant was not religiously and morally fit to hold office as a rabbi did not raise an issue of public law which was amenable to judicial review. The case is not an authority for a proposition that the legality of such disciplinary proceedings is not justiciable. If the claim had been presented as a challenge to the contractual jurisdiction of a voluntary association, the court would have had jurisdiction to consider questions of ultra vires and allegations of breaches of natural justice: see Long v Bishop of Cape Town (above); R v Imam of Bury Park Mosque, Luton, Ex parte Sulaiman Ali CA 12 May 1993 QB COF 91/1247/D (The Times, 20 May 1993) in which Roch LJ cited Denning LJs judgment in Lee v Showmens Guild of Great Britain [1952] 2 QB 329, 342; Brentnall v Free Presbyterian Church of Scotland 1986 SLT 471. In Scotland, the wider scope of the supervisory jurisdiction of the Court of Session, which extends to those who exercise a jurisdiction conferred by private contract, would have allowed the challenge to be in the form of an application for judicial review as an alternative to a claim based on contract: West v Secretary of State for Scotland 1992 SC 385, Lord President Hope at pp 399 400. Accordingly, unless the parties are able to resolve their differences, for example by a reorganisation of the trust purposes cy prs, the court may have to adjudicate upon matters of religious doctrine and practice in order to determine who are the trustees entitled to administer the trusts. Subject to further amendment of the parties cases, the question whether Sant Jeet Singh has power to appoint and dismiss trustees may depend on issues such as (i) what are the fundamental tenets of the First Holy Saint and the Nirmal sect, (ii) what is the nature of the institution at Nirmal Kutia in India, (iii) what steps or formalities were needed for a person to become the successor of the First Holy Saint, and (iv) in relation to the fourth issue whether the teachings and personal qualities of Sant Jeet Singh comply with the fundamental religious aims and purposes of the trust. Conclusion and ancillary matters For these reasons, we would allow this appeal and restore the order of Judge Cooke. In so doing, we are reinstating the permission he accorded to the appellants to amend their particulars of claim, subject to certain reservations stipulated in his order. Although the Court of Appeal entertained an appeal against that order, they did not rule on it. We can see no good reason why an appellate court should interfere with a case management decision of this sort. It is not as if the hearing is imminent, and, as we have indicated, the respondents appear to wish to expand their case. There is one other matter we should mention. In his judgment, Judge Cooke made it clear that he did not consider that expert evidence would be appropriate. Whether that was right before the respondents made it clear that they wished to raise what we have called the fourth issue need not be decided. What is clear is that, in the light of the fourth issue, there is a strong case for saying that expert evidence should be permitted. In the light of that, as well as in the light of our decision on the points raised by the appeal, we propose to order that these proceedings be remitted to the High Court for appropriate further directions, without prejudice to the parties consenting to all further directions which they agree are needed. |
A man is convicted of an offence. Satisfied that he is suffering from mental disorder, the court makes an order for his detention in hospital. Satisfied that it is necessary for the protection of the public, the court also makes a restriction order, which removes from the hospital the power to discharge him. In due course a tribunal directs his discharge from hospital on conditions. Afterwards, however, the Secretary of State for Justice (the Minister) exercises his power to recall the man to hospital, where he is subject to renewed detention. This appeal is about the explanation for the recall which the law requires the Minister to provide to the man both at the time of his recall and soon afterwards. In this case the explanation provided on behalf of the Minister, the respondent, to Mr Lee Hirons, the appellant, at the time of his recall was simply that his mental health had deteriorated. This generates three questions: (1) Was such an explanation legally sufficient? (2) If not, did it make the appellants renewed detention unlawful? (3) If his detention was unlawful, should the court formally so declare and, in particular, should it award him damages for it and, if so, how much? Fifteen days after the appellants recall, a fuller oral explanation for it was provided to him. The Minister concedes that each of two separate legal principles required it to have been provided to him within three days of the recall and indeed in writing. These conceded breaches of the appellants rights generate three further questions: (4) Did the breaches make the appellants detention between the third and the fifteenth days following his recall unlawful? (5) award him damages and, if so, how much? If so, should the court formally so declare and, in particular, should it (6) Even if they did not make his detention unlawful, should the court make the breaches the subject of a formal declaration and, in particular, should it award him damages for them and, if so, how much? The appellant appeals against the order of the Court of Appeal dated 1 May 2014, whereby it dismissed his appeal against the dismissal of his application for judicial review of the Ministers explanations to him: [2014] EWCA Civ 553, [2015] QB 385. The leading judgment was given by Sir Stanley Burnton; and Jackson LJ (who added some observations of his own) and Patten LJ both agreed with it. In effect the answers to the questions given by the Court of Appeal were: (1) Yes. (2) Not applicable. (3) Not applicable. (4) no. (5) Not applicable. (6) Not addressed but the courts order means no. B: BACKGROUND The appellant is aged 49. He has the misfortune to have suffered protracted mental disorder, namely a personality disorder and a chronic paranoid delusional disorder. The question whether he has also suffered mental illness, in particular paranoid schizophrenia, has for long been the subject of clinical disagreement. He has a long history of admission to psychiatric hospitals. The appellant has 61 convictions for a variety of offences. In 2006 he was convicted of offences of arson and burglary. In the light of the nature or degree of his mental disorder and of all the other circumstances, the court then made a hospital order pursuant to section 37 of the Mental Health Act 1983 (the Act), by which it authorised his admission to and detention in a secure hospital. But, in the light of the perceived need to protect the public from serious harm, the court then also made a restriction order pursuant to section 41 of the Act, by which the power From 11 June 2012 to 19 July 2012 the appellant resided at the care home in to discharge the appellant was removed from the hospital and vested in the Minister or the First tier Tribunal (Health, Education and Social Care Chamber). By section 79(1) of the Act, the appellant thereby became a restricted patient for the purposes of Part V of it. The appellants detention took place in medium secure hospitals first in Dawlish and, from 2009, in Doncaster. On 27 April 2012, under section 73(2) of the Act, the First tier Tribunal made a direction, which on 24 August 2011 it had in principle resolved to make but had deferred, that he should be conditionally discharged from the hospital in Doncaster. In so directing, the tribunal overruled the concerns of the appellants responsible clinician that the risks of his discharge, even on a conditional basis, were too great. Having received evidence from Mr Hart, the appellants proposed social supervisor at a registered care home for ex offenders in Lancaster, the tribunal approved a plan that the appellant should move there on 11 June 2012. There were eight conditions, including that he should reside only at places approved by Mr Hart, that he should accept treatment directed by whoever was to become his responsible clinician, that he should not drink alcohol, that he should not approach members of the public in order to promote his (very intense) religious beliefs and that he should not contact an identified woman. Lancaster. On 19 July 2012 both Mr Hart, who had indeed become the appellants social supervisor at the home, Ms Weldon, who was a psychologist attached to the home, and Dr Omar, who had become his responsible clinician in Lancaster, resolved to invite the Minister to consider whether to exercise his power under sections 42(3) and 73(4)(a) of the Act to recall the appellant to a secure hospital. That afternoon Mr Hart telephoned Mr Elliott, who was a senior case worker at the National Offender Management Service within the Ministry of Justice (the Ministry). Mr Elliott was responsible for acting on behalf of the Minister in deciding whether to recall conditionally discharged patients to hospital. Immediately after their conversation, Mr Hart sent to Mr Elliott, by email, a statement in which he outlined the concerns of himself and of Ms Weldon, who had together seen the appellant that morning, and of Dr Omar. In the statement Mr Hart suggested that in the appellant there was a greater component of mental illness (as opposed to other types of mental disorder) than had at first been observed; that his mental health had deteriorated; that he had become fixated upon securing change of the conditions of his discharge; that he had been craving alcohol; that his presentation had become more unpredictable; that he had threatened to assault somebody; that he had been ranting and swearing in the office; that, against Dr Omars advice, he had refused to take all medication; that he was likely to abscond and thereupon to abuse alcohol and to seek to contact the woman identified in one of the conditions; that the only option was to recall him; and that a bed was available for him in a medium secure hospital in Manchester. Mr Elliott immediately resolved that the appellant should be recalled to the hospital in Manchester. One hour after receiving Mr Harts email, he sent to Mr Hart by email a warrant for the appellants recall. It recited no reason for the recall. When, however, Mr Hart thereupon informed the appellant that he had been recalled to a hospital in Manchester, he added that the reason for his recall was that his mental health had deteriorated. No fuller explanation was provided to the appellant that day; and, as I have indicated, the warrant with which he was then served would not have enlightened him. That evening police officers took him from Lancaster to the hospital in Manchester. He was unhappy but cooperative. Mr Hart at once confirmed to Mr Elliott by email that the warrant had been executed. Nothing in the evidence casts doubt on the appellants assertions that, when he arrived there, the hospital in Manchester knew nothing about him; that, during that evening, Dr Kasmi, a consultant forensic psychiatrist who was to become his responsible clinician there, asked him why he had been recalled; and that even two days later the nursing staff remained unable to explain to him the reasons for his recall. Within a month of recalling a restricted patient to hospital, the Minister is obliged by section 75(1)(a) of the Act to refer his case to the First tier Tribunal. In the appellants case the Minister did so at once, namely on 20 July 2012. On 24 July 2012 an officer in the Ministry, not Mr Elliott, sent a profoundly unsatisfactory letter to the hospital in Manchester. It was no doubt intended to be addressed to the appellants responsible clinician there, namely Dr Kasmi. But it was addressed to Dr Omar even though the writer should have been well aware that he had been the appellants responsible clinician in Lancaster. It enclosed a copy of the warrant which, for some reason, the writer understood not yet to have been executed. The writer was equally unaware of the fact that the Minister had already referred the appellants case to the tribunal. In the letter the writer stated that the appellant should be informed of the reasons for his recall within 72 hours of admission; but 72 hours had passed by the date of the letter. Nor did the letter in any way identify the reasons for the recall; it did not even attach the statement which Mr Hart had emailed to Mr Elliott on 19 July. One surely needs to hope that the letter represents an isolated example of incompetence and that it does not betoken within the Ministry a cavalier attitude towards recall wholly inappropriate to the discharge of its grave responsibilities. On 3 August 2012, namely 15 days following his recall, the appellant was apprised of the reasons for it. Dr Kasmi, who had somehow secured a copy of Mr Harts statement, then read it out to the appellant and discussed it with him. But he did not give the appellant a copy of it nor provide him with any other written explanation of the reasons for his recall. As quickly as 13 August 2012 the appellants long standing and energetic solicitors in Cornwall wrote a pre action letter to the Ministry, by which he challenged the lawfulness of the decision to recall him to hospital. On 19 October 2012 his application for judicial review was issued. It is clear from the judgment by which Dingemans J dismissed the application (reported together with the judgments in the Court of Appeal at [2015] QB 385) that at that stage the appellants primary case was that there were insufficient grounds for the Ministers decision to recall him. But it was only his secondary case that he took to the Court of Appeal, namely that there was an unlawful failure to explain the reasons for the recall to him; that the failure infected the legality of his detention; but that, even if it did not do so, it nevertheless generated a right to a declaration and damages. This court is not concerned with the outcome of the proceedings before the First tier Tribunal but understands that the appellant remains presently detained in hospital, albeit no longer the one in Manchester. C: THE CONCEDED BREACHES In April 1993 the Department of Health issued a circular to local authorities, LAC (93)9, and guidelines to health authorities, HSG (93)20, both of which were entitled Recall of mentally disordered patients subject to Home Office restrictions on discharge. The two documents are in much the same terms and remain substantially operative today. In annexes they state the governments policy towards the provision to recalled patients of an explanation for their recall. The annexes introduce the subject by pointing out that a patient recalled to hospital may be in an excitable and nervous state and that it is difficult to expect whoever is escorting him to hospital to provide a full explanation of the decision to recall him. Accordingly, so they continue, a three stage procedure should be applied: (1) at the time of the patients return to hospital, the person returning him should inform him in simple terms that he is being recalled by the Minister and that, to the extent possible, a further explanation will be given later; (2) as soon as possible after re admission to hospital and in any event within 72 hours of it the patients responsible clinician or another specified person at the hospital should explain to him the reasons for his recall and ensure so far as possible that he understands them; and (3) within 72 hours of his re admission the patient should be provided with a written explanation of the reasons for his recall. Where a public authority issues a statement of policy in relation to the exercise of one of its functions, a member of the public to whom it ostensibly applies, such as this appellant, has a right at common law to require the authority to apply the policy, so long as it is lawful, to himself unless there are good reasons for the authority not to do so: Mandalia v Secretary of State for the Home Department [2015] UKSC 59, [2015] 1 WLR 4546, paras 29 31. But the appellant also had rights under article 5 of the European Convention on Human Rights (the Convention): (1) Para 1(e) provides that the lawful detention of persons of unsound mind is a case in which deprivation of liberty is permissible so long as it is in accordance with a procedure prescribed by law. (2) Para 2 provides: Everyone who is arrested shall be informed promptly, in a language which he understands, of the reasons for his arrest and of any charge against him. (3) Para 4 provides that everyone deprived of his liberty should be entitled to take proceedings by which a court will speedily decide the lawfulness of his detention. (4) Para 5 provides that every victim of detention in contravention of any of the earlier paragraphs should have an enforceable right to compensation. No issue arises in respect of para 4 of article 5 of the Convention. The Ministers obligation under section 75(1)(a) is to refer the case of a recalled patient to the tribunal within a month. But we can leave open whether, were he to delay the reference for that full month, he would nevertheless be in breach of para 4; for his practice is to make the reference much more quickly, as exemplified by his immediate reference of the appellants case. The result was that, within a day of his recall, the tribunal was seised of a jurisdiction to direct his further discharge. Equally, within 25 days of his recall, the appellants solicitors had, by their pre action letter, set in train the present proceedings, the focus of which has been the lawfulness of the Ministers decision to recall him. So there was no violation of para 4. In relation to para 2 of article 5 of the Convention the Minister submits that, in the case of the recall of a restricted patient, implementation of the three stage procedure set out in the issued policy would satisfy the patients Convention rights thereunder. He accepts that, although it is convenient for him to delegate to those on the ground the task of explaining to the patient the reasons for the decision to recall, the obligation to do so remains on him as the maker of that decision. He contends that the first stage of the procedure, applicable to the time of the recall to hospital, was duly implemented and indeed that, when Mr Hart then explained to the appellant that the reason for his recall was a deterioration in his mental health, the explanation went slightly further than was required at the first stage. Inevitably, however, the Minister concedes that the second and third stages of the procedure were not implemented: for an adequate explanation was provided to the appellant not within three days but only within 15 days of the recall and, which seems to be agreed to have been less significant, an explanation in writing was provided to him not within three days but only months later in response to the present proceedings. The Minister therefore concedes that: (1) he breached the appellants right at common law to receive within three days an adequate explanation for the recall in accordance with published policy; and (2) he also breached the appellants analogous right under article 5(2) of the Convention to be informed promptly of the reasons for his recall. The Minister makes no further concessions. So it is almost time to consider the questions identified in para 2 above. But first they must be placed in context. D: CONTEXT The context is that, for seven reasons, the way in which the Minister both reaches and implements a decision to recall a restricted patient to hospital is a function of great importance which he must approach with scrupulous care: (1) He is depriving a person of liberty. We can be proud of the fact that, even in the dark ages, our law recognised the need for strict control of a deprivation of liberty: no free man, so King John was obliged to concede in clause 39 of Magna Carta (9 Hen 3), is to be arrested, or imprisoned nor will we go against him or send any against him, except by the lawful judgment of his peers or by the law of the land. (2) Only exceptionally will the law countenance a deprivation of liberty at the direction of the executive, rather than of the judiciary before whom protections are built into the system. (3) In particular the procedure entitles the Minister to effect a persons recall without having received any representations by him or on his behalf. (4) Often, as in the present case, the Minister is depriving a person of liberty shortly after a judicial body concluded that, albeit subject to conditions, he was, on the contrary, entitled to liberty. (5) The person whom the Minister is depriving of liberty is, as a restricted patient, a member of a particularly vulnerable group and therefore any interference with their rights must be subject to strict scrutiny (Zagidulina v Russia, European Court of Human Rights (ECtHR), 2 May 2013, Application No 11737/06, para 52). The patient may well be unable to respond to his recall in a manner which, objectively, would best serve his interests. (6) The recall deprives the person of liberty for an indefinite length of time subject only to the possibility of further discharge at some stage. (7) The recall exposes the person to the possible administration to him of medical treatment without his consent pursuant to section 58(3)(b) of the Act. E: QUESTIONS (1), (2) AND (3) The appellant cannot contend that the explanation provided to him by Mr Hart at the time of his recall failed to comply with the Ministers published policy referable to the provision of an explanation at that first stage. In this regard the appellant invokes a different strand of the common law; and the cornerstone of his submission is the decision of the House of Lords in Christie v Leachinsky [1947] AC 573. There police officers arrested the respondent without a warrant. They told him that they were arresting him for an offence categorised as a misdemeanour, for which there was no power to arrest without a warrant. In fact they had reasonable grounds for suspecting that he had committed a felony, namely larceny of a bale of cloth, which, but for the deficit identified by the House of Lords, would have entitled them to arrest him without a warrant. The deficit was that they did not tell him that they were arresting him on suspicion of larceny of the cloth. Viscount Simon said at p 586: in normal circumstances an arrest without warrant either by a policeman or by a private person can be justified only if it is an arrest on a charge made known to the person arrested. Lord Simonds said at p 592: Arrested with or without a warrant the subject is entitled to know why he is deprived of his freedom, if only in order that he may, without a moments delay, take such steps as will enable him to regain it. And at p 593 he referred to the principle, which lies at the heart of the matter, that the arrested man is entitled to be told what is the act for which he is arrested. Lord du Parcq expressed it starkly at p 598: a man is entitled to his liberty, and may, if necessary, defend his own freedom by force. If another person has a lawful reason for seeking to deprive him of that liberty, that person must as a general rule tell him what the reason is, for, unless he is told, he cannot be expected to submit to arrest, or blamed for resistance. When Mr Hart told the appellant that the ground for his recall was a deterioration in his mental health, the Ministers duty about what to explain to him at that first stage was in my view satisfied. It was an accurate summary of the ground. Deterioration in health is not the only permissible ground for recall. For example the commission of a crime or the breach of a condition would, if of sufficient significance (R (MM) v Secretary of State for the Home Department [2007] EWCA Civ 687, para 50, Toulson LJ), justify a recall. Just as in the Christie case the officers had to tell the respondent only that the ground of his arrest was the suspected larceny of the cloth, without any need to refer to the grounds for their suspicion, so there was no need at that stage for Mr Hart or anyone else to communicate to the appellant the grounds for considering that his mental health had deteriorated. In any event, had he wanted to understand those grounds, the appellant had only to recall his discussion with Mr Hart and Ms Weldon that morning when, as Mr Harts written note makes clear, they had ventilated their concerns with him. It was reasonable for the Department of Health, when introducing its guidelines, to have suggested both that, at the time of his recall, a restricted patient is likely to be under stress and probably not able to digest a detailed presentation of the reasons for it and that those, for example the police, deputed to effect the recall, often in an emergency, might well know little or nothing about the background to it. Equally the effect of the Ministers immediate reference of the appellants case to the First tier Tribunal was that the failure to have provided him with detailed reasons for the recall at that stage did not delay his recourse to that facility for seeking renewed discharge. If, as I conclude, there was at the time of his recall no breach of the appellants right at common law, was there nevertheless a violation at that time of his right under article 5(2) of the Convention? Inevitably I reach for the decision of the European Commission of Human Rights, and thereafter of the ECtHR, on facts closest to those of this appeal: X v United Kingdom (1981) 4 EHRR 188. The applicant, a restricted patient, challenged the Home Secretarys recall of him in 1974 to a secure hospital following his conditional discharge, pursuant to the Mental Health Act 1959. Reporting in July 1980 to the ECtHR, the Commission concluded that his recall did not violate article 5(1) of the Convention. In relation to article 5(2), however, the Commission accepted at para 107 that: it may not be the role of police officers, who are charged with the sometimes delicate task of arresting a patient, to inform him of the detailed reasons of arrest or recall, as they are not qualified to assess the patients condition and his ability to understand the position. However, the responsibility of informing the patient or his representatives will, in such circumstances, fall on the medical officers concerned. Then in its report the Commission added and this is the high point of the appellants submissions in this connection: Nevertheless this obligation has to be discharged promptly, ie at the latest on arrival at the hospital. In the event, in the light of an unresolved dispute between the applicant and the hospital as to what he had been told on arrival, the Commission concluded that a violation of article 5(2) had at any rate occurred seven weeks later when his solicitors request for reasons for the recall had been inadequately addressed on behalf of the Home Secretary. Two points are worthy of note: (1) Under section 66 of the Mental Health Act 1959, the power to discharge a restricted patient was vested solely in the Home Secretary and the role of a tribunal, namely the Mental Health Review Tribunal, was only advisory. (2) By way of swift response to the Commissions report (and as the ECtHR was informed when in 1981 it came to consider the Commissions reference see para 16 of its judgment), the Home Secretary issued advisory circulars about the stages at which recalled patients should be informed of the reasons for their recall, which closely parallel the circulars still operative today. Upon reference to it of the X case, the ECtHR agreed with the Commission that the relief available in the habeas corpus proceedings which the applicant had swiftly taken was inadequate to satisfy his right under para 4 of article 5 of the Convention and, in that there was at that time no other avenue by which to challenge his continued detention, his right under that paragraph had been violated. When it turned to para 2, the court stressed the link between it and para 4: 66. anyone entitled to take proceedings to have the lawfulness of his detention speedily decided cannot make effective use of that right unless he is promptly and adequately informed of the facts and legal authority relied on to deprive him of his liberty. Its conclusion was that, in that the complaint under para 2 was no more than an aspect of the complaint under para 4, there was no need to rule separately upon it. In Fox, Campbell and Hartley v United Kingdom (1990) 13 EHRR 157 the ECtHR held that, in arresting the applicants in Northern Ireland on no more than a suspicion that they were terrorists, the UK authorities had deprived them of their liberty in violation of para 1 of article 5. But the court rejected their complaint under para 2. It explained the paragraph as follows: 40. This provision is an integral part of the scheme of protection afforded by article 5: by virtue of paragraph (2) any person arrested must be told, in simple, non technical language that he can understand, the essential legal and factual grounds for his arrest, so as to be able, if he sees fit, to apply to a court to challenge its lawfulness in accordance with paragraph (4). Whilst this information must be conveyed promptly (in French: dans le plus court dlai), it need not be related in its entirety by the arresting officer at the very moment of the arrest. Whether the content and promptness of the information conveyed were sufficient is to be assessed in each case according to its special features. The Commissions throw away remark in the X case that article 5(2) requires detailed reasons for a recall to be provided to a restricted patient at the latest on arrival at the hospital is far too slender a thread on which to hang a conclusion that the appellants right under para 2 was breached on the day of his recall. The remark shows no understanding of the special features of a recall which, often effected in an emergency, may, as in the case of the appellant, render the hospital unacquainted with those reasons until later. The flexibility, albeit limited, of the courts analysis in the Fox case is much to be preferred. In relation to the explanation required to be provided to the appellant at the time of his recall, I conclude that the demands of article 5(2) did not extend beyond the demands of the common law. Their demands were met. In answer to the first question, the Court of Appeal was right to conclude that Mr Harts explanation to him at that time was legally sufficient; and it followed that the second and third questions were indeed not applicable. The court is told that, since 2012, it has become the Ministers practice to include within the warrant to be served upon the restricted patient at the time of recall a brief reason for it. Indeed, in the Mental Health Act 1983: Code of Practice published in 2015, the Department of Health goes further than the guidance given in 1993 in relation to stage one when it states at para 4.19: Where a conditionally discharged patient is to be recalled to hospital, a brief verbal explanation of the Secretary of States reasons for recall must be provided to the patient at the time of recall unless there are exceptional reasons why this is not possible, eg the patient is violent or too distressed. Were this guidance to be followed and were the warrant served upon the patient also to include a brief reason for the recall, the Ministers obligations to provide an explanation for it at the time of his recall would be likely to be discharged. F: QUESTIONS (4) and (5) The starting point for consideration of the fourth question, namely the effect of the conceded breaches on the lawfulness of the appellants actual detention, is the decision of this court in R (Lumba) v Secretary of State for the Home Department [2011] UKSC 12, [2012] 1 AC 245. The Home Secretary had, so the majority held, infringed the rights of two men in reaching a decision to detain them pending deportation by reference to unpublished criteria inconsistent with her published criteria. Also by a majority, the court decided that the infringement had rendered their actual detention unlawful. It was obvious that the criteria by reference to which the Home Secretary decided whether initially to detain the men, and thereafter whether to continue to detain them, bore in principle, ie at least theoretically, on the decision to detain them even though, as the court also proceeded to find, they would nevertheless have fallen to be detained by reference to the published criteria. Lord Dyson said: 68. It is not every breach of public law that is sufficient to give rise to a cause of action in false imprisonment. In the present context, the breach of public law must bear on and be relevant to the decision to detain. Lady Hale said: 207. the breach of public law duty must be material to the decision to detain and not to some other aspect of the detention and it must be capable of affecting the result which is not the same as saying that the result would have been different had there been no breach. Lord Kerr added at para 248 that the breach had to have a direct bearing on the decision to detain. Lord Kerrs adjective took centre stage in this courts decision in R (Kambadzi) v Secretary of State for the Home Department [2011] UKSC 23, [2011] 1 WLR 1299, which swiftly followed the Lumba case. In breach of a rule and indeed by way of departure from her own policy the Home Secretary had failed on about 12 occasions in the course of less than two years to conduct a monthly review of whether the appellant should continue to be detained. By a majority the court held that her failures had rendered his detention unlawful. Lady Hale said at para 77 that the departure from policy was so obvious and so persistent and so directly related to the decision to continue to detain that it was clearly material in the Lumba sense. Lord Kerr stressed at paras 83 and 88 that the public law error touched directly on the decision to detain. The first of three decisions on the other side of the line is that of the House of Lords in R (Saadi) v Secretary of State for the Home Department [2002] UKHL 41, [2002] 1 WLR 3131, and, following the appellants application to it, also of the ECtHR in Saadi v United Kingdom (2008) 47 EHRR 427. The reason why the appellant had been detained was to enable the determination of his claim for asylum to be subject to a fast track procedure but for three days a different explanation for his detention was provided to him. The House of Lords held that the error did not affect the legality of his detention. The ECtHR held that, in informing him only after three days of the true reason for his detention, the Secretary of State had failed to inform him of it promptly and so had breached his right under article 5(2) of the Convention; but there was no suggestion that the breach had affected the validity of his detention. The second of the decisions is that of the House of Lords in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 39, [2003] 1 WLR 1763. Police officers were statutorily entitled in limited circumstances to defer compliance with an arrested persons request to see a solicitor but they were required as soon as practicable to tell him their reason for deferring it. It was held that their breach of the latter requirement did not make the appellants detention unlawful. Lord Millett at para 61 described his claim to that effect as hopeless. The third of the decisions is that of this court in R (Kaiyam) v Secretary of State for Justice [2014] UKSC 66, [2015] AC 1344. The court held that the Secretary of State had breached the rights of prisoners, implied by article 5 of the Convention, to be given access to programmes which might enable them to demonstrate to the Parole Board that they no longer represented an unacceptable danger to the public. Lord Mance and Lord Hughes considered that the implied rights were analogous to rights under article 5(4). They stated unequivocally at para 37 that a breach of article 5(4) did not directly impact on the lawfulness of detention; and they held at para 38 that, likewise, breach of the implied rights did not affect the lawfulness of the prisoners detention. In my opinion there is no link, let alone a direct link, between, on the one hand, the Ministers wrongful failure for 12 days to provide to the appellant an adequate explanation for his recall and, on the other, the lawfulness of his detention. The failure did not delay reference of his case to the First tier Tribunal. Nor has the appellant suggested that it delayed institution of the present proceedings. Even if it had created delay, the unequivocal statement of Lord Mance and Lord Hughes in the Kaiyam case about the limited effects of a violation of article 5(4) would appear to exclude the relevance of the delay to the validity of the detention itself. The case closest to the present is the Saadi case where the difference was one only of degree (namely a delay of three days rather than of 12) and not of kind. The wise judge will also address the consequences of the argument presented to him. In the present case there was a clear departure from the 72 hour policy, in relation to which the Minister can claim no extenuating circumstances. But it is easy to imagine lively arguments in other cases about either the adequacy of the reasons provided to the patient for the recall or the practicability of having provided them to him within that time frame. I would be very concerned if the right of a restricted patient to walk out of hospital or to seek to do so should depend upon where the stronger of such an argument lies. I therefore consider that the Court of Appeal was right to conclude, in answer to the fourth question, that the conceded breaches did not make the appellants detention for those 12 days unlawful; and to conclude that the fifth question was therefore inapplicable. G: QUESTION (6) As a result of the conceded breaches, the appellant suffered no pecuniary loss. But in his evidence, unchallenged by the Minister, he says that in the months following his recall to hospital he suffered great distress. Nevertheless, as one would expect, he attributes his distress to the recall itself. He does not identify the failure for 12 days to have provided him with the reasons for it as an additional cause of it and, although one may infer that to some extent it increased his level of frustration and anxiety, the time span of only 12 days precludes any inference that it caused significant non pecuniary injury. The appellant is not entitled to damages for the breach of his right at common law to receive an adequate explanation for his recall within the time identified by published policy. The breach does not amount to a tort and there is nothing to suggest that damages would have been available to the appellant in any ordinary action which he might have brought against the Minister in that respect; see section 31(4)(b) of the Senior Courts Act 1981. But the Ministers concession is also of a breach of the appellants right under article 5(2) of the Convention. Thus the claim for damages must be appraised also through the prism of section 8 of the Human Rights Act 1998 which in particular requires the court, by subsection (3), to make an award of damages for the breach only if it is necessary to afford just satisfaction to the appellant and, by subsection (4), to take into account the principles applied by the ECtHR in relation to the award of compensation under article 41 of the Convention. In R (Greenfield) v Secretary of State for the Home Department [2005] UKHL 14, [2005] 1 WLR 673, Lord Bingham of Cornhill stressed at paras 4 and 9 that the focus of the Convention was upon securing the observance of minimum standards in the protection of human rights and that compensation to the victim of a breach was of secondary, if any, importance to it. Before the House, however, was a violation of article 6; and, having referred to the specific provision under article 5(5) for compensation for violation of any of the earlier paragraphs of that article, Lord Bingham stressed in para 7 the risk of error if the decisions of the ECtHR in relation to one article were read across so as to apply to another. In R (Faulkner) v Secretary of State for Justice and R (Sturnham) v Parole Board [2013] UKSC 23 and 47, [2013] 2 AC 254, the rights of two prisoners under article 5(4) to a speedy review of their continued detention by the Parole Board had been breached. In the first case the wrongful delay was about ten months and in the second it was about six months. In the first case this court reduced the award of damages to 6,500 and in the second it restored an award of 300. In explaining the courts decisions Lord Reed conducted a masterly exposition of the approach of the ECtHR to damages for violations of article 5(4). Having observed at para 53 that the ECtHR was prepared, without direct proof, to presume harm in the form of feelings of frustration and anxiety and in answer to his question is there a de minimis principle?, he concluded that: 66. a delay [in the conduct of the requisite review] of three months or more is likely to merit an award, whereas the stress and anxiety which can be inferred from a delay of shorter duration are unlikely to be of sufficient severity. In Damages and Human Rights, 2016, Hart Publishing, Dr Varuhas argues in chapter 5(1) that in the Faulkner and Sturnham cases this court has sought too rigidly to apply the principles of the ECtHR, such as they are, to awards of compensation for Convention violations. Be that as it may, it is clear to me that damages should not be payable to the appellant for the breach of his right under article 5(2) of the Convention any more than that they should be payable for the breach of his right at common law. He has failed to establish that their effects on him were sufficiently grave. Nor would a formal declaration in this courts order add anything to my recording in this judgment of the Ministers concessions. No doubt under pressure, the Court of Appeal failed in its judgments to address the sixth question, squarely raised though it had been. But that courts wholesale dismissal of the appeal incorporates the correct, negative, answer. I therefore propose that the appeal should be dismissed. H: DISPOSAL LORD REED: I respectfully agree with the judgment of Lord Wilson, and wish only to add some brief observations in relation to the legal consequences, under the common law, of the Secretary of States failure to comply with the administrative policy under which the appellant should have been provided, after being recalled to hospital, with a full explanation of the reasons for the decision to recall him. It was decided on 19 July 2012 that the appellant should be recalled to hospital, and the decision was implemented that day. There was, under the common law, a duty to give the appellant reasons for that decision. That duty followed from the fact that the effect of the decision was to deprive him of his liberty. For the reasons explained by Lord Wilson at para 25, the Secretary of State complied with that duty. The case illustrates the extent to which the common law duty to give reasons for a decision is context specific, in the sense that what is required in order to comply with the duty depends on the context in which it arises. Quite separately, the Secretary of State had adopted an administrative policy that a full explanation of the decision to recall should be provided to patients within 72 hours of their re admission to hospital. That policy was adopted in the context of a statutory scheme governing the discharge of restricted patients, under the Mental Health Act 1983 as amended, which imposes on the Secretary of State a duty to refer the patients case to the First tier Tribunal within a month of his recall to hospital, as Lord Wilson explains at para 11. On such a reference, the tribunal has the power to order the patients discharge. It is conceded that the adoption of the policy created a public law duty to comply with it, absent good reason for non compliance. That duty arose under the common law in accordance with principles of good administration. It is conceded that there was a failure to comply with that duty in the appellants case. At the hearing of the appeal, the discussion of the effect of that failure focused primarily upon the appellants Convention rights. So far as the legal consequences under the common law are concerned, the failure to comply with the policy did not in my view render the decision to recall invalid, either ab initio or with effect from the expiry of the 72 hour period. That is so for three reasons. First, the duty is to provide reasons ex post facto. It remains capable of meaningful performance even after the 72 hour period has expired. Such performance can if necessary be enforced. Delayed performance does not, in this situation, call into question the validity of the antecedent decision. Secondly, the duty to refer the case to the tribunal within a month provides a statutory mechanism for ensuring that an adequate justification is provided for the patients detention in hospital, failing which he will be discharged. It would be inconsistent with the statutory framework governing discharge if an entitlement to release arose under the common law as soon as there had been a failure to comply with the administrative policy. Thirdly, it would be perverse if the legal consequence of the breach of a duty imposed for the sake of good administration was one which itself created administrative chaos, such as would occur if patients whose condition might require detention in hospital were entitled to walk out of the hospital as soon as the 72 hours had expired. For these reasons, in addition to those given by Lord Wilson, I agree that the failure to comply with the policy did not affect the validity of the decision to recall the appellant, or therefore the lawfulness of his consequent detention. |
On 26 October 2010 this Court issued its judgment in Cadder v HM Advocate [2010] UKSC 43, 2010 SLT 1125. It held that the Crowns reliance on admissions made by an accused without legal advice when detained under section 14 of the Criminal Procedure (Scotland) Act 1995 gave rise to a breach of his right to a fair trial, having regard to the decision of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421. This was because the leading and relying on the evidence of the appellants interview by the police was a violation of his rights under article 6(3)(c) read in conjunction with article 6(1) of the European Convention on Human Rights: see Cadder v HM Advocate, para 63. The evidence that was in question in Cadder had been obtained when the appellant was being questioned while in detention at a police station. The applicant in Salduz too had been taken into custody before he was interrogated during his detention by police officers of the anti terrorism branch of the Izmir Security Directorate. But the facts of those cases by no means exhaust the situations in which the prosecution may seek to rely on answers to questions that have been put to the accused by the police. The Court now has before it four references by judges of the High Court of Justiciary which have been required by the Lord Advocate under paragraph 33 of Schedule 6 to the Scotland Act 1998. Common to them all is the fact that incriminating answers were given to questions put by the police when the accused did not have access to legal advice. In three of them the evidence that is objected to was obtained by the police otherwise than by questioning at a police station following detention under section 14 of the 1995 Act. They can be grouped together and are the subject of this judgment. The fourth is concerned with the question whether the ratio of the decision in Salduz extends to lines of enquiry to which the accuseds answers to questions while in detention have given rise. That reference is dealt with in a separate judgment: P v HM Advocate [2011] UKSC 44. The issues that the first three references raise are (1) whether the right of access to a lawyer prior to police questioning, which was established by Salduz, applies only to questioning which takes place when the person has been taken into police custody; and (2) if the rule applies at some earlier stage, from what moment does it apply. The first reference is of a case which is the subject of an appeal against conviction. The second is of a case which is before the Appeal Court in an appeal against a ruling by a sheriff on the admissibility of evidence. The third is of case which is the subject of a devolution minute which was referred by the trial judge to the Appeal Court under paragraph 9 of Schedule 6 to the Scotland Act 1998. The cases that are the subject of the second and third references that have not yet gone to trial, so the names of the parties involved have been anonymised. In each case the reference has been made by the Appeal Court at the request of the Lord Advocate. The first reference The appellant in the first case, John Paul Ambrose, was prosecuted on summary complaint at Oban Sheriff Court on a charge of contravening section 5(1)(b) of the Road Traffic Act 1988 as being in charge of a motor vehicle whilst having consumed a level of alcohol in excess of the prescribed limit. He had been found by two police officers sitting in the passenger seat of a car parked by the roadside. A female was sitting in the drivers seat. A member of the public had expressed concerns to the police about them because they were thought to be drunk. As there was vomit beside the drivers door and the female was seen to be upset, the police officers decided to speak to the appellant. Having formed the view that he had been drinking, one of the police officers cautioned the appellant but did not give him any specification about the offence which he was suspected of having committed. The appellant made no reply when cautioned. He was then asked three questions, to which he gave answers, by the police. They were as follows: Q Where are the keys for the vehicle? A In my pocket. Q Do you drive the car? A Yes. Q Are you going to drive the car? A Ah, well she wisnae well or Aye, well she wisnae well. The appellant then removed the car keys from his trouser pocket. He was asked whether he had anything to drink in the last 20 minutes and replied that he had not. He was then given a roadside breath test which he failed. He was taken to Oban police station where he gave a breath/alcohol reading that was well in excess of the prescribed limit. The appellant pled not guilty to the complaint. He went to trial before a Sheriff on 31 May 2010 and 2 July 2010. The evidence of the questions and answers was led without objection from his solicitor. After the Crown had closed its case the appellants solicitor challenged the admissibility of this evidence on the ground that the police had not informed the appellant of the offence of which he was suspected before he was questioned. The sheriff repelled this submission. After hearing evidence from the appellant and a defence witness, he found the appellant guilty. He was fined 375, was disqualified from driving for two years and had his licence endorsed. The appellant then lodged an appeal against his conviction. Among the grounds on which he applied for a stated case was the submission that the act of the Lord Advocate in seeking a conviction in reliance on the evidence of the police interview was incompatible with his right to a fair trial under article 6(1). Leave to appeal having been refused at the first sift, he appealed to the second sift and then lodged a devolution minute in which it was stated that for the Lord Advocate to support the conviction would be incompatible with his rights under article 6(1) and article 6(3)(c). In a note which he lodged on 12 October 2010 in support of the appeal he submitted, with reference to the decision in Salduz, that the use of the evidence of the interview was unfair as he did not have access to legal representation before or during the police interview. On 3 November 2010 leave to appeal was granted at the second sift. Following a procedural hearing on 26 January 2011 and at the request of the Lord Advocate, the Appeal Court referred the following question to this court: Whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the appellant conducted under common law caution at the roadside and without the appellant having had access to legal advice was incompatible with the appellants rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights, having regard in particular to the decision of the Supreme Court of the United Kingdom in Cadder v HM Advocate 2010 SLT 1125. The second reference The accused in the second case, referred to as M, has been indicted in the sheriff court on a charge of assault to severe injury, permanent disfigurement and permanent impairment. Shortly after the assault took place on 30 August 2008, in the course of initial inquiries, the police took the accuseds details from him but allowed him to leave the locus. On 4 September 2008 however he was traced to his home address where, after administering a common law caution to the effect that he was not required to say anything but that anything he did say might be used in Page4 evidence, a police officer asked a total of seven questions, each of which was answered by the accused. They were as follows: Q I am investigating a serious assault which happened on Saturday night there, within a bar named [X]. There was a large disturbance in there too. Were you there? A Yes, aye. Q Were you involved in the fight? A Aye. Q Who were you with? A My dad and just boys fae [Y] where I used to work. Q Were they involved too? A I think so, the other boys started it. I got punched a couple of times on the eyebrow. Its still sair. Q OK, what were you wearing? A Pale blue t shirt, jeans, trainers. Q OK [M], I will stop there. I need to speak to you further except it will be recorded in a taped interview format. Can you be at [Z] Police Office tomorrow night at 8 pm? A Yes. Q I need to take your t shirt you had on, is that OK? A Aye. At this point the police officer concluded his questions because he felt that it had become obvious that the accused had some involvement on the incident and that it was not appropriate to carry out an interview there. The accused attended the police office the next day. He was then detained and interviewed under section 14 of the 1995 Act, in the course of which he made further admissions. The accused was indicted for trial, and after sundry procedure he lodged a minute raising the issue whether the Crown had power to lead evidence of the admissions which he had made. When the minute was argued before the sheriff on 9 November 2010 the Crown conceded that the evidence of the admissions made during the section 14 interview was inadmissible. But the sheriff ruled that evidence relating to the questions and answers at the accuseds home on 4 September 2008 was admissible. The accused appealed against that decision to the High Court of Justiciary, contending that by failing to allow him access to legal advice prior to interview and there being no compelling reasons to justify this, his admissions allegedly obtained under caution had been unfairly obtained and were therefore inadmissible. Following a procedural hearing on 26 January 2011 and at the request of the Lord Advocate, the Appeal Court referred the following question to this court: Whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the accused, conducted under common law caution at his home address and without the accused having had access to legal advice would be incompatible with the accuseds rights under article 6(1) and 6(3)(c) of the European Convention on Human Rights, having regard in particular to the decision of the Supreme Court of the United Kingdom in Cadder v HM Advocate 2010 SLT 1125. The third reference The accused in the third case, referred to as G, has been indicted in the High Court of Justiciary with offences including the possession of controlled drugs under the Misuse of Drugs Act 1971 and possession of prohibited firearms and ammunition under the Firearms Act 1968. The police had obtained a search warrant under the 1971 Act for the search of a flat where on 4 June 2008, having forced entry, they found the accused. Before commencing the search in terms of the warrant the accused, who had been handcuffed following a struggle, was cautioned in these terms: A systematic search will be carried out in your presence. I must caution that you are not obliged to say anything or make any comment regarding any article that may be found, but anything you do say will be noted and may be used in evidence. The accused was then detained and searched. Prior to being searched he admitted to having drugs in his jeans pocket, from which a bag of brown powder was recovered that was later found to be heroin. He was then arrested for contravention of section 23(4) of the 1971 Act. He was not arrested or charged with any other offence in the course of the search of the premises. During the search he was asked questions about the items which were found. He was not offered access to legal advice or to a solicitor before being asked these questions. After the search was concluded he was removed to a police station where he was detained under section 14 of the 1995 Act and again interviewed by the police in connection with alleged offences involving controlled drugs and firearms. He was not allowed access to legal advice before or during this interview. The Crown does not seek to rely on answers which the accused gave while he was being interviewed in the police station, but it seeks to rely on the statements and answers which he made at the premises in the course of the search. They are set out in a schedule which was completed as the search of the flat was carried out. Without that evidence there would not be sufficient evidence to convict the accused. The accused has lodged a devolution minute in which he contends that the leading of evidence of the statements and answers which he made at the premises would be incompatible with his Convention right to a fair trial. The trial judge decided to refer this issue to the Appeal Court under paragraph 9 of Schedule 6 to the Scotland Act 1998. On 18 January 2011 at the request of the Lord Advocate the Appeal Court referred the following question to this court: Is it incompatible with the Panels Convention rights for the Lord Advocate to lead evidence of his statements and answers made during the course of the search conducted under warrant granted in terms of section 23(3) of the Misuse of Drugs Act 1971 as recorded in the Search Production Schedule? In each of these three cases the circumstances differ from those that were before the court in Cadder and before the Grand Chamber in Salduz. The evidence that is objected to was obtained, in Ambroses case before he was taken to the police station for further procedures to be carried out under section 7 of the Road Traffic Act 1988 following his failure of a road side breath test, and in the cases of M and G before they were detained and questioned at a police station under section 14 of the 1995 Act. It is precisely because the issue that the references raise was not the subject of decision in either case that the courts guidance is now sought by the Lord Advocate. His position is that three features determine whether an individual has a right to legal advice under article 6 in accordance with the principle in Salduz. These features are all taken from words used by the Grand Chambers judgment in that case: see paras 55 and 56. First, he must be a suspect. Second, he must be in police custody. Third, he must be the subject of police interrogation. Unless all three features are present, he has no right of access to legal advice under article 6. These propositions all assume, of course, that the court finds that article 6(1) was engaged when the incriminating statements were made. This is because the protection of articles 6(1) and 6(3)(c) is afforded only to those who have been charged, as that word has been interpreted by the Strasbourg court. Each of these expressions will need to be analysed in the discussion that follows. Background Two very important points need, however, to be made at the outset. The first is that the jurisdiction of this court is limited to a consideration of the devolution issue which is raised by each of these references. That is plain from the wording of paragraph 33 of Schedule 6 to the Scotland Act 1998 under which the references have been made, but it needs to be emphasised yet again. The High Court of Justiciary is the court of last resort in all criminal matters in Scotland: see section 124(2) of the Criminal Procedure (Scotland) Act 1995; McInnes v HM Advocate [2010] UKSC 7, 2010 SLT 266, para 5, Fraser v HM Advocate [2011] UKSC 24, 2011 SLT 515, para 11. It is not our function to rule on how the circumstances referred to in each case would fall to be dealt with under domestic law, although this does form part of the background. The second point is that a decision by this court that there is a rule that a person who is suspected of an offence but is not yet in custody has a right of access to a lawyer before being questioned by the police unless there are compelling reasons to restrict that right would have far reaching consequences. There is no such rule in domestic law: see para 22, below. If that is what Strasbourg requires, then it would be difficult for us to avoid holding that to deny such a person access to a lawyer would be a breach of his rights under articles 6(1) and 6(3)(c) of the Convention. But the consequences of such a ruling would be profound, as the answers to police questioning in such circumstances would always have to be held in the absence of compelling reasons for restricting access to a lawyer to be inadmissible. The effect of section 57(2) of the Scotland Act 1998 would be that the Lord Advocate would have no power to lead that evidence. I agree with Lord Matthew Clarke that this would have serious implications for the investigation of crime by the authorities: see para 116, below. This suggests that a judgment pointing unequivocally to that conclusion would be required to justify taking that step. If Strasbourg has not yet spoken clearly enough on this issue, the wiser course must surely be to wait until it has done so. Section 126(1) of the Scotland Act 1998 provides that the Convention rights has the same meaning as in the Human Rights Act 1998. Section 2(1) of the Human Rights Act requires this court in determining any question which has arisen in connection with a Convention right to take into account any relevant Strasbourg case law. In R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 26 Lord Slynn of Hadley said that, although the Human Rights Act did not provide that a national court is bound by these decisions, it is obliged to take account of them so far as they are relevant: In the absence of some special circumstances it seems to me that the court should follow any clear and constant jurisprudence of the European Court of Human Rights. If it does not do so there is at least a possibility that the case will go to that court, which is likely in the ordinary case to follow its own constant jurisprudence. In R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20 Lord Bingham of Cornhill said that Lord Slynns observations in that case reflected the fact that the Convention is an international instrument, the correct interpretation of which can be expounded only by the Strasbourg court. From that it followed that a national court should not without strong reason dilute or weaken the effect of the Strasbourg case law. It was its duty to keep pace with it as it evolved over time. There is, on the other hand, no obligation on the national court to do more than that. As Lord Bingham observed, it is open to member states to provide for rights more generous than those guaranteed by the Convention. But such provision should not be the product of interpretation of the Convention by national courts. Lord Kerr says that it would be wrong to shelter behind the fact that Strasbourg has not so far spoken and use that as a pretext for refusing to give effect to a right if the right in question is otherwise undeniable: para 130, below. For reasons that I shall explain later, I do not think that it is undeniable that Strasbourg would hold that any questions put to a person by the police from the moment he becomes a suspect constitute interrogation which cannot lawfully be carried out unless he has access to a lawyer, which is the principle that Lord Kerr derives from his consideration of the mainstream jurisprudence: see para 146, below. But his suggestion that there is something wrong with what he calls an Ullah type reticence raises an important issue of principle. It is worth recalling that Lord Binghams observations in Ullah were not his first pronouncements on the approach which he believed should be taken to the Convention. In Brown v Stott 2001 SC (PC) 43, 59 he said: In interpreting the Convention, as any other treaty, it is generally to be assumed that the parties have included the terms which they wished to include and on which they were able to agree, omitting other terms which they did not wish to include or on which they were not able to agree. Thus particular regard must be had and reliance placed on the express terms of the Convention, which define the rights and freedoms which the contracting parties have undertaken to secure. This does not mean that nothing can be implied into the Convention. The language of the Convention is for the most part so general that some implication of terms is necessary, and the case law of the European Court shows that the court has been willing to imply terms into the Convention when it was judged necessary or plainly right to do so. But the process of implication is one to be carried out with caution, if the risk is to be averted that the contracting parties may, by judicial interpretation, become bound by obligations which they did not expressly accept and might not have been willing to accept. As an important constitutional instrument the Convention is to be seen as a living tree capable of growth and expansion within its natural limits (Edwards v Attorney General for Canada ([1930] AC 124) at p 136 per Lord Sankey LC), but those limits will often call for very careful consideration. The consistency between this passage and what he said in Ullah shows that Lord Bingham saw this as fundamental to a proper understanding of the extent of the jurisdiction given to the domestic courts by Parliament. Lord Kerr doubts whether Lord Bingham intended that his discussion of the issue should have the effect of acting as an inhibitor on courts of this country giving full effect to Convention rights unless they had been pronounced upon by Strasbourg: para 128, below. I, for my part, would hesitate to attribute to him an approach to the issue which he did not himself ever express and which, moreover, would be at variance with what he himself actually said. Lord Binghams point, with which I respectfully agree, was that Parliament never intended to give the courts of this country the power to give a more generous scope to those rights than that which was to be found in the jurisprudence of the Strasbourg court. To do so would have the effect of changing them from Convention rights, based on the treaty obligation, into free standing rights of the courts own creation. That is why, the courts task in this case, as I see it, is to identify as best it can where the jurisprudence of the Strasbourg court clearly shows that it stands on this issue. It is not for this court to expand the scope of the Convention right further than the jurisprudence of the Strasbourg court justifies. The background in domestic law The powers of the police to detain a person and to subject him to questioning depend on the category into which the person falls at the time these powers are being exercised. They differ according to whether the person is a witness, a suspect or an accused. Where a person is not under suspicion, the police have no power to take him into custody or to compel him to submit to police questioning. Such a person is classified, at most, as a witness. A person who is in that category can be asked to provide personal information, such as his name and address. Further questions may be put as part of a routine investigation into the events that have happened. So long as he is being questioned as a potential witness rather than as a suspect, the right to protection against self incrimination is not in play. There is no obligation to advise him of his rights, such as the right to silence or his right to seek legal advice. As Lord Justice Clerk Thomson said in Chalmers v HM Advocate 1954 JC 66, 81, a person ultimately accused may be interviewed as part of the ordinary routine investigation of the police into the circumstances of the crime. It would unduly hamper the investigation of crime if the threat of inadmissibility were to tie the hands of the police in asking questions at this stage. The position changes if the stage is reached when suspicion begins to fall on the person who is being questioned. Once suspicion has begun to fall on him the need to protect him against self incrimination comes into play. As Lord Justice General Cooper explained in Chalmers v HM Advocate 1954 JC 66, 78: The theory of our law is that at the stage of initial investigation the police may question anyone with a view to acquiring information which may lead to the detection of the criminal; but that, when the stage has been reached at which suspicion, or more than suspicion, has in their view centred upon some person as the likely perpetrator of the crime, further interrogation of that person becomes very dangerous, and, if carried too far, eg to the point of extracting a confession by what amounts to cross examination, the evidence of that confession will almost certainly be excluded. It was for a time thought that this passage was to be taken to establish that answers by suspects to police questioning were inadmissible by virtue of the persons position as a person under serious consideration as the perpetrator of the crime. But, as the law has developed, the position is less easy to define: see Renton and Brown, Criminal Procedure, 6th ed looseleaf (1996), para 24 38. In Miln v Cullen 1967 JC 21 it was held that the incriminating answers which the driver of a car gave when questioned by police officers who had formed the opinion that he was under the influence of drink were admissible in evidence. Lord Justice Clerk Grant said at p 25 that the constable, in asking the simple question whether he was the driver, was not merely acting reasonably, properly and fairly but was acting in accordance with the duties incumbent upon him. Lord Wheatley said at pp 30 31 that it was difficult to define with exactitude when a person becomes a suspect in the eyes of a police officer, as it may vary from a very slight suspicion to a clearly informed one, and that what happened after that had to be judged by the test of fairness. In Lord Advocates Reference (No 1 of 1983) 1984 JC 52, 58 Lord Justice General Emslie said that Lord Wheatleys statement in Miln v Cullen, at p 31 that in each case the issue is whether the question was in the circumstances a fair one was a sound statement of the law: A suspects self incriminating answers to police questioning will indeed be admissible in evidence unless it can be affirmed that they have been extracted from him by unfair means. The simple and intelligible test which has worked well in practice is whether what has taken place has been fair or not? (see the opinion of the Lord Justice General (Clyde) in Brown v HM Advocate 1966 SLT 105 at 107). In each case where the admissibility of answers by a suspect to police questioning becomes an issue it will be necessary to consider the whole relevant circumstances in order to discover whether or not there has been unfairness on the part of the police resulting in the extraction from the suspect of the answers in question. He went on to say that, where the words interrogation and cross examination were used in the decided cases in discussing unfair tactics on the part of the police, they were to be understood to refer only to improper forms of questioning tainted with an element of bullying or pressure designed to break the will of the suspect or to force from him a confession against his will. The current position as described in Renton and Brown, para 24 39 is therefore that the fact that the accused was at the time under suspicion or even under arrest is not in itself crucial. It is merely a circumstance like any other to be taken into account in assessing the fairness of the police questioning. The legal basis for detaining and questioning a suspect was clarified by section 2 of the Criminal Justice (Scotland) Act 1980 which was consolidated as section 14 of the Criminal Procedure (Scotland) Act 1995. The background to the legislation was described with characteristic skill and attention to detail by Lord Rodger in Cadder, para 74 86. As he explained in para 86, one aim was to put an end to the doubts about the legal basis for holding suspects for questioning when they had not been arrested. Another was to clarify the law as to the power of the police to question suspects and as to the admissibility of any answers that the suspects gave to such questions. A person may be detained for the purpose of carrying out investigations where a constable has reasonable grounds for suspecting that he has committed or is committing an offence punishable by imprisonment: section 14(1). Where a person has been detained under section 14(1) a constable may, without prejudice to any relevant rule of law as regards the admissibility in evidence of any answer given, put questions to him in relation to the suspected offence: section 14(7). The effect of the decision in Cadder is that the Lord Advocate has no power to lead and rely on answers by a detainee who was subjected to questioning by the police while he was without access to legal advice. In none of the situations described in each of the references was the person who was being questioned a detainee under section 14 of the 1995 Act. The domestic law test for the admissibility of the answers that were given to the questions put by the police is whether or not there was unfairness on the part of the police. The fact that the person did not have access to legal advice when being questioned is a circumstance to which the court may have regard in applying the test of fairness, but it is no more than that. There is no rule in domestic law that says that police questioning of a person without access to legal advice who is suspected of an offence but is not in custody must always be regarded as unfair. The question is whether a rule to that effect is to be found, with a sufficient degree of clarity, in the jurisprudence of the Strasbourg court. The reasoning in Salduz The starting point for an examination of this question must be the reasoning of the Grand Chamber in Salduz. Some of the propositions that are set out in its judgment are expressed in a way that might suggest that the right of access to a lawyer is not confined to persons who are subjected to police questioning while they are in custody. Para 55 of the judgment is in these terms: Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right. Even where compelling reasons may exceptionally justify denial of access to a lawyer, such restriction whatever its justification must not unduly prejudice the rights of the accused under article 6. The rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction. Read on its own, and without taking full account of the context in which these sentences were written, that paragraph suggests that the features which determine whether access to legal advice is to be provided are (a) that the person is a suspect, and (b) that he is subject to police interrogation. No mention is made in this paragraph of his being in police custody. The fact is, however, that the applicant was in police custody when he was interrogated by the police. The narrative of the facts in paras 12 14 shows that it was not until after he had been taken into custody by police officers from the Anti Terrorism Branch of the Izmir Security Directorate that he was interrogated. That being so, it is necessary to look elsewhere in the judgment to see whether the court was contemplating anything other than an interrogation in police custody when it came to set out what it did in para 55 of the judgment. In Part II A of the judgment, under the heading Domestic law, the court referred to legislation in force at the time of the application which provided that anyone suspected or accused of a criminal offence had a right of access to a lawyer from the moment they were taken into police custody. The reason why this had not been provided to the applicant was that the legislation did not apply to persons accused of offences falling within the jurisdiction of the state security courts, which his offence did. The challenge, therefore, was to a systematic departure from the right of access to a lawyer which the law gave to everyone else. In its examination of recent amendments in paras 29 31 of the judgment too its focus was on provisions that deal with juveniles taken into police custody. That continued to be its focus in its examination of the relevant international law materials in Part IIB. Chapter 1 of that Part refers to materials from the Council of Europe and the United Nations dealing with procedure in juvenile cases where the child had been deprived of his liberty by means of pre trial detention. The heading of Chapter 2 is Right of access to a lawyer during police custody. Reference is made in para 37 of the judgment to rule 93 of the Standard Minimum Rules for the Treatment of Prisoners adopted by the Council of Europe Ministers, which states that an untried prisoner shall be entitled as soon as he is imprisoned to choose his legal representatives and to receive visits from his legal adviser, and, in para 38, to a recommendation of the Committee of Ministers to Member States of the Council of Europe dealing with the right of prisoners to legal advice. There is no sign here or in its examination of the United Nations materials in paras 41 42 that the Grand Chamber was interested in the position of suspects who were questioned by the police when not in custody. Nor is there any sign of an international consensus that there is a right of access to a lawyer at that stage. The part of the judgment which deals with the alleged violation of article 6 of the Convention begins at para 45. The first section, which is headed Access to a lawyer during police custody, continues to para 63. It includes para 55, which I have already quoted: see para 26, above. In para 45 it is stated that the applicants allegation was that his defence rights had been violated as he had been denied access to a lawyer during his police custody. The parties submissions, as narrated in paras 47 49 were directed to this issue. There then follows a discussion of the general principles which were applicable to the case: paras 50 55. In this passage, to which I will return, the court does not, at least in so many words, limit its scrutiny of the principles to what they require in cases where the person concerned is in police custody. But in the next section, where it applies the principles to the case of applicant, the fact that he was in police custody lies at the heart of the discussion; paras 56 62. The holding in para 80 states that there had been a violation of the applicants rights under article 6(1) in conjunction with article 6(3)(c) on account of the lack of legal assistance while he was in police custody. But for the discussion of the relevant principles in paras 50 55, which is not so limited, there would be no doubt at all that the Grand Chambers declaration in the last sentence of para 55 that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction was directed to the situation where that interrogation took place while the person was in police custody. That is the conclusion that one would naturally draw from the context. The concurring opinions of Judge Bratza and Judge Zagrebelsky lend further support to this conclusion. Judge Bratza said in para O I2 that, like Judge Zagrebelsky, he thought that the court should have used the opportunity to state in clear terms that the fairness of criminal proceedings under article 6 required that, as a rule, a suspect should be granted legal advice from the moment he is taken into police custody or pre trial detention. No mention is made in either of these opinions of any rule to the effect that the suspect should be granted legal advice at any earlier stage. It may be, as Lord Rodger suggested in Cadder, para 70, that what these judges were contemplating was legal assistance for other purposes such as support for an accused who was distressed or to check on the conditions of detention. Whatever the reason, they were plainly not addressing their remarks to situations such as those described in the references where the questioning took place before the suspect was taken into police custody. The discussion of the general principles in paras 50 55 is not limited in this way. As para 50 makes clear, the fact that the applicants case was concerned with pre trial proceedings did not mean that article 6 had no application. The point is made that the fairness of a trial may be seriously prejudiced by an initial failure to comply with its provisions. In para 51 reference is made to the right of everyone charged with a criminal offence to be effectively defended by a lawyer, the choice of means of ensuring this being left to the contracting states. The paragraph ends with a warning that assigning counsel does not in itself ensure the effectiveness of the assistance he may afford an accused. So far there is nothing to suggest that the Grand Chamber was searching for a basis for a ruling that the right of access to a lawyer arose at a stage before the suspect was taken into police custody. In para 52 reference is made for the first time to the attitude of the accused at the initial stages of police interrogation and to the fact that article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer at this stage. No mention is made of where he was assumed to be when he is being questioned, but the cases referred to in the footnote to this paragraph are all cases where the applicant was in custody when he was subjected to interrogation by the police: Murray v United Kingdom (1996) 22 EHRR 29, Brennan v United Kingdom (2001) 34 EHRR 507 and Magee v United Kingdom (2000) 31 EHRR 822. In para 53 it is stated that the principles outlined in the previous paragraph are also in line with the generally accepted international human rights standards which, as the footnote to this paragraph indicates, are those set out in Part B of the judgment: see para 28, above. These are said to be at the core of the concept of a fair trial. Their rationale relates in particular to the protection of an accused against abusive coercion on the part of the authorities. The language used and the international materials referred to suggest that what the Grand Chamber had in mind here was the need for protection of the accused against abusive coercion while he was in custody. In para 54 it underlined the importance of the investigation stage for the preparation of criminal proceedings and referred to the fact that the accused often finds himself in a particularly vulnerable position at that stage of the proceedings and to the fact that early access to a lawyer was part of the procedural safeguards to which the court will have particular regard. The stage in the proceedings that the court had in mind is not specified other than by reference to the accuseds vulnerability. This is said to be amplified by the fact that legislation in criminal procedure tends to become increasingly complex. It seems that what the Grand Chamber had in mind here was a stage when the accused was being subjected to detailed questioning of the kind that, under the inquisitorial systems, will invariably take place after the accused has been taken into custody. This impression is reinforced by the reference in the third last sentence of the paragraph to the recommendations of the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment about the right of a detainee to have access to legal advice as a fundamental safeguard against ill treatment to which, I would infer, it was thought a detainee might be vulnerable. This analysis of the reasoning of the Grand Chamber in Salduz suggests that the judgment was concerned only with establishing a rule that there was a right of access to a lawyer where the person being interrogated was in police custody. The alternative view is that in para 55 it recognised a broader principle that the rule applies as soon as the person has been charged so that article 6 is engaged. This alternative has a certain logical appeal for the reasons that Lord Kerr has identified. The prejudice suffered by the accused is the same irrespective of the stage at which an incriminating statement is made in answer to questions put by the police. But the base on which this proposition rests is not that the Convention prohibits absolutely any reliance on incriminating statements. The privilege against self incrimination is not an absolute right: Murray v United Kingdom (1996) 22 EHRR 29, para 47. It is primarily concerned with respecting the will of the person to remain silent: Saunders v United Kingdom (1996) 23 EHRR 313, para 68. Everyone is entitled to respect for the right not to incriminate himself, irrespective of whether or not he is in police custody. Nevertheless a person can confess if he is willing to do so, and his confession will be admissible if it is truly voluntary. The underlying principle therefore is that there is a right against self incrimination which in some circumstances must be protected by special measures to protect the person against the risk that a confession may be obtained from him against his will by unfair tactics by the police. That is why the court recognised in its application of those principles to Salduzs case, as it had already done in para 54, that an interview which takes place in police custody has particular features which require the provision of an especially strong protection to protect the rights of the defence against a forced confession. It is that aspect of Salduzs case which seems to have informed the whole of the courts judgment. It seems to me that the Grand Chambers judgment, when taken as a whole, does not indicate with a sufficient degree of clarity or indeed, I would suggest, in any way at all that the ruling in para 55 about incriminating statements made without access to a lawyer applies to questions put by the police before the accused is taken into custody. The context would have required this to be stated expressly if it was what was intended, as the rule which the judgment laid down can be departed from only where there are compelling reasons to justify its restriction. It would have had to have been stated precisely to what situations outside police custody the rule was to apply, and it was not. The jurisprudence since Salduz The Grand Chambers judgment has, not surprisingly, been referred to many times by the Strasbourg court since the judgment in that case was delivered. The question is whether there is an indication in any of the cases that the right of access to a lawyer arises, as a rule, as soon as a person whose rights under article 6 are engaged is subject to questioning by the police. There are passages in some of the cases which indicate that Salduz is regarded as having been concerned only with the need for legal advice while the person was in custody. In Dayanan v Turkey (application no 7377/03) (unreported) given on 13 October 2009, which is a decision of the Second Section and is available only in French, the applicant was arrested and detained as part of an operation against the Hizbullah. He was informed of his right to silence and exercised it, as he refused to answer the questions put to him by the police. It was held nevertheless that there had been a breach of article 6(3)(c) in conjunction with article 6(1) because he did not have access to a lawyer while he was being interrogated. The court said: 31. Elle estime que lquit dune procdure pnale requiert dune manire gnrale, aux fins de larticle 6 de la Convention, que le suspect jouisse de la possibilit de se faire assister par un avocat ds le moment de son placement en garde vue ou en dtention provisoire. 32. Comme le souligne les normes internationales gnralement reconnues, que la Cour accepte et qui encadrent sa jurisprudence, un accus doit, ds quil est priv de libert, pouvoir bnficier de lassistance dun avocat et cela indpendamment des interrogatoires quil subit (pour les textes de droit international pertinents en la matire, voir Salduz, prcit, paras 37 44) The proposition in para 32 that an accused must have access to a lawyer from the moment he is deprived of his liberty (un accus doit, ds quil est priv de libert, pouvoir bnficier de lassistance dun avocat) seems to go further than what the Grand Chamber itself said in Salduz. It is more in keeping with the concurring opinions of Judge Bratza and Judge Zagrebelesky. However that may be, the passages which I have quoted indicate the importance that appears to have been attached by Strasbourg to the fact that the person was in police custody when he was being interrogated. It is especially significant that this is what the court saw the international consensus (les normes internationales gnralement reconnues) to be on this issue. Three other cases from Turkey are to the same effect. In Arzu v Turkey (application no 1915/03) (unreported) given on 15 September 2009 the applicant, who was arrested and placed in custody, complained that he had been denied access to a lawyer during the initial stages of the criminal proceedings against him. The court said that Salduz had considered the grievance of a lack of access to a lawyer whilst in police custody: para 46. In Duman v Turkey (application no 28439/03) (unreported) given on 23 March 2010 the court said in para 46 that the use of statements obtained at the stage of the police inquiry and the judicial investigation is not inconsistent with article 6(1), provided that the rights of the defence are respected. On that point the court said that it relied on the basic principles laid down in its judgments, including Salduz, para 55, concerning the notion of a fair procedure. In Takin v Turkey (application no 5289/06) (unreported) given on 1 February 2011 the applicant complained that he had had no legal assistance before he made his police statement or during his interrogation before the public prosecutor while in custody. The court observed that it had already examined the issue concerning the lack of legal assistance in police custody in Salduz, paras 56 62. In all these cases, as in Salduz itself, there was a systemic restriction on access to legal advice by anyone held in police custody in connection with proceedings that were to be taken in the state security courts. In Pishchalnikov v Russia (application no 7025/04) (unreported) given on 24 September 2009 the applicant, who had been arrested, was interrogated while he was in police custody. The pattern of the First Sections judgment followed that of the Grand Chamber in Salduz. It repeated many of the propositions in paras 50 55 of Salduz in its assessment of the case under the heading Restrictions on access to a lawyer in the police custody, and referred in para 71 to the fact that the right to silence and the right not to incriminate oneself are generally recognised international standards which lie at the heart of a fair procedure under article 6. But, as it was a custody case, it does not examine the question whether these propositions require access to a lawyer at any earlier stage. In Sharkunov and Mezentsev v Russia (application no 75330/01) (unreported) given on 10 June 2010 the question before the court was again directed to the lack of legal assistance while in police custody and the use at the trial of incriminating statements that had been made at that stage. In para 97 the court repeated the proposition that was first stated in Salduz, para 55 that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction. But once again the police interrogation in the course of which these statements were made took place while the applicant was in police custody. In Borotyuk v Ukraine (application no 33579/04) (unreported) given on 16 December 2010 the applicant was, once again, in police custody during the pre trial investigation. Here too the propositions on which the court based its judgment are closely modelled on what the Grand Chamber said in para 55 of Salduz. In para 79 it summarised the general principles that are to be found there. It stated that, as a rule, access to a lawyer must be provided as from the first questioning of a suspect by the police, unless it can be demonstrated in the light of the particular circumstances that there are compelling reasons to restrict that right. As in para 55 of Salduz, no indication is given that the principles are restricted to cases where the accused was in police custody. But, as in Salduz, that was the background against which the case was heard. Once again it is unclear whether the general propositions on which the judgment was based must equally be applied, as a rule, to cases where the accused was not in custody when the questioning took place. Zaichenko v Russia The First Section had the opportunity to clarify where the court stood on this issue in Zaichenko v Russia (application no 39660/02) (unreported) given on 18 February 2010. This appears to have been the only case to date in which the complaint was of lack of legal assistance during questioning by the police when the applicant was not in custody. He was stopped while he was driving home from work and his car was inspected by the police as there had been reports of workers stealing diesel from their service vehicles. Two cans of diesel were discovered in the car. The applicant made self incriminating statements in reply to questions put to him by the police at the roadside. He was charged with stealing the cans, and he was convicted. His complaint was that he had not been advised of the privilege against self incrimination when he made his admission to the police. His position at the trial was that he had purchased the diesel at a petrol station and that he did not give this explanation to the police because he felt intimidated and did not have a receipt to prove the purchase. In its assessment the court set out the general principles that are relevant to a consideration of whether there has been a violation of the right to a fair trial. It noted that article 6(3)(c) especially might be relevant before a case is sent to trial if and in so far as the fairness of the trial is likely to be seriously prejudiced by a initial failure to comply with its requirements. In para 36 it recalled, as the Grand Chamber did in Salduz, the proposition that the court set out in Imbrioscia v Switzerland (1993) 17 EHRR 441, para 38 that the manner in which articles 6(1) and 6(3)(c) were to be applied during the preliminary investigation depended on the special features of the proceedings and on the circumstances of the case. Account was taken in para 37 of the principles set out in Salduz, para 55 and in para 38 of the fact that the right to silence and the right not to incriminate oneself are generally recognised standards which lie at the heart of the notion of a fair procedure. Para 38 then contains these important propositions which did not receive the same attention in Salduz: The right not to incriminate oneself presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused (see, inter alia, J B v Switzerland, no 31827/96, para 64, ECHR 2001 III). In this sense the right is closely linked to the presumption of innocence contained in article 6(2) of the Convention. In examining whether a procedure has extinguished the very essence of the privilege against self incrimination, the Court must examine the nature and degree of the compulsion, the existence of any relevant safeguards in the procedures and the use to which any material so obtained is put (ibid). Applying these propositions to the applicants case, the court noted in para 42 that in criminal matters article 6 comes into play as soon as a person is charged and that this may occur on a date prior to the case coming before the trial court, such as the date of arrest, the date when the person concerned was officially notified that he would be prosecuted or the date when the preliminary investigations were opened. Eckle v Germany (1982) 5 EHRR 1, para 73 was referred to, which includes the proposition taken from cases such as Deweer v Belgium (1980) 2 EHRR 439, para 46 that the test as to whether a person has been charged for the purposes of article 6(1) is whether the situation of the person has been substantially affected. The court concluded that, given the context of the road check and the applicants inability to produce any proof of the diesel purchase at the moment of his questioning by the police, there was a suspicion of theft against him from that moment and that, although he was not yet accused of any criminal offence, his situation in the proceedings at the roadside was substantially affected. So article 6(1) was engaged at that point. But the fact that article 6(1) was engaged did not mean that a right of access to a lawyer arose at that point. The court observed in para 47 that the case was different from previous cases concerning the right to legal assistance in pre trial proceedings. This was because the applicant was not formally arrested or in police custody but was stopped for a roadside check which was carried out in the presence of two attesting witnesses. In para 48 it said: Although the applicant in the present case was not free to leave, the Court considers that the circumstances of the case as presented by the parties, and established by the Court, disclose no significant curtailment of the applicants freedom of action, which could be sufficient for activating a requirement for legal assistance already at this stage of the proceedings. In para 49 it noted that the role of the police in such a situation was to draw up an inspection record and receive the applicants explanation as to the origin of the cans in his car. Having done so, the police transferred the documents to the inquirer who submitted a report to his superior which prompted him to open a criminal case against the applicant. In para 51 it held that the absence of legal representation at the roadside check did not violate his right to legal assistance under article 6(3)(c). In a partly dissenting opinion Judge Spielmann said that the interview took place in circumstances that could in no way be compared to those normally observed during routine road checks and he could not agree that the circumstances of the case disclosed no significant curtailment of the applicants freedom of action such as to require legal assistance. He did not take issue with the principle formulated in para 48. His dissent was as to its application to the facts of the case. Mr Scott for Ambrose submitted that it was wrong to look at the courts reasoning in Salduz through what it decided in Zaichenko. Mr Shead for M submitted that Zaichenko was so out of line with the other cases, and so hard to reconcile with the basic principles that were stated in Salduz, that it should be regarded as having been wrongly decided. I would reject these arguments. The President of the Court, Judge Rozakis, was a member of the Grand Chamber in Salduz, as was Judge Spielmann. The importance of the question that the case raised, which was whether the ruling in Salduz applied to questioning where the applicant was not in police custody, would not have been overlooked. The reasoning shows that the reasoning in Salduz was fully taken into account. The finding in para 48 that the circumstances did not disclose a sufficient curtailment of the applicants freedom of action which could be sufficient for activating a requirement for legal assistance indicates that the court was well aware that it had to give reasons for reaching a different result. That it did so in the way that it did shows that this is a judgment which must be taken into account in the search for an answer to the question where the jurisprudence of the Strasbourg court stands on the question we have to decide. Abdurahman v United Kingdom The question whether the right of access to a lawyer applies at a stage before the person is taken into custody is now before the Strasbourg court in an application by Ismail Abdurahman, application no 40351/09. He was questioned by the police as a witness in connection with the attempt to detonate four bombs at separate points in the London public transport system two weeks after the bombings that took place on 7 July 2005. He had been approached by two police officers who took him to a police station. According to their evidence at the voir dire at the applicants trial, this was with a view to his assisting the police as a potential witness. They began interviewing him, but after about 45 minutes of questioning they considered that, as a result of the answers that he was giving, he was in danger of incriminating himself and should be cautioned. On instructions from a senior officer they continued nevertheless to interview him as if he were a witness. It was not until after he had completed and signed his witness statement, which contained statements that were incriminating and was made without access to legal assistance, that they were told to arrest him and he was then taken into custody. This case is still awaiting a hearing in Strasbourg. It has reached the stage of the court posing questions to the parties, which are whether there has been a violation of article 6(1) together with article 6(3)(c) arising from (a) the failure to caution the applicant before he gave his witness statement (Aleksandr Zaichenko v Russia, no 39660/02, 18 February 2010); and/or (b) the failure to provide him with legal assistance before he gave the witness statement? In particular, were the rights of the defence irretrievably prejudiced by the use of the witness statement at trial (Salduz v Turkey [GC], no 36391/02, para 55, 27 November 2008)? It is, of course, too early to say what view will be taken of this case when the facts have been assessed by the court in the light of the relevant principles. But it is at least likely that its judgment will provide some useful guidance as to the approach that is to be taken to a persons rights under article 6(1) together with article 6(3)(c) where the prosecution seeks to rely on answers given to questions by the police before he is formally taken into custody. The key issue, so far as the references that are before the court in this case are concerned, is whether, as a rule, access to a lawyer must always be provided when a person is questioned at any stage in the proceedings after he has become a suspect and must be taken to have been charged for the purposes of article 6 (see paras 62 63, below), or whether access to a lawyer is required, as a rule, only where the person has been taken into custody or his freedom of action has been significantly curtailed. The fact that this application is still pending suggests that, if there was any doubt as to where the jurisprudence of the Strasbourg court stands, it would have been wise to wait for its judgment in Abdurahman before holding that there is a rule that access must be provided in any situation that is not analogous on its facts to that which was before the court in Salduz. But that is for another day, as the delivery of the judgment in that case cannot be taken to be imminent. Miranda v Arizona The Lord Advocate placed considerable weight in support of his argument on the judgment of the Supreme Court of the United States in Miranda v Arizona 384 US 436 (1966). In that case the Supreme Court held that the prosecution may not use statements, whether incriminatory or exculpatory, stemming from custodial interrogation of a defendant unless it demonstrated the use of procedural safeguards which were sufficient to secure the privilege against self incrimination. These safeguards require that, unless other fully effective means are devised to inform the accused person of the right to silence and to assure continuous opportunity to exercise it, he must be warned that he has a right to remain silent, that any statement that he does make may be used as evidence against him, that he has the right to consult with an attorney and that, if he cannot afford one, a lawyer will be appointed to represent him. Custodial interrogation for the purposes of this rule means questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way: p 444. Miranda has been referred to in a number of individual opinions given by judges of the Strasbourg court. Judge De Meyer referred to it in his dissenting opinion in Imbrioscia v Switzerland (1993) 17 EHRR 441. The applicant in Imbrioscia had been questioned several times without access to a lawyer while he was in police custody but the court held, considering the proceedings as a whole, that there had been no breach of article 6(1) read with article 6(3)(c). Judge De Meyer said that the court had failed to recognise the rules governing the right to legal advice during custodial interrogation which the Supreme Court has summarised in its Miranda judgment and which he said belonged to the very essence of fair trial. In Murray v United Kingdom (1996) 22 EHRR 29 the applicant had been denied legal advice for 48 hours after he had been taken into custody. The court held that there had been a violation of article 6(1) read with article 6(3)(c). The partly dissenting judges, Judge Pettiti, joined by Judge Valticos, and Judge Walsh, joined by Judges Makarczyk and Lhmus, also referred to the Miranda judgment in this context. Judge Walsh pointed out that the Supreme Court had affirmed that the constitutional protection against self incrimination contained in the Fifth Amendment guarantees to the individual the right to remain silent unless he chooses to speak in the unfettered exercise of his own free will whether during custodial interrogation or in court. Much more recently, but prior to the Grand Chambers decision in Salduz, Judge Fura Sandstrm joined by Judge Zupani referred to Miranda in Galstyan v Armenia (2007) 50 EHRR 618 when, in para 0 I5, she described the right to be assisted by a lawyer as a bright line rule which nobody should cross and said that its purpose was to neutralise the distinct psychological disadvantage that suspects are under while dealing with the police. The Strasbourg court has not referred to Miranda in any of its judgments, and Imbrioscia, Murray and Galstyan are the only cases where it has been referred to in a dissenting opinion in the context of what is described in Miranda as custodial interrogation. But it can be assumed that the court will not have overlooked it in its search for generally accepted international human rights standards. The dissenting judgments in Imbrioscia and Murray which drew attention to it were given before the Grand Chamber considered the issue in Salduz, and those cases were cited to it in that case. As T A H M van der Laar and R L de Graaf, Salduz and Miranda: is the US Supreme Court pointing the way? [2011] 3 EHRLR 304, 315 have pointed out, the test that the Strasbourg court described in paras 47 and 48 of Zaichenko when it considered that the applicant was neither formally arrested nor interrogated in police custody and that there was no significant curtailment of his freedom of action echoes the statement in Miranda, p 477 that the rule of access to a lawyer that it describes applies when the suspect is subjected to police interrogation while in custody or otherwise deprived of his freedom of action in any significant way. It is not unreasonable to think that Miranda and subsequent cases that the ruling in that case have given rise to in the United States will influence the thinking of the Strasbourg court as it develops the principles described in Salduz. The significance of Miranda is that it follows the custodial approach to the question as to when access to a lawyer is required. The core of that decision, as der Laar and de Graaf have described it in [2011] EHRLR 304, 310, is that a suspects statement made as a result of interrogation initiated by the interrogating authorities while he is in custody cannot be used in evidence unless the prosecutor can prove that the procedural safeguards that were used were effective enough to secure the suspects right not to incriminate himself. The underlying reason is that the circumstances in which such an interrogation takes place are inherently intimidating. As Chief Justice Warren explained at p 445, an understanding of the nature and setting of the in custody interrogation was essential to the courts decision: incommunicado interrogation in a police dominated atmosphere. But it was noted that an interpretation of the requirement that the right to legal advice arose at an earlier stage would hamper the traditional function of the police in investigating crime. General on the scene questioning as to facts surrounding the crime or other general questioning of citizens was not affected. The right to legal advice was held not to extend that far because the compelling atmosphere inherent in the process of in custody interrogation was not necessarily present: Miranda, pp 477 478. The accused in that position is protected by the rule that only statements voluntarily made are admissible. I think that there is an indication here about the way the Strasbourg courts jurisprudence may develop, if there are doubts as to the significance of the courts decision in Zaichenko. Miranda shows that reasons can be given which, at the very least, the court has not yet said are irrelevant for thinking that it would be going too far to hold that there is a rule that there must be access to a lawyer irrespective of whether the person who is being questioned by the police is being held in custody. The basis for the ruling in Miranda is that police custody or its equivalent creates particular pressures which mean that the persons will is more likely to be overcome when he is being questioned under conditions of that kind. The observation in Salduz, para 53 that the rationale of the generally recognised international human rights standards relates in particular to the protection of the accused against abusive coercion on the part of the authorities fits in with this line of reasoning. This feature is likely to be absent when questions are being put at the locus or in the persons home simply with a view to deciding whether the person being questioned is to be treated as a suspect and, as such, to be subjected to further procedures. The case for police custody or its equivalent I should like, before stating my conclusions, to say a bit more about why I would hold that in principle the line as to when access to legal advice must be provided before the person is questioned should be drawn as from the moment that he has been taken into police custody, or his freedom of action has been significantly curtailed as it was put in Zaichenko, para 48. I return to the points I made in para 34, above. The privilege against self incrimination is not an absolute right: Murray v United Kingdom (1996) 22 EHRR 29, para 47; Brown v Stott 2001 SC (PC) 43, 64, per Lord Steyn. At p 60 Lord Bingham said that while it could not be doubted that such a right must be implied, there is no treaty provision which expressly governs the effect or extent of what is to be implied. At p 74 I said that implied rights are open, in principle, to modification or restriction so long as this is not incompatible with the right to a fair trial. We do know however that the right is primarily concerned with respecting the will of the person to remain silent: see Saunders v United Kingdom (1996) 23 EHRR 313, para 68. A person is therefore free to speak to the police and to answer questions if he is willing to do so, even after he has been cautioned. He can provide them with self incriminating answers if he is willing to do this, and his answers will be admissible if they are truly voluntary. This approach to the problem is familiar in domestic law: see para 22, above. So long as it is applied the fundamental right under article 6 to a fair trial will be guaranteed. The test is whether the will of the person to remain silent, if that is his will, has been respected. Answers cannot be extracted from him by unfair means, and he must be protected against the risk that they may be forced out of him. It is well understood that in some circumstances merely to caution the person that he has the right to remain silent will not be enough to protect him against the risk of a forced confession. The paradigm case is where he is in police custody. In such a situation the circumstances surrounding his questioning are likely to be oppressive and intimidating. The questioning is likely to be prolonged, and the atmosphere is likely to be coercive. In such circumstances it is reasonable to assume that he will be vulnerable to having a confession extracted from him against his will and to insist that special measures are needed to ensure that his rights are respected. As Lord Kerr points out, common experience tells us that a coercive atmosphere can exist independently of custody: para 147, below. That is why it was recognised in Miranda and in Zaichenko that a persons freedom of action to act as he wishes may be significantly impaired in other circumstances. But it does not follow that this will be so in every case when the police engage in conversation with a suspect. Circumstances will vary, and questioning which may become objectionable as the process continues may not be so during its initial stages. That is why I believe that a more flexible approach to the problem is called for than the rigid principle that Lord Kerr would adopt, which would involve laying down a rule that access to lawyer must always be provided before any police questioning can take place: see para 146, below. Lord Kerr says in para 148 that there is no reason to suppose that a person questioned by the police while not in detention would not experience the same need to acquiesce in the power of the police to require answers to potentially highly incriminating questions. The important question, he says, is whether the questions asked are liable to be productive of incriminating answers, not the circumstances in which they are being asked. That leads him to say that whenever questions of that kind are being put to a suspect they must be asked in the presence of a lawyer. I do not think that there is any support in the Strasbourg cases, or in such international authorities as we have been shown, for that proposition. The point that was being made in the Canadian case of R v Grant 2009 SCC 32; [2009] 2 SCR 353 to which he refers in para 147 was that there are situations in which psychological constraint amounting to detention have been recognised: the majority judgment of McLachlin CJ and LeBel, Fish, Abella and Charron JJ at para 30. These are where the subject is legally required to comply with a direction or command and where there is no such obligation but a reasonable person in the subjects position would feel so obligated. Not every conversation that takes place between the police and a suspect in which questions are asked is of that character. A demand or direction by a police officer is one thing. Questioning under caution is another. It is understandable that a person who is confronted by a direction or a demand by a police officer to provide information will feel that he has to comply with it. It is understandable too if the circumstances are such that he feels that he has no real choice in the matter. That is why the law requires that before questions are put to him by the police the suspect must be cautioned. In that way a fair balance is struck between the interests of the individual and the public interest in the detection and suppression of crime. The search for that balance is inherent in the whole of the Convention: Sporrong and Lnnroth v Sweden (1982) 5 EHRR 35, para 69. The whole point of the caution is to make it clear to the person that he is under no obligation to answer the questions that are being put to him. The requirement would be pointless if it is to be assumed that he will nevertheless feel, whatever the circumstances, that he has no alternative but to answer them. Whether the caution is enough to ensure that the person will have a fair trial will depend on the circumstances. Conclusion I return to the Lord Advocates submission that three features determine whether an individual has a right to legal advice under article 6 in accordance with the principle in Salduz. First, he must be a suspect. Second, he must be in police custody. Third, he must be the subject of police interrogation. The submission is that, unless all three features are present, he has no right of access to legal advice under article 6. The correct starting point, when one is considering whether the persons Convention rights have been breached, is to identify the moment as from which he was charged for the purposes of article 6(1). The guidance as to when this occurs is well known. The test is whether the situation of the individual was substantially affected: Deweer v Belgium (1980) 2 EHRR 439, para 46; Eckle v Germany (1982) 5 EHRR 1, para 73. His position will have been substantially affected as soon as the suspicion against him is being seriously investigated and the prosecution case compiled: Shabelnik v Ukraine (application no 16404/03) (unreported) given on 19 February 2009, para 57. In Corigliano v Italy (1982) 5 EHRR 334, para 34 the court said that, whilst charge for the purposes of article 6(1) might in general be defined as the official notification given to the individual by the competent authority of an allegation that he has committed an criminal offence, as it was put in Eckle, para 73, it may in some instances take the form of other measures which carry the implication of such an allegation. In ubinski v Slovenia (application no 19611/04) (unreported) given on 18 January 2007, paras 62 63 the court said that a substantive approach, rather than a formal approach, should be adopted. It should look behind the appearances and investigate the realities of the procedure in question. This suggests that the words official notification should not be taken literally, and that events that happened after the moment when the test is to be taken to have been satisfied may inform the answer to the question whether the position of the individual has been substantially affected. It is obvious that the test will have been satisfied when the individual has been detained and taken into custody. It must be taken to have been satisfied too where he is subjected to what Salduz, para 52 refers to as the initial stages of police interrogation. This is because an initial failure to comply with the provisions of article 6 at that stage may seriously prejudice his right to a fair trial. The moment at which article 6 is engaged when the individual is questioned by the police requires very sensitive handling if protection is to be given to the right not to incriminate oneself. The mere fact that the individual has been cautioned will not carry the necessary implication. But, when the surrounding circumstances or the actions that follow immediately afterwards are taken into account, it may well do so. The moment at which the individual is no longer a potential witness but has become a suspect provides as good a guide as any as to when he should be taken to have been charged for the purposes of article 6(1): Shabelnik v Ukraine, para 57. The Lord Advocate submitted that the protection of article 6(3)(c) was not engaged until the individual was actually taken into custody. But this cannot withstand the emphasis that the Strasbourg court puts on the consequences of an initial failure to comply with its provisions, as in Salduz, para 50; see also Zaichenko v Russia, para 42. As for the requirement that the individual must be in police custody, I would hold that the Strasbourg court has not said, or at least has not said with a sufficient degree of clarity, that a person who has become a suspect and is not in custody must, as a rule, have access to a lawyer while he is being questioned. I would attach particular importance to the judgment in Zaichenko v Russia, for the reasons given in para 46, above. That is not to say that the fact that the individual had no access to legal advice in that situation is of no consequence. If it was practicable for access to legal advice to be offered, this will be one of the circumstances that should be taken into account in the assessment as to whether the accused was deprived of a fair hearing, as he is entitled to respect for the right not to incriminate himself. But it is no more than that. The fact that the incriminating statements were made without access to a lawyer does not of itself mean that the rights of the defence are irretrievably prejudiced, as was held to be the case in Salduz on account of the lack of legal assistance while the applicant was in custody. The phrase police interrogation appears frequently in the cases where the applicant was detained in custody. It was suggested that, for the purposes of the rule about access to a lawyer, it means something more than just asking questions of an individual. These words are, however, extremely fact sensitive. Any questioning of an individual who has been detained in custody by persons who are referred to in the Strasbourg cases as representing the investigating authorities with the aim of extracting admissions on which proceedings could be founded will amount to interrogation for the purposes of the rule: for a statement to that effect in England, see R v Absolam (1989) 88 Cr App R 332, 336, per Bingham LJ. The same could be said of questioning that takes place at the roadside or in the persons home, depending on the circumstances. It is not necessary, if access to a lawyer is needed for the right to a fair trial to remain practical and effective (see Salduz, para 55), that the questioning should amount to an interrogation in the formal sense. It need not be a detailed and sustained course of questioning. Questions that the police need to put simply in order to decide what action to take with respect to the person whom they are interviewing are unlikely to fall into this category. But they are likely to do so when the police have reason to think that they may well elicit an incriminating response from him. With that introduction, I now turn to the questions that have been referred to this court. As I understand them, they invite us not only to deal with the situations that they describe as raising issues of principle but also to express our own view as to the answers that the Appeal Court should give on the facts as presented to us in each case. The answers to the questions referred The question in Ambroses case is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the appellant conducted under common law caution at the roadside and without the appellant having had access to legal advice was incompatible with the appellants rights under article 6(1) and 6(3)(c). I would answer this question in the negative. Applying the test that I have described in para 62, above, I would hold that Ambrose was charged for the purposes of article 6 when he was cautioned and that the police officer had reason to think that the second and third questions were likely to elicit an incriminating response from him. This conclusion is supported by the way the question whether the applicant was charged was dealt with in Zaichenko v Russia, para 41, where the court said that, given the context of the road check and the applicants inability to produce proof that he had purchased the diesel, there should have been a suspicion of theft against the applicant at the moment of his questioning by the police. The context in Ambroses case was that, when he was approached by the police, he was drunk and sitting in the car. Suspicion that he was committing an offence fell on him as soon as he told the police that the keys were in his pocket. But I would hold it would be to go further than Strasbourg has gone to hold that the appellant is entitled to a finding that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being subjected to this form of questioning at the roadside. This leaves open the question whether taking all the circumstances into account it was fair to admit the whole or any part of this evidence. There may, perhaps, still be room for argument on this point. So I would leave the decision as to how that question should be answered to the Appeal Court. The question in Ms case is whether the act of the Lord Advocate in leading and relying on evidence obtained in response to police questioning of the accused, conducted under common law caution at his home address and without the accused having had access to legal advice was incompatible with the accuseds rights under article 6(1) and 6(3)(c). I would hold that M was charged for the purposes of article 6 when he was cautioned by the police officer at his home address. Although he did yet not have enough information as that stage to detain him as a suspect under section 14 of the 1995 Act, his actions were sufficient to carry the implication that the purpose of his visit was to establish whether M was in that category. Even if that was not so at the moment when M was cautioned, the first question which the police officer put to him carried that implication. I also think that the police officer had reason to think that the second question that he asked (Were you involved in the fight?) was likely to elicit an incriminating response from him. But I would answer the question in this reference also in the negative, as it would be to go further than Strasbourg has gone to hold that the accused is entitled to a ruling that this evidence is inadmissible because, as a rule, access to a lawyer should have been provided to him when he was being asked these preliminary questions in his own home with a view to determining what further steps should be taken to deal with him in connection with the offence. As in Ambroses case, this leaves open the question whether, taking all the circumstances into account, it would be fair to admit the whole or any part of this evidence. I would leave it to the sheriff to answer that question. The question in Gs case is whether it is incompatible with the Panels Convention rights for the Lord Advocate to lead evidence of his statements and answers made during the course of the search conducted under warrant granted in terms of section 23(3) of the Misuse of Drugs Act 1971 as recorded in the Search Production Schedule. The Lord Advocate conceded that G was a suspect from the time of his first admission to possession of a quantity of heroin in his jeans. In must follow that he had been charged for the purposes of article 6 by the time the police began their search. The feature of this case which distinguishes it from the other two is that, although G had not yet been formally arrested and or taken into police custody, there was a significant curtailment of his freedom of action. He was detained and he had been handcuffed. He was, in effect, in police custody from that moment onwards. So I would answer the question in the affirmative. The circumstances were sufficiently coercive for the incriminating answers that he gave to the questions that were put to him without access to legal advice about the items to be found to be inadmissible. I would hold however that the same result need not follow in every case where questions are put during a police search to a person who is to be taken to have been charged for the purposes of article 6. It would be to go further than Strasbourg has gone to hold that a person has, as a rule, a Convention right of access to a lawyer before answering any questions put to him in the course of a police search. It is not because there is a rule to this effect that I would answer the question in the affirmative. Rather it is because it is plain from the particular circumstances of the case that G was, in effect, a detainee when he was being questioned by the police. In the absence of such indications of coercion the question, as in the other cases, will be whether, taking all the circumstances into account, it would be fair to admit the whole or any part of the evidence. I am in full agreement with Lord Hopes judgment in this case and there is LORD BROWN comparatively little that I want to say in addition. Cadder is authority for an absolute rule, derived from the European Court of Human Rightss decision in Salduz v Turkey (2008) 49 EHRR 421, that the Crown cannot lead and rely upon evidence of anything said by an accused without the benefit of legal advice during questioning under detention at a police station. For convenience I call this the Cadder rule and refer to it as absolute notwithstanding the Courts recognition in Salduz itself (at para 55) that compelling reasons may exceptionally justify denial of access to a lawyer (providing always that such a restriction does not unduly prejudice the defence) since for present purposes those possible exceptional cases can safely be ignored. The critical issue arising for our determination on these references is whether the Cadder rule applies equally to anything said by an accused in answer to police questioning even before he is detained at a police station, providing only that at the time of such questioning he is already a suspect and charged within the meaning of article 6(1) of the Convention (his situation substantially affected as explained by Lord Hope at para 39). Although these are, of course, Scottish references and, rather to my regret, we have not had the benefit of any intervention on behalf of English and Welsh prosecuting authorities to assist us as to the legal position south of the border, I cannot but notice that on their face the statutory provisions governing the position in England and Wales sit a little uneasily even with the absolute rule in Cadder, let alone with the substantial extension to that rule now proposed by the respective accused in these references. Section 76(2) of the Police and Criminal Evidence Act 1984 (PACE) provides: If, in any proceedings where the prosecution proposes to give in evidence a confession made by an accused person, it is represented to the court that the confession was or may have been obtained (a) by oppression of the person who made it; or (b) in consequence of anything said or done which was likely, in the circumstances existing at the time, to render unreliable any confession which might be made by him in consequence thereof, the court shall not allow the confession to be given in evidence against him except in so far as the prosecution proves to the court beyond reasonable doubt that the confession (notwithstanding that it may be true) was not obtained as aforesaid. By section 82(1) of PACE, confession is defined to include any statement wholly or partly adverse to the person who made it and by section 76(8) oppression is defined to include torture, inhuman or degrading treatment, and the use or threat of violence (whether or not amounting to torture). The only absolute statutory rule, therefore, is that confessions are inadmissible under PACE if obtained by oppression or in consequence of anything said or done likely to render them unreliable. Generally speaking the court would not regard a confession elicited during questioning under detention at a police station as unreliable merely because the suspect had not at the time had the benefit of legal advice (unless, of course, by reason of youth or mental frailty or for any other reason the suspect may be regarded as having been particularly vulnerable to such questioning see, for example, R v McGovern (1990) 92 Cr App R 228). Nevertheless the principle established in Salduz that underlies the Cadder rule is, I apprehend, properly given effect in England and Wales by the appropriate application of sections 58 and 78 of PACE which provide respectively: 58(1) A person arrested and held in custody in a police station or other premises shall be entitled, if he so requests, to consult a solicitor privately at any time. 78(1) In any proceedings the court may refuse to allow evidence on which the prosecution proposes to rely to be given if it appears to the court that, having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it. Consistently, therefore, with the operation of the Cadder rule in Scotland, the discretion to exclude evidence under section 78(1) is, I apprehend, routinely exercised in England and Wales in the case of significant and substantial breaches of the right to legal advice conferred by section 58 and the related rights arising under Code C of the Codes of Practice established under PACE. In England and Wales, however, suspects do not, as I understand it, have a right to free legal advice before their arrest and admission into custody. The polices only obligation at this earlier stage is to caution the suspect before questioning begins. Once, however, a decision to arrest is made and once grounds for arrest exist it cannot then be delayed so as to defer the suspects right to legal advice the police are required to stop the questioning and to resume it only at the police station. On arrival at the police station the detainee must be advised about his right to free legal advice, including a right to speak to a solicitor on the telephone, and he must be asked if he wishes to do so. Once the interview begins he must again be reminded of his right to free legal advice. So much for the position obtaining under English law. Somewhat to my surprise, my own brief judgment in Cadder is sought to be prayed in aid in support of the respondents contention on these references that the principle against self incrimination requires a suspect to be given access to legal advice before he is first questioned whatever may be the circumstances of that questioning providing only that article 6(1) is engaged (as indeed it was held to be engaged even in the situation that arose in Zaichenko v Russia (application no 39660/02) (unreported) (judgment given 18 February 2010) see paras 41 44 of Lord Hopes judgment). With the best will in the world, however, I cannot recognise my judgment in Cadder as offering the least support for any such contention. On the contrary, the whole context of that judgment was interrogation in a police station and in the last sentence I was endeavouring to explain the principal considerations which seem to me to underlie the principle against self incrimination, namely the importance of guarding against both inadequate police investigation and the exploitation of vulnerable suspects. Strasbourgs evident core concern in Salduz (see in particular para 53 of the Courts judgment) is that suspects should be protected against abusive coercion and that miscarriages of justice should be prevented. Quintessentially such risks arise in the very situation under consideration in Salduz: the interrogation of a terrorist suspect in police custody. Small wonder that the court (at para 53) saw its decision as in line with the generally recognised international human rights standards, standards which may be seen from the instruments referred to in the footnotes to relate specifically to rights of access to a lawyer during, rather than before, suspects are taken into police custody. Another decision relied upon by the respondents is that of the Supreme Court of Canada in R v Grant [2009] 2 SCR 353 and true it is that the court there, having given a wide meaning to the concept of detention, concluded on the particular facts of that case (which involved the kerbside questioning of a suspect leading to his being searched and found to be carrying a loaded firearm) that the police had breached section 10(b) of the Canadian Charter of Rights and Freedoms by failing before questioning the suspect to advise him of his right to speak to a lawyer. Section 10(b) provides: Everyone has the right on arrest or detention . (b) to retain and instruct counsel without delay and to be informed of that right . Importantly, however, the Supreme Court concluded that, the breach of section 10(b) notwithstanding, the trial judge had been entitled pursuant to section 24(2) of the Charter to admit the incriminating evidence and in the result upheld the conviction. Section 24(2) provides: Where . a court concludes that evidence was obtained in a manner that infringed or denied any rights or freedoms guaranteed by this Charter, the evidence shall be excluded if it is established that, having regard to all the circumstances, the admission of it in the proceedings would bring the administration of justice into disrepute. For present purposes, two paragraphs only from the head note to the courts immensely long judgments must suffice: When faced with an application for exclusion under section 24(2), a court must assess and balance the effect of admitting the evidence on societys confidence in the justice system having regard to: (1) the seriousness of the Charter infringing state conduct, (2) the impact of the breach on the Charter protected interests of the accused, and (3) societys interest in the adjudication of the case on its merits. At the first stage, the court considers the nature of the police conduct that infringed the Charter and led to the discovery of the evidence. The more severe or deliberate the state conduct that led to the Charter violation, the greater the need for the courts to dissociate themselves from that conduct, by excluding evidence linked to that conduct, in order to preserve public confidence in and ensure state adherence to the rule of law. The second stage of the inquiry calls for an evaluation of the extent to which the breach actually undermined the interests protected by the infringed right. The more serious the incursion on these interests, the greater the risk that admission of the evidence would bring the administration of justice into disrepute. At the third stage, a court asks whether the truth seeking function of the criminal trial process would be better served by admission of the evidence or by its exclusion. Factors such as the reliability of the evidence and its importance to the Crowns case should be considered at this stage. The weighing process and the balancing of these concerns is a matter for the trial judge in each case. Where the trial judge has considered the proper factors, appellate courts should accord considerable deference to his or her ultimate determination. Here, the gun was discovered as a result of the accuseds statements taken in breach of the Charter. When the three stage inquiry is applied to the facts of this case, a balancing of the factors favours the admission of the derivative evidence. The Charter infringing police conduct was neither deliberate nor egregious and there was no suggestion that the accused was the target of racial profiling or other discriminatory police practices. The officers went too far in detaining the accused and asking him questions, but the point at which an encounter becomes a detention is not always clear and the officers mistake in this case was an understandable one. Although the impact of the Charter breach on the accuseds protected interests was significant, it was not at the most serious end of the scale. Finally, the gun was highly reliable evidence and was essential to a determination on the merits. The balancing mandated by section 24(2) is qualitative in nature and therefore not capable of mathematical precision. However, when all these concerns are weighed, the courts below did not err in concluding that the admission of the gun into evidence would not, on balance, bring the administration of justice into disrepute. The significant impact of the breach on the accuseds Charter protected rights weighs strongly in favour of excluding the gun, while the public interest in the adjudication of the case on its merits weighs strongly in favour of its admission. However, the police officers were operating in circumstances of considerable legal uncertainty, and this tips the balance in favour of admission. In short, the position in Canada, just as in England and Wales, is that no absolute rule applies to exclude incriminating evidence obtained in breach of a constitutional right to legal advice although it may be supposed that in flagrant cases equivalent to those where the Cadder rule itself would apply directly (where a suspect in police custody is denied access to a lawyer during interrogation) the Canadian courts would invariably strike the section 24(2) balance in the accuseds favour. It follows from all this that I share Lord Hopes view that the court in Salduz ought not to be understood to be laying down an absolute rule of exclusion with regard to admissions made without the opportunity to take legal advice irrespective of whether or not the suspect was at the time actually in police custody. The contention that Salduz requires the Cadder rule to be extended in this way to my mind founders on a proper understanding both of what the Strasbourg Court was there saying in the particular factual context of that case, and of the recognised international human rights standards underlying that decision. It also seems to me inconsistent both with the terms of Judge Bratzas concurring opinion in that case (implicit in which was a recognition that under the majority judgment the very earliest time at which a suspect could be found entitled to legal advice is when he is taken into police custody or pre trial detention) and with Strasbourgs post Salduz jurisprudence (helpfully analysed by Lord Hope in great detail), most notably the judgment in Zaichenko v Russia itself. Also like Lord Hope (see paras 50 53 above) I find some assistance here in the decision of the Supreme Court of the United States in Miranda v Arizona 384 US 436 (1966). As Lord Hope observes (at para 53), the significance of Miranda is that it adopts a custodial approach to the question as to when access to a lawyer is required, the fundamental reason being that it is at that point that the circumstances in which [the suspects] interrogation takes place are inherently intimidating, because [of] the compelling atmosphere inherent in the process of in custody interrogation. As, however, Lord Hope also observes: It was noted that an interpretation of the requirement that the right to legal advice arose at an earlier stage would hamper the traditional function of the police in investigating crime. I have already indicated (at para 80 above) my own understanding of the central considerations underlying the principle against self incrimination: the importance of guarding against the exploitation of vulnerable suspects and also against inadequate police investigation. In the intimidating circumstances of custodial interrogation there are undoubtedly some suspects who confess to crimes of which in truth they are innocent. And undoubtedly too, once a suspect has confessed, the police are likely to become less inclined to pursue other useful avenues of investigation that may identify the actual offender. Thus it is that miscarriages of justice can occur. As Miranda suggests, however, the introduction of a right to legal advice (and what, of course, is being contended for here is an absolute right to free legal advice) at some pre custodial stage, so far from encouraging proper police investigation into crime, would in fact tend to inhibit it. It is, in short, one thing to require of the police that they caution a suspect before questioning him, quite another to require that he be provided with legal assistance as a precondition of any self incriminating answers later becoming admissible in evidence against him. This is the critical distinction which Zaichenko v Russia so clearly illustrates. The Court there considered quite separately the applicants article 6 complaints as to (i) legal assistance and (ii) the privilege against self incrimination and the right to remain silent and in the event it found no violation of article 6 (3)(c) in respect of the former but a violation of article 6(1) in respect of the latter (the applicants self incriminatory answers to the polices roadside questioning having been elicited without his first being cautioned). Like Lord Hope, I too would in the present context give full weight to what has come to be known as the Ullah principle see para 20 of Lord Binghams judgment in R (Ullah) v Special Adjudicator [2004] 2 AC 323. It would seem to me quite wrong for this court now to interpret article 6 of the Convention as laying down an absolute exclusory rule of evidence that goes any wider than Strasbourg has already clearly decided to be the case. And whatever else one may say about the Strasbourg jurisprudence, it can hardly be regarded as deciding the present issue clearly in the respondents favour. In the result I agree with the answers proposed by Lord Hope to the questions posed in the respective references. Essentially it comes to this. In the cases of Ambrose and M there is no absolute rule such as that laid down in Cadder which precludes reliance on the evidence in question. Rather it must be for the trial court to decide just as an English court must decide under section 78(1) of PACE whether the evidence ought fairly to be admitted or excluded. In Gs case, however, because he was, as Lord Hope puts it (para 71), in effect, in police custody from the time when, following his arrest, he was handcuffed and detained, the Cadder rule should be held to apply to his questioning during the subsequent search. That said, I also agree with Lord Hope (para 72) that the Cadder rule would by no means routinely apply to exclude answers to questions put to a suspect without his having been given the opportunity to seek legal advice during a search. That too would be to go further than Strasbourg has yet gone. LORD DYSON I agree with the answers proposed by Lord Hope for the reasons that he gives as well as those given by Lord Brown. In Salduz v Turkey (2008) 49 EHRR 421 (applied by this court in Cadder v HM Advocate [2010] UKSC 43, [2010] SLT 1125), the ECtHR decided that article 6 of the European Convention on Human Rights (the Convention) requires that, as a rule, access to a lawyer should be provided to a suspect when he is interrogated by the police while he is in detention; and that there will usually be a violation of article 6 if incriminating statements made by a suspect during a police interrogation in such circumstances are relied on to secure a conviction. I shall refer to this as the Salduz principle. The central question that arises in the present proceedings is whether the Salduz principle also applies to interrogations of a suspect that are conducted before he is placed in detention. Lord Hope says that there is no sufficiently clear indication in the Strasbourg jurisprudence of how the ECtHR would resolve this question and that we should not apply the Salduz principle to situations to which the ECtHR has not clearly stated that it applies. Lord Kerr says that (i) even if the ECtHR has not clearly decided whether article 6 requires the Salduz principle to be applied to statements obtained from a suspect when he is not in detention, that is not a sufficient reason for this court to refuse to do so (paras 126 to 130); (ii) to draw a distinction between evidence obtained before and after a suspect is detained is not only arbitrary, it is illogical (para 136); and (iii) in any event, an analysis of the Strasbourg jurisprudence clearly shows that it draws no distinction between the two cases (paras 146 and 148). It is convenient to start with explaining why I cannot accept Lord Kerrs third proposition, since, if it is clear from the Strasbourg jurisprudence that the Salduz principle applies whether or not the evidence is obtained from the suspect while he is in detention, then the premise on which the judgments of Lord Hope and Lord Brown are based falls away. As Lord Hope explains at paras 26 to 33, the judgment in Salduz was concerned with whether there was or should be a rule that there was a right of access to a lawyer where the person being interrogated was in police custody. On its facts, it was a case about a suspect who had been interrogated by the police while he was in custody. The references in para 53 to generally recognised international human rights standards (which are concerned with the position of suspects who are in custody) and to abusive coercion strongly suggest that the court was only considering the position of suspects who are in custody. Paras 37 to 44 contains a discussion of the international law materials relating to a suspects right of access to a lawyer during police custody. Unsurprisingly, the judgment says nothing explicitly about the position of a suspect who is not in custody. I agree with Lord Hope that the concurring opinions of Judge Bratza and Judge Zagrebelski lend further support to the conclusion that the court was only considering the position of suspects who are in custody. Lord Kerr says that Salduz is authority for the broad proposition that a suspect is entitled to have access to a lawyer at the investigation stage (because he is in a particularly vulnerable position at that stage of the proceedings) and that there is nothing in the reasoning of the decision to indicate that the investigation stage only begins after the suspect has been detained. But the judgment should be read as a whole. In my view, the better interpretation is that, for the reasons I have already given, the court was only addressing the issue of police interrogation of a suspect in custody. It was making the point that for such a suspect the investigation stage takes place while he is in custody, where there is the risk of abusive coercion and he is in a particularly vulnerable position of making self incriminating statements. Further, the decision of the First Section in Zaichenko provides clear support for the view that the Strasbourg jurisprudence draws a distinction between the fruits of police questioning of a suspect who is in detention and one who is not. I agree with the reasons given by Lord Hope at para 46 for rejecting the arguments that Zaichenko was wrongly decided. I note that Lord Kerr does not suggest that it was wrongly decided. He analyses the reasoning of Zaichenko closely at paras 24 to 40. He says that the basis for the courts decision that there had not been a violation of article 6(3)(c) is the cumulative effect of a number of factors (which he identifies at para 33) and that none of them, if taken in isolation, would have been sufficient to support the courts conclusion. I cannot accept this interpretation of the courts reasoning in Zaichenko. It is true that at para 46, the court notes at the outset that the applicant waived his right to a lawyer. But the court went on to give other reasons for its decision at para 47. It said that the present case is different from previous cases concerning the right to legal assistance in pre trial proceedings (see Salduz. .) because the applicant was not formally arrested or interrogated in police custody. He was stopped for a roadcheck. (emphasis added). The court was, therefore, fully alive to the difference between police questioning of a suspect at the roadside and police questioning of a suspect who has been taken into custody. It was in the context of this difference that the court made express reference to Salduz. Plainly and explicitly it did not apply the Salduz principle and it gave its reasons for not doing so. The principal reason was given at para 48 which Lord Kerr has set out at para 160 below. I agree with Lord Kerr that this paragraph is not easy to follow. But what is clear is that the court considered that, whatever restrictions faced the suspect when he was being questioned at the roadside, they did not amount to a significant curtailment of [his] freedom of action sufficient to entitle him to legal assistance at this early stage of the proceedings. This is an essential part of the courts reasoning. It is clear that the court considered that the fact that the questioning took place before the suspect had been formally arrested or detained was critical. I conclude, therefore, that the Strasbourg jurisprudence does not clearly show that the Salduz principle applies to statements made by a suspect who is not in detention when he is questioned by the police. The only case to which our attention has been drawn in which the Salduz principle has been considered in relation to statements made by a suspect who is not in detention is Zaichenko. For the reasons that I have given, Zaichenko strongly suggests that the Salduz principle does not apply in that situation. I turn to Lord Kerrs second proposition. He says that the animation of the right under article 6(1) cannot be determined in terms of geography (para 133) and that it is arbitrary and illogical to hold that a suspect has no right to access to a lawyer if he is questioned by the police until he is taken into custody: the suspect is as likely to make incriminating statements outside as inside a police station and is therefore in equal need of the protection of article 6(3)(c) in both situations. The essential question is at what stage of the proceedings access to a lawyer should be provided in order to ensure that the right to a fair trial is sufficiently practical and effective for the purposes of article 6(1). What fairness requires is, to some extent, a matter of judgment. I accept that opinions may reasonably differ on whether the line for providing a suspect with access to a lawyer should be drawn at the point when the person being questioned becomes a suspect or at the point when he is taken into custody. I do not doubt that being interrogated by the police anywhere can be an intimidating experience and that a person may make incriminating statements to the police wherever the interrogation takes place. This can occur in a situation of what the majority of the Canadian Supreme Court described as psychological detention in R v Grant 2009 SCC 32 ; [2009] 2 SCR 353, at para 30. On the other hand, the arresting of a suspect and placing him in custody is a highly significant step in a criminal investigation. The suspect cannot now simply walk away from the interrogator. For most suspects, being questioned after arrest and detention is more intimidating than being questioned in their home or at the roadside. The weight of the power of the police is more keenly felt inside than outside the police station. As was said in Miranda v Arizona 384 US 436 (1966) at p 478, there is a compelling atmosphere inherent in the process of in custody interrogation. No doubt, it is also present to the mind of the suspect that the possibility of abusive coercion is greater inside than outside the police station. Whether the difference between interrogation inside and outside the police station is sufficient to justify according the suspect access to a lawyer in one situation but not the other is a matter on which opinions may differ. But I do not see how it can be said to be arbitrary or illogical to recognise that there is a material difference between the two situations. I can agree with Lord Kerr (para 167) that one should be careful about making assumptions about the Miranda experience or believing that it can be readily transplanted into European jurisprudence. But this counsel of caution is hardly consistent with the assertion that the adoption of the distinction made in Miranda is arbitrary and illogical. So what should this court do in these circumstances? This brings me to Lord Kerrs first proposition. As I have said, to the extent that the ECtHR has spoken on the question at all, Zaichenko contains a clear statement that the Salduz principle does not apply to statements made by a suspect during police questioning while the suspect (i) is not in custody or (ii) is not deprived of his freedom of action in any significant way. I derive (ii) from para 48. That paragraph echoes the language of p 477 of Miranda: The principles announced today deal with the protection which must be given to the privilege against self incrimination when the individual is first subjected to police interrogation while in custody at the station or otherwise deprived of his freedom of action in any significant way (emphasis added). I accept, however, that there is no clear and constant Strasbourg jurisprudence on the point. So the obligation in section 2 of the Human Rights Act 1998 to take account of judgments of the ECtHR does not compel a decision one way or the other: see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295 para 26. Nor is this a case where, although Strasbourg has not expressly decided the point, it can nevertheless clearly be deduced or inferred from decisions of the ECtHR how the court will decide the point if and when it falls to be determined. Lord Kerr has referred to para 20 of Lord Binghams speech in R (Ullah) v Special Adjudicator [2004] 2 AC 323 and the dictum that the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less. Lord Brown extended this in R (Al Skeini and others) v Secretary of State for Defence [2008] 1 AC 153 at para 106 by saying that Lord Binghams dictum could as well have ended: no less, but certainly no more. At para 107 Lord Brown said that the Convention should not be construed as reaching any further than the existing Strasbourg jurisprudence clearly shows it to reach. Lady Hale said much the same at para 90. This approach was explicitly endorsed in R (Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29; [2011] 1 AC 1 by Lord Phillips at para 60, Lord Hope at para 93 and Lord Brown at para 147. But these statements are not entirely apposite where Strasbourg has spoken on an issue, but there is no clear and constant line of authority. That is the case here because there is only one case in which the ECtHR has expressly decided that the Salduz principle does not apply in relation to the interrogation of a suspect who is not in detention (Zaichenko). Moreover, despite the view I have expressed earlier in this judgment, I accept that it is arguable that the language of para 55 of the judgment in Salduz can and should be interpreted as holding that the Salduz principle does apply in such circumstances. So what should a domestic court do in this situation? Recognising that it is our duty to give effect to the domestically enacted Convention rights, I think that the correct approach was suggested at para 199 of the judgment of Lord Mance in Smith: However, it is our duty to give effect to the domestically enacted Convention rights, while taking account of Strasbourg jurisprudence, although caution is particularly apposite where Strasbourg has decided a case directly in point or, perhaps, where there are mixed messages in the existing Strasbourg case law and, as a result, a real judicial choice to be made there about the scope or application of the Convention. The position here is that Strasbourg has decided a case which is directly in point (Zaichenko). The most that can be said on behalf of the accused in these three cases is that by reason of (i) the broad terms in which para 55 of the judgment in Salduz is expressed and (ii) the decision in Zaichenko, it is arguable that there are mixed messages in the Strasbourg case law as to whether the Salduz principle applies to evidence obtained from a suspect who has been interrogated without access to a lawyer outside the police station. To use the words of Lord Mance, it follows that there is a real judicial choice to be made. Whether fairness requires the Salduz principle to apply in both situations raises questions of policy and judgment on which opinions may reasonably differ and as to which there is no inevitable answer. To demonstrate this, it is sufficient to contrast the approach of the US Supreme Court in Miranda with that of the Canadian Supreme Court in Grant. In these circumstances, I consider that caution is particularly apposite and that the domestic court should remind itself that there exists a supranational court whose purpose is to give authoritative and Europe wide rulings on the Convention. If it were clear, whether from a consideration of the Strasbourg jurisprudence or otherwise, that the Salduz principle applies to statements made by suspects who are not detained or otherwise deprived of their freedom of action in any significant way, then it would be our duty so to hold. But for the reasons that I have given, it is not clear that this is the case. In these circumstances, we should hold that the Salduz principle is confined to statements made by suspects who are detained or otherwise deprived of their freedom in any significant way. LORD MATTHEW CLARKE I refer to Lord Hopes judgment for his detailed description of the references and the background to them which I gratefully adopt. In R v Samuel [1988] QB 615 at p 630 Hodgson J, delivering the judgment of the Court of Appeal, described the right of a suspect to consult and instruct a lawyer as one of the most important and fundamental rights of a citizen. His Lordship did so in the context of section 58(1) of the Police and Criminal Evidence Act 1984 (PACE). The present references have raised the question as to when, and in what circumstances, such a right emerges as part of Scots law by virtue of the application of Article 6 ECHR. The Grand Chamber of the European Court of Human Rights in Salduz v Turkey (2008) 49 EHRR 421 held that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction (para 55). In Cadder v HM Advocate 2010 SLT 1125 this court applied that decision to the existing law of Scotland and, in particular, to the operation of the powers of detention of persons then contained in sections 14 and 15 of the Criminal Procedure (Scotland) Act 1995. As a result of the courts decision in Cadder the Scottish Parliament enacted certain provisions in the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010. In particular a new section 15A to the 1995 Act was enacted which is in the following terms: 15A Right of suspects to have access to a solicitor (c) (a) (a) (b) (1) This section applies to a person (the suspect) who is detained under section 14 of this Act, attends voluntarily at a police station or other premises or place for the purpose of being questioned by a constable on suspicion of having committed an offence, or is (i) arrested (but not charged) in connection with an offence, and (ii) being detained at a police station or other premises or place for the purpose of being questioned by a constable in connection with the offence. (2) The suspect has the right to have intimation sent to a solicitor of any or all of the following the fact of the suspects (i) detention (ii) attendance at the police station or other premises or place, or (iii) arrest (as the case may be), (b) the police station or other premises or place where the suspect is being detained or is attending, and (c) that the solicitors professional assistance is required by the suspect. (3) The suspect also has the right to have a private consultation with a solicitor (a) before any questioning of the suspect by a constable begins, and (b) at any other time during such questioning. (4) Subsection (3) is subject to subsections (8) and (9). (5) In subsection (3), consultation means consultation by such means as may be appropriate in the circumstances, and includes, for example, consultation by means of telephone. (6) The suspect must be informed of the rights under subsections (2) and (3) (a) without delay, or (b) (a) on arrival at the police station or other premises or place, and (b) in the case where the suspect is detained as mentioned in subsection (1)(a), or arrested as mentioned in subsection (1)(c), after such arrival on detention or arrest, (whether or not, in either case, the suspect has previously been informed of the rights by virtue of this subsection). (7) Where the suspect wishes to exercise a right to have intimation sent under subsection (2), the intimation must be sent by a constable if some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is necessary. (8) In exceptional circumstances, a constable may delay the suspects exercise of the right under subsection (3) so far as it is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders that the questioning of the suspect by a constable begins or continues without the suspect having had a private consultation with a solicitor. (9) Subsection (3) does not apply in relation to the questioning of the suspect by a constable for the purpose of obtaining the information mentioned in section 14(10) of this Act. Prior to that enactment, and the decision in Cadder, the position was that the courts in Scotland had never recognised a suspects right to have access to a solicitor before or during questioning of him by the police. The position was, as stated in pre Cadder versions of Renton and Browns Criminal Procedure, 6th edition at para 24 39 as follows: any statement by a suspect in answer to police questions will be inadmissible in evidence at the subsequent trial of that suspect unless it has been obtained fairly, and that all the circumstances of the questioning (apart from whether or not a caution was given to a person accused of a crime) are relevant in so far, and only in so far, as they indicate the presence or absence of unfairness. That passage continued later: The current situation is that the fact that the accused was at the same time under suspicion or even under arrest is not in itself crucial, but is merely a circumstance like any other to be taken into account in assessing the fairness of the police, in the same way as the fact that he.did not have the services of a solicitor Reference was made to, inter alia, Law v McNicol 1965 JC 32, HM Advocate v Whitelaw 1980 SLT (Notes) 25 and HM Advocate v Anderson 1980 SLT (Notes) 104. As was also noted in Renton and Brown at para 24 39 There are no legal rules in Scotland governing the questioning of a suspect such as the Judges Rules and Administrative Directions issued by the Home Office. Nor were there, until the 2010 Act, any provisions similar to those provided in England and Wales under PACE. In HM Advocate v Cunningham 1939 JC 61 Lord Moncrieff at page 65 noted that after the accused had been charged and had replied, he subsequently received an incidental intimation that he might, if he so desired, require and obtain the assistance of a law agent. His Lordship continued: I think it would have been desirable that that intimation should have been made formally and should have been made at the very outset before the making of any charge, but I am satisfied that, in not making it, the police officers followed their usual practice and acted with an intention of complete fairness. Nonetheless, any such practice, in my opinion, ought to be reformed The later full bench decision in Chalmers v HM Advocate 1954 JC 66 gave some support for the view that all answers given by a suspect to a police officer were inadmissible and nothing was said about a suspects right to have a solicitor present when he was being questioned. Although that decision was never over ruled its influence was considered to have been virtually removed by subsequent case law, concerned, it seems, with rising crime rates, which made the criterion of admissibility, fairness see Lord Advocates Reference (no. 1 of 1983), 1984 JC 52. The decision in the case of Cadder, in applying the law as set out in Salduz, can be seen as truly innovative as regards what had been understood to be the domestic law of Scotland up until that time. The present references raise, in the first place, the question as to how far the innovation goes having regard to the relevant Strasbourg jurisprudence. The focus of the hearing before this court was concerned, to a significant extent, with how the suspects right to access to a lawyer has been defined to date by the Strasbourg court, either expressly, or by necessary implication, whatever other arguments there may be in principle, or policy, for defining it otherwise. The defence in the cases before us sought to take from the language of the ECtHR, in discussing the right in the decided cases on the topic, a broad approach to its nature and its extent. They had some basis for doing so having regard to how the court expressed itself in Salduz at para 55 where the Grand Chamber was to the effect Article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police. At para 52 of the judgment one finds the following Article 6 will normally require that the accused be allowed to benefit from the assistance of a lawyer already at the initial stages of police interrogation. That language, it was submitted, focused on the status of the person as a suspect when determining his rights rather than his position being that of a person in custody. Similar language can be seen in previous judgments of the Court. For example in Panovits v Cyprus (Application No 4268/04) (unreported) given 11 December 2008 the Court, at para 66, observed that the concept of fairness enshrined in Article 6 requires that the accused be given the benefit of the assistance of a lawyer already at the initial stages of police interrogation see also Borotyuk v Ukraine (Application No 33579/04) (unreported) given 16 December 2010 at para 79. It should, however, be noted that Panovits was a case which concerned the questioning of a child when the child had gone to the police station with his father, as requested by the police, and was thereafter arrested. Borotyuk was also a custody case. In Panovits, at para 65, the court, having said that it was reiterating that the right to silence and the right not to incriminate oneself were generally recognised international standards, which lay at the heart of the notion of a fair procedure under Article 6, went on to say: Their rationale lies, inter alia, in the protection of the accused against improper compulsion by the authorities, thereby contributing to the avoidance of miscarriages of justice and to the fulfilment of the aims of Article 6. In Salduz similar remarks were made by the court at paragraph 53: These principles, outlined at para 52 above, are also in line with the generally recognised international human rights standards which are at the core of the concept of a fair trial and whose rationale relates in particular to the protection of the accused against abusive coercion on the part of the authorities. They also contribute to the prevention of miscarriages of justice and the fulfilment of the aims of Article 6, notably equality of arms between the investigating or prosecuting authorities and the accused. Those remarks would tend, in my judgement, to support the contention that the focus of the courts concern in Salduz, and other cases, has been in relation to those situations where methods of coercion or oppression might be more readily, and effectively, employed upon a suspect person, namely when his liberty has been curtailed by the authority detaining him. Significant support for that being the focus of such a rule is to be found in the jurisprudence of the United States, and particularly the seminal decision of the US Supreme Court in Miranda v State of Arizona 384 US 436 (1966), where at p 467, para 23 the court said: Today, then, there can be no doubt that the Fifth Amendment privilege is available outside of criminal court proceedings and serves to protect persons in all settings in which their freedom of action is curtailed in any significant way from being compelled to incriminate themselves. We have concluded that without proper safeguards the process of in custody interrogation of persons suspected or accused of crime contains inherently compelling pressures which work to undermine the individuals will to resist and to compel him to speak where he would not otherwise do so freely. In order to combat these pressures and to permit a full opportunity to exercise the privilege against self incrimination, the accused must be adequately and effectively apprised of his rights and the exercise of those rights must be fully honoured. The court then at pp 478 479, paras 66, 67 defined the right and its extent, together with its rationale in the following way: To summarise, we hold that when an individual is taken into custody or otherwise deprived of his freedom by the authorities in any significant way and is subjected to questioning the privilege against self incrimination is jeopardised. Procedural safeguards must be employed to protect the privilege and unless other fully effective means are adopted to notify the person of his right of silence and to assure that the exercise of the right will be scrupulously honoured, the following measures are required. He must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires. Opportunity to exercise these rights must be afforded to him throughout the interrogation. After such warnings have been given, and such opportunity afforded him, the individual may knowingly and intelligently waive these rights and agree to answer questions or make a statement. But unless and until such warnings and waiver are demonstrated by the prosecution at trial, no evidence obtained as a result of interrogation can be used against him. The Miranda decision has informed international legal discussion of the right of the suspect to have access to a lawyer, since the decision was given. Another factor pointing towards the more restrictive extent of the right in question is that the Strasbourg court, in defining it, has done so by referring to the context of what are described as pre trial proceedings, see para 50 of the Salduz judgment. The person taken into detention who, in due course, may face being tried for a crime, might well be said to be involved, at the stage of any questioning, while detained, to be in pre trial proceedings for the purposes of Article 6. That that is the context in which the Strasbourg court has been considering the right in question under Article 6 is, I think, supported by what the court had to say recently in Affaire Brusco c France (Requete No 1466/07) (unreported) given 14 October 2010, at para 45: La Cour rappelle galement que la personne place en garde vue a le droit dtre assiste dun avocat ds le dbut de cette mesure ainsi que pendant les interrogatoires, et ce a fortiori lorsquelle na pas t nforme par les autorits de son droit de se taire. That passage also, to my mind, points to the phrases in Salduz early access to a lawyer and from the first interrogation of a suspect by the police as being references to the earliest point in time after the person is taken into custody with his liberty having been restricted by the investigating authorities. The reference by the Strasbourg court to equality of arms, at para 53 of its judgment in Salduz, also, in my opinion, supports that approach. Once a persons liberty is curtailed by the authorities, the balance of power between him and the representatives of the state shifts significantly and, it might be said, requires to be redressed by his having access to a lawyer. All of these considerations, taken together, with what Lord Hope has to say in his analysis of the Salduz decision, and other Strasbourg jurisprudence, ultimately persuades me that the proper understanding of those decisions is that the right to have access to a lawyer emerges at the point when the suspect is deprived of his liberty of movement, to any material extent, by the investigating authorities and is to be questioned by them. It follows that I am in agreement with Lord Hope that the Strasbourg jurisprudence, to date, does not support the defence contention in these references that the ECtHR has gone as far as to say that the right emerges as soon as a suspect is to be questioned by the police in whatever circumstances. As to whether this court should go further than the ECtHR seems to have gone so far, certain important considerations lead me to the conclusion that it should not. The first is the difficulty that can arise in relation to defining precisely at what point in time someone becomes a suspect, as opposed to being a witness or a detained person. The second is that the broader version of the right, contended for by the defence in these cases, could have serious implications for the proper investigation of crime by the authorities. If the police are to be required to ensure that a person who they wish to question about the commission of a crime (in a situation where the circumstances point to the person being a possible suspect) should have access to a lawyer, if he so wishes, then such a requirement could hamper proper and effective investigations in situations which are often dynamic, fast moving and confused. The unfortunately regular street brawls in city and town centres, or disturbances in crowded places like night clubs, which, on occasions, result in homicide, are simply examples of situations which highlight the problems that might be involved. In relation to the first of these considerations I note that the limits of the Miranda rights have been, very recently, (16 June 2011) re visited by the US Supreme Court in JDB v North Carolina 564 US 2011. That case involved the questioning of a 13 year old. The majority of the court held that the childs age was a relevant factor to be taken into account in addressing the question as to whether he had been in custody at the time of questioning. The majority did not depart from the test being whether or not the person was in custody at the relevant time and at page 18 of the opinion of the court they directed the state court to address that question, taking account of all of the relevant circumstances of the interrogation, including the childs age at the time. The disagreement between the majority and minority was with regard to the relevance of the childs age in judging of the question as to whether or not he was in custody at the relevant time. In giving the dissenting judgment, with which the rest of the minority concurred, Alito J at pp 1 2 said Mirandas custody requirement is based on the proposition that the risk of unconstitutional coercion is heightened when a suspect is placed under formal arrest or is subjected to some functionally equivalent limitation on freedom of movement. Alito J, then, at page 8 of his judgment, under reference to previous authorities remarked that a core virtue of the Miranda rule has been the clarity and precision of its guidance to police and courts. Again at page 13 he remarked that a core virtue of Miranda was the ease and clarity of its application. I am persuaded that the value of clarity and certainty in this area are relevant factors in deciding the extent of the right. As to the second consideration, I recall what was said by Lord Wheatley in Miln v Cullen 1967 JC 21 at pp 29 30: While the law of Scotland has always very properly regarded fairness to an accused person as being an integral part of the administration of justice, fairness is not a unilateral consideration. Fairness to the public is also a legitimate consideration, and in so far as police officers in the exercise of their duties are prosecuting and protecting the public interest, it is the function of the Court to seek to provide a proper balance to secure that the rights of individuals are properly preserved, while not hamstringing the police in their investigation of crime with a series of academic vetoes which ignore the realities and practicalities of the situation and discount completely the public interest. That dictum is, of course, of its time and pre dates the experience of examples of convictions obtained on false confessions which have caused justifiable public concern. Nevertheless it is difficult, even now, to contradict the substance of what his Lordship said. As was said by Binnie J in the Canadian case of R v Grant 2009 SCC 32 [2009] 2 SSC 353 at para 180 It is not controversial that in the early stages of a criminal investigation the police must be afforded some flexibility before the lawyers get involved. The police do have the right to ask questions and they need to seek the co operation of members of the public, including those who turn out to be miscreants. It seems to me that the balancing of legitimate interests referred to by Lord Wheatley is a further justification for restricting the right to have access to a lawyer to situations in which the suspect is in custody. The law in formulating a right designed to protect and support a legitimate interest, such as the right to silence, should seek to avoid defining that right in such a way, as to damage, or unduly inhibit another legitimate interest such as the efficient investigation of crime. The task, which may be a delicate and difficult one, is to produce a result which strikes a rational balance between the two interests. I consider the balance struck in the US Miranda jurisprudence achieves that end. For the foregoing reasons I agree entirely with Lord Hope as to the way in which references in the cases of Ambrose and M should be answered. In relation to these two cases the admissibility or otherwise of the replies to questioning will fall to be determined by the Appeal Court and the trial judge respectively in accordance with the rules as to fairness. In the passage in his judgment in Miln v Cullen, cited above, Lord Wheatley continued: Even at the stage of routine investigations, where much greater latitude is allowed, fairness is still the test, and that is always a question of circumstances. As regards Gs case I consider that the right to access to a lawyer, before questioning, arises not only when the suspect is taken into the physical surroundings of a police station. The focus should be on whether, at the commencement of the proposed questioning, the individuals liberty is significantly restricted by the police. The location where that occurs is not in itself conclusive. In relation to rights of this kind matters should be judged in accordance with what the substance of the position is rather than its form. It follows that I, therefore, also agree with Lord Hope in the way in which the reference in Gs case should be answered. I also agree with Lord Hope, for the reasons given by him, that the Cadder rule would not necessarily routinely apply to exclude answers to questions, put to a suspect, without his having been given the opportunity to seek legal advice, during a search. There is no justification in the Strasbourg jurisprudence, as I read it, for the right to be so interpreted. By way of a footnote I would add this. Our attention was drawn by the defence, in support of their position, to a Proposal for a Directive of the European Parliament and of the Council on the right of access to a lawyer in criminal proceedings and on the right to communicate upon arrest recently published by the European Commission Brussels, XXX COM (2011) 326/3. Article 3(1) of the draft of the proposed Directive, attached to that document is in the following terms: 1. Member States shall ensure that suspects and accused persons are granted access to a lawyer as soon as possible and in any event: (a) before the start of any questioning by the police or other law enforcement authorities; (b) upon carrying out any procedural or evidence gathering act at which the persons presence is required or permitted as a right in accordance with national law, unless this would prejudice the acquisition of evidence; (c) from the outset of deprivation of liberty. The proposed Article 3 appears to envisage three discrete situations where the right of access to a lawyer should arise. The authors of the proposal appear to believe that those draft provisions reflect the settled jurisprudence of the Strasbourg court see para 13. It follows from what I have said above that their apparent understanding of the Strasbourg jurisprudence does not coincide with my own. LORD KERR Introduction The well known aphorism of Lord Bingham in para 20 of R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323 that the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more, but certainly no less has been given a characteristically stylish twist by Lord Brown in R (Al Skeini and others) v Secretary of State for Defence [2007] UKHL 26; [2008] 1 AC 153 at para 106 where he said that the sentence could as well have ended: no less, but certainly no more. In keeping with this theme, some judges in this country have evinced what might be described as an Ullah type reticence. On the basis of this, it is not only considered wrong to attempt to anticipate developments at the supra national level of the Strasbourg court, but there is also the view that we should not go where Strasbourg has not yet gone. Thus, in the present case Lord Hope says that this courts task is to identify where the jurisprudence of the Strasbourg court clearly shows that it currently stands and that we should not expand the scope of the Convention right further than the current jurisprudence of that court justifies. Lord Binghams formulation of the principle expressed in para 20 of Ullah was prompted by his consideration of the effect of section 2 of the Human Rights Act 1998 by which the courts of this country are enjoined to take into account Strasbourg case law. Therefore, said Lord Bingham, although such case law was not strictly binding, where a clear and constant theme of jurisprudence could be detected, it should be followed because the Convention, being an international instrument, had as the authoritative source of its correct interpretation the Strasbourg court. A refusal to follow this would dilute or weaken the effect of the Strasbourg case law. I greatly doubt that Lord Bingham contemplated much less intended that his discussion of this issue should have the effect of acting as an inhibitor on courts of this country giving full effect to Convention rights unless they have been pronounced upon by Strasbourg. I believe that, in the absence of a declaration by the European Court of Human Rights as to the validity of a claim to a Convention right, it is not open to courts of this country to adopt an attitude of agnosticism and refrain from recognising such a right simply because Strasbourg has not spoken. There are three reasons for this, the first practical, the second a matter of principle and the third the requirement of statute. It is to be expected, indeed it is to be hoped, that not all debates about the extent of Convention rights will be resolved by Strasbourg. As a matter of practical reality, it is inevitable that many claims to Convention rights will have to be determined by courts at every level in the United Kingdom without the benefit of unequivocal jurisprudence from ECtHR. Moreover, as a matter of elementary principle, it is the courts duty to address those issues when they arise, whether or not authoritative guidance from Strasbourg is available. The great advantage of the Human Rights Act is that it gives citizens of this country direct access to the rights which the Convention enshrines through their enforcement by the courts of this country. It is therefore the duty of this and every court not only to ascertain where the jurisprudence of the Strasbourg court clearly shows that it currently stands but to resolve the question of whether a claim to a Convention right is viable or not, even where the jurisprudence of the Strasbourg court does not disclose a clear current view. Finally, section 6 of the Human Rights Act leaves no alternative to courts when called upon to adjudicate on claims made by litigants to a Convention right. This section makes it unlawful for a public authority, including a court, to act in a way which is incompatible with a Convention right. That statutory obligation, to be effective, must carry with it the requirement that the court determine if the Convention right has the effect claimed for, whether or not Strasbourg has pronounced upon it. In this context, it would be particularly unsatisfactory, I believe, if, because of an Ullah type reticence, we should feel constrained not to reach a decision on the arguments advanced by the respondents to these references just because those very arguments are likely to be ventilated on behalf of the applicant in ECtHR in Abdurahman v United Kingdom application no 40351/09 and we cannot say how Strasbourg will react to them. If the much vaunted dialogue between national courts and Strasbourg is to mean anything, we should surely not feel inhibited from saying what we believe Strasbourg ought to find in relation to those arguments. Better that than shelter behind the fact that Strasbourg has so far not spoken and use it as a pretext for refusing to give effect to a right that is otherwise undeniable. I consider that not only is it open to this court to address and deal with those arguments on their merits, it is our duty to do so. The nature of the right under article 6(1) taken in conjunction with article 6(3)(c) The true nature of the right under article 6(1), taken in conjunction with article 6(3) (c), can only be ascertained by reference to its underlying purpose. What is its purpose? The respondents argue that its purpose is that when a person becomes a suspect, because of the significant change in his status that this entails; because of the potential that then arises for him to incriminate himself or to deal with questions in a way that would create disadvantage for him on a subsequent trial; and because of the importance of these considerations in terms of his liability to conviction, the essential protection that professional advice can provide must be available to him. The right, it is argued, should not be viewed solely as a measure for the protection of the individuals interests. It is in the interests of society as a whole that those whose guilt or innocence may be determined by reference to admissions that they have made in moments of vulnerability are sufficiently protected so as to allow confidence to be reposed in the reliability of those confessions. For reasons that I will develop, I consider that these arguments should prevail. If it has taught us nothing else, recent experience of miscarriage of justice cases has surely alerted us to the potentially decisive importance of evidence about suspects reactions to police questioning, whether it is in what they have said or in what they have failed to say, and to the real risk that convictions based on admissions made without the benefit of legal advice may prove, in the final result, to be wholly unsafe. The role that a lawyer plays when the suspect is participating in what may be a pivotal moment in the process that ultimately determines his or her guilt is critical. Thus understood, the animation of the right under article 6(1) cannot be determined in terms of geography. It does not matter, surely, whether someone is over the threshold of a police station door or just outside it when the critical questions are asked and answered. And it likewise does not matter whether, at the precise moment that a question is posed, the suspect can be said to be technically in the custody of the police or not. If that were so, the answer to a question which proved to be the sole basis for his conviction would be efficacious to secure that result if posed an instant after he was taken into custody but not so an instant before. That seems to me to be a situation too ludicrous to contemplate, much less countenance. Two supremely relevant, so far as these appeals are concerned, themes run through the jurisprudence of Strasbourg in this area. The first is that, in assessing whether a trial is fair, regard must be had to the entirety of the proceedings including the questioning of the suspect before trial see, for instance, Imbrioscia v Switzerland (1993) 17 E.H.R.R. 441, Murray v United Kingdom (1996) 22 E.H.R.R. 29; Averill v United Kingdom (2000) 31 E.H.R.R. 839; Magee v United Kingdom (2000) 31 E.H.R.R. 822; and Brennan v United Kingdom (2001) 34 E.H.R.R. 507. The second theme is that, although not absolute, the right of everyone charged with a criminal offence to be effectively defended by a lawyer, assigned officially if need be, is one of the fundamental features of a fair trial Poitrimol v France (1993) 18 E.H.R.R. 130 and Demebukov v Bulgaria (Application No 68020/01) (unreported) given 28 February 2008 at para 50. Taken, as they must be, in combination, these features of a fair trial lead inexorably to the conclusion that where an aspect of the proceedings which may be crucial to their outcome is taking place, effective defence by a lawyer is indispensable. When one recognises, as Strasbourg jurisprudence has recognised for quite some time, that the entirety of the trial includes that which has gone before the actual proceedings in court, if what has gone before is going to have a determinative influence on the result of the proceedings, it becomes easy to understand why a lawyer is required at the earlier stage. There is no warrant for the belief that vulnerability descends at the moment that one is taken into custody and that it is absent until that vital moment. The selection of that moment as the first occasion on which legal representation becomes necessary is not only arbitrary, it is illogical. The need to have a lawyer is not to be determined on a geographical or temporal basis but according to the significance of what is taking place when the later to be relied on admissions are made. This much, I believe, is clear from paras 54 and 55 of the judgment in Salduz v Turkey (2008) 49 EHRR 421. It is worth setting out para 54 to examine its constituent parts and in order to draw together the various strands of guidance that it contains. This is what the court said in that para: the Court underlines the importance of the investigation stage for the preparation of the criminal proceedings, as the evidence obtained during this stage determines the framework in which the offence charged will be considered at the tria1. At the same time, an accused often finds himself in a particularly vulnerable position at that stage of the proceedings, the effect of which is amplified by the fact that legislation on criminal procedure tends to become increasingly complex, notably with respect to the rules governing the gathering and use of evidence. In most cases, this particular vulnerability can only be properly compensated for by the assistance of a lawyer whose task it is, among other things, to help to ensure respect of the right of an accused not to incriminate himself. This right indeed presupposes that the prosecution in a criminal case seek to prove their case against the accused without resort to evidence obtained through methods of coercion or oppression in defiance of the will of the accused. Early access to a lawyer is part of the procedural safeguards to which the Court will have particular regard when examining whether a procedure has extinguished the very essence of the privilege against self incrimination. In this connection, the Court also notes the recommendations of the CPT [European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment], in which the committee repeatedly stated that the right of a detainee to have access to legal advice is a fundamental safeguard against ill treatment. Any exception to the enjoyment of this right should be clearly circumscribed and its application strictly limited in time. These principles are particularly called for in the case of serious charges, for it is in the face of the heaviest penalties that respect for the right to a fair trial is to be ensured to the highest possible degree by democratic societies. The first question that arises from this passage concerns the meaning of the investigation stage. That stage is stated to be particularly important for two related reasons. The first is that evidence obtained at that stage determines the framework in which the offence with which the defendant is charged will be considered at trial. In other words, evidence obtained during the investigation stage can significantly influence the outcome of the proceedings and on that account it requires close attention as to its reliability. The second reason is that at that very time (viz when evidence capable of influencing the trials outcome is being obtained) the accused finds himself in a vulnerable position. It may seem trite to ask why he should be vulnerable at that time but the answer, it seems to me, is both plain and significant. He is vulnerable because at this investigation stage, evidence which may be instrumental in securing a finding of guilt against him is being obtained and collated. The way that he reacts during the collection of that evidence may prove to be of critical importance in his subsequent trial. His vulnerability may be enhanced, moreover, because increasingly complex legislation permits the evidence to be obtained and used in ways that were not previously possible. I return then to the anterior question. What is meant by the investigation stage? It must surely include any point or juncture at which evidence which is potentially inculpatory of an accused is being obtained. This is of especial importance when the investigation stage provides the setting for a statement by the accused person that might incriminate him. ECtHR recognised in para 54 of Salduz that an incriminating statement might occur at an early stage of the investigation and it was for this reason that early access to a lawyer was considered to be necessary. That early access is expressly required so that the very essence of the right not to incriminate oneself is not destroyed. But extinction of the essence of the right, it seems to me, is precisely what may happen if statements tending to incriminate, made without the benefit of legal advice, are admitted in evidence against their maker on his or her trial. And that conclusion reinforces my view that it is not the place at which admissions are made nor whether the individual making the statements has been detained that is important. What is important is the use to which such statements may subsequently be put. The same message is provided by the opening words of para 55 of Salduz: Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective" article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right. Once more, it is noteworthy that the court here does not refer to the place at which the first interrogation takes place nor whether the person who is answering questions has been detained. It is from the moment of the first interrogation that the need for the presence of a lawyer is deemed to be required and that point is chosen because that is precisely when self incriminating statements may begin to be made. In this connection I should say that I do not construe the judgments of Judge Bratza and Judge Zagrebelsky in Salduz as seeking to link the need for a lawyers presence inextricably with the moment that a suspect is taken into custody. At O I2 Judge Bratza said: At para 55 of the judgment, the Court states as a general principle that in order for the right to a fair trial to remain sufficiently, practical and effective, article 6 requires that, as a rule, access to a lawyer should be provided, as from the first interrogation of a suspect by the police. This principle is consistent with the Court's earlier case law and is clearly sufficient to enable the Court to reach a finding of a violation of article 6 on the facts of the present case. However, I share the doubts of Judge Zagrebelsky as to whether in appearing to hold that the right of access to a lawyer only arises at the moment of first interrogation, the statement of principle goes far enough. Like Judge Zagrebelsky, I consider that the Court should have used the opportunity to state in clear terms that the fairness of criminal proceedings under article 6 requires that, as a rule, a suspect should be granted access to legal advice from the moment he is taken into police custody or pre trial detention. It would be regrettable if the impression were to be left by the judgment that no issue could arise under article 6 as long as a suspect was given access to a lawyer at the point when his interrogation began or that article 6 was engaged only where the denial of access affected the fairness of the interrogation of the suspect. The denial of access to a lawyer from the outset of the detention of a suspect which, in a particular case, results in prejudice to the rights of the defence may violate article 6 of the Convention whether or not such prejudice stems from the interrogation of the suspect. It is immediately obvious from this passage that Judge Bratzas concern was that the judgment of the court did not go far enough. It is clear that his assumption was that the first interrogation of a suspect would normally take place after he had been taken into custody. He felt that to prescribe that the presence of a lawyer was only then required might not be sufficient. Statements could be made or events could occur which might prove incriminating after the suspect was taken into custody but before the first formal interrogation began. That was why Judge Bratza suggested that a lawyer was required when the accused was taken into custody. But his statement to that effect does not betoken a view that the moment that custody begins should be invested with some special significance. On the contrary, it reflects concern that the suspects vulnerability and his need for a lawyer should not be seen as inevitably coincident with the opening of the formal interview. Statements made or events occurring before that time are just as likely to require the presence of a lawyer if the fairness of the trial is to be assured. The cases decided in Strasbourg post Salduz and discussed by Lord Hope in paras 36 40 of his judgment do not appear to me, with respect, to contribute much to the debate except for the case of Borotyuk v Ukraine (Application no. 33579/04). All of the cases concerned suspects who were already in custody when the questioning began. Lord Hope has suggested that importance was attached by Strasbourg in some of these cases to the fact that the person was in custody when he was being interrogated. I do not so read them. It seems to me that the cases are at least as consistent with the view that the important factor in play was that the interrogation was the occasion when inculpatory statements might be made and on that account a lawyers presence was considered an indispensable concomitant of a fair trial. In Borotyuk an interesting passage appears at para 79. There the court said: The Court emphasises that although not absolute, the right of everyone charged with a criminal offence to be effectively defended by a lawyer, assigned officially if need be, is one of the fundamental features of fair trial (see Poitrimol, cited above, para 34). As a rule, access to a lawyer should be provided as from the first questioning of a suspect by the police, unless it can be demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right. The rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police questioning without access to a lawyer are used to secure a conviction (see Salduz vs Turkey [(2008) 49 EHRR 421], para 55. Quite apart from the observation that access to a lawyer was deemed necessary as from the first questioning of a suspect, the emphasis in this passage seems to be on the inevitable prejudice that will occur if questioning takes place at a time and in circumstances where incriminating statements might be made. This, as it seems to me, is entirely consonant with the underlying philosophy of article 6(1) taken in conjunction with article 6(3)(c). The essential question is: when the questioning is taking place, is the suspect in a position where the advice of a lawyer is essential if a fair trial is to occur. If he is liable to incriminate himself at that time, a lawyers presence is required so that he may be fully advised as to how he may or should respond to the interrogation. Likewise, if he requires advice as to how he should react to questioning, for example by giving information that may subsequently emerge at the trial, he needs to have proper guidance. Remaining silent when a perfectly innocent explanation is available may fatally undermine a subsequently proffered defence. I would therefore express the principle, to be derived from a consideration of the mainstream Strasbourg jurisprudence, in this way: where a person becomes a suspect, questions thereafter put to him or her that are capable of producing inculpatory evidence constitute interrogation. Before such interrogation may be lawfully undertaken, the suspect must be informed of his or her right to legal representation and if he or she wishes to have a lawyer present, questions must be asked of the suspect, whether or not he or she is in custody, in the presence of a lawyer. The Lord Advocate in the present appeal submitted that the touchstone should be the taking into custody of the individual because this marked the start of the coercive atmosphere in which the vulnerability of the suspect was aroused. I cannot accept that argument. Common experience tells us that a coercive atmosphere can exist independently of custody. The subject was also helpfully considered, albeit in a different context, in the Canadian case of R v Grant 2009 SCC 32; [2009] 2 S.C.R. 353. In that case the Supreme Court of Canada held that what it described as psychological detention such as to give rise to rights under section 9 of the Canadian Charter of Rights and Freedoms was established where an individual has a legal obligation to comply with a restrictive request or demand, or where a reasonable person would conclude by reason of the state conduct that he or she had no choice but to comply. Although the right under section 9 of the Charter is one that entitles an individual not to be arbitrarily detained or imprisoned, as opposed to the right not to incriminate oneself, the relevance of the decision to the present appeal lies in the courts analysis of when the interaction between a police officer and the person he has stopped and questioned assumes a coercive quality. At para 30 of the majority judgment of McLachlin CJ and LeBel, Fish, Abella and Charron JJ it was stated: we find that psychological constraint amounting to detention has been recognized in two situations. The first is where the subject is legally required to comply with a direction or demand, as in the case of a roadside breath sample. The second is where there is no legal obligation to comply with a restrictive or coercive demand, but a reasonable person in the subject's position would feel so obligated. The rationale for this second form of psychological detention was explained by Le Dain J. in [R v Therens [1985] 1 SCR 613, 644] as follows: In my opinion, it is not realistic, as a general rule, to regard compliance with a demand or direction by a police officer as truly voluntary, in the sense that the citizen feels that he or she has the choice to obey or not, even where there is in fact a lack of statutory or common law authority for the demand or direction and therefore an absence of criminal liability for failure to comply with it. Most citizens are not aware of the precise legal limits of police authority. Rather than risk the application of physical force or prosecution for wilful obstruction, the reasonable person is likely to err on the side of caution, assume lawful authority and comply with the demand. The element of psychological compulsion, in the form of a reasonable perception of suspension of freedom of choice, is enough to make the restraint of liberty involuntary. Detention may be effected without the application or threat of application of physical restraint if the person concerned submits or acquiesces in the deprivation of liberty and reasonably believes that the choice to do otherwise does not exist. There is no reason to suppose that a person questioned by police while not in detention would not experience the same need to acquiesce in the power of the police to require answers to potentially highly incriminating questions. In as much, therefore, as a coercive atmosphere is required in order to stimulate the need for the protection that a lawyers presence brings, I consider that it is just as likely that this will occur outside a police station as within. As I have said, the important question is whether the circumstances in which questions are asked are liable to be productive of incriminating answers, not whether those questions are being asked in a police station or whether the suspected person can be said to be in custody. Zaichenko v Russia This decision needs to be examined because of the possibly discordant note that it strikes in what I consider to be the clear message of what I have described as the mainstream European jurisprudence on the subject. The applicant had been stopped by police when driving away from his place of work on 21 February 2001. He was asked to account for two cans of diesel that were discovered in his car. He replied that he had poured the fuel from the tank of a service vehicle that he drove as an employee into the containers that the police had found in his car. He said that he intended to use it for his own personal purposes in other words, he admitted to having stolen it. A vehicle inspection record was prepared by a police officer at the scene in which it was stated that the applicant had explained that he had poured out the fuel from the company premises. The applicant signed that document. He also signed another document entitled explanations in which his statement to the following effect was recorded: Since 1997 I have been employed as a driver by a private company. On 21 February 2001 I arrived to my workplace at 9 am. During the day I was repairing my service vehicle. In the evening I poured out thirty litres of fuel from the tank of my service vehicle. I have previously brought the cans, ten and twenty litres each, from home. After work, at around 8 pm, I was driving home in my car and was stopped by the police. The car was inspected in the presence of the attesting witnesses. I poured out the fuel for personal use. On 2 March 2001 an official known as an inquirer compiled a report on the events of 21 February 2001. It was recorded that the applicant had intentionally stolen thirty litres of diesel from his service vehicle. The report was stated to have been based on, among other things, the inspection record compiled by the police at the scene and the applicant's written statement. The accusation section of this statement read, At 8 pm on 21 February 2001 [the applicant] . being at work intentionally stole from his service vehicle the diesel in the amount of thirty litres. Thereby, he caused to the company pecuniary damage in the amount of 279 roubles. The applicant appended his signature to the following certificates that appeared at the foot of the statement: I have been informed of the nature of the accusation, the right to have access to the case file, the right to legal representation, the right to make requests and challenge the inquiring authorities' actions. and I have studied the case file and have read this document. I have no requests or motions. I do not require legal assistance; this decision is based on reasons unrelated to lack of means. I will defend myself at the trial. At his trial the applicant retracted the confession and instead advanced a defence that he had purchased the fuel. He maintained that evidence of his admissions to police officers when his car was stopped should not have been admitted because he had not been informed of his right against self incrimination. At para 19 of ECtHRs judgment it is recorded that the appeal court in Russia had decided that the applicant's allegation of self incrimination had been rightly rejected by the trial court as unfounded. At paras 42 and 43 of its judgment, ECtHR dealt with the question of whether the applicant had been charged during the events of 21 February 2001. As to that the court said this: 42. The Court reiterates that in criminal matters, Article 6 of the Convention comes into play as soon as a person is charged; this may occur on a date prior to the case coming before the trial court, such as the date of arrest, the date when the person concerned was officially notified that he would be prosecuted or the date when preliminary investigations were opened (see Eckle vs Germany, 15 July 1982, 73, Series A no. 51, and more recently, O'Halloran and Francis vs the United Kingdom [GC], nos. 15809/02 and 25624/02, 35, ECHR 2007. ). Charge, for the purposes of Article 6 1, may be defined as the official notification given to an individual by the competent authority of an allegation that he has committed a criminal offence, a definition that also corresponds to the test whether the situation of the [person] has been substantially affected (see Shabelnik vs Ukraine, no. 16404/03, 57, 19 February 2009; Deweer vs Belgium, 27 February 1980, 46, Series A no. 35; and Saunders vs the United Kingdom, 17 December 1996, 67 and 74, Reports of Judgments and Decisions 1996 VI). Given the context of the road check and the applicant's inability to produce any proof of the diesel purchase at the moment of his questioning by the police, the Court considers that there should have been a suspicion of theft against the applicant at that moment. 43. Applying these principles to the facts of the case, the Court notes that the trial court's use made of the admissions made on 21 February 2001, which led to the institution of criminal proceedings against the applicant and then served for convicting him of theft, is at the heart of the applicant's complaints under Article 6 of the Convention (compare Saunders, cited above, 67 and 74; and Allen vs the United Kingdom (dec.), no. 76574/01, 10 September 2002). It is also noted that the inspection record itself indicated Article 178 of the RSFSR Code of Criminal Procedure as the legal basis for the inspection (see paragraph 26 above). Thus, although the applicant was not accused of any criminal offence on 21 February 2001, the proceedings on that date "substantially affected" his situation. The Court accepts that Article 6 of the Convention was engaged in the present case. Nor was there any disagreement on this point between the parties. The substantial effect which prompted the finding that article 6 was engaged appears to comprise the suspicion which the court felt the police must have had that the applicant had been guilty of theft and the fact that the events that occurred at the roadside check led to his subsequent prosecution and conviction. On that basis the same conclusion (that article 6 is engaged) is irresistible in the three cases involved in these references. In each of the cases it is clear that, at the time that the relevant admissions were made, the police either did have or should have had a suspicion that the persons to whom they were posing questions were guilty of the offences that were under investigation and that the statements made in answer to those questions were or were likely to be highly incriminating of all three. But why in Zaichenko, if article 6 was engaged, was the applicant not entitled to the protection of article 6(3)(c), taken in conjunction with article 6(1)? For an answer to this, one must conduct a probe of the later passages of the judgment which, I should confess in advance, has not led me to an entirely clear understanding of the rationale underlying the courts conclusion on the issue. At para 46 the court said this: 46. The Court notes at the outset that the applicant only complained that he had not been afforded enough time to contact a lawyer in a nearby town. The Court cannot but note that, as confirmed by the applicant's representative in his letter to the European Court dated 26 July 2002, both on 21 February and 2 March 2001 the applicant chose not to exercise his right to legal representation with the hope that the court would give him a fair trial even without counsel. It is difficult to be sure that, in using the phrase, the court cannot but note, the judgment at this point was indicating that, because the applicant had elected not to have legal representation, this was a basis on which it could be concluded that there had not been a violation of article 6(3)(c). Observations that appear later in the judgment would tend to support that view, however. In the first instance, the para following (para 47) opens with the word moreover which suggests that the decision of the applicant not to seek legal representation was, at least, one of a number of reasons for the finding that article 6(3)(c) had not been breached. Secondly, at para 50 of the judgment, the court refers to the applicants election not to seek legal assistance either on 21 February or on 2 March 2001 as a waiver of his right to legal assistance. Some of the other reasons for finding that there had not been a violation of article 6(3)(c) appear in para 47: 47. Moreover, the Court observes that the present case is different from previous cases concerning the right to legal assistance in pre trial proceedings because the applicant was not formally arrested or interrogated in police custody. He was stopped for a road check. This check and the applicant's self incriminating statements were both carried out and made in public in the presence of two attesting witnesses. It is true that the trial record contains a statement by the applicant suggesting that the writing down of the inspection record and/or his subsequent statement were started on the spot but were completed in the village of Birofeld. Nevertheless, the Court concludes on the basis of the materials in the case file that the relevant events, namely the drawing of the inspection record and the taking of the applicant's explanation, were carried out in a direct sequence of events. The distinction between Zaichenkos case and earlier decisions that is highlighted here viz that the applicant had not been arrested or interrogated while in police custody is not expressly stated to be a reason that alone would warrant a finding that there had not been a violation of article 6(3)(c) taken in conjunction with article 6(1). It seems to me impossible to say, on the basis of the statements in this paragraph, that ECtHR has concluded that formal arrest and interrogation in custody are essential prerequisites to the invocation of the right. Rather, it appears that the court treated the cumulative effect of factors that were peculiar to this particular case as the basis for the finding that there had not been a violation of article 6(3)(c). These factors can be enumerated as follows: (1) the applicant had waived his right to a lawyer and had explicitly stated that he did not want a lawyer to represent him despite having been told on 2 March 2001 that he was entitled to legal representation; (2) he had not been formally arrested or interrogated in police custody; (3) the initial questioning of the applicant took place at a road check and not in any formal setting; (4) the applicant was questioned in a public place with other witnesses present who could attest to a lack of coercion on the part of the police; and (5) the checking of the applicants car and his questioning as to the source of the diesel all occurred as part of a seamless process. I do not believe that any one of these factors can be elevated to a position of pre eminence nor does it appear to me that it can be said with confidence that any single factor, taken in isolation, would be sufficient to support the finding that there had not been a breach of article 6(3)(c). The succeeding paragraphs in the judgment repeat the matters dealt with in paras 46 and 47 or expand on them to some extent. It is not necessary to consider these in any detail but I should mention para 48, if only to say that I have had a little difficulty in following the reasoning that it contains. It reads: Although the applicant in the present case was not free to leave, the Court considers that the circumstances of the case as presented by the parties, and established by the Court, disclose no significant curtailment of the applicant's freedom of action, which could be sufficient for activating a requirement for legal assistance already at this stage of the proceedings. It is not immediately clear why someone who was not free to leave the scene could be said not to have had any significant curtailment of his freedom of action. Be that as it may, it appears to be the case that if the court had found that there had been a significant curtailment of the applicants freedom of action, it would have regarded this as a sufficient basis for a finding of a violation of article 6(3)(c). What would constitute such a curtailment of freedom of action has not been made clear, however. Altogether, it is not easy to distil any obvious principle from this paragraph and I would be reluctant to ascribe to it any significance beyond that relevant to the circumstances of the case of Zaichenko itself. Although ECtHR concluded that Mr Zaichenko had waived his right to legal assistance, it decided that there had not been a waiver of his right not to incriminate himself. At para 52 the court held that it was incumbent on the police to inform the applicant of the privilege against self incrimination and the right to remain silent. Their failure to do so at the roadside check before putting questions to him constituted a violation of article 6(1), therefore. In a partly dissenting opinion, Judge Spielmann (who, as Lord Hope pointed out in para 46 of his judgment, was a member of the Grand Chamber in Salduz) addressed forthrightly the question of when the right to legal representation arose and, relating it directly to the decision in Salduz, came down firmly in favour of what I believe to be the logical position, namely, that it began when police questioning started. In para 3 of his opinion, Judge Spielmann said: 3. In Salduz vs Turkey the Court held that as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police (see Salduz vs Turkey [GC], no. 36391/02, 55, ECHR 2008 . ). The Court also held that the lack of legal assistance during a suspect's interrogation would constitute a restriction of his defence rights and that these rights would in principle be irretrievably prejudiced when incriminating statements, made during police interrogation without access to a lawyer, were used for a conviction. The Court took a similar approach in the equally important judgment in Panovits (Panovits vs Cyprus, no. 4268/04, 66 and 70 73, 11 December 2008). (original emphasis) Judge Spielmann also questioned the reasoning of the majority that is contained in para 48 of the courts judgment. At para 6 he said: 6. Contrary to what is said in para 48 of the judgment, I cannot agree that the circumstances of the case disclose no significant curtailment of the applicant's freedom of action. I am of the opinion that those circumstances were sufficient to activate a requirement for legal assistance. I do not understand Judge Spielmanns dissent necessarily to indicate that there was a divergence of views between him and the majority about the nature of the principle at stake. The principle which I believe can be said to be common to both is that when a suspect is interrogated by police he is entitled to legal assistance. Where Judge Spielmann parted company with the majority was in its conclusion as to whether the principle applied. Because of the accumulation of factors that the court had identified (see para 158 above) and because it concluded that there had not been a curtailment of Mr Zaichenkos freedom of action, it held that the principle did not apply. Judge Spielmann, by contrast, did not attach the weight to the factors that the majority had considered militated against a finding of violation of article 6(3)(c) and he disagreed (in my view, quite properly) with the suggestion that someone who was not free to leave the scene nevertheless had not suffered any curtailment of his freedom of action. Miranda v Arizona As Lord Hope has said in para 52, curtailment of freedom of action carries echoes from Miranda v Arizona 384 US 436 (1966). And as Lord Hope suggests, it may well be that Miranda will influence the thinking of Strasbourg, it having featured in a number of prominent dissenting judgments in that court already. But I question whether this will lead to the adoption of the custodial approach to the question as to when access to a lawyer is required. Curtailment of an individuals freedom of action can arise even when he has not been taken into custody. The important question must surely be whether the suspect feels constrained to answer the questions posed to him by the police officer. As the Grant case illustrates, this can arise either because of the manner in which the police officer manages the exchange with the suspect or because of the latters belief that he has no option but to answer the questions put to him. Quite apart from these considerations, however, I believe that one must be careful about making assumptions about the Miranda experience or believing that it can be readily transplanted into European jurisprudence in any wholesale way. The implications of that decision must be considered in the context of police practice in the United States of America. Nothing that has been put before this court establishes that it is common practice in America to ask incriminating questions of persons suspected of a crime other than in custody. Indeed, it is my understanding that as soon as a person is identified as a suspect, police are trained that they should not ask that person any questions until he or she has been given the Miranda warnings. Custody was identified in Miranda as one of the features necessary to activate the need for legal representation but custody has been held to mean either that the suspect was under arrest or that his freedom of movement was restrained to an extent associated with a formal arrest Stansbury vs California, 511 US 318 (1994); New York vs Quarles, 467 U.S. 649, 655 (1984). So it is clear that the rule that custody is required before entitlement to legal representation arises is not inflexible or static and that its underlying rationale is closely associated with the question whether the person questioned feels under constraint to respond. Hampering police investigation One of the principal practical arguments advanced against the requirement that a suspect be informed that he is entitled to legal representation before incriminating questions are put to him is that this will hamper police investigations. The argument is a venerable one. It has been deployed in reaction to various proposals for safeguards intended to protect suspects rights including the right to have a solicitor present during interviews and the audio recording or the videotaping of interviews. There is no evidence that the introduction of those measures brought about any widespread impediment to police investigations nor is there, in my view, any convincing evidence that this would be the result of recognising the right of a suspect to be informed that he or she is entitled to legal representation before being required to provide potentially incriminating answers to police questioning. As the respondents have pointed out, in the final analysis, these cases are about the admissibility of evidence. There is no legal prohibition on police asking questions of a suspect that may produce incriminating answers. The legal consequence of doing so without first informing the suspect of his or her right to be legally represented will be, in my opinion, that the answers produced will be inadmissible in evidence unless compelling reasons such as were discussed in para 55 of Salduz exceptionally justify denial of access to a lawyer. One can anticipate, therefore, that police may decide in appropriate circumstances to proceed with questions in order to further the investigation but have to accept that if they are capable of producing incriminating answers from someone who is a suspect, the replies will be inadmissible. A balance will always have to be struck between unfettered police investigatory powers and the complete safeguarding of suspects rights. The history of criminal jurisprudence shows how that balance has been struck in different ways and at different times, reflecting, no doubt, changing attitudes as to what properly reflects contemporary standards. It is my belief that the proper balance to strike for our times is the one that I have suggested in para 146 above. Conclusions For the reasons given in para 153 above, I consider that article 6 of ECHR was engaged in each of the respondents cases at the time that the relevant questions were asked. I have no doubt that when they were asked those questions each of them was suspected of having committed an offence. I agree with Lord Hope that the administration of a caution is not necessarily determinative of this issue but, in the particular circumstances of these cases, I do not believe that any other conclusion is possible. The second and third questions that were put to the respondent, Ambrose, were clearly capable of producing incriminating responses. In fact they did so and it is evident that the answers have been relied on in order to establish his guilt, (although that might well have been possible simply by proving that he was in the car and in possession of the keys). In these circumstances, I am of the view that he had a right under article 6(3)(c) taken in conjunction with article 6(1) of ECHR to be informed, after his reply to the first question, that he was entitled to legal representation before answering further questions, and that, absent such a warning, the incriminating answers given by him to the second and third questions were not admissible. The questions put to the respondent who has been referred to as M, apart from the first question, were also clearly capable of producing incriminatory replies although whether they would in fact be probative of guilt would be a matter for trial, if indeed the answers were held to be admissible. Since they clearly had the capacity of producing inculpatory responses, however, I consider that the questions put to M at his home, apart from the first question, are inadmissible. In the case of the respondent referred to as G, for the reasons given by Lord Hope (with which I agree), it is indisputable that, at the time the impugned questions were put to him, he was in custody and, whatever view one takes of the effect of the European jurisprudence, the incriminating answers that he gave are inadmissible. But, for the same reasons that I have given in the cases of Ambrose and M, I would have held that they were inadmissible, regardless of whether G was in custody at the time that the answers were given. |
If an employee is dismissed on written notice posted to his home address, when does the notice period begin to run? Is it when the letter would have been delivered in the ordinary course of post? Or when it was in fact delivered to that address? Or when the letter comes to the attention of the employee and he has either read it or had a reasonable opportunity of doing so? Given the vast numbers of working people who might be affected by this issue, it is perhaps surprising that it has not previously come before the higher courts. This Court, in Gisda Cyf v Barratt [2010] UKSC 41; [2010] ICR 1475, held that the effective date of termination for the purpose of unfair dismissal claims under the Employment Rights Act 1996 was the date on which the employee opened and read the letter summarily dismissing her or had a reasonable opportunity of doing so. But the Court was careful to limit that decision to the interpretation of the statutory provisions in question. The common law contractual position might be quite different, as indeed the Court of Appeal had said that it was: [2009] EWCA Civ 648; [2009] ICR 1408. There is nothing to prevent the parties to a contract of employment from making express provision, both as to how notice may or must be given and for when it takes effect, as happened in Geys v Socit Gnrale, London Branch [2012] UKSC 63; [2013] 1 AC 523, but that was not done in this case. We are considering, therefore, the content of a term which must be implied into the contract of employment. The employer contends that notice is given when the dismissal letter is delivered to the employees address (which by statute is deemed to be when the letter would be delivered in the ordinary course of post unless the contrary is shown). The employee contends that notice is not given until the letter comes to the attention of the employee and she has had a reasonable opportunity of reading it. The facts The essential facts are very simple. Mrs Haywood was continuously employed by various bodies in the NHS for many years. On 1 November 2008, she began employment with the Newcastle and North Tyneside Community Health PCT. On 1 April 2011, her employment transferred to the Newcastle upon Tyne NHS Foundation Trust (the Trust) on the same terms and conditions as before. Section 19 of her contract of employment with the PCT provided that Unless there is mutual agreement that a different period should apply, this employment may be terminated by you or NPCT by the notice period as set out in section 1 . Section 1 gave the Minimum notice period from you or NPCT as 12 weeks. Very shortly after the transfer, the Trust identified Mrs Haywoods post as redundant. As both parties knew, if her employment terminated by reason of redundancy on or after her 50th birthday on 20 July 2011, she would be entitled to claim a non actuarially reduced early retirement pension. If it terminated before that date, she would not. At a meeting to discuss her possible redundancy on 13 April 2011, Mrs Haywood informed the Trust that she had booked two weeks annual leave from Monday 18 April, was going to Egypt, and would be due back at work after the extended bank holiday weekend on 3 May 2011. The period of leave had been recorded on the Trusts records. Mrs Haywood asked that no decision be taken while she was away, but the Trust did not agree to that. On 20 April 2011, it issued written notice (in fact dated 21 April) of termination of her employment on the ground of redundancy. The Trust maintained that the letter was sent by three methods: by email to her husbands email address; by recorded delivery; and by ordinary first class post. However, the Trust sought (unsuccessfully) to recall the notice sent by email that same day. The trial judge was satisfied that only two notices had been sent by email and by recorded delivery (para 37(xii)). The email is not relied on by the Trust. Hence the letter which is relevant in this appeal is the one sent by recorded delivery. The crucial date was 27 April. Notice given on or after that date would expire on or after Mrs Haywoods 50th birthday. Notice given before that date would expire earlier. Mrs Haywood and her husband were away on holiday in Egypt from 19 to 27 April. They asked Mr Haywoods father, Mr Crabtree, to look after the house while they were away. He went daily to check that it was secure, remove mail from the doormat to the hall table and water the plants. A recorded delivery slip was left at their home on 21 April. On 26 April, Mr Crabtree found the recorded delivery slip, collected the letter from the local sorting office and left it at their home. Mr and Mrs Haywood arrived back there in the early hours of 27 April. Mrs Haywood opened and read the letter later that morning. Mrs Haywood made various Employment Tribunal claims in respect of her dismissal, which were not pursued. In these High Court proceedings, she claims that her 12 weeks notice did not begin until 27 April, when she received and read the letter, and therefore expired on 20 July, her 50th birthday, and accordingly that she is entitled to the early retirement pension. The claim was tried by His Honour Judge Raeside QC, sitting as a High Court Judge, in January 2014. He handed down a partial judgment on 27 May 2015: Case No 3BM30070. He held that it was necessary to imply a term that Mrs Haywood had a right actually to be informed, either orally or in writing, of her dismissal; she had to have a reasonable opportunity actually to look at the letter (paras 70, 71). He declared that Mrs Haywood was still employed by the Trust on 20 July 2011 and made various orders relating to the payment of her pension, both in the future and in arrears. But he granted a stay of those provisions pending a possible appeal and they have remained stayed ever since. The Trusts appeal to the Court of Appeal was dismissed by a majority: [2017] EWCA Civ 153. Proudman J held that the contents of the letter had to be communicated to the employee (para 57). Arden LJ held that the letter had to be received (para 130(2)); where it has been delivered to the partys address, there is a rebuttable presumption that it has been received (para 136); but that presumption had been rebutted by the judges finding that Mrs Haywood did not receive the letter until 27 April there was no need for her to have read the letter but she had to have received it (para 149). Lewison LJ dissented: notice is validly given under the contract when a letter containing the notice actually arrives at the correct destination, whether the recipient is there to open it or not (para 124). The agency point Before turning to the major issue of principle, which divided the Court of Appeal and also divides this Court, it is convenient to mention a point which was raised for the first time in the Court of Appeal by Lewison LJ. This is that Mr Crabtree, By taking it upon himself to collect and sign for the letter, must, in my judgment, be taken to have been acting as Mrs Haywoods agent (para 84). Arden LJ disagreed: There was no argument on this at the hearing or finding by the judge. [Mr Crabtrees] witness statement is consistent with his having acted on his own initiative (para 134). In their Grounds of Appeal, the Trust argued that Lewison LJ was right to hold that Mr Crabtree was acting as Mrs Haywoods agent and that delivery to him was therefore delivery to her. It is fair to say that very little time was devoted to this ground in the hearing before us. On its own, it does not raise a point of law of general public importance for which permission to appeal would be granted and arguably would require a finding of fact by the trial judge. At all events, in my judgment (with which I understand that all my fellow Justices hearing this case agree), on the evidence that was available to the court, Arden LJ was correct to hold that, in acting as he did, Mr Crabtree was not acting at Mrs Haywoods agent for the receipt of the letter. The issue of law The Trust argues that there is a common law rule, principally derived from some historic landlord and tenant cases, which supports its case that notice is given when the letter is delivered to its address. Mrs Haywood argues that the common law rule is not as clear cut as the Trust says that it is. Furthermore, there is a consistent line of Employment Appeal Tribunal (EAT) authority which supports her case that, in the absence of an express contractual provision to the contrary, there is an implied term that a notice served by an employer upon an employee takes effect only when it has actually been received by the employee and the employee has either read or had a reasonable opportunity of reading it. It is convenient, therefore, to look first at the non employment cases principally relied upon by the Trust and then at the employment cases principally relied upon by Mrs Haywood. The non employment cases The Trust relies on a line of cases dating back to the 18th century, almost all in the landlord and tenant context, holding that delivery of a notice to the tenants (or landlords) address is sufficient, even though it has not actually been read by the addressee. Some of these are in the context of an express statutory or contractual provision that service may be effected by post. In Jones d Griffiths v Marsh (1791) 4 TR 464; 100 ER 1121, it was held that delivering a notice to quit to the tenants maidservant at his house (which was not the demised premises) was sufficient. Personal service was not necessary in every case, although it was in some. Kenyon CJ remarked that in every case of the service of a notice, leaving it at the dwelling house of the party has always been deemed sufficient. Doe d Neville v Dunbar (1826) Moot M 9; 173 ER 1062 was to the same effect. Abbott CJ had no doubt as to the sufficiency of a notice served at the tenants home, even though the tenant was away: were it otherwise, a landlord would have no means of determining a tenancy, if his tenant happened to be absent from his house at the time when it was necessary to serve the notice. In Papillon v Brunton (1860) 5 H & N 518; 157 ER 1285, a tenant served notice to quit by posting it to his landlords agent. The jury found that it arrived that same day, after the agent had left, but there ought to have been someone there to receive it. The judges agreed that this was good service. In Tanham v Nicholson (1872) LR 5 HL 561, delivery to the tenants adult children at the property was held sufficient. But Lord Westbury pointed out that, in Jones, Lord Kenyon had limited his remarks to notices affecting property, such as notices to quit, and not those notices which are intended to bring an individual into personal contempt (p 573). As Lady Blacks much fuller treatment demonstrates, each of these cases could be seen as service upon an agent authorised to accept it. The other landlord and tenant cases relied on by the Trust are less helpful, because they involved express statutory and/or contractual terms. Stidolph v American School in London Educational Trust Ltd [1969] 2 P & CR 802 concerned the requirements for terminating a lease of business premises under the Landlord and Tenant Act 1954 and the Landlord and Tenant (Notices) Regulations 1954. The Act expressly provided that notice could be served by registered post in a letter addressed to the tenants last known place of abode. The landlords solicitors had sent, by registered post, an unsigned notice to quit accompanied by a letter signed by them. This was held sufficient. But Lord Denning observed that I do not think that a tenant can avoid the effects of a notice like this which is properly sent by registered post to him by saying that he did not take it out of the envelope or read it (p 805). And Edmund Davies LJ said this (pp 805 806): Based upon considerations mainly of business efficacy, there is a long standing presumption in our law that a letter, duly addressed, pre paid and posted, which is not returned to the sender has in fact been received by the addressee unless he can establish the contrary. The usefulness of a presumption of this kind would be destroyed if the addressee could nevertheless be heard to say: Although I received the postal packet quite safely, I did not read the contents, or I did not examine the postal packet to see that I had extracted all that it contained. Both observations are as consistent with Mrs Haywoods case as they are with the Trusts. In Stephenson & Son v Orca Properties Ltd [1989] 2 EGLR 129, the deadline for giving notice of a rent review to the tenant was 30 June. The notice was posted recorded delivery on 28 June, but it was not received and signed for until 1 July. The issue was whether it was deemed, under section 196(4) of the Law of Property Act 1925 (see para 34(2) below), to have been delivered in the ordinary course of post on 29 June. Scott J held that that would have been the case with an ordinary registered letter, but a recorded delivery letter was not received until signed for. So the notice was out of time. Wilderbrook Ltd v Olowu [2005] EWCA Civ 1361; [2006] 2 P & CR 4, also concerned a rent review notice sent by recorded delivery, received and signed for at the demised premises. The lease incorporated the statutory presumption as to service in section 196(4) of the Law of Property Act 1925 (see para 34(2) below). The Court of Appeal rejected the argument that it was not received in accordance with the contract until the tenant had actually seen it. Carnwath LJ quoted Lord Salmon in Sun Alliance & London Assurance Co Ltd v Hayman [1975] 1 WLR 177, at p 185: Statutes and contracts often contain a provision [that] notice may be served upon a person by leaving it at his last known place of abode or by sending it to him there through the post. The effect of such a provision is that if notice is served by any of the prescribed methods of service it is, by law, treated as having been given and received. Once again, this does not help us to determine what term as to service is to be implied into an employment contract, to which section 196(4) does not apply. With the exception of the employment case of London Transport Executive v Clarke (dealt with below at para 29), the only case outside landlord and tenant law relied on by the Trust is The Brimnes, Tenax Steamship Co Ltd v The Brimnes (Owners) [1975] QB 929, CA. One issue was when the owners notice withdrawing the vessel from hire, sent by telex, had been received by the charterers. It was held effective when it arrived at the charterers machine during business hours and not when it was actually read. Megaw LJ said this, at pp 966 967: With all respect, I think that the principle which is relevant is this: if a notice arrives at the address of the person to be notified at such a time and by such a means of communication that it would in the normal course of business come to the attention of that person on its arrival, that person cannot rely on some failure himself or his servants to act in a normal business like manner in respect of taking cognisance of the communication so as to postpone the effective time of the notice until some later time when it in fact came to his attention. Cairns LJ made this general observation, at pp 969 970: In my opinion, the general rule is that notice must reach the mind of the charterer or of some responsible person on his behalf. There must clearly be exceptions to this rule: for example, if the charterer or his agent deliberately keeps out of the way, or refrains from opening a letter with a view to avoiding the receipt of notice. How much further than this do exceptions go? I feel little doubt that if an office were closed all day on an ordinary working day, though without any thought of a notice of withdrawal arriving, such a notice delivered by post on that day must be regarded as then received. These statements can scarcely be seen as a ringing endorsement of the Trusts case, as their starting point is receipt. Notices delivered during normal working hours to an office which can reasonably be expected to be staffed to receive and deal with them properly may be in a different category from notices delivered to a private home. The employment cases Mrs Haywood relies upon a line of EAT cases dating back to 1980, holding in a variety of contexts which do not all depend upon the construction of the employment protection legislation, that written notice does not take effect until the employee has read it or had a reasonable opportunity of doing so. In Brown v Southall & Knight [1980] ICR 617, the issue was whether the employee had the 26 weeks continuous employment, ending with the effective date of termination, then required to bring an unfair dismissal claim. The letter summarily dismissing him was sent by post after he had left to go on holiday. His period of employment was less than 26 weeks on the date that it would have been delivered to his home but more than that on the date when he arrived back and read the letter. The EAT (Slynn J presiding) held that he had the necessary 26 weeks employment, for the reasons given at p 628: It seems to us that it is not enough to establish that the employer has decided to dismiss a man or, indeed, has posted a letter saying so. That does not itself, in our view, terminate the contract. Nor, in our view, is it right, in looking at the matters as the industrial tribunal did in considering the reasonable steps taken by the employer, to look solely at what the employer does and to ask whether that constitutes the taking of reasonable steps. In our judgment, the employer who sends a letter terminating a mans employment summarily must show that the employee has actually read the letter or, at any rate, had a reasonable opportunity of reading it. If the addressee of the letter, the employee, deliberately does not open it or goes away to avoid reading it he might well be debarred from saying that notice of his dismissal had not been given to him. That, however, did not happen in this case. The same approach was adopted by the EAT (Morison J presiding) in McMaster v Manchester Airport plc [1998] IRLR 112, another case of a dismissal letter arriving while the employee was away from home. This too was a case about the effective date of termination, but for the purpose of the time limit for making a complaint of unfair dismissal. It was common ground that any dismissal had to be communicated, whether it was summary or on notice. The tribunal commented, at para 9: It seems to us that, as a matter of principle, unless compelled to take a different view, the doctrine of constructive or presumed knowledge has no place in the private rights of parties to contracts of employment, and questions as to whether a dismissal has been communicated or not, save in an evidential sense only. When the Gisda Cyf case, referred to in para 2 above, which concerned a summary dismissal by letter, came before Bean J sitting alone in the EAT ((UKEAT 0173/08, unreported), he agreed with all that Morison J had said it was laying down a clear and workable principle. He drew a distinction between delivery to a large commercial concern during business hours and delivery to a persons home. Edwards v Surrey Police [1999] IRLR 456 also concerned the effective date of termination for the purpose of the time limit for bringing an unfair dismissal complaint. But the issue was whether the employees resignation took effect when the employee decided that she could not continue working for the employer or when that decision was communicated to the employer. The EAT (Morison J presiding) held that before a contract of employment can be terminated there must have been communication by words, or by conduct, such as to inform the other party to the contract that it is indeed at an end (para 14). In George v Luton Borough Council (EAT 0311/03, unreported) the EAT (Judge Serota QC presiding), agreed that the acceptance of the employers repudiatory breach had to be communicated, but held that there might be a distinction between cases of an employee giving notice and cases where an employer is seeking to terminate the employment, in which case the employee must know and actually have the termination communicated to him. Receipt of the employees letter accepting the breach by the Council was sufficient (para 14). To the same effect was Potter v RJ Temple plc (2003) UKEAT/0478/03/LA), where the EAT (Judge Richardson presiding) held that an employees notice was effective when received by his employers even if it had not been read. Brown v Southall & Knight was followed in an entirely different context in Hindle Gears Ltd v McGinty [1985] ICR 111, and this time to the employees disadvantage. During a strike, employers were exempt from unfair dismissal claims only if they dismissed an entire striking workforce. They were not entitled to dismiss only those strikers who were unwanted elements. So if there were striking employees who were not dismissed, or who were re engaged within three months, those who were dismissed could bring claims. The employer sent out letters dismissing all the strikers, but two of them had left home to report for work early in the morning of the day after the letters were posted, before the letters were actually received. The Industrial Tribunal held that the two employees had been dismissed but then re engaged that morning, with the result that the 39 striking employees could bring complaints of unfair dismissal. The EAT (Waite J presiding) held that the two employees had not been dismissed before they returned to work; therefore they had not been re engaged that morning; and they were not part of the striking workforce on the relevant date. This was because, at p 117: Communication of the decision in terms which either bring it expressly to the attention of the employee or give him at least a reasonable opportunity of learning of it is in our view essential. Most recently, in Sandle v Adecco UK Ltd [2016] IRLR 941, the EAT (Judge Eady QC presiding) upheld the employment tribunals decision that an agency worker had not been dismissed because, although the firm to which the agency had assigned her had terminated the assignment, the agency had done nothing to communicate her dismissal: dismissal does have to be communicated. Communication might be by conduct and the conduct in question might be capable of being construed as a direct dismissal or as a repudiatory breach, but it has to be something of which the employee was aware. (para 41) Two other employment cases were relied upon by the Trust. In London Transport Executive v Clarke [1981] ICR 355, the employee had taken unauthorised leave to go to Jamaica. After sending two letters to his home address asking for an explanation and giving an ultimatum, the employers wrote on 26 March saying that his name had been permanently removed from their books on that day. When he returned they refused to reinstate him. The majority of the Court of Appeal held that a contract of employment was not terminated until the employers had accepted the employees repudiatory breach, which they did when he was dismissed on 26 March. The issue was whether his dismissal was unfair. There was no issue as to the precise timing, or as to when the employee became aware of the contents of the letter. The most that can be said on behalf of the Trust is that the majority assumed that posting the letter was sufficient. The other case is the decision of the Court of Appeal in the Gisda Cyf case: [2009] EWCA Civ 648; [2009] ICR 1408. The majority, Mummery LJ with whom Sir Paul Kennedy agreed, approved the decisions in Brown v Southall & Knight and McMaster v Manchester Airport plc, but expressly on the basis that they were construing the statutory definition of the effective date of termination in section 97(1) the Employment Rights Act 1996 or its predecessor, for the purpose of unfair dismissal claims, rather than applying the law of contract; it did not follow that the correct construction of the statute was controlled by contractual considerations: para 33. Lloyd LJ dissented: in his view resort should first be had to the general law on contracts of employment. The EAT cases cited above had distinguished between those where the employee had given notice to the employer and those where the employer had given notice to the employee. In the first category were George v Luton Borough Council and Potter v RJ Temple plc (see para 26 above), where it was held that an employees notice was effective when received by his employers even if it had not been read. In the second category were all those cases where an employers notice had been held only to take effect when the employee had received and read, or had a reasonable opportunity to read, them. He took the view that the latter category of cases was wrongly decided and the same rule should apply to both. In the Supreme Court, the approach of the majority was upheld. The Court emphasised that it was interpreting a statutory provision in legislation designed to protect employees rights, so that the general law of contract should not even provide a preliminary guide, let alone be determinative (para 37). However, Lord Kerr (giving the judgment of the Court) was careful to say that the judgment should not be seen as an endorsement of the employers argument as to the effect of common law contractual principles (para 38). The case was an unusual one, in that the employee was not represented before the Supreme Court and so there had been no argument to the contrary. For that reason, although this case is determinative of the meaning of the effective date of termination in section 97(1) of the Employment Rights Act 1996, it is of no assistance in the determination of the issue in this case. The last employment case to mention is Geys v Socit Gnrale, London Branch (see para 3 above). The Bank purported to exercise its contractual right to terminate the employees employment by making a payment in lieu of notice. The severance payment due depended on the date of termination: was it when the Bank repudiated the contract of employment, or when it made a payment in lieu of notice into the employees bank account, or when, in accordance with an express term in the contract, the employee was deemed to have received the Banks letter telling him that it had exercised its right to terminate with immediate effect and made a payment in lieu of notice? The Supreme Court held that the repudiation was not effective unless and until accepted by the employee (which it was not); that the mere payment of money into a bank account was not sufficient notification to the employee that he was being dismissed with immediate effect; so that the date of termination was the date on which he was deemed to have received the letter. Apart from the repudiation point, most of the case depended upon the express terms of the contract, which included a term as to when a written notice sent by post was deemed to have been received. For present purposes the case is relevant only insofar as it stresses the need for notification of dismissal (or resignation) in clear and unambiguous terms, so that both parties know where they stand whether or not the employee is still employed and when he ceased to be employed (paras 57 58). Baroness Hale of Richmond (with whom Lord Hope of Craighead, Lord Wilson and Lord Carnwath agreed) cited with approval, at para 56, the following passage from Crossley v Faithful & Gould Holdings Ltd [2004] ICR 1615, per Dyson LJ, at para 36: It seems to me that, rather than focus on the elusive concept of necessity, it is better to recognise that, to some extent at least, the existence and scope of standardised implied terms raise questions of reasonableness, fairness and the balancing of competing policy considerations. Policy Both parties have placed great weight on what they see as the policy considerations favouring their solution. Mr Cavanagh QC, for the Trust, points out that, as there was no express term stating how notice was to be given and when it was to be taken to have effect, some term has to be implied into this contract. That being so, as stated in Crossley, policy questions are relevant. There should be no special rule for employment cases. There should be as much certainty and clarity as possible. The Trusts approach is more certain than the employees. Under the employees approach, it would not be possible for a letter giving notice to state with certainty the date on which the employment would end. It is also fairer to give the benefit of the doubt to the sender of the letter, because there will usually be more objective evidence of when it was sent. If there are several dismissals, all will take effect on the same day, and not on different days depending on when the letter was received. The employees approach does not necessarily work for the benefit of employees, who might be keen for the employment to end. There must be the same rule for employers and employees. He also argues that the Trusts approach delivery to the home address is consistent with or more favourable than many statutory provisions about notice. He cites, in ascending order of severity, the following examples: (1) By the Interpretation Act 1978, section 7 (replacing a provision to like effect in the Interpretation Act 1870), service of a document by post, where authorised or required, is deemed to be effected by properly addressing, pre paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. However, in Freetown Ltd v Assethold Ltd [2012] EWCA Civ 1657; [2013] 1 WLR 701, at para 37, Rix LJ pointed out that this changed the common law, which required receipt; it introduced a rebuttable presumption; and required the sender to prove that the letter had been properly addressed, prepaid and posted. (2) By the Law of Property Act 1925, section 196(4), notices required to be served on a lessee or mortgagor are sufficiently served if sent by post in a registered letter addressed to the person to be served by name, at his place of abode or business, and the letter is not returned undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered. (3) By the Misuse of Drugs Act 1971, section 29(4) certain notices sent by registered post or recorded delivery shall be deemed to have been effected at the time when the letter containing it would be delivered in the ordinary course of post and section 7 of the 1978 Act is disapplied. (4) By the Public Health Act 1875, section 267, notices and other documents served by post shall be deemed to have been served at the time when the letter containing the same would be delivered in the ordinary course of post, and in proving such service it shall be sufficient to prove that the notice order or other document was properly addressed and put into the post. However, as Mr Glyn QC for Mrs Haywood points out, it does not follow that any of these differing statutory provisions reflects the common law as to the term to be implied into an employment contract. Their purpose was to lay down a rule which might well be different from what would otherwise be the common law position. He also cites the judgment of the Supreme Court in Gisda Cyf, at para 43: There is no reason to suppose that the rule in its present form will provoke uncertainty as to its application nor is there evidence that this has been the position hitherto. The inquiry as to whether an employee read a letter of dismissal within the three months prior to making the complaint or as to the reasons for failing to do so should in most cases be capable of being contained within a short compass. It should not, as a matter of generality, occupy a significantly greater time than that required to investigate the time of posting a letter and when it was delivered. Furthermore, if an employer wants greater certainty, he can either make express provision in the contract, or tell the employer face to face, handing over a letter at the same time if the contract stipulates notice in writing. Large numbers of employees are not sacked on a whim. The employer knows when employees are going on leave and can make arrangements to ensure that they are notified beforehand. All the notices can be stated to expire on the same specified date. There is no prohibition on giving more than the prescribed minimum period of notice. Nor is it usually necessary to give a prescribed period of notice before a particular date, as it is with notices to quit. The rule established in the EAT from 1980 onwards has survived the replacement, by the Employment Rights Act 1996, of the legislation which applied in Brown and there have been several other Parliamentary opportunities to correct it should it be thought to have caused significant difficulty. It has not been confined to the interpretation of the effective date of termination for the purpose of Part X of the 1996 Act and has been applied in several different contexts. It was only in Gisda Cyf that the possibility was raised that the common law and statutory rules might be different. But it makes obvious sense for the same rule to apply to all notices given by employers to employees. Conclusion reasons: In my view the approach consistently taken by the EAT is correct, for several (1) The above survey of non employment cases does not suggest that the common law rule was as clear and universal as the Trust suggests. Receipt in some form or other was always required, and arguably by a person authorised to receive it. In all the cases there was, or should have been, someone at the address to receive the letter and pass it on to the addressee. Even when statute intervened in the shape of the Interpretation Act, the presumption of receipt at the address was rebuttable. There are also passages to the effect that the notice must have been communicated or come to the mind of the addressee, albeit with some exceptions. (2) The EAT has been consistent in its approach to notices given to employers since 1980. The EAT is an expert tribunal which must be taken to be familiar with employment practices, as well as the general merits in employment cases. (3) This particular contract was, of course, concluded when those cases were thought to represent the general law. (4) There is no reason to believe that that approach has caused any real difficulties in practice. For example, if large numbers of employees are being dismissed at the same time, the employer can arrange matters so that all the notices expire on the same day, even if they are received on different days. (5) If an employer does consider that this implied term would cause problems, it is always open to the employer to make express provision in the contract, both as to the methods of giving notice and as to the time at which such notices are (rebuttably or irrebuttably) deemed to be received. Statute lays down the minimum periods which must be given but not the methods. (6) For all the reasons given in Geys, it is very important for both the employer and the employee to know whether or not the employee still has a job. A great many things may depend upon it. This means that the employee needs to know whether and when he has been summarily dismissed or dismissed with immediate effect by a payment in lieu of notice (as was the case in Geys). This consideration is not quite as powerful in dismissals on notice, but the rule should be the same for both. I would therefore dismiss this appeal. It was only on 27 April 2011 that the letter came to the attention of Mrs Haywood and she had a reasonable opportunity of reading it. LADY BLACK: The foundation of the Trusts argument is that there is a common law rule that written notice of termination of a contract is given when the notice document is delivered to the recipients address, and that there is no need for the recipient to have sight of the document or the envelope containing it, or even to be present at the time. Mrs Haywood disputes that such a common law rule exists. In order to decide who is right, it is necessary to look in some detail at a line of old authorities on the giving of notice. Lord Briggs, like Lord Justice Lewison in the Court of Appeal, concludes from it that there has been, for over two centuries, a term generally implied by law into relationship contracts terminable on notice, that written notice is given when the relevant document is duly delivered by hand or post to the address of the recipient, irrespective of whether/when the recipient actually gets the notice. Lady Hale does not consider that the old authorities establish this proposition. I agree with Lady Hales judgment, and, in the light of the disagreement between her and Lord Briggs, merely wish to set out here, in a little more detail, the reasons why, in my view, the old line of authorities are not to the effect that the Trust suggests. I am indebted to Lady Hale and Lord Briggs for having introduced and analysed the authorities, albeit that their analyses differ, as I am able to build on what they have already said (see paras 13 and 14 of Lady Hales judgment, and paras 84 et seq of Lord Briggs judgment). In considering the authorities, I have found it helpful to keep in mind that there are different sorts of service, increasingly personal in nature. Putting a notice document into a post box might be said to be at one end of the spectrum. This is the point at which, where the postal rule applies, an acceptance of a contractual offer would take effect, for example. However, no one has contended in this case that notice could have been given at such an early stage. At the other end of the spectrum is the communication of the contents of the document to the mind of the recipient. In between, various possibilities exist, from which I would pick out service of the notice on an agent of the intended recipient who is authorised to receive such communications, and personal service. When I speak of personal service in this context, I mean, following what it seems to me is the practice of the older authorities, ensuring that the notice actually reaches the recipients hands. It is also helpful to keep in mind when approaching the authorities that presumptions feature prominently in them and that presumptions come in various guises too, the most obvious distinction being between the rebuttable presumption and the irrebuttable presumption. The starting point for an examination of the old authorities is Jones d Griffiths v Marsh (1791) 4 TR 464. This is the case in which a notice to quit was served on the tenants maidservant at the tenants house, the contents being explained to her at the time, but (as the report puts it) there was no evidence that it ever came to the defendants hands, except as above. The tenant argued that this was not sufficient for a notice to determine an interest in land, especially as the service had been at a house which was not the demised premises. The summary of the decision of Lord Kenyon CJ, and Buller J reads: Where the tenant of an estate holden by the year has a dwelling house at another place, the delivery of a notice to quit to his servant at the dwelling house is strong presumptive evidence that the master received the notice. In deciding that the tenant had been served with due notice to quit, Lord Kenyon and Buller J expressed their decisions in rather different ways. The reports of their judgments are so short that it is worth setting them out in full. Lord Kenyon said at p 465: This is different from the cases of personal process: but even in the case alluded to of service on the wife [of a declaration in ejectment], I do not know that it is confined to a service on her on the premises; I believe that if it be served on her in the house, it is sufficient. But in every case of the service of a notice, leaving it at the dwelling house of the party has always been deemed sufficient. So wherever the Legislature has enacted, that before a party shall be affected by any act, notice shall be given to him, and leaving that notice at his house is sufficient. So also in the case of an attorneys bill, or notice of a declaration being filed: and indeed in some instances of process, leaving it at the house is sufficient; as a subpoena out of the Court of Chancery, or a quo minus out of the Exchequer. In general, the difference is between process to bring the party into contempt, and a notice of this kind; the former of which only need be personally served on him. Buller J said at pp 465 466: Ex concessis personal service is not necessary in all cases. Then what were the facts of this case? It was proved that this notice was delivered to the tenants servant at the dwelling house of the tenant, and its contents were explained at the time; and that servant who was in the power of the defendant was not called to prove that she did not communicate the notice to her master; this was ample evidence, on which the jury would have presumed that the notice reached the tenant. Lord Briggs takes this case as a clear statement of already settled law to the effect that a notice left at the intended recipients dwelling house is valid from the point of delivery. He would reject the argument that this was a decision about service on the maidservant as the tenants agent, taking the view that the judgments turn on the leaving of the document at the house rather than it being given to anyone there. I do not share his confidence about this, but before explaining why, I will look at the whole line of authority up to and including the important case of Tanham v Nicholson (1872) LR 5 HL 561, because later cases shed light on the issue, in my view. Lady Hale says of the main authorities in this line that they could be seen as cases concerning service upon an agent authorised to accept it (para 14). I agree that that is a fair reading of them, although all is not perfectly clear and uniform, not least because the old reports are sparing in detail, and not all the cases address specifically the issues that are of interest to us, with our 21st century perspective. Although not cited to us, the next relevant case chronologically seems to me to be Doe d Buross v Lucas (1804) 5 Esp 153. The action was one of ejectment, to recover possession of premises. The brevity of the report makes it difficult to be sure of the precise facts. The tenant had died, leaving his widow as his executrix. The notice to quit was given by leaving it at the house where he had lived during his lifetime, but there was no evidence of it having come into his widows hands. It was argued that this was not a legal notice to quit, that service at the house where the tenant lived was never sufficient, and that there had to be delivery to the tenant, his wife or a servant, with (in the case of a servant) evidence that the notice came into the tenants hands. The plaintiff asserted, relying on Jones d Griffiths v Marsh, that the mere service of the notice at the house was sufficient. Rejecting the plaintiffs argument, the Lord Chief Justice, Lord Ellenborough, said: that case was different from this; in that case, the notice was delivered at the tenants dwelling house, and explained to the servant. The objection was then taken, that the servant was not called, who might have accounted for the notice, and stated whether it had been delivered or not; and that not being called, it was strong presumptive evidence, that her master had received the notice, and should be left to the jury: but here there was no such evidence offered. The tenant might be turned out of possession by a trick. From this, it seems that Lord Ellenborough considered that mere delivery at the house was not enough, and that he saw Jones v Marsh as a case of notice received by the tenant himself, because there had been no evidence to rebut the presumption that arose from the delivery of the notice to his servant. Next in time is Walter v Haynes (1824) Ry & Mood 149 which is one of the few examples we were given from outside the field of residential property. An action of assumpsit was brought upon a bill of exchange. A notice of dishonour had been posted in a letter addressed to Mr Haynes, Bristol. This was held not to be sufficient proof of notice. Setting out why, Lord Abbott CJ spoke in terms which made it plain that what was required was that the letter did in fact come into the hands of the person for whom it was intended. Normally, the post was sufficiently reliable for posting a letter to be tantamount to delivery into that persons hands, but the address on this communication was not sufficiently precise for that to be presumed. Lord Abbott said at pp 149 150: It is, therefore, always necessary, in the latter case [of a letter addressed generally to AB at a large town], to give some further evidence to shew that the letter did in fact come to the hands of the person for whom it was intended. I come then to Doe d Neville v Dunbar (1826) M & M 9. This was another notice to quit case. Two copies of the notice to quit were served at the defendants house, one on the servant and the other on a lady at the house. The defendant complained that this was not good enough. His argument can be gleaned from the following summary in the report at p 11: It was attempted to shew that both the lady and the servant on whom notices were served were dead; and it was argued that in that case, as the defendant would be unable to call them to prove that they did not communicate the notice to him by the [relevant date], according to the course suggested by Buller J in Jones d Griffiths v Marsh, 4 TR 464, and as the sufficiency of the notice was treated, both in that case and in Doe d Buross v Lucas, 5 Esp 153, and in Doe d Lord Bradford v Watkins, 7 East, 553, as depending on the presumption that it came to the tenants hands, there would be no sufficient evidence that it did so, to entitle the plaintiff to a verdict. An interesting feature of this passage is the assertion that the sufficiency of the notice in Jones d Griffiths v Marsh depended on the presumption that it came to the tenants hands. This is in line with Lord Ellenboroughs view of it in Buross v Lucas and, to my mind, might be taken to indicate that Jones d Griffiths v Marsh was not treated, in the 30 years or so after it was decided, to be clear and established authority that mere delivery at the address constituted notice. Lord Abbott CJ, had no doubt, however, that the notice in Neville v Dunbar was sufficient. The brevity of the report makes it difficult to gain a full understanding of the reasoning. It could be read as endorsing mere delivery to the house as sufficient (as Lord Briggs reads it), but the decision might equally have been based upon the proposition that service on the servant was sufficient whether or not the notice reached the master, or upon the proposition that service on the servant raised a presumption (not rebutted on the evidence) that the master had received the notice. In order to make sense of what Lord Abbott said, it is necessary to note that, immediately after the passage I have just quoted from the argument, there is the statement: The proof however failed as to the servant. It seems, therefore, that it was not established that the servant was in fact dead, from which it followed that the defendant could have called him or her to give evidence that he or she had not communicated the notice to him, but had not done so. In that context, Lord Abbott said: I have no doubt that the service of the notice was sufficient. The question does not arise here, for the servant might be called: but I have no doubt of the absolute sufficiency of the notice; were it to be held otherwise, a landlord would have no means of determining a tenancy, if his tenant happened to be absent from his house at the time when it was necessary to serve the notice. Doe d Lord Bradford v Watkins, the third of the three cases referred to in the argument in Neville v Dunbar, seems to have concerned a notice to quit served on one of two tenants holding under a joint demise of premises. It seems that it was left to the jury to determine whether the notice had reached the other defendant, but it is not easy to get a great deal of assistance from the report. Papillon v Brunton (1860) 5 H & N 518 is the next case requiring consideration. Lord Briggs takes the view that this makes it even clearer that the principle in play is not dependent upon personal delivery to an agent. It is the case in which a notice to quit was posted by the tenant to the landlords agents place of business, that is to say the landlords solicitors chambers. It should have arrived the same day, but the solicitor only found it when he went in the next day. It was held to be good notice on the day of posting. In attempting to arrive at a proper understanding of Papillon v Brunton, it must be noted that the trial judge had left it to the jury to say whether the letter arrived at the solicitors chambers on the day of posting or on the morning of the next day, and the jury found that it arrived on the day of posting after the solicitor left, and said that they thought he ought to have had somebody there to receive it. Pollock CBs judgment includes the following passage at p 521: we think that in the case of a notice to quit the putting it into the post office is sufficient, and that the party sending it is not responsible for its miscarriage. As this letter was posted in London between nine and ten oclock in the morning, the probability is that it arrived immediately after the agent left his chambers. Indeed it is possible that it may have arrived in the due course of post, but by some accident. was overlooked either not delivered by the servant to the clerk or in some way mislaid. Besides it did not appear that it was not delivered before seven oclock in the evening; and the jury considered that the agent ought to have had some one in his chambers at that time. A notice so sent must be considered as having reached the agent in due time, and the same consequences must result as if he had actually been there and received it. In my opinion the finding of the jury was right, and the notice was delivered at the agent's place of business in sufficient time to inform him, if he had been there, that the tenancy was to be determined at the time specified. For these reasons I think there ought to be no rule. Whilst this passage commences with a rather general observation, suggesting that mere posting of a notice is sufficient, that thought is not continued throughout the remainder of it. As the reasoning develops, it seems to turn, at least to some extent, not on the mere fact of the notice arriving at the agents chambers, but on the fact that it probably arrived on the day of posting and the solicitor ought to have had someone at the chambers to receive it. In highlighting the opportunity for the agent to have had the information had he arranged matters as he should have done, the approach bears some resemblance to the approach taken to termination of employment in the statutory context in cases such as Gisda Cyf, namely that the effective date of termination is when the employee reads the letter or has had a reasonable opportunity of reading it. Martin B simply concurred with Pollock CB, but Bramwell B and Wilde B provided short judgments agreeing there should be no rule. It is difficult to ascertain precisely what was of most importance to Bramwell B, although the jurys finding that the agent should have had someone at his chambers when the notice arrived had clearly impressed itself upon him. Wilde B said he took the same view as Bramwell B, and expressed himself in one further sentence, which might be supposed to encapsulate what had weighed particularly with him, and was as follows: The jury have found that the notice arrived at the agents place of business at a time when someone ought to have been there to receive it. So we come to the decision of the House of Lords in the Irish case of Tanham v Nicholson (1872), which I see as important. There is nothing to suggest that the fact that it was an Irish case makes any difference to the law applicable in relation to notices to quit, and the cases cited included familiar ones such as Jones d Griffiths v Marsh, Neville v Dunbar and Papillon v Brunton. The notice was delivered by hand to the tenants house where it was given to his daughter. It was sufficient to entitle the landlord to maintain ejectment against the father. Lord Briggs interprets the case as one about agency, rather than about service by post at the recipients home, but considers it to contain relevant dicta supporting the existence of a common law rule that delivery of an ordinary civil notice to the home of the intended recipient operates to transfer the risk to the recipient at that point, with the necessary corollary, I think, that it is at that point of physical delivery that the notice is given. I see the case rather differently. A little background is required as to the history of the case and the arguments being advanced by the parties. The trial judge had left to the jury the question, Whether, in fact, the notice to quit ever reached [the tenant], or became known to him? The jury found it did not. The judge considered that there had still been sufficient service in law and directed that a verdict be entered for the landlord. The matter proceeded through various levels of court to the House of Lords. The tenant conceded that he was living in the house where the notice was served and that the house was part of the demised premises, but he argued that to be sufficient, the notice had to be received by the tenant himself or by his duly appointed agent, which his daughter was not. The landlord argued that there was no rule that required personal service of a notice to sustain an ejectment and that service at the house was sufficient. In any event, said the landlord, the tenants daughter and sons were agents of the tenant and service on them was amply sufficient. Although all arriving at the same result, that there had been sufficient service of the notice, their Lordships differed in their reasoning. For the Lord Chancellor, Lord Hathersley, the solution lay in agency. He introduced the problem as follows (p 567): The sole question in the case is an extremely short one, and it is simply this, whether or not the delivery of a notice to quit on one who, undoubtedly, according to the evidence, was a servant of the tenant, at the house of the tenant, that house being on the demised property, is to be taken as a good and effectual service of that notice, so as to subject the person to whom it is addressed to the consequence of being ejected upon the termination of the notice. At p 568, in a passage which is worth quoting in full, he set out his view that if the servant is constituted an agent for receiving service of the document in question, service on the agent is service on the principal: I apprehend that the real point in the case, when you come to consider it, is this; not whether or not the person you have constituted your agent, by your line of conduct, to receive any document that may be left at your house, has performed that which is his or her duty, but whether or not you have constituted that person your agent. Because, if once you have constituted your servant your agent for the purpose of receiving such a notice, the question of fact as to whether that servant has performed his duty or not, is not one which is any longer in controversy. When once you constitute your servant your agent for that general purpose, service on that agent is service on you he represents you for that purpose he is your alter ego, and service upon him becomes an effective service upon yourself. So, said the Lord Chancellor, when the law has said in repeated cases that the effective service of notice on a servant at the dwelling house situated upon the demised property is a service upon the tenant, it has proceeded upon the basis that the law considers that servant to be an implied agent of the tenant for that particular purpose. The tenant could rebut that by showing that the agency was not correctly implied on the facts, but there could be no inquiry as to whether the agent did his duty by the tenant in dealing with the notice. Having brought [the notice] home to the agent of the person . you have brought it home to the tenant himself (p 571). By the conclusion of his speech, the Lord Chancellor had refined the case to one question, namely, whether this woman was an agent of the tenant or not. As she was an agent qualified to receive a notice, that was an end of it. Lord Westbury thought the law on the service of notices to quit to be in an unsatisfactory state. Lord Briggs has quoted (at para 91) what he said about the undue burden on a landlord deprived of the benefit of due service by things beyond his control. Lord Westbury noted the suggestion, which he said was to be found in the judgments given by some other Judges, that receipt of the notice by the tenants servant at his dwelling house was not absolutely sufficient, but only prima facie evidence of delivery to the master, rebuttable by evidence proving that the notice never reached him. He contrasted this with Jones d Griffiths v Marsh, where he said that Lord Kenyon CJ had laid down that in every case the service of a notice to quit by leaving it at the dwelling house of the tenant is sufficient, and with what Lord Abbott CJ had said (possibly in Neville v Dunbar, although Lord Westbury does not specify). Although it is possible to interpret Lord Westburys apparently approving reference to Lord Kenyon in Jones d Griffiths v Marsh as endorsing a principle that mere delivery at the tenants house was sufficient, I do not think that that interpretation withstands a reading of Lord Westburys speech as a whole. It will be recalled that in Jones d Griffiths v Marsh, the notice had not just been left at the premises, but had been served on the tenants maidservant, and this would have been in Lord Westburys mind. Apart from anything else, the employment of a domestic servant was commonplace in those days. Furthermore, it is noteworthy that Lord Westburys examples of the things that might unfairly deprive the landlord of the benefit of service commence with the wilful act of the servant or the servants incapacity, although they do of course include also any accident that might befall the notice after it has been received in the dwelling house of the tenant. When Lord Westbury spoke of the uncertainty and doubt that had come into the law (see the passage quoted at para 93 of Lord Briggs judgment), I do not think that he was complaining that there had been a principle (whether or not derived from Lord Kenyon) that mere physical delivery to the tenants address was sufficient, which had now been put in doubt. I think what he had in mind was what he saw as a clash between, on the one hand, Lord Kenyon and Lord Abbott, who considered service on the tenants servant was conclusively sufficient, and, on the other, some other Judges who held that it simply gave rise to a rebuttable presumption that the notice had been served. It is noteworthy that, having expressed the hope that the uncertainty and doubt could be cleared up, he did not then return to Jones d Griffiths v Marsh and declare the principle to be that mere delivery to the premises was enough, even though that would have been a simple way through on the facts of the case, the notice undoubtedly having arrived at the tenants address. Instead, he went on to consider what was to be made of receipt by a servant. Even then, he did not go so far as to say that delivery to the tenants servant would be conclusively sufficient. What he in fact went on to do, in the very next paragraph following his lament about the uncertainty, was to deal with the case on the assumption that delivery to the servant was only prima facie evidence of delivery to the master (the lower ground, see p 574). He found there to be no evidence to contradict this prima facie evidence and, indeed, all the evidence pointed to the father having knowledge of the notice. The jurys conclusion that the father did not know was so utterly unwarranted by the facts, in Lord Westburys view, that it ought not to have prevented judgment being entered for the landlord. Accordingly, he did not need to resolve the clash of authority between Lord Kenyon and some other Judges, if clash it was. Lord Westbury introduced his final paragraph with the view that the matter is left, by certain expressions used in former decisions, in a state of some embarrassment. Whilst he expressed the hope that the judgment in the case may tend to relieve cases of this kind in future, I do not think that his own speech provided any such relief, as he then summarised his conclusion in terms which left open whether or not delivery to the servant was conclusive or merely gave rise to a rebuttable presumption, saying: if it were open to contradiction, on the ground that it might be proved that the tenant had no knowledge of the notice, that proof has not been given, but the contrary conclusion has been in fact established. (Emphasis supplied) No relief came from Lord Colonsay either. His speech revolves around agency. He began it by observing (p 576) that, [i]t is held in law that notice given to the servant of the party residing in the house is a service of notice on the master. He then went on to consider whether evidence had been adduced to rebut that rule or presumption of law, if the question was in a condition in which it could be rebutted. He found no circumstances sufficient to rebut the legal inference that the person to whom the notice was given, standing to the party in the relation of servant, was not a legal agent to receive that notice (sic, but I think the not is an error). He too concluded that the judge was right to hold the notice was sufficient. Two features of Tanham v Nicholson strike me as particularly significant. First, none of their Lordships resolved the case by the simple route of holding that delivery of the document at the tenants address was sufficient notice, even though that seems to have been argued by the landlord. There was no dispute about the arrival of the notice at the premises, so that solution would have been open to them if delivery was all that was required and, if they had thought Jones d Griffiths v Marsh was properly to be interpreted in that way, they could have drawn support from what Lord Kenyon said there. But instead of taking that approach, each looked at the implications of delivering the notice to the daughter. The Lord Chancellor was satisfied that that was service on the tenant, because service on his agent was tantamount to service on him. Lord Westbury and Lord Colonsay were perhaps more generous to the tenant, allowing for the possibility that service on the servant gave rise only to a rebuttable presumption of service on the tenant. None of the speeches provides support for the proposition that agency is simply irrelevant in connection with a service of a notice. Secondly, it is clear from the speeches that the law on the service of notices to quit was thought to be in a rather unsatisfactory state, a state which gave rise to different reasoning from each of their Lordships. This is hardly a promising foundation for a submission that the common law has long been settled in relation to the requirements for service of a notice and requires only that it be duly delivered to the home of the intended recipient. I need only refer to one further Victorian case, and then only for completeness. This is the decision of the Court of Appeal in Hogg v Brooks (1885) 15 QBD 256. A lease of a shop contained a provision for the landlord to terminate the demise by delivering written notice to the tenant or his assigns. The lessee mortgaged the premises by way of underlease and disappeared. Written notice to determine the tenancy was sent to him at his last known address but returned without having reached him and he could not be found. Notice was also given to the mortgagee and the occupier of the premises. The Court of Appeal held that the landlord was not entitled to recover possession of the premises. The termination clause in the lease had to be construed according to the ordinary meaning of the English language. There were no assigns of the tenant, so notice could only be given by serving it on the tenant himself and it had not been served on him. I need not add to what Lady Hale has said about the other non employment cases upon which the Trust relies (commencing at para 15 of her judgment). I share her view of them and of what is said in the employment cases about the common law position. In short, I do not think that it has been shown that there is a clear and long standing common law rule that service of what Lord Briggs describes as an ordinary civil notice occurs when the notice is delivered to the recipients address. In so far as any clear principle emerges at all from the older cases, it seems to me, particularly in the light of Tanham v Nicholson, to revolve around delivery to the recipients agent, who might be the recipients household servant, professional agent, or (in certain circumstances, such as those in Tanham v Nicholson) family member. In each case, the agent appears to have been someone who, as part of their role, would be expected to take in communications of the type concerned for the intended recipient. For the purposes of service, the agent was (to quote the Lord Chancellor in Tanham v Nicholson, in the passage set out at para 64 above) the alter ego of the intended recipient so that, as he said, service on that agent is service on you. What the courts might have said had they been called upon to consider the same questions in the modern world in which there are no longer domestic servants, is unknown, and irrelevant. For present purposes, what matters is that the clear common law rule for which the Trust contends does not, in my view, emerge from the old cases. My unease about the suggested general common law rule is compounded by the concentration within a narrow field of the cases upon which the Trust relies. It may be that a great deal of research has been done into other areas with no relevant result, and we have been spared the trouble of trawling through the underlying material. However, I would have been interested to know, for example, what the position is, and was before the Partnership Act 1890, about the service of notices terminating a partnership, and to have seen some other examples drawn from contractual situations other than notices relating to property. As Lord Briggs says, relationship contracts come in many varieties. Absent a common law rule of the type for which the Trust contends, I see no reason for a term to that effect to be implied into an employment contract. Indeed, as Lady Hale explains, there is every reason why the term implied into an employment contract should reflect the position consistently taken by the EAT from 1980 onwards. LORD BRIGGS: (dissenting) (with whom Lord Lloyd Jones agrees) I would have allowed this appeal. The question is whether the term which must be implied into a contract of employment terminable on notice so as to identify, where necessary, the time of the giving of postal notice of termination, is that notice is given at the time when the document is duly delivered to the employees home address, or at some later time, such as the time when it actually comes to the attention of the employee, or when the employee has had a reasonable opportunity to read it. The question arises in this case in relation to termination on notice, by which I mean termination by a document which brings the relationship to an end at a specified date in the future, rather than immediately or, to use the jargon of the law of employment contracts, summarily. The essence of termination on notice is that there is a period, usually called the notice period, between the giving of the document, also confusingly called the notice, and its taking effect. The precise identification of the time when notice is given is not invariably, or even usually, necessary in order to determine when the employment actually terminated. This will usually be the time (almost always the date) specified in the document. But sometimes a notice is expressed to take effect a specified number of days or weeks after it is given, so that the date of its giving is a vital element in determining the date of termination. Sometimes notice is given for a specified date, but with only the contractual (or statutory) minimum notice period allowed before it takes effect, and issues then arise as to whether notice was given in sufficient time before it is expressed to take effect. The notice in the present case was an amalgam of both those types, because it was expressed both to give a specific period of notice (12 weeks), and to take effect upon a specified day in the future (15 July 2011). The question is not whether any term as to the time of the giving of notice should be implied, but rather what that term is. It is common ground that the term is one which the law implies into a whole class of contract, rather than one which is context specific. Nor is the question what that term should be. The task of this court is not to fashion, for the first time, a new implied term to fit a new situation, with a free rein to choose between available alternatives on modern policy grounds. Rather it is to examine the common law authorities to find out what that implied term already is. Contracts of employment determinable on notice have been around for hundreds of years, and there must be many millions extant in the common law world at this moment which must be taken to have had such an implied term embedded in them from the moment when they were made. The use of the post to give such notice has been an accepted method for well over a century, even if recent advances in information technology may well mean that it has only a few more years of useful life. It has not been suggested that any recent changes in the modes or efficiency of the postal service call for some revision of the implied term, by comparison with the term which the law has implied since Victorian times. Contracts of employment are only a sub species of a much larger group of what may be described as relationship contracts terminable on notice. They include contracts between landlord and tenant, licensor and licensee, contracts of partnership, service contracts not constituting employment, and many kinds of business contract such as commercial agencies, distributorship agreements and franchises. In most of them there will be provision for termination on notice, which permits notice by post to a partys home or business address, and the need to be able, when the occasion requires, to ascertain the time when notice is given calls for the law to imply a term for that purpose. Nor do the particular facts of this case call for an anxious re examination or development of the previous law, even though the financial consequences for the parties are, because of an unusual fact (the approach of the pension threshold on the employees 50th birthday), large indeed. The essential (and sufficient) facts which give rise to the question before the court are only that the letter containing the notice was only duly delivered on the last available day (from the employers perspective) but the employee was not at home until the following day. Absence of the recipient from home (or from the office) on the day of delivery is a common feature of the cases in which this question has already been addressed. In my judgment there has been for over two centuries a term generally implied by law into relationship contracts terminable on notice, namely that written notice of termination is given when the document containing it is duly delivered, by hand or by post, to the home (or, if appropriate, business) address of the intended recipient, rather than, if later, when it actually comes to the recipients attention, or when the recipient, absent at the time of delivery, has returned home and has had a reasonable opportunity to read it. That term is clearly identified by the common law authorities as the correct one. Although there has been a different approach taken to the identification of the effective date of termination of employment for statutory purposes connected mainly with the running of time for bringing proceedings for unfair dismissal, contracts of employment are not otherwise an exception to the legal principle applicable generally to relationship contracts, as the courts dealing with the statutory question have been at pains to emphasise. True it is that many of the old cases in which the common law rule has been laid down have concerned the landlord and tenant relationship, but the reasoning in those cases is not specific to that relationship. Nor are the consequences of the loss of a home or place of business necessarily of a lesser order than those following from the loss of a job. I would add that there are in my view sound reasons of policy why the implied term should be as I have described, to some of which I will refer in due course. But these do not amount even collectively to a ground for my conclusion, save in the negative sense that the existing law is not so defective in policy terms that it needs now to be changed. Rather, my conclusion is based simply upon an analysis of what the reported cases show that the law already is on this question. My analysis accords closely with the reasoning to be found in the dissenting judgment of Lewison LJ in the Court of Appeal. I gratefully adopt Lady Hales summary of the facts. Although the date upon which the termination notice was duly delivered was postponed because of the absence of anyone at Mrs Haywoods home to sign for recorded delivery, the helpful intervention of Mr Crabtree in going to the sorting office and collecting it meant that, for present purposes, it was duly delivered on 26 April, just in time for it to expire before Mrs Haywoods 50th birthday if giving notice is effective at the time of due delivery. But Mrs Haywood did not return home from her holiday abroad until the following morning, so it did not come to her attention until then, nor did she have a reasonable opportunity of reading it before her return. The Common Law Cases on Notices I am also content largely to follow my Ladys summary of the authorities, although I will need to say a little more about the reasoning in some of them. The earliest is Jones d Griffiths v Marsh (1791) 100 ER 1121. The issue in that case was as to the validity of service of a notice to quit premises let to a tenant on a periodic tenancy. The notice was hand delivered to the tenants home (not the premises demised by the lease) and given to the tenants servant, with an explanation of its contents. Lady Hale has cited the relevant dictum of Kenyon CJ: in every case of the service of a notice, leaving it at the dwelling house of the party has always been deemed sufficient. The context shows that he was speaking in the widest possible terms, about the services of notices generally, rather than just about notice to quit. He gave, as examples, notices of any kind required to be served by statute, service of an attorneys bill, service of a declaration, service of legal process and even service of a sub poena. The only exception was what we would now call a penal notice, where non compliance might expose the recipient to imprisonment for contempt of court, which required personal service. That was not a case about timing, because there was no evidence that the notice to quit ever reached the tenant himself, although Buller J was prepared to infer that it had done. Nonetheless it is inherent in a conclusion that the notice was valid upon due delivery to the tenants home that it was given then, and not at the time when it might have come to the tenants attention. It is to be noted that Kenyon CJ was not purporting to decide the point for the first time. He took it to be settled law, of the widest application to notices required to be served. I would not agree with the submission for Mrs Haywood that the case was one about service upon an agent of the tenant, although it was given to a servant. The judgments make no mention of agency, and service was said to be effected by leaving the notice at the tenants house, rather than by giving it to anyone. In 1791 it may be doubted whether houses generally had letter boxes, so there may have been no alternative than to knock on the door and give the notice to someone. The very short report of Doe d Buross v Lucas (1804) 5 esp 153 does seem to suggest a different analysis from that laid down by Kenyon CJ in Griffiths v Marsh, for the reasons set out by Lady Black in her judgment. But it is important to bear in mind that in that case the tenant had died before the notice to quit was given, and the tenancy had by then become vested in the deceased tenants widow. The report does not indicate whether she was living at the property when the notice was served. I would for my part be reluctant to treat the common law rule as validating the giving of notice by delivery only to the home of a deceased former tenant. With respect to Lady Black I do not consider that Walter v Haynes (1824) Ry & M 149 is of any real assistance. That was a case in which the plaintiff sought to prove service of a notice of dishonour of a bill of exchange by evidence only that she had posted it, addressed to Mr Haynes, Bristol. It was rejected as sufficient evidence because Bristol was a large town, which might contain any number of residents by the name of Haynes. It is true that Abbott CJ used language about proving that the notice had come into the hands of the intended recipient, but this was not a case about the distinction between delivery to the persons home, and personal delivery into his hands. On the contrary, had there been a sufficiently detailed address on the letter, so that it appeared to be directed to his home, proof of posting would have been sufficient. Doe d Neville v Dunbar (1826) Moot M 9; 173 ER 1062 is the earliest case cited to us about the timing of service, again of a notice to quit. The relevant lease required two quarters notice to quit. Notice to quit on the September quarter day needed to be given by 25 March. Two copies were hand delivered to the tenants home (again, not the demised premises) on 22 March by the landlords attorney and given to a servant and an otherwise unidentified lady there. But the attorney was told that the tenant was absent and would not return home until 26 March. Nonetheless the notice was held to have been given in good time. This case has an interesting similarity with the present case, since Mrs Haywood had informed the Trust that she was going abroad for a holiday, and was still away when the termination letter was duly delivered. The very short judgment of Abbott CJ, following the Griffiths v Marsh case, included the dictum: were it otherwise, a landlord would have no means of determining a tenancy, if his tenant happened to be absent from his house at the time when it was necessary to serve the notice. Again, there is no indication that the court was treating this as a case of personal service upon an agent of the tenant. The emphasis is all on delivery to the home of the person to be served. The underlying theme of the judgment is to recognise that where a contract is terminable by a period of notice, it must be interpreted in a way which makes it possible for the person seeking to terminate to give that notice at the appropriate time, even if the other party is absent. Lady Black notes in her judgment that both counsel and the judge referred to a presumption of due delivery where the recipients agent is given the notice, and is not called to prove that she did not inform her master in good time. But it is hard to see how such a presumption could have operated to save the notice in that case, because the landlords attorney was told that the tenant was away and would not be returning until the day after the last available date for service. In the absence of telephones, it is hard to see how the tenant could have been informed in good time. However that may be, I consider that Abbott CJ was seeking to make it clear that, regardless of any such presumption, notice was duly given, by being delivered to the tenants house in good time. Papillon v Brunton (1860) 5 H & N 518; 157 ER 1285 makes it even clearer that the principle is not dependent upon personal delivery to an agent. It is also the earliest case about postal service. Again, service of the notice to quit had to be given by the tenant by the March quarter day, and it was proved that it had been duly delivered by post to the landlords agents business premises late on that day, between six and seven oclock in the evening, after the agent had left for the day. It only came to his attention on the following morning. Pollock CB said that the notice was duly delivered on the quarter day. He said: the notice was delivered at the agents place of business in sufficient time to inform him, if he had been there, that the tenancy was to be determined at the time specified. It is implicit in that finding that it was not necessary for the notice actually to have come to the agents attention on that day, or for him to have been at the address at all on the date of due delivery. In one sense this is a case about service on an agent, but the ratio is that timely service at the business address of the agent is sufficient, regardless whether it comes to the attention of the agent in good time. The case is therefore on all fours with those described above, save that it related to business premises rather than to the home of the person to be served. Furthermore Pollock CB said (during argument) that leaving a notice at the landlords dwelling while he was away abroad would have been good and therefore timely service. Baron Bramwell said that: if a person tells others that a particular place is his place of business where all communications will reach him, he has no right to impose on them the obligation of finding out whether he sleeps at his place of business or elsewhere. I doubt whether, in the absence of any express limitation by the agent, it is necessary that the notice should be given within the hours of business. The message to be taken from that observation, (with which Baron Martin agreed) coupled with Baron Pollocks observation during argument is that, if a person nominates an address (home or business) for delivery of notices under a contract, without limiting the time when a notice may be delivered there, they take the risk that it arrives when they (or their agent) are not actually there. That which is true about the time of day is in my judgment equally applicable to any longer period of time. For as long as the intended recipient holds out an address as the place to which to deliver a notice, then that person takes the risk that, at the time of delivery, there will be no one there to read it. Applied to the present case, Mrs Haywood knew that she planned to be away from home on a holiday at a time when her employers might wish to terminate her employment by notice. She could have supplied them with an alternative means (or place) of delivery of notice to her while away, such as the address of her hotel or her email address, but she did not. Her notice period was a long one, and it is not therefore at all surprising that she did not do so, and certainly not a matter for criticism. However long her holiday, she would be back home to read her incoming mail long before her employment actually ended. But her address remained the place at which such a notice could be delivered, even if she might not be there to receive it. The question reached the House of Lords in Tanham v Nicholson (1872) LR 5 HL 561 on an Irish appeal. It was about personal service of a landlords notice to quit upon an agent of the tenant at the tenants home, which formed part of the demised premises. The agent then destroyed it, so that the tenant never received it. It was therefore a case about agency, rather than merely service by post at the recipients home. Nonetheless there are some relevant dicta. Lord Westbury said: If the landlord has once done that which the law throws upon him the obligation to do, his rights consequent upon having performed that legal duty ought not to be affected in any manner whatever by that which is done by his antagonist, upon whom the notice has been served. It would be an idle thing to say that a landlord serving a notice in due manner according to law, is to be deprived of the benefit of what he has done by the wilful act of the servant of the tenant, or by the incapacity of that servant, or by any accident that may befall the notice after it has been received in the dwelling house of the tenant on whom it was served. (my emphasis) Later, commenting on the Jones v Marsh case, he continued: Lord Kenyon lays it down as beyond the possibility of dispute that in every case the service of a notice by leaving it at the dwelling house of the tenant has always been deemed sufficient. But he qualifies that by explaining that he speaks of notices affecting property, as notices to quit, and not those notices which are intended to bring an individual within personal contempt. Those may require personal service. The other, the ordinary civil notice (if I may so call it) is abundantly satisfied if it be left at the dwelling house of the party. Again, the generality of this dictum, as applicable to the ordinary civil notice is significant. It is apparent that neither Kenyon CJ nor Lord Westbury were confining their analysis to landlord and tenant cases. In their view, every kind of notice not requiring personal service such as contempt proceedings, falls within the principle that due delivery to the recipients home is sufficient. I have no doubt that they would have regarded a notice to terminate an employment as an ordinary civil notice. Lord Westbury concluded: I shall be glad, therefore, if we can relieve the law from a degree of uncertainty and doubt brought into it, contrary to all principle, and if we can, in justice to the landlord, relieve him from having an act done by him, which act satisfies the obligation of the law, nullified and rendered of no effect by circumstances which have happened altogether after the delivery of his notice, and in the house of the tenant or under the control of the tenant, with which the landlord has no concern whatever. In my judgment these dicta reinforce what appears from the earlier cases, namely that from the moment when an ordinary civil notice is duly delivered to the home (or office) of the intended recipient, the law allocates the risk of mishap thereafter to the recipient. Those risks include destruction of the notice before it comes to the attention of the recipient, but also the risk (exemplified by the Neville v Dunbar and Papillon v Brunton cases) that it will not come to the attention of the intended recipient until after the due date for service because he or she is away from home. This is because the obligation on a person to give such a notice must be one which can be effectively discharged by taking steps available to that person, without the effectiveness of those steps being undermined by matters within the control of the intended recipient. A recurrent theme in the speeches of both the Lord Chancellor and Lord Westbury is that, to the extent that the dicta originating with Buller J in Jones v Marsh and Lord Ellenborough in Buross v Lucas might suggest that delivery to the recipients home or agent might only raise a rebuttable presumption of due delivery, they were wrong. In respectful disagreement with Lady Black, I do not read their concentration upon agency, or any part of what Lord Westbury said about what he called the lower ground to represent a stepping back from their firm adherence to what Kenyon CJ said in Jones v Marsh, or what Abbott CJ said in Neville v Dunbar as representing the high ground of principle which they sought trenchantly to affirm. They focussed upon agency, and upon the lower ground only because that was the way in which the case had mainly been argued. I agree that with Lady Black that Lord Colonsay appears to have confined himself to the lower ground. Lady Black refers to Hogg v Brooks (1885) 15 QBD 256. The case may have turned upon an unusually drafted break clause in a lease. In any event none of the authorities cited to us are referred to in the brief judgment of Brett MR. His conclusion appears to have been that, for as long as the tenant remained untraceable, the break clause in the lease simply could not be activated at all. I venture to doubt whether that very uncommercial result, derived from a literalist reading of the clause, so as to exclude service either upon the demised premises, or upon the last known residence of the tenant, would be followed today. I agree with Lady Hale that Stidolph v American School in London Educational Trust Ltd [1969] 2 P & CR 802 is not of decisive force, because it was not suggested that the intended recipient was not at home when the relevant statutory notice arrived by post. But I do not regard the fact that, in that and other cases, the requisite formalities for giving notice are statutory, means that the cases can be ignored. In every case the question is: what duty or obligation by way of service or delivery is imposed upon the person required to give notice? Once that duty has been performed, matters which then affect the question whether or when the notice actually comes to the attention of the intended recipient are for the risk of the recipient. In the present case Mrs Haywood does not suggest that postal delivery to her home was not a permitted method of giving notice of termination. The Brimnes, Tenax Steamship Co Ltd v The Brimnes (Owners) [1975] 1 QB 929, CA was a case about the summary termination, by telex, of a charterparty by the owner upon breach by the charterer. It was not about termination on notice. The dicta cited by Lady Hale recognise the impracticability in that context of an implied term that the communication of termination be timed to take effect only upon the telex actually being read, or coming to the attention of a responsible employee. Beyond that the case offers little assistance. In my judgment the Trust was right to place emphasis in its submissions upon the wide range of statutory provisions which appear to be formulated upon an assumption that service of what may loosely be described as ordinary civil notices is completed upon delivery to the intended recipients address, regardless when, or even whether, the contents thereafter come to the attention of the recipient. They include section 7 of the Interpretation Act 1978, section 196 of the Law of Property Act 1925, section 1147 of the Companies Act 2006, section 29 of the Misuse of Drugs Act 1971, section 267 of the Public Health Act 1875 and Part 6 of the Civil Procedure Rules. All of them provide for the service or giving of notices by post to the intended recipients address. None of them require the notices to be brought to the attention of the recipient, or postpone the effective date of service or delivery until an absent intended recipient has returned home. Some of them provide for a rebuttable presumption that the notice is deemed to be delivered on a specified date after posting, but the presumption is as to the date of due delivery (sometimes described as receipt), not the date when the notice comes to the attention of the intended recipient. That is why, in the Stidolph case, Edmund Davies LJ said that the relevant statutory presumption of due receipt would be undermined if the recipient could, while admitting receipt, still challenge the notice on the basis that its contents had not actually come to his attention. To much the same effect is the dictum of Carnwath LJ in Wilderbrook Ltd v Olowu [2005] EWCA Civ 1361; [2006] 2 P & CR 4, cited by Lady Hale. While I agree that cases about statutory provisions for service of notices by post do not directly impinge upon the construction of an employment contract to which no such provision applies, they are of such wide application to ordinary civil notices that they can fairly be said to reflect settled common law, from the earlier cases which I have described, to the effect that if postal or other delivery to the recipients home is an authorised method of giving notice, it is achieved once the notice is actually delivered, regardless of whether the intended recipient is actually at home, and regardless of what may thereafter happen to it when it gets there, such as being burned by an agent or eaten by the dog. Like Lewison LJ, and in respectful disagreement with Arden LJ, I do not read Freetown Ltd v Assethold Ltd [2012] EWCA Civ 1657; [2013] 1 WLR 701 as an authority to the contrary. At para 37, Rix LJ speaks of the common law as requiring proof of receipt, whereas the Interpretation Act deemed receipt from proof of posting. But he did not thereby mean that the common law required it to be shown that the document had actually come to the attention of the recipient, merely that it had been duly delivered at the recipients address. This is apparent from his description of the facts, at para 3. It was a case where the answer to the question whether a statutory appeal had been issued in time turned upon the time lag between when it was posted and when it arrived, not between when it arrived and when its contents first came to a persons attention. The essential difference between my analysis of the common law cases and that of Lady Hale and Lady Black is that they treat them all as at least consistent with the theory that delivery to an agent is as good as delivery to the principal, in the eyes of the law. I agree that this theory is capable of being identified as one of the strands by which those cases where delivery was made on time to an agent of the intended recipient at the principals home can be analysed. But it does not address the cases, such as Papillon v Brunton, where there was no one at the specified (business) address at the relevant time. Furthermore, if the underlying principle is that delivery is complete only when there is actual communication to the intended recipient or a reasonable opportunity to read the contents of the notice, the agency theory fails to explain those cases, such as Neville v Dunbar, where the agent could not possibly have communicated the contents of the notice to the intended recipient in sufficient time, or those where, on the facts found, there was no such communication, such as Tanham v Nicholson. The agency theory is simply not supportive of the supposed principle. Rather, it supports the concept of the allocation of risk, where delivery either to the address supplied by the intended recipient, or to the recipients agent, transfers to the recipient the risk as to the consequences which then ensue, including the consequences of any delay before it reaches the hands of the recipient. Nor does the theory that the agency analysis was what mattered address the trenchant wording of the senior judges, which constantly asserts that delivery to the relevant home or business address is sufficient. In days when homes were (at least among the moneyed classes who could afford to litigate) usually staffed even where their resident owners were away, there may not have appeared to be much practical difference between the transfer of risk when the notice was delivered to the intended recipients home (or business) address, and when it was put into the hands of an agent. But the leading judgments are careful to state that either will do, and the typical modern case where a home address is empty when the owner is away makes the delivery to the address alternative more important than it may once have been. The Employment Cases Turning to cases about employment there is, as Lady Hale observes, very little about the common law as to termination on notice. There is however a significant amount of authority about the requirements for summary termination. In my judgment, they say almost nothing about the requirements for termination on notice. Summary termination means that the employment relationship comes to an abrupt end, with immediate consequences including but not limited to the running of a short limitation period for the bringing of unfair dismissal proceedings. It is an exceptional process, whereas termination on notice is the normal agreed way in which (subject to statutory consequences about unfairness or discrimination) the contract may be terminated, usually by either side. Summary termination may be a right conferred upon the employer by express contractual term, in specified circumstances usually involving serious breach of contract by the employee. It may just consist of the acceptance by one party of a repudiatory breach by the other as putting an immediate end to the contract. It is therefore no surprise to find dicta in some (although not all) of the authorities on summary termination (usually called dismissal) to the effect that actual communication to the employee is necessary. By contrast termination on notice always involves a period thereafter while the employment relationship continues. That period may be short or long, but will usually include sufficient time for a delay between the date of delivery of the notice and the date when it comes to the attention of the employee to be accommodated, so that the employee still knows about the termination well before it happens, even if that period may be shorter than the full contractual or statutory notice period. The rules which the common law has developed over centuries about the giving of ordinary civil notices represent a compromise between the reasonable need for the givers of the notice to be able to exercise the right triggered by the notice, at a time of their choosing, without being hindered by uncertainties about what happens to the document containing the notice after they have parted with it, and the need of the recipients to receive the contents of the notice at a place where it is likely to come to their attention within a reasonable time. Thus the common law has not (as it did in relation to acceptance of a contractual offer) treated mere posting as sufficient. Although posting raises a presumption of due delivery, it remains open to the intended recipient to prove that the notice document never arrived. Due delivery to the recipients home (or office) marks the point where the risk of mishap passes from the sender to the recipient. There is no reason why the law should automatically apply this time honoured compromise to the more draconian and immediate process of summary termination. Nor by the same token is there any basis to read the cases about summary termination as saying anything about the requirements for valid termination on notice. Brown v Southall & Knight [1980] ICR 617 was a case about summary dismissal. The question was whether the date of delivery of the letter summarily dismissing the employee was the effective date of termination for statutory purposes connected with the period of his continuous employment, or the slightly later date when the employee returned home and read it. None of the cases about the requirements of a notice were cited to the EAT. This is hardly surprising, because it was simply not a case about termination on notice. Had it been, the time lag between delivery and reading the notice would not have mattered, because neither event would have terminated the employment there and then. The passage in the judgment of Slynn J cited by Lady Hale confines his analysis to summary termination in express terms. He says: In our judgment, the employer who sends a letter terminating a mans employment summarily must show that the employee has actually read the letter The next in time is London Transport Executive v Clarke [1981] ICR 355, which was about the requirements for the effective communication by the employer of its election to treat a repudiatory breach by the employee as having terminated the contract; ie summary termination. This was held to have been achieved on the date when a letter to that effect was delivered by post to the employees home address, even though he was not at home. The employee, who had been abroad without leave, returned home and read the letter about three weeks later. It is fair comment that the date issue was not critical to the outcome, but the Court of Appeal appear to have regarded it as axiomatic that the communication of the acceptance of the repudiation was effectively achieved by, and at the time of, the delivery of the letter to the employees home when he was not there. The Brown case was cited, but not referred to in the judgments. The EAT applied a slightly more nuanced approach to the requirements for communication of summary termination in Hindle Gears v McGinty [1985] ICR 111, which was a case about the attempted summary dismissal of an entire group of striking workers, by letters to all their homes. Two workers decided to return to work before the letters arrived, so they had no opportunity to read them before they arrived for work. The question was whether they had been dismissed and then re engaged on arrival at work, or not dismissed before they resumed work. Following and developing the decision in the Brown case, Waite J said that the requirement in a summary termination case for the communication of the dismissal to the employee meant that the letter had either to have been read by the employee, or that the employee had had a reasonable opportunity to read it. Again, it was not a case about termination by notice, and none of the cases about the requisites of an ordinary civil notice were, or needed to be, cited. McMaster v Manchester Airport plc [1998] IRLR 112 was also a case about summary dismissal. That much was common ground. It is true that the requirement for communication to the employee, for the purpose of determining the effective date of communication, was treated as applying both to summary dismissal and dismissal on notice, but this was again common ground. The only case referred to in the judgment was Brown v Southall & Knight. The report does not show whether any other cases were cited, but it looks most unlikely (bearing in mind the common ground) that the cases on the requirements of an ordinary civil notice were cited. The dictum of Morison J (at para 9) that constructive or presumed knowledge has no place in private rights under employment contracts may be right or wrong, but it has nothing to do with the requirements of a valid notice. Validity upon due delivery does not depend on any kind of knowledge on the part of the intended recipient. It is simply a good notice upon due delivery, just as is a posted acceptance of an offer, even if never delivered or received. Edwards v Surrey Police [1999] IRLR 456 was not (save in a statutory sense about constructive unfair dismissal) about a dismissal at all. Rather, it was about summary resignation. The issue was whether the employees employment had an effective date of termination when she decided to resign and wrote a letter to her employer saying so, (as had been held at first instance), or when the letter of resignation reached the employer (as the EAT held). There neither was, nor needed to be, consideration of the requirements of a valid notice, as between the due delivery and the reading of the letter. On either basis, the effective date was within the period for the bringing of her claim for constructive unfair dismissal. The next case, George v Luton Borough Council (2003) EAT/0311/03 is also about summary termination by resignation. The employee gave notice by letter dated 30 July 2002 that she was resigning with effect from 31 July, complaining of constructive dismissal. It reached the offices of the employer on 1 August, but was not read by anyone in authority there until 2 August. She commenced proceedings for constructive unfair dismissal only on 1 November. The EAT held that the letter was to be construed as an acceptance of repudiation by the employer, not as a 28 day contractual notice of termination. The case offers no assistance therefore on the question as to the requirements or effective date of a notice of termination. The Brown, McMaster and Edwards cases were all cited, and it was accepted that summary termination by the employer required communication to the employee. But the EAT held that a summary resignation letter from the employee took effect upon delivery to a corporate employer, rather than upon its being read by someone in authority. None of the cases about ordinary civil notices were cited, or relevant. Potter v RJ Temple plc (2003) UKEAT/0478/03 was yet another case about an employees acceptance of repudiation by the employer as putting an immediate end to the contract. The acceptance was faxed to the employer, and arrived at 8.21 pm on 13 September 2002, but was read only on the following day at the earliest. The employees application for constructive unfair dismissal was out of time if the faxed letter took effect upon due delivery. Although it was not a case about termination by notice, both the facts and the outcome bear a real similarity with Papillon v Brunton, although neither that case or any of the others on ordinary civil notices were cited. HHJ Richardson took it as read that termination by the acceptance of a repudiation needed to be communicated, but concluded that the need for certainty as to the effective date of termination for statutory purposes meant that communication should be taken to be achieved upon due delivery of the letter, rather than upon its being read, even though the letter arrived after office hours. The developing jurisprudence in the EAT about the effective date of termination by an employer was approved in the Court of Appeal by majority and by this court unanimously in Gisda Cyf v Barratt [2009] ICR 1408 and [2010] 4 All ER 851. It was again a case about summary dismissal rather than dismissal on notice. Once effective, it brought about the immediate termination of the contract. The dismissal followed disciplinary proceedings against the employee. The letter was posted on 29 November 2006, delivered to the employees home, while she was away visiting a relative, on 30 November, and read by her on the day after her return, on 4 December. The timeliness of her subsequent proceedings for unfair dismissal depended upon the effective date of termination being on or after 2 December. It was held that the effective date of termination was 4 December, when the employee read the letter. Both the majority in the Court of Appeal and this court were at pains to limit their reasoning to the statutory meaning of the effective date of termination, rather than, if different, to the ordinary common law of contract as applied to employment contracts which, it had been argued, pointed to the date of due delivery, even in cases of summary termination. The essential reasoning was that it would be wrong, in construing a statutory term in legislation for employee protection, to conclude that a short limitation period for bringing a claim should start running before the employee had learned, or had a reasonable opportunity to find out, that her employment had been terminated: see per Lord Kerr, giving the judgment of the Supreme Court, at paras 34 37. The phrase effective date of termination defined in section 97(1) of the Employment Rights Act 1996 contains separate formulae, in separate sub sections, for termination on notice, and termination without notice. For termination on notice it is the day upon which the notice expires. For termination without notice it is the date upon which the termination takes effect. The Gisda Cyf, Brown and McMaster cases were all about the second of those formulae. The only considered judicial view in Gisda Cyf about what was the relevant law of contract for the purpose of determining when summary dismissal by letter to the employees home took effect is to be found in the dissenting judgment of Lloyd LJ in the Court of Appeal. He considered that it was the date of due delivery rather than the date (if later) when the letter was or reasonably could have been read. The majority in the Court of Appeal did not express a view on the point, and nor did this court, not least because, by then, the employee was unrepresented. In both courts, the contractual analysis was, in the end, held to be irrelevant. But the case does make clear that the Brown and McMaster line of cases in the EAT about the effective date of termination are about statutory construction, not the common law about the termination of contracts. They are not even about the statutory meaning of effective date of termination when the contract is terminated on notice, rather than summarily. Bearing in mind that the effective date in a notice case is not until the notice expires, which may be weeks after it is delivered or read, it is by no means obvious that the same answer to the question about delivery or reading of the notice would follow from the analysis of the courts reasoning in relation to summary termination. I am content to leave that question to be answered on an occasion when it needs to be (if it ever arises). I agree with Lady Hales reasons for not finding this courts decision in Geys v Socit Gnrale, London Branch [2012] UKSC 63; [2013] 1 AC 523 of significant assistance. It was about the ordinary common law of contract, but it was specifically about two types of alleged summary termination, one by repudiatory breach and the other by the making of a payment in lieu of notice. Any issue about a time lag between the due delivery and reading of a notice of dismissal was dealt with by express term. Likewise I have not found significant assistance from the latest dismissal case in the EAT, namely Sandle v Adecco UK Ltd [2016] IRLR 941. The question was whether the employee had been summarily dismissed by inaction on the part of the employer. The EAT held that there had been no dismissal at all, because nothing relevant had been communicated to the employee. The requirement in the passage cited by Lady Hale that there be something of which the employee was made aware does not (and was not intended to) resolve the question whether communication by written notice is effective upon due delivery. Standing back and reviewing the employment cases as a whole, the following points stand out. First, none of them was about termination on notice, by the employer or the employee. They were all about summary termination. Secondly, and unsurprisingly, none of the long standing common law authorities about the requisites of an ordinary civil notice, reviewed at the beginning of this judgment, were even cited, although there was some, inconclusive, consideration of the common law principles in the Gisda Cyf case in the Court of Appeal, broadly supportive of due delivery as the relevant date. Thirdly, the only authoritative guidance that a summary termination document is not effective upon due delivery, but only when read, or after a reasonable opportunity for reading, relates to the statutory context about the effective date of termination, in which the potential for a different answer under the common law is treated as irrelevant. In the non statutory summary termination context, the cases go either way. Fourthly, the policy reasons for rejecting due delivery in the statutory context are firmly linked to the fact that summary termination has immediate effect, in particular by starting the running of a short limitation period, which is simply not a consequence of the due delivery of a notice of termination taking effect at a future date. Finally, the only statement in all the employment cases (in McMaster) that a termination on notice is given only when it is read, rather than when delivered, merely recorded the parties agreement about the matter, rather than even an obiter dictum by the court. Policy I have already expressed my view that policy plays a subordinate role where there is already an established common law principle which supplies the standard implied term. I have described the common law principle that an ordinary notice takes effect when it is duly delivered to the recipients address as a compromise which strikes a fair balance in relation to the risks to both parties of the notice not immediately reaching the recipient, and which preserves as far as possible the reasonable requirements of both the giver and the recipient. The time honoured implied term therefore has a sensible and even handed policy objective behind it. Some of its advantages benefit both parties equally. The foremost is certainty. Both the employer and the employee need to know when the employment will actually terminate, even where (as often happens) the notice expresses an expiry date by reference to a stated period from receipt. The employee needs to know from what future date to seek to put in place alternative employment, or state assistance in lieu of wages. An employee giving the notice to their employer may well wish to fix precisely the date from which he or she is free to begin employment, for example, with a competitor, free from restrictions under the current contract. The employer giving or receiving notice will wish to know precisely from which date to recruit, train and put in place a replacement employee. Neither will wish to be subject to uncertainties about matters known only to the other party, such as when after due delivery the notice came to the attention of the intended recipient. Neither will wish to have to become embroiled in a dispute about whether the other party deliberately absented themselves from home or office in order to make the giving of timely notice more difficult or even impossible. Counsel for Mrs Haywood submitted that it was a policy advantage to treat both the statutory test for effective date of termination and the common law rule about the taking effect of a notice of termination in the same way. I disagree. First, it ignores the fact that all the cases on effective date relate to summary termination rather than termination on notice, and that the policy considerations applicable to each are not the same. Secondly, to treat the statute as amending what I consider to be settled common law about termination on notice is to give it an effect well beyond that which it has been held to have, and beyond that which is needed to preserve to the employee the full benefit of the short limitation period. It was submitted further that the employment world has been proceeding since the decision in the Brown on the assumption that it reflects the common law, so that parties to employment contracts currently in force must be taken as making that assumption. Again, I disagree. In my judgment the absence from the Gisda Cyf case of any judicial challenge to Lloyd LJs analysis of the position at common law makes this submission untenable. Where, as here, the development of a standard implied term at common law may be perceived to be based upon a compromise about the fair allocation of risk, as I have described, it is inherently unlikely that all policy considerations will point in the same direction. There will always be reasons for, and against, drawing the compromise line there, or elsewhere. In the present circumstances I am satisfied that there is a sufficient basis in policy for drawing the line where it has for so long been drawn, unless matters have so changed over time to require it now to be moved. True it is that, in the modern world, few private homes are staffed in the way in which a few were in the 18th and 19th centuries. It may be that people now travel away from home, and certainly abroad, more than they used to. It may be that the post is a little less reliable than it may once have been. But it has not been submitted that these changes make a critical difference. Even if they are significant in relation to post, this will be a passing phase. Before long it is likely that most notices of this type will be sent electronically, accessible by the intended recipient anywhere in the world with a wi fi signal, via mobile phone or tablet. The Judgments in the Court of Appeal It will already be apparent that I find myself in broad agreement with the reasoning of Lewison LJ in his dissenting judgment. As for the majority, Proudman J held that nothing less than actual communication to the employee would suffice: see para 70(a). Arden LJ held that the essential requirement was receipt by the employee (regardless whether she opened it and read its contents) but that due delivery to the employees home was not sufficient for receipt, until at least she actually saw the envelope containing the letter: see para 149. These are but crude summaries of two carefully reasoned judgments, but those conclusions are in my judgment each inconsistent with the common law principles applicable to the delivery of ordinary civil notices, including employment notices, as I have sought to explain. Lady Hales formulation is slightly different again. She prefers the formula that notice is given at the earlier of the times when it is read, or when the employee has had sufficient time to do so. It is to be noted that, if departure is to be made from the long established principle that notice is given when it is duly delivered, no precise consensus has emerged as to the alternative, for the foundation of what we all recognise should be a standard implied term. |
I consider that each of the nine appeals should be dismissed. In my respectful view the approach of Lord Phillips, Lady Hale and Lord Kerr to the meaning of the word knowledge in sections 11(4) and 14(1) of the Limitation Act 1980 (the Act) is misconceived and would throw the practical application of the subsections into disarray. I also consider that any exercise of the discretion under section 33 so as to permit any of the nine actions to proceed would be aberrant in circumstances in which they have no real prospect of success. What is the nature of the exercise which the court conducts when asked by a defendant to rule that an action in respect of personal injuries is time barred under section 11 of the Act? Subsection (4) provides that the action shall not be brought after the expiration of three years from (a) (b) the date on which the cause of action accrued; or the date of knowledge (if later) of the person injured. The subsection refers, at (a), to the cause of action notwithstanding that, if the action is to continue, it may well transpire that the claimant has no cause of action. When the subsection turns, at (b), to the date of knowledge (if later) and so requires the court to appraise the claimants knowledge of the four facts specified in section 14(1), which relate to, although do not comprise all elements of, his cause of action, the assumption that indeed he has a cause of action remains. That explains why sections 11(4)(b) and 14(1) refer to knowledge (which can be only of matters which are true) rather than to belief (which can be in matters which are untrue as well as in those which are true). Knowledge of the second of the four facts specified in section 14(1) is that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty. This knowledge of attributability (as it is convenient to describe it) is predicated upon the assumption that the claimant has a valid cause of action and thus would be able to establish among other things, even in the teeth of opposition from the defendant, not just attributability (which means only that there is a real possibility that the act or omission caused the injury: Spargo v North Essex District Health Authority [1997] P1QR P235 at P242, Brooke LJ) but, rather, that his act or omission actually caused the injury in the legally requisite sense. In the decision of the Court of Appeal in Halford v Brookes [1991] 1 WLR 428 the trial judge, Schiemann J, is quoted, at p 442H, as having referred to the bizarre situation when a defendant asserts that the plaintiff had knowledge of a fact which the plaintiff asserts as a fact but which the defendant denies is a fact. The situation may indeed seem bizarre until one remembers that, at the stage of an inquiry under section 11, the exercise requires the existence of the fact to be assumed. Were the action to continue, the defendant might well deny it; but he does not do so at that stage. The assumption that, in an inquiry under sections 11(4) and 14(1) of the Act, the cause of action exists leads me, with inevitable discomfiture, to a profound disagreement with one of the essential foundations for the conclusions of the minority in this court. It was the preferred view of Foskett J, upon which he would have acted had he not felt constrained by authority to act otherwise, that the veterans who issued their claim on 23 December 2004 acquired the requisite knowledge of attributability only on a later date, namely 29 June 2007, when the Rowland report was privately presented to them. It is the conclusion of the minority that (a) it is indeed possible for a claimant to lack knowledge of attributability at the time when he issues his claim and, if so, time will not have begun to run against him; and irrespective of whether the later presentation to them of the Rowland report then led them to acquire it, the veterans lacked such knowledge when they issued their claim, with the result that none of them is time barred. (b) In my view, however, it is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim. By that date he must in law have had knowledge of it. Pursuant to CPR 22.1(1)(a) and (4), he must verify his claim form by a statement that he believes that the facts stated in it are true. The word in the statement of truth is believes rather than knows only because of course the assumption that the cause of action exists does not apply to the claim form. That it exists is indeed only a claim. Although the statement of truth covers wider ground, it can in my view be regarded as an explicit recognition by the claimant that he then has knowledge of attributability for the purpose of section 14(1). Irrespective, however, of the degree of significance to be attached to the statement of truth, it is clear to me that the inquiry mandated by section 14(1) is retrospective, namely whether the claimant first had knowledge of it (and of the other specified facts) within or outside the period of three years prior to the date of issue. As Lord Mance said of an analogous section of the Act in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682, at para 106, Under section 14A the onus is on a claimant to plead and prove that he first had the knowledge required for bringing his action within a period of three years prior to its bringing. And, see, to similar effect, the judgment of the Court of Appeal in Nash v Eli Lilly & Co [1993] 1 WLR 782 at p 796H. Lord Phillips cites, at para 143 below, the view of Waite LJ in Whitfield v North Durham Health Authority [1995] 6 Med LR 32 in support of the proposition that lack of knowledge of attributability can survive the issue of a claim. In 1987, thus prior to the claim issued in 1992 with which the Court of Appeal was there concerned, the claimant had issued a claim which had never been served. Waite LJ observed that her issue of the claim in 1987 did not necessarily betoken that she had knowledge under section 14(1). But the observation was an aside in that the court proceeded to find that she had had the requisite knowledge in 1985. In the Eli Lilly case, cited above, by contrast, the Court of Appeal, in a passage at 795H 796A cited with approval by Judge LJ in Sniezek & Bundy (Letchworth) Ltd [2000] PIQR P213 at P228, observed that it had difficulty in perceiving how in any case where a claimant has sought advice and taken proceedings, it can rightly be held that the claimant had not then had relevant knowledge. It follows that I prefer the latter approach. Yet, frankly, I doubt whether in any of those three cases the Court of Appeal was afforded the leisurely consideration of the nature of knowledge for the purpose of sections 11(4) and 14(1) which has been afforded to this court in the present case. The statutes of limitation, which stretch back to 1540, have been in place for two main reasons. One is to protect defendants from being vexed by stale claims. They are Acts of peace: see ACourt v Cross (1825) 3 Bing 329, 332 (Best CJ). The other is to require claims to be put before the court at a time when the evidence necessary for their fair adjudication is likely to remain available, or, in the words of the preamble to the 1540 Act, at a time before it becomes above the Remembrance of any living Man. to. know the perfect Certainty of such Things. Conventionally, therefore, they have required the assertion, by claim, of a cause of action within a specified period following its accrual. The modification of the conventional requirement now reflected in sections 11 and 14 of the Act was born of the injustice suffered by a claimant who lost his right to claim damages for personal injuries before he knew of its existence: see para 17 of the Report of the Committee on Limitation of Actions in Cases of Personal Injury dated September 1962, Cmnd 1829, chaired by Edmund Davies J. But, in para 30, the committee also expressed its concern not to encourage actions of a speculative character. In the event it set out, at para 34, its conclusion that the conventional requirement should not apply so as to bar a claimant if (a) the first occasion on which he discovered, or could reasonably have been expected to discover, the existence of his injury, or the cause to which it was attributable, was such that it was not reasonably practicable for him to start proceedings in time; and (b) he has in fact started proceedings within a certain period (which we consider should be twelve months) after such occasion. The committee recommended that, additionally, such a claimant should need the leave of the court. The result was section 1 of the Limitation Act 1963, the terminology of which was to prove troublesome (see Smith v Central Asbestos Co Ltd [1973] AC 518) and thus to lead to the improvements first included in section 1 of the Limitation Act 1975 and soon consolidated in sections 11 and 14 of the Act. For present purposes the only importance of section 1 of the 1963 Act is that, reflective of the recommendations in the Edmund Davies report, it referred to facts being outside the knowledge of the claimant until a date which. was a date not earlier than twelve months before the date on which the action was brought (italics supplied). So, by the latter date, the claimant was taken to have acquired the knowledge; and the only question was whether he had issued his claim within the specified period after having done so. This was in my view an essential boundary of the scheme by which the conventional requirement was relaxed; and I see no reason to doubt that it so remains. It is in my view heretical that a claimant can escape the conventional requirement to assert his cause of action for personal injuries within three years of its accrual by establishing that, even after his claim was brought, he remained in a state of ignorance entirely inconsistent with it. Indeed it is, as Smith LJ observed in the course of argument in the Court of Appeal, a bit Alice in Wonderland. What, then, is comprised in the knowledge of attributability which section 14 (1) of the Act requires? In articulating his preferred view Foskett J made no bones about it: he considered that one of the constituents of the knowledge should be evidence, specifically that the veteran should appreciate that there was credible evidence that, as a result of the tests, he had been exposed to ionising radiation at a level above that to which all human beings are exposed and that his injury was capable of having been caused by his exposure to it. Lord Phillips states, at para 141, that the preferred view of Foskett J was in principle correct. But, no doubt because Mr James Dingemans QC concedes on behalf of the veterans that evidence is no part of knowledge for the purpose of the subsection, Lord Phillips reformulates the preferred view of Foskett J so as to require that the claimants belief be based (para 137) or founded (para 141) on known fact. For her part, Lady Hale suggests, at paras 168 and 170, that the belief should have a reasonable basis either in evidence or, alternatively, in objective fact. And, for his part, Lord Kerr, who adheres strictly to the word knowledge, concludes at para 209 that it exists only when founded on objectively verifiable facts. In reality, however, all three of these formulations in my view remain requirements that the claimant must, actually or constructively, have evidence before he is to be fixed with the knowledge which will set time running. Indeed, in paras 140 and 142, Lord Phillips suggests that, although the appellants may for long have believed that their injuries were attributable to the exposure, they lacked knowledge of attributability because, at least until presentation to them of the Rowland report, there was no scientific evidence available that provided significant support to the belief. And, in para 172, electing not there to apply her difficult alternative requirement of a basis in objective fact (for which facts are other than objective?), Lady Hale explains her conclusion that the appellants have lacked knowledge because they have lacked evidence. If, indeed, upon a preliminary issue as to limitation, the court is required to weigh the nature, strength and verifying quality of the evidence as to the attributability of the injuries which became available, actually or constructively, to the claimant, and to identify the time when it did so, the determination of the issue will in my view expand into a preliminary trial entirely contrary to the intention of Parliament as expressed in the subsection. This court should not readily jettison the welter of jurisprudence about the meaning of knowledge in section 14(1) of the Act which has accumulated over more than 20 years. Lord Phillips has helpfully charted it in paras 112 to 121. His analysis is, at para 117, that the Eli Lilly case, cited above, is the first of a series of decisions which equated knowledge with subjective belief and, at para 141, that the equation was wrong. In fact the phrase subjective belief is not to be found in any of the decisions. The concepts of belief and indeed of knowledge are inherently subjective. Even when under section 14(3) it fixes a claimant with constructive knowledge, the law deems him to have subjective knowledge. So I take Lord Phillips phrase to be no more than a convenient shorthand for the antithesis of what in his view is connoted by the word knowledge, namely that it must be belief which is founded on fact. In the early case of Davis v Ministry of Defence, 26 July 1985, [1985] CLY 2017, the Court of Appeal took a narrow view of the meaning of knowledge in section 14(1) of the Act. May LJ said that reasonable belief was not enough. But in the Halford case, cited above, Lord Donaldson MR said, at p 443F, that reasonable belief would normally suffice and that Davis had been an exceptional case. For twenty years Lord Donaldsons approach has prevailed. It was specifically endorsed by Judge LJ in the Sniezek case, cited above, at P228 and ultimately also in the House of Lords, namely in the Haward case, cited above, in the passage in the speech of Lord Nicholls quoted by Lord Phillips in para 121 below. Lord Phillips is therefore correct to point out that when, in the present proceedings, it accepted that the belief had to be held with a degree of confidence but, as an aside, declined to accept that it had to be reasonable, the Court of Appeal was, apparently without so realising, disagreeing with a statement of Lord Nicholls in the House of Lords as well as with that of Lord Donaldson. Had I been offering a view of the meaning of knowledge in section 14(1) in circumstances in which I had been unassisted by authority, I think that I might have ventured the phrase reasoned belief rather than reasonable belief. The word reasoned might even better have conveyed the need for the belief not only to be held with a degree of confidence (rather than to be little more than a suspicion) but also to carry a degree of substance (rather than to be the product of caprice). But the distinction between the phrases is a matter of little more than nuance. In the resolution of marginal issues, and even at the level of this court, there is a lot to be said for maintaining consistency in the law. So I consider that this court should reiterate endorsement for Lord Donaldsons proposition that a claimant is likely to have acquired knowledge of the facts specified in section 14 when he first came reasonably to believe them. I certainly accept that the basis of his belief plays a part in the inquiry; and so, to that limited extent, I respectfully agree with para 170 of Lady Hales judgment. What I do not accept is that he lacks knowledge until he has the evidence with which to substantiate his belief in court. Indeed we should not forget that, if the action is to continue, the court will not be directly interested in evidence about mere attributability; it will require proof of actual causation in the legally requisite sense. What then is the degree of confidence with which a belief should be held, and of the substance which it should carry, before it is to amount to knowledge for the purpose of the subsection? It was, again, Lord Donaldson in the Halford case, cited above, who, in the passage quoted by Lord Phillips in para 115 below, offered guidance in this respect which Lord Nicholls in the Haward case, cited above, was, at para 9, to describe as valuable and upon which, at this level of generality, no judge has in my view yet managed to improve: it is that the belief must be held with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence. In Broadley v Guy Clapham & Co [1994] 4 All ER 439 Hoffmann LJ, in the passage quoted by Lord Phillips at para 118 below, paraphrased Lord Donaldsons guidance in terms of a search for the moment at which the claimant knows enough to make it reasonable for him to begin to investigate whether he has a case against the defendant. I respectfully agree with the analysis by Lord Phillips of what Hoffmann LJ meant. The investigation upon which the claimant should reasonably embark is into whether in law he has a valid claim (in particular whether the act or omission of the defendant involves negligence or other breach of duty, being a matter of which the claimant is specifically not required to have had knowledge under section 14(1)) and, if so, how that claim can be established in court. So it is an investigation likely to be conducted with the assistance of lawyers; but, in the light of their advice, it may well also embrace a search for evidence, including from experts. The focus is upon the moment when it is reasonable for the claimant to embark on such an investigation. It is possible that a claimant will take legal advice before his belief is held with sufficient confidence and carries sufficient substance to make it reasonable for him to do so. Thus, as Judge LJ pointed out in the Sniezek case, cited above, at P229 and P232, it does not automatically follow that, by the date when he first took legal advice, the claimant will have acquired the requisite knowledge; but such an inference may well be justified. I hasten however to attach an obvious rider. From the fact that a claimant may well need to consult experts after he has acquired the requisite knowledge, it in no way follows that he will have acquired such knowledge by the date when he first consults an expert. Section 14(3) expressly recognises that the facts which he is required to know may be ascertainable by the claimant only with the help of experts and deems him to have acquired such knowledge at the point at which he might, with their help, reasonably have been expected to acquire it. In my view the date upon which the claimant first consulted an expert is not, on its own, likely to assist the court in determining whether by then he had the requisite knowledge. Instead the court will have regard broadly to the confidence with which the claimant held the belief, and to the substance which it carried, prior to his consulting the expert (and in particular, no doubt, the reasons which induced the claimant to consult him) and also, if the conclusion is that at that prior stage the claimant lacked belief of the requisite character, the effect upon the claimants belief of his receipt of the experts report. In short the assistance given to a claimant by an expert in this respect can be of two kinds. One is assistance in his acquiring knowledge of the facts required by section 14. He may, for example, advise the claimant that he has a medical condition, of which he was previously unaware, which provides him with a substantive basis for believing that his injury is attributable to an act or omission of the defendant. The other is the provision of evidence which will, in court, help him to substantiate the claim which, in the light (among other things) of his knowledge of the limited matters specified by section 14(1), he proposes to bring. To the above, at its level of generality, I find it impossible to make useful addition. In principle, and subject to the fact that the assault by the appellants in this court upon the reasoning of the Court of Appeal is of a generic character, there is no escape from turning at this stage to attend at least broadly to the individual facts of the nine appeals before the court. They are nine out of a large number of claims which have been made subject to a Group Litigation Order because they give rise to common or related issues of fact or law: see CPR 19.10. Indeed, along with the claim of the late Mr Sinfield continued by his widow, which is not time barred, they were no doubt chosen because, so it was considered, they had material similarities with many of the other claims in the group and thus their determination would inform that of many of the others. But, with respect to Lord Phillips, I cannot subscribe to his conclusion, at paras 159 and 160 below, that the existence of the other claims in the group should affect determination of the nine appeals. CPR 19.12(1)(a) provides that this courts judgment or order is binding on the parties to all other claims presently within the group unless the court orders otherwise. If, as to which I have no view, there would be any particular injustice in visiting adverse judgments in the nine appeals upon other, materially similar, claims within the group, the quoted clause would cater for it. Mr Ayres Mr Ayres claim was issued on 1 February 2007. He died on 29 November 2010. Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 1 February 2004. He had served with the RAF as an aircraft fitter on Christmas Island in 1957 when detonations had taken place off Malden Island, and again in 1958, when others had taken place off Christmas Island itself. He was well aware that the detonations caused radiation and that the aeroplanes upon which he worked had had to be decontaminated for that reason. In the late 1990s he developed haematuria (blood in the urine). By then he was aware of the existence of the British Nuclear Tests Veterans Association (BNTVA). He knew that it was an action group committed to secure compensation for veterans who suffered injuries believed to have been caused by radiation and that, to that end, it and three of its members had taken proceedings in the European Court of Human Rights (the ECtHR) in which they had alleged exposure of the servicemen to ionising radiation and consequential illnesses. He kept newspaper articles about the campaign. Mr Ayres said in evidence that, when he developed haematuria, he firmly believed that it was capable of having been caused by his exposure to radiation. But the injury upon which his action is founded is prostate cancer, with which he was diagnosed on 2 December 2003. His evidence, unsurprising in the light of what he already believed, was that, on receiving the diagnosis, he knew that there was a real possibility that the cancer had also been caused by his exposure to radiation. Mr Brothers Mr Brothers died on 13 June 2000 and his widows claim under the Fatal Accidents Act 1976 was issued on 23 December 2004. Under section 12(2) of the 1980 Act her claim was barred if she first had the requisite knowledge prior to 23 December 2001. Mr Brothers had served with the RAF as a navigator on sniffer planes in 1956 and 1957 which collected radioactive samples from clouds generated by the detonations. In 1997 he was diagnosed as suffering from cancer of the oesophagus. For at least the previous 20 years it had been his practice to smoke 20 cigarettes a day. At the time of the diagnosis, however, Mrs Brothers knew that cancer was capable of being caused by radiation and that Australian veterans had claimed damages for illnesses, including cancer, which they alleged to have been the result of exposure to radiation. Although in evidence she explained that Mr Brothers denied to her that it was possible that his cancer had been the result of his exposure, she added that she believed that it was capable of having caused it. Indeed in letters to two doctors in March 2002 she wrote that she had always believed that his cancer had been caused by it. Mr Clark Mr Clark died on 28 September 1992. His widows claim under the 1976 Act was issued on 31 March 2008. Under section 12(2) of the 1980 Act her claim was barred if she first had the requisite knowledge prior to 31 March 2005. Mr Clark had done part of his National Service on Christmas Island as a Sapper with the Royal Engineers in 1957 and 1958 when detonations had taken place in the vicinity. In February 1991 he was diagnosed with the lung cancer from which, within two years, he was to die. From his teenage years he had smoked 20 cigarettes a day. Days prior to the diagnosis, however, he had mentioned his service on Christmas Island to the doctors and had told them that he had been unprotected. He got in touch with the BNTVA. In March 1991 he signed a home made statement, for possible reference in future court proceedings, in which he described his exposure to the tests, his subsequent suffering from various conditions and the recent diagnosis of his terminal cancer. Of those actions on his part Mrs Clark was aware. Shortly after his death she made an unsuccessful application for a war pension on the basis that his cancer had been linked to his service on Christmas Island. In 2002 she consulted solicitors about bringing a claim under the 1976 Act. Mr Dickson Mr Dicksons claim was issued on 23 December 2004. He died of heart disease in May 2006. Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001. He had served as a lance corporal in the Royal Engineers on Christmas Island in 1958 when detonations had taken place in the vicinity. Soon afterwards he began to suffer skin disorders and, by 1990, he had begun to suffer a variety of other illnesses, including colitis. In 1986 he became a member of the BNTVA and embarked upon a tireless public campaign on its behalf for veterans to be compensated for injuries alleged to have been sustained by exposure to radiation. He had, so Foskett J found, a genuine belief, which he communicated to his doctor, that his own ill health had been caused by exposure to it; and he also believed that the respondents denials about the level of exposure to servicemen had been untrue. In 1989 he applied for a war pension on the ground that his exposure to it in 1958 had damaged his immune system; as in the case of all the other applications for war pensions to which I will refer, the respondent denied that the detonations had caused any significant exposure to radiation and the application was refused. In 1990 Mr Dickson was for some reason expelled from the BNTVA but continued his campaign alone. In 1992 he was quoted in The People as saying, on a basis which is unclear, that his army files demonstrated his exposure to a high level of radiation; he added that he wanted action. Mr Hart Mr Harts claim was issued on 23 December 2004. Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001. He had performed his National Service as an engineer mechanic with the Royal Navy and in 1956 had served aboard HMS Diana near the Monte Bello islands when its function had been to monitor the fall out from two nuclear explosions conducted there. In 1959, following his return to civilian life, he first developed a lipoma (a benign fatty lump on the skin) and, during the next decades, developed numerous further lipomas which spread all over his body. From 1973, if not before, he considered that they might have been caused by his exposure to radiation in 1956. In 1988 he joined the BNTVA and well understood the link which it was asserting between radiation and the injuries of its members. In 1991 he applied for a war pension on the basis that his lipomas had been caused by exposure to radiation. Much later, namely in July 2002, Mr Hart was diagnosed with bowel cancer, whereupon he consulted solicitors. Thereafter his claim was issued reasonably promptly. But he claimed damages for the lipomas as well as for the cancer and it is now common ground that the inquiry is into his knowledge of their attributability. Mr McGinley Mr McGinleys claim was issued on 23 December 2004. Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001. He had served as a plant operator in the Royal Engineers on Christmas Island in 1958 when detonations had taken place in the vicinity. Soon afterwards he began to suffer from bouts of vomiting and diarrhoea and from blisters on the skin. In 1976 he was diagnosed as infertile. He was a founder member of the BNTVA. He was its Chair from its inception in 1983 until 2000; and he was perhaps its most vociferous spokesman. In 1984 he applied for a war pension on the ground that exposure to radiation in 1958 had caused his infertility. In 1991, with the assistance of a journalist, he wrote a book, entitled No Risk Involved, in which he set out his experiences on Christmas Island and his subsequent ill health. In 1991 he launched one of the applications to the ECtHR to which I have referred in para 16. In a document in support of it, signed by him in 1993, he referred to the realisation that his prolonged and continuing debilitating illnesses and infertility were caused by his deliberate and unprotected exposure by the UK in 1958 to the detonations. In his present claim, however, Mr McGinley does not repeat the allegation that the exposure was deliberate, known as the guinea pig allegation. Mr Noone Mr Noones claim was issued on 23 December 2004. Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001. He had served in the RAF as an air frame mechanic on Christmas Island in 1957 when detonations had taken place in the vicinity. From then onwards he suffered from severe and persistent acne. He soon came to suspect that it had been caused by exposure to radiation. By 1983, notwithstanding contrary advice from a consultant dermatologist, he had come to believe that it had been so caused. On 3 June 1983 he was reported in The Guardian as having stated that the exposure had caused his condition. In the same year he joined the BNTVA and made a similar statement in an application for a war pension. In 1986 and 1989 he suggested likewise to different GPs. Mr Ogden Mr Ogden died of cancer on 5 August 2004 and his step daughters claim for the benefit of his estate was issued on 23 December 2004. Under section 11(4) and (5) of the 1980 Act her claim was barred if Mr Ogden first had the requisite knowledge prior to 5 August 2001. He had served with the RAF as an air wireless fitter on Christmas Island in 1958 when detonations had taken place in the vicinity. In 1986 he suffered a brain tumour, became a member of the BNTVA and promptly applied for a war pension on the basis that the tumour had been caused by his exposure to radiation in 1958. In 1994 he was diagnosed with cancer of the colon and on 12 April 2001, in making a second application for a pension so as to encompass the cancer as well as the tumour, he wrote that they had been caused by his proximity to the detonations. Mr Rokoratu The Claim of Mr Rokoratu (who has sadly died days prior to the delivery of these judgments) was issued on 23 December 2004. Under section 11(4) of the Act his claim was barred if he first had the requisite knowledge prior to 23 December 2001. He is a citizen of Fiji and had served as a stevedore with the Fijian Royal Naval Volunteer Reserves on Christmas Island in 1958 when detonations had taken place in the vicinity. From 1961 onwards he suffered a variety of illnesses, in particular lipomas. In October 1998 he applied to the ECtHR on the basis that he had suffered injuries as a result of exposure to radiation on Christmas Island. In a report dated 9 November 1998 in support of the application a consultant physician in Fiji wrote that his lipomas were likely to be linked to his exposure to the detonations in 1958. Mr. Rokoratu told Foskett J that the report had confirmed his belief in the link. In my view the Court of Appeal was correct to conclude that all nine of the appellants had the requisite knowledge prior to the period of three years relevant to them. For the facts of each case which I have distilled in the above paragraphs drive a conclusion that, prior to the relevant period, each reasonably believed that the injury was able to be attributed to the nuclear tests conducted by the respondent between 1956 and 1958. Their many private and public statements down the years about the cause of their conditions; the nation wide campaign for compensation pursued for so long and with such vigour through the BNTVA; the applications for war pensions; and the applications to the ECtHR: all these were the product of reasonable beliefs. The appellants held them with sufficient confidence to have made it reasonable for them to begin to investigate whether they had valid claims against the respondent. In asking the court to allow them further time in which to obtain it, Mr. Dingemans concedes that even today the appellants lack evidence with which to establish a credible case that the injuries were caused by the tests; and so it follows that, irrespective of when they began to investigate whether they had valid claims against the respondent, they would probably have learned that, as remains the position today, their claims had no reasonable prospect of success. But that is entirely irrelevant to an inquiry under sections 11(4) and 14(1): once the requisite knowledge has arisen, the difficulty of actually establishing the claim confers no right thereunder to a further, open ended, extension of the time within which the action must be brought. In so saying I have returned to the irrelevance of evidence to an inquiry under the subsections. If their actions were to proceed, the nine appellants therefore needed to persuade the court to exercise its discretionary power under section 33 of the 1980 Act to disapply section 11(1). Section 33 requires the court first, by subsection (1), to conduct an inquiry into the degree of prejudice likely to be suffered by the defendant in the event of exercise of the power and by the claimant in the event of a refusal to do so; and second, by subsection (3), to have regard to all the circumstances of the case and in particular to six specified matters. But the appellants grounds of appeal require this court to consider only one, generic, feature of the reasoning which led the Court of Appeal to decline to exercise the power under section 33 in any of the nine actions; and, at the end of his oral presentation of the appeals which stretched in effect over almost two days, Mr. Dingemans wisely devoted only the final five minutes to the ground referable to section 33. It is that the Court of Appeal wrongly elevated the issue of causation to be the determining factor under the section. It is indeed a fair reading of that courts full judgment upon the issue that it regarded the difficulties which confront the appellants in establishing that their injuries were caused by the tests as determinative against exercise of the power under section 33. I stress, however, that it carefully weighed all the other relevant factors, for example that, as will have been noted, the claim of Mr Ayres was out of time by less than two months whereas the claims of the other eight appellants were out of time by between three years (in the case of Mr Rokoratu) and 18 years (in the case of Mr Noone). It is undesirable that a court which conducts an inquiry into whether a claim is time barred should, even at the stage when it considers its power under section 33, have detailed regard to the evidence with which the claimant aspires to prove his case at trial. But the ten claims placed before Foskett J were of particular complexity; and the nature of the submissions made to him on behalf of the appellants about the meaning of knowledge for the purpose of section 14(1) of the 1980 Act led him to undertake, over ten days of hearing and expressed in 885 paragraphs of judgment, a microscopic survey of the written evidence available to the parties, in particular to the appellants, in relation to causation. At all events the result was to yield to the Court of Appeal an unusual advantage, namely a mass of material which enabled it with rare confidence to assess the appellants prospects of establishing causation. It expressed its conclusion in terms of the very great difficulties which confronted the appellants in that regard. But, in line with the realistic concession made by Mr Dingemans in this court, the fact is that, for the reasons set out by Lord Phillips in paras 156 to 158 below, their claims have no real prospect of success. In my view it would have been absurd for the Court of Appeal to have exercised the discretion to disapply section 11 so as to allow the appellants to proceed in circumstances in which the next stage of the litigation would be likely to have been their failure to resist entry against them of summary judgment pursuant to CPR 24.2(a)(i). In this regard I do not share the view of Lord Phillips, at para 160 below, about the relevance of the fact that, at least until that next stage, the action brought by the late Mr Sinfield, together no doubt with other actions in the group which do not fall foul of section 11, are to proceed. LORD WALKER The decision of the House of Lords in Cartledge v E Jopling & Sons Ltd [1963] AC 758 revealed a serious injustice in the law relating to limitation of actions. Workmen suffering from an insidious industrial disease, pneumoconiosis, might find that their rights of action against their employers were statute barred before they even knew that they were suffering from the disease. To remedy that injustice Parliament enacted the Limitation Act 1963. That Act was severely criticised by the House of Lords in Smith v Central Asbestos Co Ltd [1973] AC 518 and it was repealed and replaced by the Limitation Act 1975, now consolidated as part of the Limitation Act 1980 (the 1980 Act). The need for the claimant to know the legal significance of the proposed defendants acts or omissions (one of the main points of criticism) was removed. But two important general features were reproduced (though in a different form) in the new legislation. One was that the commencement of the limitation period was to be triggered by the claimants actual or constructive knowledge of certain facts. The other was that these included the fact that the claimants personal injuries were attributable to conduct of the proposed defendant (which was described in the original statute in terms of negligence, nuisance or breach of duty, but in the new statute as the act or omission which is alleged to constitute negligence, nuisance or breach of duty). The new legislation also has produced difficult problems for the courts. They can be roughly grouped under two general heads. First, what is it that the claimant has to know at the date of knowledge (the what? question). Secondly, how must the claimant know what he has to know that is, what state of mind, assessed subjectively or objectively or by a mixture of the two, amounts to knowledge for this purpose (the how? question). The what? question depends on the interpretation and application of section 14(1) of the 1980 Act, and in particular (since it gives rise to most of the problems) section 14(1)(b), which relates to the fact that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty. The how? question depends partly on the interpretation and application of section 14(3) of the 1980 Act: For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice. It also depends on giving a fair and workable meaning to the provisions as a whole. Almost all of the many authorities cited to the Court in this appeal are concerned with one or both of these questions. My perception is that the case law has made more progress in clarification of the what? question than of the how? question. That may be because in some of the leading cases the House of Lords or the Court of Appeal has been able to reach a conclusion on actual knowledge and has not found it necessary to consider constructive knowledge. For instance in Haward v Fawcetts [2006] 1 WLR 682 the defendants (a firm of accountants) relied only on the actual knowledge of the claimant, and the House of Lords found that his actual knowledge of the financial state of the business in which he had invested was sufficient to make it reasonable for him to consider whether his accountants advice had been flawed. The case was concerned with section 14A of the 1980 Act, added by the Latent Damage Act 1986, but the same principles apply. So the difficulties of constructive knowledge do not feature in Lord Nicholls admirably brief statement of the relevant principles at paras 7 to 15. In Spargo v North Essex District Health Authority [1997] PIQR P235, P242 Brooke LJ referred to this branch of the law being already grossly over loaded with reported cases. That was fifteen years ago, and the overload has increased. But this appeal requires the Court, in the context of heavy group litigation, to grapple with some unresolved difficulties. In view of the differences of opinion in the Court I wish, while conscious of adding to the overload, to set out my reasons in my own words. I start with some observations on the what? question and then address the how? question. The what? question The case law on the concept of attributable has developed in a coherent way. It is not without its difficulties, especially in cases involving specialised and technical areas of expertise (discussed by Lord Mance in Haward v Fawcetts [2006] 1 WLR 682 at paras 114 to 121). But on the whole the case law is consistent and provides a workable test. In Smith v Central Asbestos Co Ltd [1973] AC 518, 543 Lord Pearson quoted the Oxford English Dictionary definition of attributable (capable of being attributed or ascribed, especially as owing to, produced by) and stated that attributable refers to causation. This view has been consistently followed in later authorities on the legislation in its present form. In Haward v Fawcetts [2006] 1 WLR 682, para 45, Lord Scott quoted a passage from the judgment of Hoffmann LJ in Hallam Eames v Merrett Syndicates Ltd [2001] Lloyds Rep PN 178, 181, which conveniently sets out some of the most important cases: In other words, the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence . It is this idea of causal relevance which various judges of this court have tried to express by saying the plaintiff must know the essence of the act or omission to which the injury is attributable (Purchas LJ in Nash v Eli Lilly & Co [1993] 1 WLR 782, 799) or the essential thrust of the case (Sir Thomas Bingham MR in Dobbie v Medway Health Authority [1994] 1 WLR 1234, 1238) or that one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based (Hoffmann LJ in Broadley v Guy Clapham & Co [1993] 4 Med LR 328, 332). In this context, therefore, attributable has been interpreted by the courts as directed to a real possibility of a causal link: Lord Nicholls in Haward v Fawcetts at para 11, citing Nash v Eli Lilly & Co at pp 797 798. In that case Purchas LJ (who gave the judgment of the Court) quoted with approval some observations of Hidden J in his second judgment on the preliminary issue: The stark strength of the word knowledge does not stand alone. It is knowledge that attribution is merely possible, a real possibility and not a fanciful one, a possible cause as opposed to a probable cause of the injury. At this point the what? question and the how? question come into close proximity, since confident knowledge that there may be some causal link between two events is not dissimilar from a less confident belief that there is indeed a causal link between them. So the way in which attributable has been interpreted in the case law eases the Courts task in deciding whether knowledge includes more or less firmly held belief. But it does not remove all the difficulties, as this appeal shows. Broadley v Guy Clapham & Co [1994] 4 All ER 439 was an unusual case because it involved a double limitation point. Mrs Broadley had a complaint against a surgeon who had operated on her in August 1980, but she did not consult a solicitor (the defendant) until June 1983. The solicitor arranged for her to see a specialist in July 1983, who gave a favourable oral opinion. But for some unexplained reason nothing was done to pursue the claim and in August 1990, having taken other legal advice, Mrs Broadley sued the solicitor whom she had consulted in 1983. He pleaded that the claim against him was statute barred, because (as he contended) her claim against the surgeon became statute barred in August 1983, and so that was when any cause of action against him arose. So there was an issue as to whether the standard three year period applied to her original claim against the surgeon, or was to be treated as extended under sections 11 and 14 of the 1980 Act. In his judgment Hoffmann LJ used a colloquial expression, barking up the wrong tree, which has been repeated in some later cases. He said ([1994] 4 All ER 439, 449): Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant. But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate. He will also not have reached the starting point if, in an unusual case like Driscoll Varley v Parkside Health Authority, he thinks he knows the acts and omissions he should investigate but in fact he is barking up the wrong tree. Driscoll Varley v Parkside Health Authority [1991] 2 Med LR 346 is mentioned a little earlier in the judgment. It was a case in which the plaintiff thought that an injury to her leg had been caused by a surgeons negligence, but later discovered that the real cause was not the operation but the removal of the leg from traction during subsequent treatment. It seems a rather marginal example of barking up the wrong tree, since the plaintiffs misapprehension was in relation to the causative event in a single course of treatment, although the real complaint was about the after care rather than the operation itself. The point is relevant in this appeal because Mr Dingemans QC put in the forefront of his case the submission that those of his clients who thought they had been exposed to ionising radiation were barking up the wrong tree, because they were focusing on prompt (gamma ray) radiation. Foskett J was inclined to accept that submission (para 515, in the course of the discussion of his preferred view). The Court of Appeal (para 86) rejected this, having observed in the previous paragraph that the claimants contention on this point demonstrated a fundamental misunderstanding of the concept of knowledge for limitation purposes. The how? question That leads on to the how? question. Many of the authorities which discuss this question are concerned with a range of significant injuries (such as dermatitis, hearing loss or pneumoconiosis) caused by an employers failure to provide a proper working environment and a safe system of work. One employee may be unaware of even the possibility that his injury is caused by his working environment. Another may be in a state of suspicion, which he would wish to have confirmed by a medical expert. Yet another may be totally convinced, on not wholly rational grounds, that the working environment is the cause of his trouble. One may wait an unreasonable length of time before taking medical advice; another may consult his general practitioner, but get no further; yet another may be referred to a specialist consultant. And where the potential claimant does seek medical advice, whether from a general practitioner or from a specialist, it may on occasion turn out to be wrong. So the courts have had to interpret and apply the provisions of section 14 to a wide variety of factual situations. I shall consider some of them, in chronological order. Like Lord Phillips, I start with Davis v Ministry of Defence 26 July 1985, CA transcript 413 of 1985. The plaintiff worked for the defendant as a welder from 1955 until 1971. In 1973 he started an action for damages for dermatitis which he and his general practitioner thought to have been caused by dust in his working environment. For reasons that are not clear, the first action lapsed but in 1982 Mr Davis started a fresh action. The Court of Appeal allowed his appeal against an order striking out the new action. Lord Phillips sets out two passages from the judgment of May LJ including his much quoted observation: Knowledge is an ordinary English word with a clear meaning to which one must give full effect: reasonable belief or suspicion is not enough. I have to say that I find the judgment of May LJ quite puzzling. Early in the judgment he directed himself, correctly, that attributable meant capable of being attributed to. He recorded that at the time when the first action was commenced, Mr Davis firmly believed that his trouble was caused by his work, that his doctor shared that view, and that a doctor who examined Mr Davis on behalf of the Ministry considered his condition to be not unconnected with the work which he had been doing. On the other hand Mr Davis stated in an affidavit that his specialist medical opinions were in some respects conflicting and confused and that having considered counsels final opinion he was forced to conclude that his dermatitis might have been caused by his own predisposition. That seems to leave open at least the possibility that it had been caused by dust in the workplace. But May LJ referred to the combined state of mind of the appellant himself, as a layman, and that of his doctors and legal advisers as not amounting to knowledge in the relevant sense. I am left wondering whether, although asking himself whether they knew that the dermatitis was capable of being attributed to the working environment, May LJ was setting too high a threshold in his interpretation of capable of being attributed, as compared with the passages referred to in para 35 above. In Halford v Brookes [1991] 1 WLR 428 Lord Donaldson of Lymington MR described the facts of Davis v Ministry of Defence as highly unusual. He summarised the advice given to Mr Davis as more conclusively unfavourable to him than appears from my reading of the transcript. But on any view Halford v Brookes was itself a much more unusual case, in that it was concerned (under section 14(1) (c)) with the identity of the proposed defendant or defendants in a claim arising out of a lethal attack on a teenage girl. That was the context in which Lord Donaldson made his much quoted observation that reasonable belief will normally suffice. But in fact he concluded that the plaintiff (the dead girls mother) knew (with sufficient confidence to justify embarking on the preliminaries to the issue of a writ against both defendants) all the facts listed in section 14(1), including that the acts of violence against her daughter were done by one or other, or both, of the proposed defendants. The Court of Appeal held that actual knowledge was established, and that it was not a case in which constructive knowledge had any part to play. The Court of Appeal exercised discretion under section 33 of the 1980 Act to allow the claim to proceed. Neither of those cases can be said to have settled the law, but Halford v Brookes has had much more influence on its development. Nash v Eli Lilly & Co [1993] 1 WLR 782 is the first case bearing any resemblance to the present appeal. The limitation issues arose in class actions alleging injuries caused by a pharmaceutical product for relief of arthritic pain, marketed in the United Kingdom as Opren between October 1980 and August 1982, when it was withdrawn because it was producing unacceptable side effects including photosensitivity and onycholysis, and sometimes fatal liver and kidney failure. On the trial of preliminary issues Hidden J held that the claims of almost all of the lead plaintiffs were statute barred, and declined to exercise discretion under section 33 in their favour. The Court of Appeal allowed three of the eighteen appeals, two on the grounds that the claims were not statute barred, and one by exercising discretion under section 33 (the judgment on the individual appeals is not reported). The judgment of the Court of Appeal had to deal with three aspects of section 14(1): significant injury under para (a), attributability under (b), and (because different companies in the pharmaceutical group were sued) identification of defendants under para (c). It also had to consider the how? question, including constructive knowledge under section 14(3). In a section of the judgment headed Knowledge the Court of Appeal discussed Davis v Ministry of Defence and Halford v Brookes and tended to prefer the approach in the latter case (p 792): We do not, of course, intend to lay down a definition of the word knowledge for the purposes of a statute in which Parliament left the word to speak for itself. In applying the section to the facts of these cases, we shall proceed on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice. Whether or not a state of mind for this purpose is properly to be treated by the court as knowledge seems to us to depend, in the first place, upon the nature of the information which the plaintiff has received, the extent to which he pays attention to the information as affecting him, and his capacity to understand it. There is a second stage at which the information, when received and understood, is evaluated. It may be rejected as unbelievable. It may be regarded as unreliable or uncertain. This was essentially a subjective approach. In relation to the issue of significant injury (which was an important issue in that case) a subjective element may appear to be mandated by section 14(2), but the House of Lords has recently shown that approach to be mistaken: see Lord Hoffmann in A v Hoare [2008] AC 844 at paras 33 to 35; compare Lady Hale at paras 56 to 61. Taken together, the unanimous decisions of House of Lords in A v Hoare (on section 14(2)) and Adams v Bracknell Forest Borough Council [2005] 1 AC 76 (on section 14(3); paras 42 to 51 are particularly in point) appear to me to mark a decisive shift away from a subjective approach on these issues. What was within a claimants actual knowledge is undoubtedly a subjective question. But the notion that whether a claimant has knowledge depends both upon the information he has received and upon what he makes of it (Nash v Eli Lilly & Co [1993] 1 WLR 782, 795) can no longer be accepted, at any rate without a lot of qualification. The recent authorities recognise that the policy of the law is for the date of knowledge to be ascertained in the same way for all claimants, without regard to their personal characteristics, which can be taken into account at the later stage of exercising discretion under section 33 of the 1980 Act. As Lord Hoffmann put it in Adams v Bracknell Forest Borough Council [2005] 1 AC 76, para 45: The Court of Appeal in Forbes [v Wandsworth Health Authority [1997] QB 402] was right in saying that the introduction of the discretion under section 33 had altered the balance. As I said earlier, the assumptions which one makes about the hypothetical person to whom a standard of reasonableness is applied will be very much affected by the policy of the law in applying such a standard. Since the 1975 Act, the postponement of the commencement of the limitation period by reference to the date of knowledge is no longer the sole mechanism for avoiding injustice to a plaintiff who could not reasonably be expected to have known that he had a cause of action. It is therefore possible to interpret section 14(3) with a greater regard to the potential injustice to defendants if the limitation period should be indefinitely extended. Actual knowledge and constructive knowledge Adams shows that in Nash v Eli Lilly & Co the Court of Appeal was wrong, in para 4 of the summary of its conclusions (at p796) to state that the temporal and circumstantial span of reasonable inquiry [under section 14(3)] will depend on the factual context of the case and the subjective characteristics of the individual plaintiff involved. But that is not the only point on section 14(3) that calls for examination. As already mentioned, many of the reported cases were decided simply on actual knowledge. It may be that both litigants and judges tend to regard that as a more satisfactory approach, with a focus on the claimants oral evidence given at the hearing of a preliminary issue, or at trial. The issue of constructive knowledge generally calls for more elaborate pleadings and for expert evidence. Although the general burden of proving that he is entitled to the benefit of a deferred date of knowledge is on the claimant, in practice it is for the defendants to raise issues under section 14(3), as Haward v Fawcetts illustrates (the issue of burden of proof in these cases was fully, and in my view correctly, examined by Mance J in Crocker v British Coal Corporation (1995) 29 BMLR 159, 169 173). So in practice the parties tend to join issue on actual knowledge, and judges to reach a conclusion on that issue, with constructive knowledge being held in reserve, as it were. As Lord Phillips points out in para 119 of his judgment, the well known survey of the relevant principles made by Brooke LJ in Spargo v North Essex District Health Authority [1997] PIQR P235, P242 does not deal with constructive knowledge at all. But understandable though it is that courts may tend to look first at actual knowledge, that approach does not give full effect to Parliaments purpose in enacting section 14(3). What the statute requires is a single inquiry as to the claimants knowledge, which under section 14(3) is extended, not only to facts which he could have learned with the help of medical or other appropriate expert advice, but also more generally to facts observable or ascertainable by him. There is little authority as to these wide general words, but it was suggested in Nash v Eli Lilly & Co [1993] 1 WLR 782, 800, that they would include any relevant information that had been given wide publicity in the press or on television, for instance as to a drugs unacceptable side effects, or its withdrawal from the market. In this appeal the Ministry of Defence has pleaded a large number of matters of that sort, starting in 1945 and going down to 1999, in sub paragraphs (a) to (j) of para 31 of its points of defence on the limitation issue. Adams marks a very important shift towards a more objective approach to the claimants state of knowledge. This goes a long way to blunt or blur the clear distinction, in ordinary discourse, between knowledge and belief. As Simon Brown LJ said in ODriscoll v Dudley Health Authority [1998] Lloyds Rep Med 210, 221, knowledge and belief inevitably shade into one another. Lord Donaldsons well known statement that reasonable belief will normally suffice is reinforced, but weight must be given to the belief being reasonable or, as Lord Wilson suggests, reasoned. The significance of legal advice There is one further problem about the how? question that I must address, before trying to draw some conclusions. It is the significance of the claimant seeking legal advice by consulting a solicitor. This is a topic that crops up repeatedly in the authorities, and judicial opinions have varied a good deal. In Halford v Brookes [1991] 1 WLR 428, 434, Russell LJ rejected the suggestion that other appropriate expert advice included legal advice. One of the most important changes, when the Limitation Act 1963 was replaced by the Limitation Act 1975, was to get away from the claimant needing to know about the technicalities of different causes of action. In general, legal advice is not a prerequisite to knowledge within the meaning of the 1980 Act (though this must be qualified in some cases within section 14A concerned with questionable advice on technical matters such as financial services and pensions: Haward v Fawcetts [2006] 1 WLR 682, paras 59 to 62 and 113 to 117). In line with that, in Halford v Brookes (p 443) Lord Donaldson put forward the test of knowledge as know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence. This formulation has been taken up in later cases, notably Nash v Eli Lilly & Co [1993] 1 WLR 784, 796 (point 3), Spargo v North Essex District Health Authority [1997] PIQR P235, P242 (point 3) and Haward v Fawcetts [2006] 1 WLR 682, para 9 (Lord Nicholls). That is a formidable line of authority. But still there is no clear consensus. Most strikingly, in Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213, Judge LJ (at P229) rejected the notion that time automatically starts to run against a client who has taken legal advice, whereas Simon Brown LJ (at P 234) found it difficult indeed to imagine a case where, having consulted a solicitor with a view to making a claim for compensation, a claimant could still then be held lacking in the requisite knowledge. I respectfully but unhesitatingly prefer the view of Judge LJ. The typical scenario for a claim for personal injury sustained from a bad working environment (exemplified by Ali v Courtaulds Textiles Ltd (1999) 52 BMLR 129) is for the potential claimant to go for medical advice to his general practitioner. The overworked GP is naturally more interested in diagnosis and treatment than in aetiology, unless his patient presses him. It is often a trade union representative (or in Mr Alis case a community worker) who at some later date advises the claimant to take legal advice, which at that stage can be no more than preliminary; it generally results in a referral to a medical specialist who is asked to advise on the likely cause of the trouble, as well as on the seriousness of the injury and its prognosis. The facts of Sniezek, as recounted in detail by Bell J at P216 to P217, show how protracted and uncertain that process can be. Mr Sniezek first consulted his union solicitors in 1990; it was 1994 before he obtained favourable medical advice linking the hyposensitivity of his aerodigestive tract with polymer exposure; and further investigations postponed the issue of the writ until 1998 (the reference to 1988 on P217 of the report is one of several obvious errors in editing). So in practice a claimants first visit to a solicitor may do no more than initiate the process of obtaining expert medical advice. That process may take years, with the solicitors function limited to the collation of medical and other technical evidence (such as the nature of the polymer in Ali, or the nature of the pesticide in Griffin v Clwyd Health Authority [2001] EWCA Civ 818, [2001] P1QR P31). In the present appeal several different branches of science and medicine are relevant to the what? question under section 14(1)(b), as appears from the different specialisms of the expert witnesses on both sides. To return to the original formulation in Halford v Brookes, it is clear that Lord Donaldson envisaged that the collection of evidence to support the claimants claim was something which would normally come after the date of knowledge, when the claimant first knows that he has a possible claim. That is how it was understood by Hoffmann LJ in Broadley v Guy Clapham & Co [1994] 4 All ER 439, 449. In a passage just before his reference to barking up the wrong tree Hoffmann LJ observed: How does one determine the essence of the act or omission? The purpose of section 14(1), as Lord Donaldson MR pointed out in Halford v Brookes [1991] 1 WLR 428 at 443, is to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant. He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ. Sniezek shows that in practice three years may not be enough where the claim for personal injury raises difficult issues of causation, and in the present appeal the causation issues are very complex indeed. Nevertheless there is a distinction in principle between a claimants knowledge (actual or constructive) that he has a real possibility of a claim (Brooke LJs second point in Spargo), and the assembly by the claimant and his legal team, with the help of experts, of material justifying the commencement of proceedings with a reasonable prospect of success. Of all the difficulties in this anxious appeal, the biggest difficulty of all, to my mind, is in the practical application of this abstract distinction between knowledge of the essence of a claim and the evidence necessary to prove it to the requisite legal standard. The judgments below There has been a good deal of discussion of the judges preferred view referred to in paras 514 to 521 of his judgment. It is apparent from para 521 that it amounts to setting a relatively high threshold [to] the level of appreciation of the material matters. But it is not entirely clear whether this relates to the degree of specificity of the section 14(1)(b) facts (which in this appeal is much the most important element in the what? question) or to the clarity or confidence of the lead claimants state of mind (the how? question). Paras 514 to 517 are concerned with the specificity of the facts, but then the judge seems to move on to the claimants state of mind. The Court of Appeal had no doubt that the preferred view set the threshold too high. It stated (para 85): It is clear from the principles set out in Spargo that it is the knowledge of possibilities that matters; a claimant needs only enough knowledge for it to be reasonable to expect him to set about investigation. He can have knowledge even though there is no helpful evidence yet available to him. The claimants contention that they did not have knowledge of possible attributability until they received the results of the Rowland study demonstrates a fundamental misunderstanding of the concept of knowledge for limitation purposes. This is to be contrasted with the judges preferred view (in para 514 of his judgment) that a claimant would not have knowledge unless he appreciated, not only that his injury was capable of being caused by abnormal radiation, but also that there is some credible evidence that he was exposed to ionising radiation at an abnormal level during, or shortly after, and in consequence of, the nuclear tests. The Court of Appeal described the judges preferred view (and the critical importance which it places on the Rowland study) as demonstrating a fundamental misunderstanding. In my respectful view this criticism is too strongly expressed. The judge had, during his ten days of the hearing of the preliminary issue, and the further period when he was writing his very clear and comprehensive judgment, taken on board an enormous mass of complex evidence and some intricate legal submissions. There was no legal test by which he could, as with an alchemists touchstone, distinguish essence from evidential support. It was a matter of considering the voluminous material before him, stepping back, and making an evaluative judgment. It is an exercise on which an appellate court will be slow to differ from the trial judge who has seen and heard several of the lead claimants (or their widows) giving evidence. I respectfully doubt whether the Court of Appeal was right to differ from the judge in his conclusion that the belief of many of the claimants that they had been exposed to prompt radiation was a significant misconception which (had it stood alone) would have amounted to barking up the wrong tree. But as the Court of Appeal pointed out, it did not stand alone. The facts as to fallout exposure to alpha and beta radiation were readily available and widely known, and exposure to fallout was pleaded as part of the lead claimants case. More crucially, however, I respectfully consider that the judge was wrong, not only in his preferred view, but also in his evaluation of the state of knowledge at the lower level of appreciation which he instructed himself to apply. Even under the more demanding test adopted on the preferred view, it was common knowledge from the 1980s (indeed, from soon after the bombs dropped on Hiroshima and Nagasaki in 1945) that exposure to fallout radiation could cause leukaemia, many other forms of cancer, infertility and other serious injuries. It was also well known that many of the 22,000 service personnel who took part in the nuclear tests had been exposed to fallout radiation which, while relatively low, was above the normal background radiation to which all living creatures are exposed. The real difficulty for the claimants was to produce cogent evidence, either from their individual medical histories or from epidemiological material, that the dose of radiation was sufficiently high for a causative link with their injuries to be established on the balance of probabilities. The Ministry of Defence adamantly maintained throughout that their exposure was for practical purposes negligible, and this seems to have been confirmed by successive NRPB epidemiological reports in 1988, 1993 and 1999 (apart from a small additional risk in respect of most forms of leukaemia and multiple myeloma) and by the Phelps Brown study (of cataracts) in 1996 1997. The Rowland study (the results of which were made available to the claimants in 2007, before its full publication in 2008) was seen by the claimants and their advisers as a long awaited breakthrough in the evidence of causation (the Ministry of Defence are very critical of this report, but that issue lies in the future). All this is carefully recorded, in very much greater detail, in the judges judgment. But the judge did in my view err in treating the Rowland report as essential rather than evidential. Putting it in the simplest terms (and I am very conscious of the danger of over simplification in this appeal), I think that the judge erred on the what? question rather than on the how? question. My final position is therefore close to that set out in Lord Wilsons judgment, and I gratefully adopt his summary (at paras 16 to 24) of the particular circumstances of the individual appellants. I agree with Lord Wilson that it was appropriate for the Court of Appeal to make a fresh exercise of discretion under section 33 of the 1980 Act. I also agree that because of the unusual course which the preliminary issue has taken, and the mass of evidence touching on the causation issue, the Court of Appeal was in an unusually good position to exercise that discretion, and this Court should not interfere with its decision not to let any of the appellants claims proceed. I do however have reservations about Lord Wilsons proposition (concurred in by Lord Mance) that the effect of the statutory provisions is that the claimant is assumed to have a cause of action. No doubt this is correct in the general sense that every claimant who issues a claim form commencing contentious proceedings is assumed to have a cause of action unless and until his particulars of claim are struck out, or the action is discontinued or dismissed. But I do not see that this general assumption helps, and it may actually be a distraction, in understanding the way that sections 11, 14 and 14A of the 1980 Act operate. The putative character of the section 14(1)(b) and section 14A(8)(a) facts depends not on any implicit assumption but on the long standing and consistent meaning which the courts have given to attributable. So I am inclined to think that this is a novel and unnecessary refinement. Like Lord Wilson and Lord Mance, I most respectfully disagree with much of Lord Phillipss reasoning. I do not see how a claimant who has issued a claim form claiming damages for personal injury can be heard to suggest that he did not, when it was issued, have the requisite knowledge for the purposes of the 1980 Act. More generally, I consider that the practical result of Lord Phillipss analysis would be a situation that Parliament cannot have intended when it enacted these provisions. It would mean that persons (and sometimes, as in this case, large groups of persons) with a belief that they had suffered personal injuries through the fault of a government department or local authority, or any other public sector or private sector body, but with no real prospect of proving legal liability on the balance of probability, would be able to keep their claims on ice, as it were, for an indefinite period, in the hope that one day the right evidence might turn up. Our judgments on this appeal will not, I fear, be an ideal source of guidance to lower courts which regularly have to deal with these difficult problems. There are two reasons for that: the extreme complexity of this group litigation, and the division of opinion in the Court. For my part I would suggest that short summaries like that of Brooke LJ in Spargo (which Lord Phillips rightly describes as a valiant attempt) may be unhelpful if treated as if they were statutory texts. The words of the 1980 Act themselves must be the starting point, illuminated where necessary by judicial exposition, of which the opinion of Lord Nicholls in Haward v Fawcetts [2006] 1 WLR 682, paras 8 to 15, is the most authoritative. To that guidance I would tentatively add two points. In a complex case section 14(3) is an essential part of the statutory scheme, not an occasional add on. And the date of a claimants first visit to a solicitor is (without more) of very little significance in most cases. LORD BROWN I too would dismiss these appeals for the reasons given by Lord Walker, Lord Mance and Lord Wilson. I do not believe that there are any significant differences between their three judgments but, if there are, and if something approaching a canonical text is required, I would align myself principally with Lord Wilsons reasoning. Perhaps the most critical proposition to which each of the above three judgments commits is (in Lord Wilsons words at para 3): It is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim. As Lord Walker puts it at para 67: I do not see how a claimant who has issued a claim form claiming damages for personal injury can be heard to suggest that he did not, when it was issued, have the requisite knowledge for the purposes of the 1980 Act. Although Lord Walker in the previous paragraph expressed reservations about Lord Wilsons proposition (concurred in by Lord Mance) that the effect of the statutory provisions is that the claimant is assumed to have a cause of action, I do not myself understand these reservations to amount to any ultimate difference in approach. Rather it seems to me that the only point Lord Wilson (and Lord Mance) are making when they say that, in deciding whether a given claim is statute barred, the court has to assume that the claimant has knowledge of the facts necessary to support his pleaded cause of action, is that the claimant cannot at that stage be heard to suggest otherwise ie just what Lord Walker then says in the above quoted para 67. In short, once a claimant issues his claim, it is no longer open to him to say that he still lacks the knowledge necessary (by reference to sections 11 and 14) to set time running. On Lord Phillips approach, the more hopeless the claim, the likelier it is that the claimant will be in a position to defeat the Limitation Act defence, and this, indeed, no matter how long ago (some half a century in the present cases) the alleged cause of action arose. With the best will in the world, this simply cannot have been Parliaments intention. I share to the hilt Lord Phillips view (expressed at para 158) that these claims have no reasonable prospect of success. But I profoundly disagree with his conclusion that on this account, because there were no known facts capable of supporting a belief that the veterans injuries were attributable to exposure to ionising radiation (para 139), even the Rowland report fall[ing] well short of establishing causation according to established principles of English law (para 157), time has still to this day not begun to run. Nor do I find any more persuasive Lord Kerrs view that time [began] to run from the date that [the veterans] became aware of or ought to have been aware of the contents of the Rowland report (para 211) so as to delay the claimants date of knowledge until after their claims were issued presumably until they saw the Rowland report in June 2007. The plain fact is that, despite decades spent urgently trying to assemble a viable case, on the evidence as it presently stands these claims (in which huge costs have already been expended) are doomed to fail. As the claimants then leading counsel readily accepted in argument for the Court of Appeal, We havent got material which gets you near a balance of probabilities so that a further policy exception (to the Fairchild exception) would be needed to allow for a claim based merely on a material increase in risk a development of which, in the light of this courts judgments in Sienkiewicz v Greif [2011] 2 AC 229, Lord Phillips at para 157 rightly recognised there to be no foreseeable possibility. Even had I been persuaded that time had not run in any of these cases I would, like Lord Mance, nevertheless have been disposed to dismiss them. As he says at para 88: If proceedings have no proper basis in fact, they should not be allowed to persist. In short, although the veterans can hardly be expected to recognise this, these appeals now provide the court with the opportunity, rather than yet again to extend, instead once and for all to end, the false hopes on which these claims have for so long rested. LORD MANCE Lord Phillips and Lord Wilson have expressed radically different views about the concept of knowledge in the Limitation Act 1980. The present appeals concern personal injuries claims, and their disagreement relates to the knowledge referred to in sections 11(4)(b), 12(2)(b) and 14. But parallel disagreement must necessarily exist between them with regard to sections 11A(4)(b) and (5)(b) (actions in respect of defective products) and 14A (special time limit for negligence actions, other than for personal injuries, where facts relevant to cause of action are not known at date of accrual). The correct resolution of this disagreement is of general importance. In my opinion, Lord Wilsons analysis is consistent with and correct in the light of prior authority, and is the analysis which makes sense of the statute and its purpose. I agree with his reasoning and conclusions. I shall not repeat his examination of authority, but content myself with a few points. First, the statute assumes that a cause of action has accrued (section 11(4)(a)) and that facts exist of which knowledge may exist (section 14(1)). Such facts include an injury which is significant (section 14(1)(a)), and which is attributable to an act or omission now alleged to constitute negligence, nuisance or breach of duty (section 14(l)(b)). Attributable here means capable of being attributed as a possible cause of the damage, as opposed to a probable one: see Spargo v North Essex District Health Authority [1997] PIQR P235 and Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682, paras 10 11, per Lord Nicholls). The facts further include the identity of the defendant (section 14(1)(c)) and, if the relevant act or omission is of some other person, the identity of that person and the additional facts supporting the bringing of an action against the defendant (section 14(1)(d)). The assumption that a cause of action and relevant facts exist favours the claimant. They are taken as given. There is no investigation at this stage as to whether they can be made good. The facts to which paragraphs (a) to (d) of section 14(1) refer must be ascertained from the way in which the claimant puts his or her case in the proceedings which are being pursued. Hoffmann LJ encapsulated this in a much quoted sentence in Broadley v Guy Clapham & Co [1994] 4 All ER 439, 448h j: Section 14(1)(b) requires that one should look at the way in which the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based. This passage was repeated by Hoffmann LJ, giving the judgment of the court, in Hallam Eames v Merrett Syndicates Ltd [2001] Lloyds Rep PN 178, 181. Significantly, it received full approval by the House of Lords in Haward v Fawcetts [2006] 1 WLR 682, a decision under section 14A(5). Lords Nicholls, Lord Walker and I all quoted the passage with approval (paras 10, 62 and 120), with Lord Walker adding: The court is concerned with the identification of the facts which are the essence or essential thrust of the case or which distil what [the claimant] is complaining about (para 66). Lord Scott accepted and applied the opinions expressed in Nash v Eli Lilly & Co [1993] 1 WLR 782, Dobbie v Medway Health Authority [1994] 1 WLR 1234 and Hallam Eames that the requisite knowledge is knowledge of the facts constituting the essence of the complaint of negligence (para 49). Lord Brown said that What the claimant must know to set time running is the essence of the act or omission to which his damage is attributable, the substance of what ultimately comes to be pleaded as his case in negligence (para 90). The speeches in the House of Lords endorsed guidance regarding the concept of knowledge given in a series of Court of Appeal decisions, going back to Halford v Brookes [1991] 1 WLR 428. Lord Nicholls said (para 9): Thus, as to the degree of certainty required, Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443. He noted that knowledge does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: 'suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice'. In other words, the claimant must know enough for it to be reasonable to begin to investigate further. Lord Walker noted at para 57 the numerous cases showing that the starting point may occur at a time when a claimants knowledge about his complaint is far from complete, that a claimant may have the requisite knowledge . even though he may not yet have the knowledge sufficient to enable him or his legal advisers to draft a fully and comprehensively particularised statement of claim, but that by the time, often years later, that the limitation issue comes to be decided, whether as a preliminary issue or at trial, the claimant's case will have been pleaded, and the defendant's act or omission which is alleged to constitute negligence will (or at any rate should) have been clearly identified. I referred to the same passage as Lord Nicholls (paras 112 and 126). These passages indicate that courts, by using the words reasonable belief as part of the description of the requisite knowledge, are focusing not so much on whether or how far the belief is evidence based, but more on whether it is held with a sufficient degree of confidence to justify embarking on the preliminaries to making a claim including collecting evidence. There is a degree of circularity about such a definition, but this is probably inherent in the concept of knowledge in any context (cf Insurance Corporation of the Channel Islands v Royal Insurance (UK) Ltd (unreported) (Comm Ct, 30 July 1997), where, in the different context of affirmation, I described it as a jury question). If a claimant is pursuing proceedings which he has issued for personal injuries and his state of mind when he issued them was in substance no different from his state of mind for more than the three prior years, then, in agreement with Lord Wilsons para 5 and the passages he there cites, I find it difficult to see how he can claim in those proceedings that he lacked sufficient knowledge of the facts asserted for the purposes of the Limitation Act 1980. It is of course for a claimant to put his case as he thinks fit. No one is bound to commence proceedings, and the position may be different it is unnecessary to decide if the claimant has issued proceedings which he is no longer pursuing and in relation to which no limitation issue can therefore arise (as was the case in Whitfield v North Durham Health Authority [1995] 6 Med LR 32). But, if a claimant elects to issue and is pursuing proceedings, he must identify the case made and stand by it. Among the allegations which must, either explicitly or implicitly, be made, is that the case is not time barred. Once an issue of knowledge is identified as arising under sections 11(4)(b) and 14(1), the onus lies upon the claimant to make good his case on knowledge, as I noted in Haward v Fawcetts, para 106. A claimant bringing proceedings necessarily asserts that he or she has a properly arguable claim. In the present cases, the claims were expressly to the effect that the claimants had suffered personal injuries by reason of the negligence of the defendant in exposing them to radiation, radioactivity or contaminated material in one way or another. In modern procedure, such an assertion is attested by a statement of belief, as Lord Wilson notes in para 3, and so it was here. Once proceedings are begun, it is by reference to the facts asserted as giving rise to the claim that the question of knowledge must be tested. The claimant cannot avoid this. Indeed, it is difficult in normal circumstances to think of a claimant trying to do so. Nor did the claimants originally try to do so in the present case. They pleaded a case of conventional causation. However, shortly before and at trial, the case run acknowledged in effect that causation could not be established as a matter of probability. The argument then was that a material increase in risk was sufficient. The hope was to invoke the principle or an extension of the principles in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and/or Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32. That was and is, however, a hope without prospect of success. During the trial of the present issue, the emphasis shifted to an attempt to show that, by the time of any trial on the merits, the claimants could hope to have acquired evidence to show causation by reference to a balance of probability or a doubling of risk or a synergical effect. As matters stand, the claimants clearly have no case on causation. But that is no answer in my opinion to their limitation problems. They have chosen to bring proceedings on the basis of certain facts. Whether the facts by reference to which their case falls to be assessed for limitation purposes are those pleaded (a straightforward allegation of causation) or those later asserted (an increase in the risk of injury being caused or, now, an admission that the claimants cannot presently establish causation, coupled with a submission that the proceedings should continue in the hope that causation will in future prove possible to establish), the limitation question is not whether those facts give rise to a good claim in law. It is when the claimants first had knowledge of those facts, in accordance with the test indicated in Halford v Brookes. This they did, in each of the nine cases before the Court, more than three years prior to the issue of the proceedings (or, in the case of Mr Ogden, more than three years prior to his death). The opposite view of the law taken by Lord Phillips leads him to the conclusion that the claimants can overcome or avoid any limitation problems, because they have never had and still do not have the knowledge of any facts which could lead to success. The defendants appropriate response to this situation would, in his view, have been to apply to strike out the claims or for summary judgment. If Lord Phillips is right about this bifurcation of remedies, then, contrary to Lord Phillips reference to the present case involving an unusual feature (para 93) or unusual facts (para 147), I think that it could often be relevant. The present case illustrates that the weakness of a claimants factual case may become apparent in relation to issues arising in conjunction with a limitation defence, such as an application for an extension of time under section 33. Defendants often deny that any factual basis exists for a claim, and, particularly though not exclusively where the claim is said to have been fabricated, it would follow that, on their case, the claimant could never have had knowledge, in the evidence based sense in which Lord Phillips uses the word, of essential facts on which the claim was based. As a matter of caution, a defendant contemplating the possibility that the claim might be time barred would be bound to consider the possibility that the court might conclude that the claimant had probably not had evidence based knowledge of the facts alleged, and so that the claim could not properly be struck out. To cover this possibility the defendant would have to adopt a double limbed approach. One limb would be based on limitation; in relation to that the onus would be on the claimant. The other limb would involve an application to strike out or for reverse summary judgment, grounded on the absence of any factual basis for the claimants case; in relation to that the onus would be on the defendant. In the present case, Lord Phillips concludes that the claimants can overcome the limitation problem, because even now they have no evidence for the facts that they need to show in order to succeed. But Lord Phillips refuses to strike out or dismiss the claims, because the defendant has not pursued any formal application to that effect. That is a result which would I think be viewed with some surprise by an observer of the English legal system. It is not one with which I could concur, even if I were otherwise of Lord Phillips view. If proceedings have no proper basis in fact, they should not be allowed to persist. I agree with Lord Wilsons remarks in this connection, particularly with his indication that the fact that this is a group action should not be allowed to prejudice any other claimant who may show that in his or her particular circumstances there is a viable claim which is not time barred. On the question whether there should be an extension of time under section 33, the Court of Appeal was in my view right in concluding that the judge erred in the exercise of his discretion and that it was incumbent on it to re exercise the discretion, as it did on a generic basis. To the reasons it gave, particularly in paras 103 to 111, one might add the judges under estimate of the difficulties on causation (evident for example in paras 187 and 230 of his judgment) when linked with references to the claimants genuinely believing on apparently reasonable grounds that they have a case and to a credible fall out case (paras 618 and 625). These passages also suggest that he must have approached the issue of discretion on a wrong basis. DISSENTING JUDGMENTS LORD PHILLIPS Introduction Between October 1952 and September 1958 the respondent (MoD) carried out experimental explosions in the atmosphere of a total of 21 thermonuclear devices. This was a mammoth operation. It took place in Australia and the South Pacific and involved approximately 22,000 soldiers, sailors and airmen, many of whom were performing National Service. From these servicemen are drawn the majority of the 1011 claimants, most of whom commenced a group action on 23 December 2004 but a minority of whom have joined the action by claim forms issued on various dates between 16 November 2007 and 29 September 2008. They have become known as atomic veterans and I shall call them the veterans. Some of the claims are brought by the personal representatives of veterans who have died. Each claim alleges breach of duty on the part of the MoD in exposing the veteran to radiation that has caused illness, disability or death. I shall refer to these alleged consequences, which in most cases involve some form of cancer, simply as injuries. There is an issue in many of the individual cases as to whether the claim is time barred under the provisions of the Limitation Act 1980. On 5 July 2007 the Senior Master ordered, inter alia, that this question be tried as a preliminary issue. Further to that order the group and the MoD each selected five lead cases for the trial of the issue of limitation. The object of the Senior Masters order was to obtain rulings on issues that are generic to all the cases. It has been common ground that the question of whether their claims are time barred has to be decided case by case on consideration of the particular facts of each case, but there are issues of law and of the application of the law in a case such as this that are generic. The application of the 1980 Act to claimants involved in group litigation raises particular difficulties that will have to be explored. The issues Three generic issues arise. Sections 11 and 14 of the 1980 Act (section 11 and section 14) together provide that the limitation period within which a claimant must bring a claim in respect of personal injuries that he has suffered is three years from the date when the cause of action accrued or, if later, the date when he acquired knowledge that he had sustained an injury that was attributable to the act or omission which he alleges constituted breach of duty on the part of the defendant. I shall refer to this as knowledge of attributability by way of shorthand. A similar provision in relation to knowledge applies in the case of a claim brought by a personal representative or dependant of someone who has died. For the sake of simplicity I shall throughout this judgment treat the veterans as being the claimants. The first generic issue relates to the extent to which knowledge can be equated with belief. So far as concerns the existence of facts, knowledge and belief are words that can, in some circumstances at least, be used to describe the same state of mind. My knowledge of my birthday is the same as my belief as to the day on which I was born. There is an issue as to whether, in all circumstances, knowledge can be equated with subjective belief for the purposes of sections 11 and 14. The second generic issue arises out of an unusual feature of this case. It is the MoDs case that there are no known facts that support the allegations of breach of duty and causation pleaded by the claimants. It is the veterans own primary case that they only acquired knowledge of attributability after they had commenced their proceedings. This raises the question of the effect of the 1980 Act and the proper approach of the court if proceedings are commenced before the litigant has acquired the knowledge that would normally cause time to begin to run. That question has to be considered in the context of a group action. The third generic issue relates to section 33 of the 1980 Act (section 33). This gives the court power to allow an action to proceed notwithstanding that it has not been commenced within the limitation period. The Court of Appeal declined to exercise this power in relation to any of the veterans. A common reason for the decision in the case of each veteran was that the claim had no realistic prospect of success. There is an appeal against that decision in each case. The question arises of the relevance of individual prospects of success where group litigation is being pursued. The uncertainties The problems to which this appeal gives rise are due, in large measure, to the absence of evidence of fact that supports the claim that the veterans injuries are attributable to exposure to ionising radiation. Exposure to radiation can damage your health in one of two ways. If you are close to the explosion you can be exposed to what is called prompt radiation from gamma rays. This radiation, while powerful, is short lived. Alternatively you may be exposed to fall out of alpha and beta particles. These can be carried quite some distance from the seat of the explosion. If they are ingested by breathing or swallowing they can remain within the body for a significant period during which they will continue to radiate, producing a cumulative effect. The master particulars of claim were served on 29 December 2006. The veterans solicitor has endorsed them with the requisite statement on behalf of the veterans that they believe the facts stated in the particulars of claim to be true. Those facts include: allegations in para 13 of both external and internal exposure and i) an allegation in para 2 that each veteran was exposed to radiation, radiation contamination, radioactivity, radioactive fallout and/or biological residue during the conduct of the tests and their aftermath; ii) failure to protect against exposure to ionising radiation; iii) allegations in para 13 of failure to prevent servicemen from contamination with radioactive fallout as a result of swimming and consuming seafood. Thus both prompt and fallout exposure is alleged. The uncertainties The areas of uncertainty were and are twofold, albeit that the two are interlinked. The first is whether the veterans were exposed to radiation as alleged. The second is whether their injuries have been caused by exposure to radiation. Each of these matters is alleged by the veterans and denied by the MoD. Mr Dingemans QC submits that this uncertainty has recently significantly diminished. Although the claimants believed that the veterans had been exposed to ionising radiation there was no objective ground for this belief until the preparation of a report (the Rowland report) in 2007. The Rowland report gives the results of tests on blood samples taken from 50 New Zealand veterans who had served on ships that were no closer to the site of some of the tests than had been most, if not all, of the claimants. Many, though not all, of the samples showed an abnormal incidence of changes to chromosomes that was indicative of exposure to low dose radioactive fallout. Mr Dingemans submits that these tests provided, for the first time, objective grounds for concluding that the veterans were subjected to similar exposure. I shall deal with the significance of this submission in due course. At the start of the hearing of the limitation issue before Foskett J the veterans abandoned that part of their claim that alleged exposure to prompt radiation. As allegations of exposure to prompt radiation had been at the forefront of their claims this was a dramatic change of stance. The claims are now solely based on alleged exposure to radioactive fallout. If that alleged exposure can be proved, it does not follow that the veterans have viable claims. It will still be necessary to prove that the injuries in respect of which the claims are made were caused by the exposure. The veterans are not currently in a position to prove this. There is scientific evidence that demonstrates that ionising radiation is capable of causing some, at least, of the injuries in respect of which individual claims are brought. There are, however, other potential causes of such injuries. They are experienced by many of the same age as the veterans for a variety of reasons. The most that the evidence currently available can establish is that such low dose exposure as may be proved will have increased the risk to the particular veteran of sustaining the injury in respect of which the claim is made. There is no known basis for concluding that the exposure will have gone so far as to double that risk. On the law as it stands, merely proving an increase in risk will not establish a good cause of action. To succeed a veteran must show that, on balance of probability, the injury would not have been sustained had it not been for the exposure. In the course of argument Mr Dingemans accepted that none of the 9 lead claimants currently has the evidence needed to establish a credible case of causation. The 1980 Act The following are the material provisions of the 1980 Act. 11 Special time limit for actions in respect of personal injuries. (1) This section applies to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statue or independently of any contract or any such provision) where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in respect of personal injuries to the plaintiff or any other person. (3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) or (5) below. (4) Except where subsection (5) below applies, the period acceptable is three years from (a) the date on which the cause of action accrued: or (b) the date of knowledge (if later) of the person injured. (5) If the person injured dies before the expiration of the period mentioned in subsection (4) above, the period applicable as respects the cause of action surviving for the benefit of his estate by virtue of section 1 of the Law Reform (Miscellaneous Provisions) Act 1934 shall be three years from (a) the date of death: or (b) the date of the personal representatives knowledge; whichever is the later. 14 Definition of date of knowledge for purposes of sections 11 and 12 (1) In sections 11 and 12 of this Act references to a persons date of knowledge are references to the date on which he first had knowledge of the following facts (a)that the injury in question was significant; and (b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty; and (c) the identity of the defendant; and (d) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant; and knowledge that any acts or omissions did or did not, as a matter of law, involve negligence, nuisance or breach of duty is irrelevant. (2) For the purposes of this section an injury is significant if the person whose date of knowledge is in question would reasonably have considered it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment. (3) For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, act on) that advice. 33 Discretionary exclusion of time limit for actions in respect of personal injuries or death. (1) If it appears to the court that it would be equitable to allow an action to proceed having regard to the degree to which (a) the provisions of section 11 or 12 of this Act prejudice the plaintiff or any person whom he represents; and (b) any decision of the court under this subsection would prejudice the defendant or any person whom he represents; the court may direct that those provisions shall not apply to the action, or shall not apply to any specified cause of action to which the action relates. The draftsman of the Act seems to have proceeded on the basis that, by the time that the action was commenced, there would be no doubt that the act or omission alleged had caused the claimants injury. That impression is further supported by section 33(3) (e). This includes in the matters relevant to the exercise of the discretion that the court enjoys under section 33: the extent to which the plaintiff acted promptly and reasonably once he knew whether or not the act or omission of the defendant, to which the injury was attributable, might be capable at that time of giving rise to an action for damages. Thus the Act does not address what constitutes knowledge that an injury is attributable to an alleged act or omission where there is an issue between the parties as to whether the alleged act or omission occurred at all and, if it did, as to whether it caused the claimants injury. The approach of the courts below One of the ten lead cases related to a veteran called Sinfield. Foskett J held that he was first diagnosed as having a significant injury less than two years before he commenced proceedings. That finding has not been challenged by the MoD, which now accepts that the claim in relation to Mr Sinfield is not time barred. It is the other 9 cases that raise the question of the meaning of knowledge. Foskett J and the Court of Appeal held that the test of knowledge had been laid down by binding authority. The relevant case law demonstrated that the knowledge referred to in sections 11 and 14 could be equated with subjective belief. Each veteran had pleaded exposure to atomic radiation causing injury. Each veteran acquired the relevant knowledge at that moment in time when he formed the subjective belief that his injury was attributable to exposure to radiation. Attributable to did not mean caused by but capable of having been caused by. Thus the courts below held that each case turned on its own facts. The evidence bearing on each veterans state of mind had to be examined in order to identify when he first had the belief that started time running. The hearing before Foskett J lasted 10 days. The evidence called included expert evidence in relation to the development of scientific knowledge of the effects of ionising radiation. Individual veterans gave evidence of their knowledge and belief in relation to the injuries sustained and their cause. Having analysed the evidence Foskett J delivered a judgment that was 885 paragraphs in length. He held that 5 of the 10 claims had been commenced more than 3 years after the date when the relevant knowledge was acquired. In relation to those claims he exercised his discretion under section 33 in favour of the veteran, so that the claims were permitted to proceed. He held that the other 5 claims had been started within three years of acquiring the relevant knowledge, so that they were in time. The hearing before the Court of Appeal spanned a week. The judgment of the Court, delivered by Smith LJ, was 305 paragraphs in length. The Court of Appeal did not differ in principle from the approach of Foskett J. The test to be applied was one of subjective belief. When looking at the individual cases, however, the Court repeatedly held that Foskett J had applied too high a threshold of knowledge or belief. The Court held that in the case of each of the 9 claimants knowledge had been acquired more than three years before proceedings were commenced. The Court of Appeal held that Foskett J had erred in principle in the exercise of his discretion under section 33. None of the 9 claims should be permitted to proceed. There was one common objection to permitting the claims to proceed. This was that none of them had a realistic prospect of success. We were told that the veterans have been represented in the limitation proceedings under a conditional fee agreement (CFA) that is restricted to those proceedings and that if they were successful they would seek to recover from the MoD costs in the sum of 17.5m, inclusive of success fee and ATE premium. The first generic issue: the meaning of knowledge Foskett J had toyed with an alternative test of knowledge, which he had described as his preferred view. This introduced into the test of knowledge an objective element. No veteran could acquire the knowledge that started limitation running until there was accessible to him scientific evidence that demonstrated the possibility that his injury was caused by exposure to ionising radiation. That evidence was provided for the first time by the Rowland report. All claims were brought within three years of the publication of that report, indeed most of them, including the claims of all of the lead cases, were brought before it was published. It followed that no claim was out of time. Foskett J concluded, however, that he was precluded by authority from applying his preferred view. The Court of Appeal held that he was right to reach that conclusion. Mr Dingemans has put the preferred view at the forefront of his case before us. He has urged this Court to hold that no veteran acquired knowledge until the Rowland findings were published. By way of alternative submission he has sought to restore the findings of Foskett J, urging that they were correct and not findings with which the Court of Appeal should properly have interfered. Mr Gibson QC for the MoD observed that, if the preferred view is correct, none of the nine claimants had the relevant knowledge when they commenced proceedings. He submitted that the Court of Appeal was correct both in its approach and in its conclusions. Subjective belief in attributability amounts to knowledge of attributability. What is the test of knowledge? I turn to consider the authorities that led Foskett J, reluctantly, and the Court of Appeal to conclude that knowledge could be equated with subjective belief. Sections 11 and 14 are concerned with knowledge of what section 14(1) describes as facts. The significant facts are (i) the injury sustained by the claimant (ii) the act or omission of the defendant alleged to constitute a breach of duty and (iii) the fact that the injury is attributable to that act or omission. In many claims for personal injury all three will be matters of which a claimant can sensibly say he has knowledge. The cause of the injury will be known to the claimant from his own observation. There will be some cases, however, where cause and effect are not clear. Primary facts may be in issue. Or the causal nexus between those facts may only be capable of ascertainment by the application of specialist knowledge or expertise that the claimant does not enjoy. Even then, they may only be capable of evaluation on the basis of degree of probability. This is such a case. I turn to consider the cases that address the problem of knowledge where the material facts are not clear. My starting point is the unreported case of Davis v Ministry of Defence (July 26 1985, CA; Transcript No 413 of 1985). The plaintiff contracted dermatitis when working for the defendant. He believed that it was caused by his conditions of work. His general practitioner was of the same view. Accordingly he started an action against the defendant in 1973, but he did not pursue it because he received advice, including expert medical advice, that the action had no reasonable prospect of success. He continued to believe, however, that the defendant was responsible. In 1982 after another attack of dermatitis he received fresh medical advice that, contrary to the previous advice, his condition was likely to be caused by his conditions of work. He began a fresh action. An application to strike this out on the ground that his claim was unarguably out of time succeeded at first instance, but was reversed by the Court of Appeal. May LJ said this at pp 7 and 9 of the transcript in relation to knowledge under section 14: Knowledge is an ordinary English word with a clear meaning to which one must give full effect: reasonable belief or suspicion is not enough. The relevant question merits repetition When did the appellant first know that his dermatitis was capable of being attributed to his conditions at work? With all respect to the learned judge, I think that he wrongly assimilated what the appellant firmly believed throughout to what he knew. I have no doubt, as I have said, that the appellant has always believed that his dermatitis was due to his employers fault and that he had a good claim against them. However, it is clear that he was advised that he did not and the combined state of mind of the appellant himself, as a layman and that of his doctors and legal advisers, which must be attributable to him by section 14(3) of the 1980 Act, cannot, in my opinion so surely be said to have been such that they knew, prior to 10 November 1978 that the dermatitis was capable of being attributed to the appellants working conditions. This is the first case where the plaintiff knew of both the facts that he alleged had caused his illness and of the illness itself, but where the uncertainty related to causation. It is of particular interest that May LJ applied section 14(3) so as to give the plaintiff constructive knowledge that his illness was not attributable to his conditions of work. Also significant is his interpretation of attributable as meaning capable of being attributed. Where the uncertainty is as to causation of an illness or disease there may be a number of possible causes. In this situation the meaning of knowledge raises particular problems. The claimant is unlikely to be in a position to form a considered view of the cause of his illness from his own knowledge. He will need advice on this. The relevant knowledge is thus likely to be constructive, under section 14(3)(b). Applying the approach of May LJ, the claimant will not have knowledge that his illness is attributable to a particular cause unless there is a body of respectable medical opinion that recognises that this is possible. In Halford v Brookes [1991] 1 WLR 428 the plaintiff had issued a writ as administratrix making a civil law claim for damages against two defendants for murdering her daughter nine years before. One defendant had been prosecuted for murder and acquitted, essentially because, although it was obvious that one or other of the defendants had murdered the young girl, it was not clear which had done so. There were strong grounds for suspecting that both defendants had been complicit in the murder. The plaintiff delayed commencing proceedings because she was unaware that it was open to her to make a civil claim. The defendants defence denied the allegation of murder but, at the same time, contended that the claim was time barred because the plaintiff had had knowledge that the murder was attributable to them for well over three years. At first instance Schiemann J remarked upon the paradox of this stance, but held that the claim was time barred. In the Court of Appeal Lord Donaldson of Lymington MR held that May LJs definition of knowledge in Davis could only be applied to the special facts of that case. He held at p 443: Knowledge clearly does not mean know for certain and beyond possibility of contradiction. It does, however, mean know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence. Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice. Thus the Master of the Rolls applied an objective test to the quality of the belief. It had to be sufficiently firm to justify taking the preliminary steps towards the issue of proceedings. Furthermore, although Lord Donaldson referred to belief, the belief in question was based upon knowledge of facts that gave rise to the inference that the two defendants had been guilty of murder. This was not a case, such as Davis, where the uncertainty was whether medical evidence supported a link between working conditions and the illness contracted. It was uncertainty as to some of the primary facts. Where some of the primary facts are in the exclusive knowledge of the defendant, reasonable belief in the existence of those facts will necessarily be founded on other secondary facts. Thus, on analysis, the test applied in Halford was whether the facts known to the plaintiff should have led a reasonable person with knowledge of the law to take steps to commence legal proceedings. Davis received detailed consideration by the Court of Appeal in Nash v Eli Lilly & Co [1993] 1 WLR 782. This case is of particular importance because, like the present case, it involved a group action in which lead claimants had been selected. The group action was for personal injuries, in the form of unpleasant side effects (injuries), in particular photosensitivity, alleged to have been caused by taking the drug known as Opren. This drug was withdrawn from the market in 1982 and by the time of the limitation proceedings it was common ground that Opren was capable of causing the injuries in respect of which the claims were brought. The actions were commenced in 1987 and 1988. Just as in the present case limitation was tried as a preliminary issue. One issue related to the date at which each plaintiff acquired knowledge that he had sustained a significant injury. The more pertinent issue was the date on which he acquired knowledge that this injury was attributable to Opren. The trial judge held that if a plaintiffs medical practitioner would have advised him that his symptoms could be attributable to Opren, he had constructive knowledge of that fact. The position of each of the lead plaintiffs was explored and it was held that most of the claims were time barred. The hearing in the Court of Appeal lasted 12 days and the judgment of the Court was delivered by Purchas LJ. A particular issue arose in relation to the position of at least one of the claimants who had formed the firm belief that his injuries were attributable to Opren but who did not bring proceedings because he was advised by a specialist that this was not so. The Court gave detailed consideration to Davis in a lengthy portion of its judgment dealing with the distinction between belief and knowledge. This included the following critical passage: It is to be noted that a firm belief held by the plaintiff that his injury was attributable to the act or omission of the defendant, but in respect of which he thought it necessary to obtain reassurance or confirmation from experts, medical or legal, or others, would not be regarded as knowledge until the result of his inquiries was known to him or, if he delayed in obtaining that confirmation, until the time at which it was reasonable for him to have got it. If negative expert advice is obtained, that fact must be considered in combination with all other relevant facts in deciding when, if ever, the plaintiff had knowledge. If no inquiries were made, then, if it were reasonable for such inquiries to have been made, and if the failure to make them is not explained, constructive knowledge within the terms of section 14(3) must be considered. If the plaintiff held a firm belief which was of sufficient certainty to justify the taking of the preliminary steps for proceedings by obtaining advice about making a claim for compensation, then such belief is knowledge and the limitation period would begin to run. The last sentence suggests that a firm belief that an injury is attributable to an alleged act or omission can start the limitation period running however unreasoned or ill informed that belief may be. This was the start of a series of decisions that equated knowledge with subjective belief. Broadley v Guy Clapham & Co [1994] 4 All ER 439 involved a claim against a solicitor for professional negligence. There was an underlying issue as to whether a claim that the plaintiff had enjoyed against a surgeon had become time barred. The surgeon had operated on the plaintiffs knee and the operation had left her with foot drop. The trial judge held that she did not herself have knowledge that the surgeon had caused this outcome but should have sought medical advice that would have disclosed this fact. Thus she acquired constructive knowledge under section 14(3)(b). The Court of Appeal upheld both his decision and his reasoning. Hoffmann LJ said, at p 448: Section 14(1)(b) requires that one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based. He went on to make a statement that, if not read with care, is capable of misleading. He said, at p 449 The purpose of section 14(1), as Lord Donaldson MR pointed out in Halford v Brookes [1991] 3 All ER 559 at 573, [1991] 1 WLR 428 at 443, is to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant. He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ. Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant. But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate. He will also not have reached the starting point if, in an unusual case like Driscoll Varley v Parkside Health Authority, he thinks he knows the acts and omissions he should investigate but in fact he is barking up the wrong tree. The statement that time begins to run when the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant relates to an investigation whether, having regard to the knowledge of attributability that has been acquired, a case against the defendant exists. The passage should not be read as holding that time begins to run as soon as the claimant knows enough to make it reasonable to make a further investigation of the facts that are relevant to attributability. I can now proceed to Spargo v North Essex District Health Authority [1997] PIQR P235 in which Brooke LJ set out the effect of a number of decisions, including Nash v Eli Lilly: (1) The knowledge required to satisfy section 14(1)(b) is a broad knowledge of the essence of the causally relevant act or omission to which the injury is attributable; (2) Attributable in this context means capable of being attributed to, in the sense of being a real possibility; (3) A plaintiff has the requisite knowledge when she knows enough to make it reasonable for her to begin to investigate whether or not she has a case against the defendant. Another way of putting this is to say that she will have such knowledge if she so firmly believes that her condition is capable of being attributed to an act or omission which she can identify (in broad terms) that she goes to a solicitor to seek advice about making a claim for compensation; (4) On the other hand she will not have the requisite knowledge if she thinks she knows the acts or omissions she should investigate but in fact is barking up the wrong tree: or if her knowledge of what the defendant did or did not do is so vague or general that she cannot fairly be expected to know what she should investigate; or if her state of mind is such that she thinks her condition is capable of being attributed to the act or omission alleged to constitute negligence, but she is not sure about this, and would need to check with an expert before she could be properly said to know that it was. This summary has been treated as definitive see McGee on Limitation Periods, 6th ed (2010) at 8.026. The summary is a valiant attempt to summarise the previous jurisprudence, but is capable of confusing. It does not deal with constructive knowledge. Significantly it states that a firm belief in attributability can amount to knowledge. Courts have had particular difficulty in interpreting Nash v Eli Lilly and Spargo in circumstance where it is reasonable to expect a potential plaintiff to seek expert medical advice on causation, whether or not he or she holds a firm belief that an injury has been caused by medical treatment or by conditions at work see ODriscoll v Dudley Health Authority [1998] Lloyds Rep Med 210, Ali v Courtaulds Textiles Ltd (1999) 52 BMLR 129 and Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213. The facts of this last case might have been devised as an examination question on limitation. The claimant experienced a sensation of burning on his lips and throat and formed the firm view that this was the result of exposure to polymer at his workplace, a view that he never abandoned. He stopped work because of this in 1988 and sought legal and medical advice. He was seen by a number of experts, all of whom could find nothing wrong with him. One indeed concluded that his symptoms were psychosomatic. Ultimately, in 1994 a senior ENT Registrar advised that his symptoms might well be attributable to exposure to polymer. The trial judge took that as the date on which he acquired knowledge for the purpose of section 14. The Court of Appeal did not agree, holding that the claimants firm belief in the face of expert advice to the contrary constituted knowledge for the purpose of section 14. In Haward v Fawcetts [2006] UKHL 9; [2006] 1 WLR 682 the House of Lords considered knowledge for the purposes of sections 11 and 14 in the context of a claim for professional negligence in giving investment advice. Lord Nicholls of Birkenhead at para 9 approved the approach of Lord Donaldson MR in Halford v Brookes. He said Thus, as to the degree of certainty required, Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443. He noted that knowledge does not mean knowing for certain and beyond the possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice and collecting evidence: Suspicion, particularly if it is vague and unsupported will indeed not be enough but reasonable belief will normally suffice. In other words, the claimant must know enough for it to be reasonable to begin to investigate further. At para 11 he paraphrased the position by stating that time does not begin to run until the claimant knows that there is a real possibility that his damage was caused by the act or omission in question. The decision of Foskett J in relation to knowledge I propose to refer to only a few particularly relevant incidents of the hearing before Foskett J. Suspicion that veterans may have been injured by exposure to ionising radiation in the tests has a long history. This was explored in voluminous evidence. This focussed on events in the 1980s and thereafter. Of particular significance was the formation in May 1983 of the British Nuclear Test Veterans Association (BNTVA). The objects of the BNTVA included the relief of persons suffering from disability attributed to the effects of exposure to radioactivity particularly dealing with nuclear weapons testsTo conduct or promote research into the causes, effects, and treatment of such disablement and to claim financial assistance, benefits and compensation as they may be entitled to. (My emphasis) 268 of the claimants have been members of the BNTVA and all five of the lead claimants selected by the MoD have been members. Substantial evidence was also adduced before Foskett J of the progress of scientific research and opinion in relation to the effect of exposure to ionising radiation, with particular reference to the position of the veterans. In 1985 a veteran called Melvyn Pearce commenced an action against the MoD in which he alleged that a lymphoma that he had developed in 1978 was caused by exposure to ionising radiation during nuclear testing at Christmas Island. After a successful excursion as far as the House of Lords on a preliminary point on Crown immunity ([1988] AC 755) Mr Pearce discontinued his action because those acting for him concluded that it would be impossible to prove that radiation had caused his cancer. The Government commissioned the National Radiological Protection Board (NRPB) to survey the possible effects of radiation on the servicemen who had participated in the tests. The NRPB published reports in 1988, 1993 and 2003. These showed no general increase in mortality on the part of veterans either generally or from cancers. The reports have been subject to expert criticism the methodology of which has itself been criticised by the MoD. A number of other epidemiological surveys were carried out in relation to veterans who had taken part in the atomic testing. None of these led to the conclusion that veterans were suffering a disproportionate incidence of injuries. I have referred at para 97 to the Rowland report which was published in 2008, but shown privately to the appellants in 2007. This dealt with assays on 50 New Zealand veterans who served on two ships that took part in some of the tests, which were compared with results of similar assays on 50 controls. Two of the assays showed no difference, but the third, which was an assay known as mFISH, indicated that aberrant changes to chromosomes had occurred in veterans with three times the frequency of similar changes in the controls. The report concluded that the likely cause of this was ionising radiation thus indicating that the veterans had incurred long term genetic damage as a result of their participation in the tests. The report emphasised, however at p 6, that the current study makes no claims on the health status of the veterans. Before Foskett J the MoD argued that there was no evidence that the veterans had been exposed to abnormal ionising radiation or that such radiation had caused their injuries, but that the belief that their injuries were attributable to radiation none the less amounted to knowledge of attributability for the purposes of sections 11 and 14. Counsel for the veterans description of this argument was set out by Foskett J as follows at para 519 Mr Browne has submitted that there is a logical tension in the defendant's case on limitation in that it is contended that each individual claimant should at the first sign of significant health effects have realised the link to the negligent acts or omissions concerning the tests such that the limitation clock started ticking, yet in the same breath it is contended that no reputable scientist then (or indeed now) could support any such link thus denying any chance of establishing liability. He has submitted that the defendant's argument seems to proceed on the basis that whatever the state of scientific knowledge might have been at any time as to whether any participant or veteran had been exposed to substantial ionising radiation and as to whether such exposure had the potential to cause the significant injury suffered, none the less if the lay participant or veteran suspected that he had been exposed to such radiation and suspected that there might be a link between such exposure and the relevant injury, then he should be fixed with actual knowledge to that effect. Foskett J at para 520 said that he sympathised with the submission that there was a logical tension in this argument. That was why he would have liked to decide the limitation issue on the basis of his preferred view, which he expounded at paras 514 to 518 as follows. Knowledge of attributability under section 14 meant that each veteran had to have knowledge of two matters. The first was that his injury was capable of being caused by abnormal radiation. The second was that he had been exposed to such radiation. This knowledge could only be obtained from scientific material. Insofar as the veterans had believed that they had been exposed to prompt radiation, there had been no foundation for that belief and it was unsound. They had been barking up the wrong tree. Not until the Rowland report was there material upon which knowledge could be based both that the veterans could have been exposed to fall out contamination well after the explosions and that this exposure was capable of causing chromosomal aberrations that evidenced the kind of mechanism that could have led to at least some of the injuries of which they complained. In short, Foskett J favoured a test of knowledge of attributability that required belief to be reasonably founded on fact. He concluded, reluctantly, that the decided cases precluded the adoption of his preferred view. Instead his approach was to look in each case for the moment at which the veteran had manifested not merely suspicion but a firm belief that his illness was attributable to exposure to radiation. This was the moment at which the relevant knowledge of attributability was acquired. The decision of the Court of Appeal in relation to knowledge The Court of Appeal held that Foskett J had been right to reject the preferred view. After reference to authority, and citation of the passage from Haward v Fawcetts that I have set out at para 121 above, the Court summarised the position as follows at para 92: So, in a case where the claimant's state of mind is more accurately described as one of belief rather than knowledge, it seems to us that what matters is whether his state of belief is such as to make it reasonable to expect him to begin to investigate further. In general that assessment will have to be made by reference to the things that he has said and done. For example, if he says that, at such and such a time, he had a firm belief that his illness had been caused by radiation, it would obviously be reasonable to expect him to begin investigating. If he said that he had a firm belief that his illness could have been caused by radiation, that would also, we think, be enough. The Court went on at para 93 to indicate a critical disagreement with the test of Lord Donaldson MR that Lord Nicholls had approved: We note that, in Halford, Lord Donaldson MR suggested that a belief would have to be reasonable before it could amount to knowledge. With great respect, we do not think that the belief needs to be objectively reasonable. We think that what matters is the claimant's subjective state of mind. If a claimant comes to believe that there is a causal connection between his condition and the matters complained of, it will matter not from where he has derived that belief, even it were from an incompetent expert adviser or from a newspaper article which was not based on sound research. If the belief were of such strength that it was reasonable to expect him to start investigating his claim, it would amount to knowledge within section 14. The Court applied a test of subjective belief when considering the individual cases. By way of example I quote the following passage from para 222 in respect of Mrs Clarks state of mind in relation to the cause of her late husbands cancer: In so far as Mrs Clarks state of mind would more aptly be described in terms of belief rather than knowledge, she needed only to have a strong enough belief to make it reasonable to expect her to start making inquiries. The application of this test led the Court to conclude that all 9 claimants had acquired knowledge of attributability more than three years before the commencement of proceedings. Conclusions in respect of the first generic issue Section 14 is about knowledge, actual and constructive, of facts. The object of the section is apparent from its terms. Time will begin to run when the claimant has, or ought reasonably to have, knowledge of the facts that make up the essential elements of his claim. These are: the fact that he has sustained a significant injury; the identity of the defendant; the act or omission alleged to constitute negligence, nuisance or i) ii) iii) breach of duty; iv) the fact that the injury is attributable to that act or omission; v) if the act or omission was of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of the action against the defendant. It is unnecessary for the claimant to know that the alleged act or omission constituted negligence, nuisance or breach of duty. Knowledge is limited to fact, not law. Section 14(3) defines constructive knowledge. It lays down a test of knowledge that the claimant ought reasonably to have been expected to acquire either from facts observable or ascertainable by him or facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek. Thus the claimant is expected, where it is reasonable to do so, to make inquiries in order to ascertain the relevant facts and, if he does not do so, will be deemed to have knowledge of the facts that those inquiries would have disclosed. The words that I have emphasised underline the fact that objective standards have to be applied. There has been some divergence of view as to whether, when applying the test of what is reasonable, allowance has to be made for particular characteristics of the claimant contrast the views of Lord Hoffmann, Lord Walker and Lady Hale in Adams v Bracknell Forest Borough Council [2004] UKHL 29; [2005] 1 AC 76 at paras 44 46, 75 78 and 91 respectively. Lord Hoffmann disagreed with statements in earlier cases that it was necessary to have regard to the character and intelligence of the plaintiff when considering whether he had acted reasonably. He applied a test that was strictly objective. His approach was followed by the Court of Appeal in B v Nugent Care Society (Practice Note) [2009] EWCA Civ 827; [2010] 1 WLR 516, rightly in my view. If a claimant is suffering from any disadvantage in comparison to the reasonable man regard can be had to this when exercising discretion under section 33. The wording and the scheme of section 14 does not permit the replacement of the test of actual or constructive knowledge of the specified facts with a test of subjective belief. There is good reason for this. It is not desirable that a plaintiff should commence an action on the basis of subjective belief that is not reasonably founded on a basis of fact. Nor would it be just to discriminate between two claimants who had identical knowledge of the material facts on the ground that one believed that they demonstrated attributability while the other formed the view that they did not. Section 14 envisages different stages in the acquisition of knowledge and different degrees of knowledge. At each stage the claimants state of mind has to be assessed according to an objective standard. In some circumstances the claimant will have the knowledge of attributability as a result of his own observation of the circumstances in which he has sustained his injury. The facts that he knows will leave him in no doubt as to what act or omission has caused his injury and who was responsible for it. In that situation he will normally have the knowledge that would lead a reasonable person to consult a solicitor with a view to making a claim for compensation. In other circumstances he will not know, from his own observation, all the relevant facts in relation to the cause of his injury. His limited knowledge may be such as would lead a reasonable person to make further investigations as to the facts. In that situation he will have imputed to him the knowledge that he would have acquired if he had made those investigations. The question will then be whether that knowledge would have led a reasonable person to consult a solicitor with a view to making a claim for compensation. At no stage, as a matter of law, is it relevant to consider the subjective belief of the claimant divorced from the facts that have led to that belief. When considering the claimants state of mind the relevant question will not be what he believed, but what he reasonably believed. A reasonable belief will be based to some degree on known facts. In practice the distinction between knowledge and belief is not one that will normally arise. The starting point will be a claimant who has commenced proceedings more than three years from the date when the cause of action arose. The claimant will normally have pleaded a viable case; the act or omission alleged will be one that was capable of having caused the injury in respect of which he claims. It will be common ground that he had the relevant knowledge of attributability at the time that he commenced the proceedings. The issue will be when he first acquired that knowledge. The distinction between knowledge and belief is critical in the present case because it is common ground that when the nine lead claimants started these proceedings there were no known facts capable of supporting a belief that the veterans injuries were attributable to exposure to ionising radiation. Insofar as veterans believed that their injuries were attributable to such exposure that belief was not reasonable. No individual claimant was in a position to know that his injury was attributable to exposure from his own observation or from facts that he was capable of ascertaining by himself. The reasonable course for any veteran who suspected that his injury might be attributable to exposure to radiation was to seek expert advice. Some did so. Those who did not were all in a similar position. They had constructive knowledge of the scientific data available to those from whom they should reasonably have sought advice. Experts had carried out epidemiological surveys to see if these suggested that the veterans were suffering a disproportionate incidence of injuries compared to the rest of the population and concluded that they were not. The MoD denied that the veterans had been exposed to ionising radiation and there was no known reason to gainsay this. In short, there was no scientific evidence available that provided significant support to the belief that the veterans injuries were attributable to exposure to ionising radiation. Foskett J and the Court of Appeal fell into error in equating subjective belief with knowledge. In so far as there were statements in earlier decisions of the Court of Appeal to which I have referred in paras 112 to 121 above which lent support to that approach, those statements were unsound. I question both the reasoning and the conclusions about knowledge of the Court of Appeal in Sniezek v Bundy, Foskett Js preferred view was correct in principle. Belief in attributability had to be founded on known fact if it was to amount to knowledge. It had to be reasonable belief. The Court of Appeal was wrong to alter this test, which had been advanced originally by Lord Donaldson MR, so as to remove the requirement that the belief should be reasonable. The search for the moment when each of the lead veterans formed a subjective belief that it was possible that his injuries were attributable to exposure to radiation was misconceived. The scientists were the people to whom it was reasonable for the veterans to look for advice but, at least before the publication of the Rowland report, such scientific data as was or became available did not support the theory that there was a serious possibility that the veterans injuries were attributable to exposure to radiation. In their Amended Points of Claim on Limitation those veterans who commenced proceedings before the publication of the Rowland report allege that their knowledge of the existence of scientific evidence that demonstrated that their injuries were attributable to the acts or omissions of the defendants did not arise until after the commencement of proceedings. It is open to question whether the Rowland report demonstrates that the veterans injuries are attributable to exposure to radiation, as to which see paras 155 to 157 below. What is not open to question is that, prior to the publication of that report, there was no evidence that demonstrated that the veterans injuries were attributable either to prompt radiation or to fall out radiation. In effect the proceedings were commenced on a speculative basis. The veterans further plead that the consequence of this is that their claims are not time barred. Whether that submission is correct is the second generic issue. The second generic issue: the effect of starting proceedings for personal injury without reasonable grounds for belief that the injury was caused by breach of duty What is the position where a claimant starts an action for personal injury against a defendant in circumstances where he has no reasonable grounds for believing that his injury is attributable to the act or omission that he alleges against the defendant? Such a situation was considered by the Court of Appeal in Whitfield v North Durham Health Authority [1995] 6 Med LR 32. The question arose in limitation proceedings of the effect of a writ that had been issued but not served. Waite LJ held that the issue of a writ was not determinative of knowledge under section 14. He observed that it might be the product of a generalised though as yet unspecifically informed sense of grievance (memorably rendered by Stanley Holloway as Somebodys got to be summonsed) Where a personal injury action is commenced more than three years after the cause of action arose and the defendant raises a challenge on the ground that it is time barred, the onus is on the claimant to prove that the action was started less than three years from the date on which he acquired knowledge, as defined by section 14 see the comprehensive analysis of burden of proof in the context of limitation of Mance J in Crocker v British Coal Corporation (1995) 29 BMLR 159 at pp 169 173. If the claimants response to the limitation challenge is to allege that he started proceedings without knowledge that his injury was attributable to the act or omission that he alleges caused it the defendant is likely to contend that the action should not be permitted to proceed. There are three arguments that can be advanced for bringing such an action to an end, all three of which have been advanced in the present case: The claimant is time barred because the requirements of sections 11 i) and 14 are not satisfied. ii) The claim should be struck out on the ground that it discloses no reasonable cause of action and is an abuse of process. iii) Summary judgment should be given in favour of the defendant. I shall consider each in turn. Limitation In the present case the MoD sought to show that the veterans claims were time barred by showing that they had subjectively come to believe that their injuries were attributable to exposure to radiation more than three years before they commenced proceedings, notwithstanding that, according to the MoD, they had no reasonable grounds for that belief. For the reasons that I have given that approach was misconceived. At one time I was attracted to the argument that a claimant who cannot point to any moment in time before commencement of proceedings when he acquired knowledge of attributability is not in a position to discharge the burden of proving that he commenced the proceedings within three years of acquiring knowledge as required by section 11. The MoD did not advance that argument and, on reflection, I believe that it would have been fallacious. Section 11 provides that an action may not be brought after the expiration of the period of three years that commences with knowledge. If the claimant has not acquired knowledge before bringing the action, that period has not begun to run. For these reasons I have concluded that on the unusual facts of this case the MoD was not in a position to raise a limitation defence to the veterans claims. The Court of Appeals finding that all the claims were out of time must accordingly be reversed. The MoD had other options. It could simply have left the veterans to attempt to prove the exposure and causation that the MoD denied. In the case of the claim brought by Pearce they took no limitation defence and the claim was ultimately dropped because of the problem of proving causation. The Ministry might have taken the view that the same was likely to occur in the present case. It did not, however, take that course. Nor did it formally apply to strike out the proceedings or apply to the court to grant it summary judgment. None the less in the course of the limitation proceedings it sought to persuade the court to do one or the other of its own motion. I turn to consider whether the court should have done so. Strike out In this case the MoD invited Foskett J to strike out the lead claims pursuant to CPR r 3.4 on the ground that each claim was bound to fail as the claimant was not in a position to establish causation. He declined to do so on the grounds that it would not be right to prejudge the issue of causation. He was not persuaded that the veterans were bound to fail on that issue. The Court of Appeal held at paras 70 72 that the judge had reached the right answer, but that he should have based his decision on procedural grounds. The Court held at para 71 that CPR r 3.4(2) only permits the court to strike out proceedings where the terms of the pleading itself justify this course. That may be true, but CPR rr 3.1(1) and 3.4(5) preserve the inherent jurisdiction of the court to strike out proceedings on the ground of abuse of process and the Court of Appeal was wrong not to consider the overall merits of the veterans position. I am not persuaded that the conduct of the veterans in commencing proceedings before they had reasonable grounds to believe that their injuries were caused by exposure to radiation constituted an abuse of process. A case such as this poses special problems for the litigant. It is not uncommon for a number of people who suffer injury or disease to form the suspicion or even belief that this is attributable to the exposure of their bodies to some noxious substance or process. Initially there may be no significant scientific support for such suspicion or belief. The suspicion or belief that the MMR injection causes autism, or that the use of mobile phones causes brain tumours are, perhaps, examples of such suspicions or belief. The parents of victims of thalidomide, or those who suffered from taking Opren, may initially have had no sound basis for suspecting the cause of the conditions caused by those products. In such circumstances no individual victim can reasonably be expected to commence proceedings on suspicion. Nor can any individual reasonably be expected single handed to obtain the necessary expert assistance to investigate whether his suspicions or belief are well founded. Group action is the sensible way forward. Once a group is formed the practical course for anyone who suspects or believes that he may be in the same position as the other members of the group is likely to be to join the group. In that case the knowledge of the group and those advising it will become the constructive knowledge of the individual. Whether and when it will be reasonable for a group to commence legal proceedings will depend upon the particular circumstances. Normally investigation of the facts will precede the commencement of proceedings. The pre action protocol for disease and illness claims may well be relevant. It is possible to conceive of circumstances where it may be reasonable to commence group proceedings even though investigations are ongoing and there is uncertainty as to attributability of a disease to a suspected cause. This might be a reasonable precautionary step in order to forestall the possibility of a limitation challenge such as the present or it might assist in obtaining funding. In the present case problems of funding played a role in the initiation and pursuit of the litigation. Some funding appears to have been obtained from the Legal Services Commission to carry out investigations and proceedings were instituted with this assistance at the end of 2004. The Treasury Solicitor then agreed to an extension of the time for service of Particulars of Claim because of difficulties arising out of the funding certificate. The Legal Services Commission withdrew funding on 17 August 2005. This led to a hiatus in the proceedings. Ultimately a Conditional Fee Agreement backed by after the event insurance was obtained. Although this was limited to the limitation issue alone this may have had some influence upon the fact that master particulars of claim were settled and were served on 29 December 2006. Having regard to this history I do not consider that the initiation of this group action, albeit that it was launched on a speculative basis, constituted an abuse of process and it would not have been right to strike it out on that basis. If the MoD wished to bring the proceedings to an end the appropriate course was to seek summary judgment pursuant to CPR r 24.2 on the ground that the claimants had no real prospects of succeeding on their claims. Although the MoD did not make a formal application to this end it did give the veterans notice that it would be contending at the limitation hearing that the claimants had no real prospects of success and invited Foskett J to strike the proceedings out on this basis. Summary judgment The Court of Appeal stated at paras 5 and 70 that the judge declined to give the MoD summary judgment pursuant to CPR r 24(2) although I do not believe that the judge, having declined to strike out the proceedings, gave separate consideration to summary judgment. At all events the Court of Appeal itself considered whether it should grant the defendant summary judgment on the ground that the claims had no real prospect of success. The Court ruled at para 75 that it would not be right to do, basing its ruling on purely procedural grounds: We are of the view that we should refuse summary judgment on purely procedural grounds. We recognise that the claimants had been informally put on notice that causation would be raised in an application for summary judgment. Further, we acknowledge that, even without such informal notice, it behoved the claimants to prepare themselves to show the general merits of their claims in case the judge had to consider whether to exercise his discretion under section 33. But notwithstanding those two factors, we consider that we should not grant summary judgment in the absence of a formal application. The claimants should have been left in no doubt that they faced summary judgment if they could not show an arguable case on causation. It was simply not appropriate in a case of this importance and complexity to place on the judge the decision as to whether or not to exercise the jurisdiction under Part 24 of his own motion. Thus, because of the lack of formal notice, we consider that it would not be fair to give summary judgment against the claimants under this rule. The Court of Appeal considered the problems that the veterans would experience in establishing causation when it came to consider of the exercise of discretion under section 33. They concluded, at para 156, that the veterans cases on causation faced very great difficulties which were much more serious than they appeared to Foskett J. I would endorse that conclusion. The current difficulties facing the veterans in relation to causation appear to me to be very great indeed. The Rowland report assists them a little but it does not have the significance that Mr Dingemans has sought to attach to it. The Rowland report shows that many of the New Zealand veterans had a raised incidence of chromosome translocation that suggested exposure to abnormal, albeit low level, fall out radiation. But this was not true of all of the veterans assayed. The assays of some showed no abnormalities. This is no more than one would expect. Exposure to fall out radiation results from inhalation or ingestion of fall out. It may result from swallowing sea water while swimming or eating contaminated fish. Thus it can vary from one man to the next. The most that can be deduced from the Rowland report is that it is probable that individual veterans were exposed to low level fall out. There is currently no evidence that there is any correlation between the raised incidence of chromosome translocation of individual New Zealand veterans and the incidence of cancer or any of the other conditions of which the claimant veterans complain. Nor is not suggested that the aberrant chromosomes identified by the mFISH assay could themselves have had a mechanistic link in the contraction of cancer, although there is an established mechanistic link between some chromosome aberrations and cancer. The Rowland report results simply constitute a biomarker suggesting exposure to radiation. The most that the veterans as a group are currently in a position to establish is that there is a possibility that some of them were exposed to a raised, albeit low level, of fall out radiation and that this may have increased the risk of contracting some at least of the injuries in respect of which they claim. This falls well short of establishing causation according to established principles of English law. Foskett J was prepared to contemplate the possibility that the Supreme Court would extend the principle in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 so as to equate causing an increase of risk with causing injury. The Court of Appeal at para 154 held that there was no foreseeable possibility of this. In the light of the observations of this Court in Sienkiewicz v Greif [2011] UKSC 10; [2011] 2 AC 229 the Court of Appeal was plainly correct. For these reasons I do not believe that the veterans claims have a reasonable prospect of success. Despite this conclusion I have decided that the Court of Appeal was right not to grant the MoD summary judgment. There are two interrelated reasons for this. The first is that I agree with the Court of Appeal that it would be unjust to enter summary judgment against the 9 lead claimants when the MoD made no formal application for summary judgment. While the veterans allegation that they had been ambushed by the MoD was unjustified, they could properly complain that they had not been given adequate warning that they would have to resist summary judgment. The other reason is that these are lead cases in group litigation. The object of selecting lead claimants for the purpose of trying preliminary issues is that the decisions of the court in the lead cases will be determinative, or treated as determinative, in the other cases that raise the same issues. It does not seem to me fair to those other claimants to expect them to accept a ruling that the claims have no reasonable prospects of success when that issue was not fairly and squarely on the table when the arrangements were made for the hearing of the lead cases. Section 33 As I have concluded that none of the claims is out of time, the question of exercising discretion under section 33 does not arise. Had it arisen I might not have reacted to it in the same way as the Court of Appeal. The 1011 claimants must include a significant number in respect of whom there is no limitation defence. These will include those whose injuries were diagnosed, or appreciated to be significant, less than three years before proceedings were commenced. One of the principal reasons for limitation of actions is to protect defendants from being vexed by stale claims. Where group claims are proceeding in any event, this is not such a significant consideration. It may be unjust to preclude some claimants from participating in the litigation on the ground that they did not bring their claims soon enough. This is a factor that the Court of Appeal does not appear to have taken into account. It might have led me to differ from the Court of Appeals conclusion. As it is, on my view of the case no issue arises under section 33. For the reasons that I have given I would allow all 9 appeals and reinstate the actions of the lead claimants. LADY HALE Limitation of actions is a creature of statute, not of the common law. Until the Limitation Act 1623, there were no limitation periods for non land related claims. When introduced, they were and remain a procedural, not a substantive, bar to the claimants action. If the defendant does not plead limitation, the cause of action subsists and the court must try the claim. In an age of private claims against private defendants, it may even have been regarded as ungentlemanly to raise a limitation defence, but we can hardly blame the Government or a liability insurer for seeking to protect the interests of the taxpayer or its policy holders and shareholders by doing so in a case such as this. The current law of limitation is complicated and incoherent. This is, as the Law Commission pointed out in 1998, largely because it has been subjected to a wide range of ad hoc reforms, following the recommendations of reform bodies charged with recommending reforms of particular pockets of law. The Commission went on to comment that the traditional approach of limitation periods running from accrual of a cause of action has led to problems, which the Legislature has tried to solve, either by moving to a discoverability starting date (as in the Latent Damage Act 1986) or by relying on a judicial discretion to disapply the limitation period (as in the Defamation Act 1996), or by using both approaches (as in the regime for personal injuries) (Consultation Paper No 151, Limitation of Actions, para 1.21). In other words, this is a field in which statute has intervened for policy reasons. But in policy terms the current regime for personal injury claims, combining discoverability with discretion, might be thought to have the worst of all possible worlds. From the defendants point of view, one aim of limitation periods is to ensure that a fair trial will still be possible because the evidence will not have been lost or deteriorated. Another aim is that the defendant will not be harassed with stale claims and he (or his insurer) can treat matters as closed after a certain length of time. From the states point of view, there is also an interest both in fair trials and in an end to litigation. From the claimants point of view, there may be some interest in being encouraged to get on with it while the evidence is still fresh, but in general the claimant will want as long as possible in which to recognise and consider their cause of action, to take legal advice on their case, and to attempt to negotiate a settlement with defendants (para 1.36). In policy terms, the crucial question is whether a fair trial is still possible in the individual case, coupled with the ability to write off claims after a period of time. Where a cause of action depends upon damage resulting from the defendants tort, a limitation period based upon the accrual of the cause of action may have nothing to do with whether a fair trial will still be possible or with the interests of the defendant in not being harassed by stale claims. Mr Sinfields illness was not diagnosed until many years after the exposure which is alleged to have caused it. The action was brought within the three years after the diagnosis. The defendant will have to live with the evidentiary and other consequences of that. Even if the illness had occurred earlier, and thus the cause of action had arisen earlier, it was not discovered until the diagnosis. When the Limitation Act 1963 responded to Cartledge v E Jopling and Sons Ltd [1963] AC 758, by introducing discoverability into the personal injury limitation regime, it was prioritising the interests of the claimant in being compensated for his injury over the interests of both the defendant and the state. But given the length of time which some illnesses take to develop after exposure to the causative agent, perhaps it did not seem such a very radical step. By contrast, the introduction of the power to disapply the limitation period in personal injury cases in the Limitation Act 1975 was a radical step. But it was a step more closely linked to the policy aims underlying the limitation legislation. It enables the court to ask whether the defendant deserves to enjoy the windfall of a limitation defence, or the claimant to lose the benefit of a claim, by reference to the crucial questions of whether a fair trial of the action will still be possible and whether there is a good reason for the delay in bringing the claim. In policy terms, the world would be a more sensible and predictable place if we had only the discretion provided by section 33 of the Limitation Act 1980, without the discoverability provisions in sections 11 and 14. It might be better still if the cause of action accrued at the date of the wrongful act or omission rather than at the date of damage. Hence, in policy terms, it is understandable that the Law Commission welcomed the approach to discoverability in personal injury actions which has been developed in the Court of Appeal. In policy terms, shifting the burden to the discretion in section 33 is preferable to postponing the date when time begins to run. The Court of Appeals approach, as we know, culminated in the view that a strong but completely irrational belief that an injury was attributable to the act or omission of the defendant equated with knowledge of that fact for the purpose of section 14(1) of the 1980 Act. Once there was power to disapply the limitation period in cases where a fair trial would still be possible, justice could be done to both parties irrespective of the date of knowledge. The realist in me is not surprised that the Court of Appeal applied a subjective test to the date of knowledge. The court could then get on with weighing the competing interests under section 33. I remember doing just that in Roberts v Winbow [1999] Lloyds Rep Med 31. However, that is not what the statute provides. Like it or not, time does not begin to run until the claimant has knowledge of the essential facts. We have been focussing in this case on knowledge (b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty. The Court of Appeal has reached the position that a sufficiently strong subjective belief to send the claimant to a solicitor to investigate making a claim is knowledge of attributability for this purpose, even though there is no reasonable basis in evidence or objective fact for that belief. This leads to unedifying inquiries, such as those which took place in these cases, into the strength of the various claimants belief, however unreasonable inquiries made on behalf of a defendant who has always maintained that there is no reasonable basis for their beliefs (and thus contributing to the strong sense of injustice they feel). On the Court of Appeal authorities, a claimant who strongly believed, on no reasonable ground whatsoever, that his illness was caused by exposure to radiation has knowledge of the fact that his injury is attributable to that exposure, whereas a claimant who strongly believed that it was not, on the reasonable ground that those in a position to know the truth denied it, has no such knowledge. The strength of a claimants subjective belief is not a sensible basis for deciding who does, and who does not, have an absolute right to pursue his action. I suspect that that point would never have been reached had the law confined itself to knowledge of the fact of injury. That was the problem in Cartledge v Jopling. Diagnosis is a relatively clear cut question. You do or do not have the disease. You do or do not know, on the basis of a reliable diagnosis, that you do or do not have the disease. The hypochondriac who believes, on no ground whatsoever, that he has a disease cannot be said to have knowledge of the fact that he has an injury, let alone that it is significant. If this had been the only context in which knowledge had come to be explored, I do not think that the Court of Appeal would have found itself in the place where it eventually arrived. But most of the cases are about knowledge of attributability. Even on the basis that attributable means capable of being attributed to, it is difficult to see how an unreasonable belief in attributability can amount to knowledge of the fact of attributability. It clearly does not. It amounts to an unreasonable belief. Only when there is some reasonable basis in evidence or objective fact for that belief can it be turned into something approaching knowledge. We do not need in this case to debate the point at which belief can turn into knowledge because we can confidently state that there was no such basis for the veterans beliefs, however strongly held, until at the earliest the publication of the Rowland report. It is my belief, therefore, that the Court of Appeal, bit by bit in the way that Lord Kerr and Lord Phillips have described, turned a very sensible policy approach to how the law should approach limitation in personal injury cases into a construction of section 14 of the Limitation Act 1980 which cannot be justified by the words used. Some of these claimants did have a strongly held belief that their illnesses were caused by exposure to radiation. That depended on (a) proof of their exposure and (b) proof that their exposure caused their illnesses. There was no evidence to get them to point (a) until the Rowland report, but that only supplied the possibility. Each of the claimants would have to be assessed to see whether the same chromosomal effects were found in them. There is still no evidence to supply a causal connection between that exposure and the claimants various illnesses. In agreement with Lord Phillips and Lord Kerr, upon whose analysis of the law I cannot improve, I would hold that none of these actions is statute barred and the discretion under section 33 does not arise. As we are in a minority, it is not necessary for me to choose between them, but logically I prefer Lord Phillips view. Rowlands has got the claimants further than they were before, but it has not supplied the basis for a belief in causation as well as exposure. So the claimants still do not have the knowledge required for time to begin to run. There is a very good case for the law being different. But I do not think that we should translate our view of what a sensible law of limitation would say into our view of what it does say. Knowledge and belief are different concepts and there is no reason to believe that Parliament intended to equate the two. I would therefore allow this appeal and make the order which Lord Phillips proposes. LORD KERR The genesis of the statutory provisions In the Report of the Committee on Limitation of Actions in Cases of Personal Injury (1962) (Cmnd 1829) (prompted by the decision in Cartledge v E Jopling & Sons Ltd [1963] AC 758 and leading to the enactment of the Limitation Act 1963) at para 8 the following appears: [The claimant] may, for example, obviously be suffering from a particular disease without being able to attribute it to the conditions under which he has been working, either because there is no sufficiently widespread knowledge of the causal connection between the processes on which he is, or formerly was, engaged and the disease in question, or because he has no reason to suppose that these processes in fact expose, or exposed, him to some noxious substance. The problem in the state of the law which the Committee had identified was therefore firmly linked to an absence of knowledge of the fact that an employees disease had been caused by work processes. And this was reflected in the terms of the 1963 Act. By section 1(1) of that Act, section 2(1) of the Limitation Act 1939, which had imposed a time limit of three years for bringing certain actions, was to no longer afford a defence where the requirements of section 1(3) were fulfilled. Section 1(3) provided: The requirements of this subsection are fulfilled in relation to a cause of action if it is proved that the material facts relating to that cause of action were or included facts of a decisive character which were at all times outside the knowledge (actual or constructive) of the plaintiff until a date which (a) either was after the end of the three year period relating to that cause of action or was not earlier than twelve months before the end of that period, and (b) in either case, was a date not earlier than twelve months before the date on which the action was brought (emphasis added). The material facts expression in this subsection was explained in section 7(3) of the Act: any reference to the material facts relating to a cause of action is a reference to any one or more of the following, that is to say (a) the fact that personal injuries resulted from the negligence, nuisance or breach of duty constituting that cause of action; (b) the nature or extent of the personal injuries resulting from that negligence, nuisance or breach of duty; (c) the fact that the personal injuries so resulting were attributable to that negligence, nuisance or breach of duty, or the extent to which any of those personal injuries were so attributable. For time to begin to run, therefore, the claimant had to know as a fact that the personal injuries resulted from negligence etc and that they were attributable to that default. As Lord Walker has observed (in para 29 of his judgment) these twin requirements were replicated in the Limitation Act 1975 (which is now consolidated as part of the Limitation Act 1980). The 1975 Act followed on the Law Reform Committees Interim Report on Limitation of Actions in Personal Injury Claims of May 1974 (Cmnd 5630). In para 49 of the Report, the committee confronted directly the question of how the date of knowledge should be determined. It outlined various tests that had been considered: It has not been suggested to us, and in our view could not reasonably be suggested, that the plaintiff's date of knowledge should arrive until he has knowledge (actual or constructive) both of his injured condition and of its having been caused by an act or omission of the defendant. In our view, the crucial question to be answered is whether the date of knowledge should arrive (1) on the plaintiff's acquiring knowledge of those facts; or (2) on his acquiring knowledge of these facts and also that he has a worthwhile cause of action against the defendant; or (3) at some intermediate point between these states of knowledge, as for example on his becoming aware, in the words of Lord Pearson, [in Smith v Central Asbestos Co Ltd [1973] AC 518] (as a matter of fact in the same manner as a jury would decide) that the defendants were at fault and that his injuries were attributable to their fault. The Committee chose the first of these alternatives. It is significant that the way that it expressed its conclusion was that the plaintiffs knowledge should arrive only when he had actually or constructively acquired knowledge of two matters which it described as facts. The first was his injured condition and the second that the condition had been caused by an act or omission of the defendant. In my view, the characterisation of the second of these as a fact clearly indicates that it was contemplated that there would have to be some factual foundation for it. I am reinforced in that view by the later passage in the Law Reform Committees report at para 54 where it said that the only possible intermediate solution was that adopted by Lord Pearson in Smiths case (set out in sub para (3) of para 49 of the report and quoted above). Although the committee rejected this formulation it did so because the concept of fault could not be satisfactorily defined and because it contained a considerable subjective element. It did not suggest that the knowledge of the plaintiff should be other than knowledge of a particular set of facts. Nothing in the report suggests that the committee considered that mere belief in a state of affairs would be sufficient. Indeed, in para 55, it put its conclusion in this way: that the plaintiff should have knowledge, actual or constructive, both of his injured condition and of its having been caused by acts or omissions of the defendant. This seems plainly to point to the requirement that there be an objective basis for the knowledge of facts which the plaintiff had to have. In light of this, it is unsurprising that the prefatory words of section 14(1) of the 1980 Act are that the date of knowledge is the date on which the plaintiff first had knowledge of the facts which are outlined in the sub paragraphs which follow. The facts contained in those sub paragraphs of which the plaintiff is required to have knowledge are (a) that the injury was significant; (b) that it was attributable to the act or omission of the defendant; (c) the identity of the defendant; and (d) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant. In relation to the attributability element of the plaintiffs knowledge, what was stipulated was that the plaintiff was required to know as a fact that the injury was attributable to (in the sense of being capable of being the cause of) the act or omission. From a purely textual analysis of the statute, therefore, it is impossible to suggest that what it intended to convey was that the test should be that the plaintiff would have statutory knowledge when he believed (or even firmly believed) that the injury was attributable to the defendants act or omission. The natural meaning of the language used was that the plaintiff needed to know it rather than to believe it and that he needed to know it as a fact. Indeed, the phrase knowledge of facts permeates the section. Section 14(1)(d), for instance, provides that, if it is alleged that the act or omission was that of a person other than the defendant, time would begin to run only when the plaintiff had knowledge of the identity of that person and the additional facts supporting the bringing of an action against the defendant. The word knowledge appears nine times in the subsections which precede section 14(3) and in all but one of these, knowledge is associated with facts. Knowledge of facts is also the same formula used in section 14(1A). It is interesting to note, therefore, that knowledge of the facts is required for a wide spectrum of circumstances such as: (i) the identity of the defendant; (ii) that the injury was significant; and (iii) the further unspecified facts that are needed to support the bringing of an action against the defendant when it is alleged that the act or omission was that of a person other than the defendant. The direct association between knowledge and facts continues in section 14(3) which provides: For the purposes of this section a persons knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek; but a person shall not be fixed under this subsection with knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice. Subjective belief versus knowledge of facts If, as the respondent contends, the rubric knowledge of the facts is to be interpreted as firm belief in a state of affairs, it surely must have that meaning for each of the circumstances in which it is employed. Therefore, if the respondent is right, the claimant need only have a belief in the identity of the defendant rather than knowing who he is; he need only believe that his injury was significant rather than knowing it to be such; and need only believe the other facts that support the bringing of an action against the defendant, where it is alleged that the act or omission was that of a person other than the defendant. If the respondents argument was correct, there is therefore a wide and surprising range of matters and circumstances that a claimant needs only to believe in rather than to know, for statutory knowledge to arise. If that interpretation were to be accepted, the repeated use in the section of the word knowledge (which is in no sense a natural synonym of belief) is mystifying. It would have been a simple task to convey that a claimant need only believe in these matters if that had been the intention of Parliament. But it is, to my mind, inherently unlikely that Parliament could ever have intended that claimants should be encouraged to commence litigation when all that they had to go on was a belief, however strongly held. It is possible to imagine states of mind that might be required of a claimant as points on a spectrum, with, at one end, simple belief with no factual foundation whatever and, at the other, objectively verifiable certainty. On the belief side of this spectrum, various alternative formulations of states of mind can be envisaged. Belief in a state of affairs which, if true, would constitute the requisite knowledge; or reasonable grounds for believing certain facts; or a real possibility that the facts which the claimant believes are correct; or credible information supporting the correctness of the facts. To interpret section 14 so as to fasten on any one of those formulations would require, at least, a determinedly purposive approach. But the respondent in this case would have us go further than any of these and construe the section as requiring no more than mere belief. Simple unvarnished belief is qualified only (in the respondents submission) by the requirement that it be belief of such a quality as would prompt a sensible person to begin investigations into the viability of proceedings. This is, in essence, a purely subjective state of mind. The second element, that a sensible person holding such a belief would be moved to investigate whether to bring proceedings, does not sound at all on the source or accuracy of the belief. So an unreasoning belief, provided it was sufficiently firmly held, would qualify as knowledge activating the beginning of the limitation period. That precisely constructed and specifically defined set of circumstances that an individual should have a belief that was personal to him or her and that this would act as the catalyst for an inquiry whether to launch proceedings seems to me to be impossibly and impermissibly incompatible with the natural meaning of section 14. It is not clear what becomes of the limitation period as a consequence of the progress (or lack of it) of the inquiries, if the respondents argument is accepted. On its analysis, when the moment arrives that a claimants belief in a set of affairs hardens into a conviction that inquiries should be made, time begins to run. But what happens if the inquiries are initially unproductive and the claimants belief falters? Mr Gibson QC submitted that what mattered was the claimants subjective state of mind and his degree of certainty. He said that statutory knowledge equates with firmness of belief. He also argued that belief was transformed to the status of fact by its inclusion in a statement of claim. But what happens if the claimant loses belief after the statement of claim has been issued? What if the firmness of his purpose, the strength of his belief crumbles? Is the limitation period to be suspended? If subjective belief of sufficient resolution is the catalyst for time starting to run, why should not a failure of belief stop time running? And how is the question of whether subjective belief is present to be judged? Is this inevitably linked to the issue of proceedings? What if a claimant testifies that he or she did not believe that there was a connection between the exposure and the onset of disease but was advised to issue proceedings in the hope that evidence could be obtained to forge such a link, are they to be fixed with a belief that, in truth and in fact, they did not hold? These considerations clearly point, in my opinion, to the unworkability of a system so directly linked to and uniquely dependent on a claimants subjective belief. Other anomalies arise, if subjective belief is substituted for knowledge based on objective fact. If two individuals are exposed to the same noxious materials and both develop disease in consequence, but medical science has not evolved to the point where either could be fixed with constructive knowledge that this was due to the exposure, time begins to run against the claimant who has a firm belief in the cause of his illness sufficient to lead him to consult a solicitor but not against his fellow employee who does not share that strength of belief. Such a situation defies logic as well as legal principle. The authorities The obvious starting point is that chosen by Lord Phillips (in para 112 of his judgment) of Davis v Ministry of Defence (unreported). In that case May LJ decried what he considered was the wrongful assimilation by the trial judge of firm belief and knowledge. The facts of the case required the question of belief versus knowledge to be addressed directly. The appellant had always believed that his dermatitis had been caused by working conditions. But he was advised that there was not sufficient evidence of this. His belief was therefore not supported by objective evidence. As Lord Wilson has pointed out (in para 9 of his judgment), in Halford v Brookes [1991] 1 WLR 428, 443F, Lord Donaldson MR characterised Davis as an exceptional case. Indeed, at 442H he suggested that the facts of Davis were highly unusual. But one wonders, in the light of contemporary experience, if the case was quite as unusual as it has been portrayed. Developing medical science about the aetiology of various conditions, particularly perhaps in the field of asbestos related disease, has shown its remarkable tendency to catch up with and provide support for the firmly held beliefs of workers that the condition from which they suffered was caused by their working conditions. In any event, the important thing, as it seems to me, is not whether Davis can be dismissed as an exceptional case but whether the reasoning that led to its outcome is sound and can be applied to the present appeal. In my judgment the reasoning is indeed sound and is directly relevant to the problem that this case poses. Lord Wilson considers it to be heretical to allow a claimant to escape what he describes as the conventional requirement to assert his cause of action for personal injuries within three years of its accrual (para 6 of his judgment) by establishing that, even after his claim was brought, he remained in a state of ignorance entirely inconsistent with it. One can see the initial attraction of that argument. But it is necessary, I believe, to take a step back. The important question on which to focus is when the action accrues. Like it or not, the legislature has decreed that this occurs when a claimant is in a mental state which amounts to knowledge of facts that are, among other things, capable of showing that the personal injury which is the subject of his claim was due to the default of the defendant. True it may be, as Lord Wilson says, that the concepts of belief and knowledge are inherently subjective but that does not mean that they are interchangeable. I know something to be true because I have a factual foundation for my knowledge of its truth. I may believe something to be true without any basis in practical reality whatever. And simply because I assert the truth of a particular proposition, I cannot be taken to know (as opposed to believe) it to be so. I am of the opinion, therefore, that the Court of Appeal in Davis was right to recognise the clear distinction between belief (even firm belief) and knowledge. The latter concept is inexorably tied to an objective assessment of what is known rather than what is taken on faith or impression. The approach of May LJ in Davis was approved by Slade LJ in Wilkinson v Ancliff (BLT) Ltd [1986] 1 WLR 1352 but the retreat from its clear demarcation of knowledge of facts from firm belief may be supposed to have begun with Halford. The facts of the latter case have been set out by Lord Phillips at para 114 of his judgment and need not be repeated. At 434B Russell LJ said: Once the plaintiff in this case realised that her daughter's death was capable of being attributed to the activities of the defendants or one or other of them, time began to run and, subject to the provisions of section 33 of the Act, she had three years thereafter in which to issue her proceedings. It should be noted that, although the distinction between knowledge and belief might have begun to be blurred by this case, Russell LJs formulation does not equate knowledge with belief. Realised is the word employed rather than knew. Realisation is, of course, a concept which could span both knowledge and belief although it might be considered to be more comfortably accommodated in the former. In any event, Lord Donaldson MR addressed the issue in somewhat different terms. At 443E F he said: The word [knowledge] has to be construed in the context of the purpose of the section, which is to determine a period of time within which a plaintiff can be required to start any proceedings. In this context knowledge clearly does not mean know for certain and beyond possibility of contradiction. It does, however, mean know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence. Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice. It is important to observe that the Master of the Rolls said that it was necessary that the plaintiff should know with sufficient confidence that a state of affairs existed that justified embarking on the preliminary steps that would lead to the issue of proceedings. And, of course, in this case, Mrs Halford was deemed to know that her daughter had been killed by one or other of the defendants. It was not a question of her merely believing that one or other had committed the crime. But, importantly, Lord Donaldson MR in this passage described the quality of knowledge required as that which was sufficient to prompt inquiries to be made and in the same passage suggested that reasonable belief would normally be sufficient. In my opinion, these two concepts have been conflated in later decisions, so that belief (as opposed to knowledge) sufficient to prompt investigations has become the yardstick. I doubt if this was Lord Donaldson MRs intention. He did not elaborate on what was meant by reasonable belief in this context but, juxtaposed as this was with the statement that a plaintiff should know with sufficient confidence that further inquiries were justified, one can only suppose that he considered that the belief would have to have a sufficiently secure factual foundation in order to activate the limitation period. In Nash v Eli Lilly & Co [1993] 1 WLR 782, Purchas LJ disavowed an attempt to define knowledge see 792C. But in the passage of his judgment at 796 F H quoted by Lord Phillips at para 117 above he addressed the question of whether firm belief could be equated with knowledge. In the first part of this passage, Purchas LJ appears to strongly reject this notion for he said: a firm belief held by the plaintiff that his injury was attributable to the act or omission of the defendant, but in respect of which he thought it necessary to obtain reassurance or confirmation from experts, medical or legal, or others, would not be regarded as knowledge until the result of his inquiries was known to him or, if he delayed in obtaining that confirmation, until the time at which it was reasonable for him to have got it. It can be deduced from this passage that the firm belief, in order to be transformed to a condition of knowledge, required to be bolstered by reassurance or confirmation from experts in other words, they would need to confirm that there was a sound basis in fact for holding the belief. So far, so unexceptionable. But the final sentence of the passage, as Lord Phillips has pointed out, led to the later misapprehension that belief, provided it was of sufficient firmness, could, without more, be equated with knowledge. There Purchas LJ, in what seems to be a complete reversal of the statement quoted above, said: If the plaintiff held a firm belief which was of sufficient certainty to justify the taking of the preliminary steps for proceedings by obtaining advice about making a claim for compensation, then such belief is knowledge and the limitation period would begin to run. In an earlier passage at 792C D the same approach can be detected: In applying the section to the facts of these cases, we shall proceed on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice. What, with respect, these passages neglect to address is the source of the certainty. One can express oneself certain in a particular belief but knowledge depends on factual information rather than simple belief, however fervently held. Where the decision in Nash fell into error was in concentrating on the plaintiffs state of mind and the degree of certainty with which the belief that constituted that state of mind was held rather than making the all important link between knowledge and facts sufficient to support it. Essentially the same confusion of knowledge with belief is apparent in Spargo v North Essex District Health Authority [1997] PIQR P225 where Brooke LJ said at P242: A plaintiff has the requisite knowledge when she knows enough to make it reasonable for her to begin to investigate whether or not she has a case against the defendant. Another way of putting this is to say that she will have such knowledge if she so firmly believes that her condition is capable of being attributed to an act or omission which she can identify (in broad terms) that she goes to a solicitor to seek advice about making a claim for compensation In the first sentence of this passage, the plaintiff is treated as having the necessary knowledge when she knows enough. In the second sentence firm belief is said to be another way of putting the need to know. I must respectfully disagree. Knowing is not believing. To know something to be true is different from believing it to be so. The confusion begun by Nash between knowledge and belief was continued in Sniezek v Bundy (Letchworth) Ltd [2000] PIQR P213 CA. In that case Simon Brown LJ recognised that the difficulty in conceptualising what is meant by knowledge in section 14 generally arose in relation to knowledge of the fact of attributability (P233). And at P234 he observed that, as had been held in Spargo, a real possibility of establishing causation constitutes attributability. In an earlier passage at P223 P234 he said this: it seems to me that the real contrast being struck in Nash vs Eli Lilly is between on the one hand the mere believer whose situation is described in the first passage in the judgment, and on the other hand the firm believer sufficiently certain of his case to have clearly in mind (although always, of course, subject to the taking of appropriate advice and the preparation of evidence) the making of a compensation claim. I do not have difficulty with the proposition that knowledge that there is a real possibility that the condition was caused by the act or default of the defendant constitutes statutory knowledge of attributability. And one can understand why it might be considered that there is a small step between knowing of a real possibility and firmly believing that there is a connection between the injury and the default of the defendant. But there is a significant difference between the two. Knowledge of a real possibility that the act or omission of the defendant caused the injury involves some evaluation of the factual foundation for the claim. It is not essential to the holding of a firm belief that a similar examination be conducted. The focus of the debate should be on what the claimant knew as a fact or, at least, on what he knew was a possible fact and not on what he believed. This is, I think, well captured by Lord Mance in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682 at para 128 where he said: the question is when Mr Haward actually knew both enough of the acts or omissions now alleged to constitute negligence and that the loss suffered was capable of being attributable thereto to make it reasonable for him to begin to investigate whether or not the claimants had a claim (emphasis added). The claimant needs to know that the acts or omissions possibly caused the injury. He does not need to know that they constitute actionable fault. But he needs to know at least that there is a reasonable possibility that those acts or omissions were responsible for his injury. As Lord Nicholls put it in para 11 of Haward, time does not begin to run against a claimant until he knows there is a real possibility his damage was caused by the act or omission in question (emphasis added). The effect of the issue of proceedings Lord Wilson considers that it is a legal impossibility for a claimant to assert that he did not have knowledge of attributability for the purpose of section 14 (1) after he has issued his claim. My disagreement with this view is inevitable in light of the conclusion that I have reached as to the proper interpretation to be given to knowledge for the purposes of section 14. The plain fact is that a claimant need only verify that he believes the facts stated in his claim form to be true. The terms in which this requirement is couched reflect, in my opinion, the prosaic truth that the significant averments in claim forms consist of assertions that are, by definition, likely to be controversial. Claimants cannot be supposed to know that what is asserted is true in any conventional sense. It is only if one gives knowledge a specialised meaning (which abandons its normal connotation for a concept that is entirely different) for the purposes of section 14 that it becomes possible to say that when a claimant says that he believes something to be true, he is in effect to be taken as saying that he knows it to be such. The proper test Foskett J formulated his preferred view of the elements of the knowledge that a claimant is required to have in para 514 of his judgment. According to this test they required to know: That the injury of which he complains was capable of being caused i) by the act or omission of the defendant; and ii) That there is credible evidence that the act or omission alleged had occurred. Lord Phillips considered that this preferred view (which, in light of the authorities, Foskett J felt unable to follow) was correct in principle and, with respect, so do I but with one minor qualification, which may amount to no more than a slight reworking of the same test. In Haward and Spargo it was held that the claimants were required to know that there was a real possibility of the act or omission having caused the damage. This reflected the circumstance that attributable in the context of section 14 has been construed as meaning capable of being attributed. If a condition is capable of being attributed to exposure to a noxious agent, it follows that there is a real possibility that it was so attributable if the condition has developed and harmful exposure is established. I would therefore express the test compendiously as follows: the claimant must know from objectively verifiable facts that there was a real possibility that the injury suffered was due to the act or omission complained of. Applying the test to these cases The Ministry of Defence has consistently denied that the veterans were exposed to ionising radiation that was in any way capable of causing injury. That remains their position. Although many of the veterans have for many years believed (with varying levels of conviction and passion) that the conditions that they have suffered were caused by exposure to this radiation, until they were made aware or ought to have become aware of the findings of the Rowland study they could not have known from objectively verifiable facts that there was a possible connection between their exposure and the various conditions from which they have suffered. As Foskett J said, before the Rowland report, all the evidence raised nothing more than a suspicion of exposure to excess ionising radiation with no clear link to the conditions of which complaint is made para 517 of his judgment. In my judgment, the Rowland report has supplied the necessary objective factual foundation for knowledge on the part of the veterans that there is a real possibility of a connection between their exposure and the conditions that they have suffered. Lord Phillips has said that the most that the veterans as a group can show, on the basis of this report, is that there is a possibility that some of them were exposed to a raised, albeit low, level of fall out radiation and that this may have increased the risk of contracting some at least of the injuries in respect of which they claim (para 157 of his judgment). But this is enough, in my opinion, to meet the test of knowledge from objectively verifiable facts that there is a possible connection between tortious exposure and injury. I would therefore hold that time has begun to run from the date that they became aware of or ought to have been aware of the contents of the Rowland report. Striking out and summary judgment For the reasons given by Lord Phillips, with which I agree, Foskett J was right not to accede to the application to strike out these proceedings and to refuse the defendants application for summary judgment. I consider that the judge was fully justified in his view that the veterans were not bound to fail on the issue of causation. True it is that the evidence on this issue does not look especially promising for them at present. But, as Lord Phillips has illustrated, there are examples in the past of group litigation where the signs cannot have been propitious when litigation was commenced and, as he has said, depending on the particular circumstances of the case, it may well be prudent to issue proceedings, even though investigations are continuing. It may well be correct, as Lord Phillips has suggested in para 154, that the judge did not give separate consideration to the question of summary judgment, having decided to refuse the strike out application but, if this is the position, it is hardly surprising. Once he had decided that the veterans were not bound to fail, it was not open to him to accede to the application for summary judgment against them. Moreover, at a more general level, I would question the propriety of giving summary judgment on a preliminary hearing on whether an action is statute barred, particularly where detailed medical evidence is required in order to address the question of causation. Although in the present case there was an extensive review of the evidence, its presentation was principally geared to the examination of its relevance to the date of the claimants knowledge for the purposes of section 14. As Foskett J said (at para 5 of his judgment) the merits of the individual claims [did] not arise for consideration. A confident judgment on the myriad issues that the question of causation in a complicated case such as the present raises will normally only be possible when there has been a full ventilation and testing of the experts evidence on both sides. Conclusion I would allow the appeals and make the order that Lord Phillips has proposed. |
This case is about the employment status of district judges, but it could apply to the holder of any judicial office. The issue is whether a district judge qualifies as a worker or a person in Crown employment for the purpose of the protection given to whistle blowers under Part IVA of the Employment Rights Act 1996 (the 1996 Act). If a district judge does not on the face of it qualify for whistle blower protection, the further question is whether this is discrimination against her in the enjoyment of her right to freedom of expression under the European Convention on Human Rights. And if it is, what is the remedy? In section 230(3) of the 1996 Act, a worker is defined as an individual who has entered into or works under (or where the employment has ceased, worked under) (a) a contract of employment, or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. The appellant does not claim that a judge works under a contract of employment within limb (a) of that definition, but contends that she does fall within limb (b) of the definition. The history of the case The appellant was appointed a district judge by the then Lord Chancellor, Lord Falconer of Thoroton, with effect from 6 February 2006. Under section 6 of the County Courts Act 1984, as it then stood, district judges were appointed by the Lord Chancellor. As it now stands, they are appointed by Her Majesty the Queen on the recommendation of the Lord Chancellor. In October 2005, the appellant had been sent a letter offering her appointment which talked in terms of her accepting that offer. The letter itself contained several stipulations as to the duration of her appointment, her salary, her pension on retirement, and other matters. Enclosed with the letter was a memorandum entitled District Judges Memorandum on conditions of employment and terms of service. This was a detailed document, which included terms as to sitting days, sick pay, maternity, paternity and adoption leave, training, the prohibition of legal practice, relations with the press and media, outside activities, and much more. The memorandum made it clear that the salary was taxed under Schedule E to the Income Tax Act and that the judge was an employed earner for the purpose of national insurance contributions. Although described as a life time appointment, a judge is required to vacate office on her 70th birthday (unless extended) and can resign before that date. The appellants Instrument of Appointment, signed by the Lord Chancellor on 27 January 2006, simply talked in terms of his approving her to sit at each of the county courts on the Wales and Chester circuit. In fact, she first sat at the Crewe County Court and in 2009 transferred to the Warrington County Court. In 2010, the Cheshire courts were transferred to the Northern Circuit and major cost cutting reforms were announced. In 2011, the Runcorn County Court was closed and the business transferred to Warrington, as were some tribunal sittings. The appellant raised a number of concerns relating to the cuts, in particular about the lack of appropriate and secure court room accommodation, the severely increased workload placed upon the district judges, and administrative failures. She raised these with the local leadership judges and senior managers in Her Majestys Courts and Tribunals Service and eventually in a formal grievance. She claims that her complaints fell within the definition of qualifying disclosures under section 43B of the 1996 Act, in particular as tending to show a failure to comply with legal obligations, that miscarriages of justice were likely, or that the health and safety of any individual had been, is being or is likely to be endangered. The disclosures were made to an employer or other responsible person within the meaning of section 43C of the 1996 Act and thus they were protected disclosures within the meaning of section 43A. Under section 47B(1) of the 1996 Act, a worker has the right not to be subjected to any detriment by any act, or any deliberate failure to act, by his employer done on the ground that the worker has made a protected disclosure. The appellant claims that she was subjected to a number of detriments as a result of her complaints: a significant delay in investigating her grievance; being seriously bullied, ignored and undermined by her fellow judges and court staff; being informed that her workload and concerns were simply a personal working style choice; and inadequate steps to support her in returning to work; she also claims that a severe degradation in her health, resulting in psychiatric injury and a disability under the Equality Act 2010, was such a detriment. The appellant was signed off work due to stress from the end of January 2013 but has recently returned. In February 2015 the appellant made a two part claim in the Employment Tribunal. Both parts of her claim depended upon her being a worker within the meaning of section 230(3) of the 1996 Act (or having the same protection as such a worker). One part of her claim was for disability discrimination under the Equality Act 2010, as a result of failure to make reasonable adjustments to cater for her disability. This claim is derived from European Union law. It is therefore accepted that, as a result of the decision of this court in OBrien v Ministry of Justice (formerly Department for Constitutional Affairs) [2013] UKSC 6; [2013] 1 WLR 522, in the light of the guidance given by the Court of Justice of the European Union in ((Case C 393/10) [2012] ICR 955), a judge is a worker for the purpose of European Union law and national law has to be interpreted in conformity with that. That case concerned discrimination against part time workers, but the same result was reached by the Court of Appeal for Northern Ireland in Perceval Price v Department of Economic Development [2000] IRLR 380, that tribunal judges were workers for the purpose of discrimination on grounds of sex. Hence the disability discrimination claim will continue in any event. The other part of her claim was under the whistle blowing provisions in Part IVA of the 1996 Act, inserted by the Public Interest Disclosure Act 1998. These provisions are not derived from European Union law and accordingly the definition of worker does not have to be read so as to conform to the requirements of EU law. This means that a judge may have a different status in employment law, depending upon whether or not the employment right in question is derived from EU law. In relation to the whistle blowing claim, the Ministry of Justice objected that the appellant was not a worker as defined by section 230(3)(b) of the 1996 Act. At a preliminary hearing, the Employment Tribunal judge held that she was not a worker, that accordingly she had no protection against infringement of her right to freedom of expression under article 10 of the ECHR, but that it was not possible to read or give effect to section 230(3)(b) so as to give her that protection. The Employment Appeal Tribunal also held that she was not a worker, but found that there were adequate safeguards in place to protect freedom of speech for judges and there was therefore no need to read section 230(3)(b) so as to bring a judge within it, but that in any event it was not possible to do so: [2017] ICR 404. The Court of Appeal also held that the appellant was not a worker. The appellant was permitted also to raise for the first time the argument that denying her whistle blowing protection was discrimination in the enjoyment of her right to freedom of expression and thus contrary to article 14 of the ECHR read with article 10. But she failed in that too: [2018] ICR 827. On appeal to this court, the appellant continues to argue that she is a worker within the meaning of section 230(3)(b) of the 1996 Act. She also raises for the first time a new argument, that she is in Crown employment within the meaning of section 191 of the 1996 Act. If she fails in each of those, she continues to argue that her exclusion from whistle blowing protection is a breach, either of her rights under article 10 or under article 14 read with article 10 of the ECHR and that either section 230(3)(b) or section 191 of the 1996 Act should be read and given effect so as to bring her within that protection. Is a judge a worker? It is not in dispute that a judge undertakes personally to perform work or services and that the recipient of that work or services is not a client or customer of the judge. The issue is whether that work or services is performed pursuant to a contract with the recipient of that work or services or pursuant to some different legal arrangement. Nor is it in dispute that judges hold a statutory office. In broad terms, an office has been defined (by Lord Atkin in McMillan v Guest [1942] AC 561, 564) as a subsisting, permanent, substantive position which had an existence independent of the person who filled it, and which went on and was filled in succession by successive holders. Office holders do not necessarily hold office pursuant to any kind of contract. As Lord Hoffmann explained in Percy v Board of National Mission of the Church of Scotland [2005] UKHL 75; [2006] 2 AC 28, para 54: The distinction in law between an employee, who enters into a contract with an employer, and an office holder, who has no employer but holds his position subject to rules dealing with such matters as his duties, the terms of his office, the circumstances in which he may be removed and his entitlement to remuneration, is well established and understood. One of the oldest offices known to law is that of constable. It is notorious that a constable has no employer. It required special provision in [section 17 of the Sex Discrimination Act 1975] to bring the office of constable within the terms of the Act and to deem the chief constable to be his employer. But there are many other examples of offices; public, ecclesiastical and private. However, it is also well established that an office holder may hold that office under a contract with the person or body for whom he undertakes to perform work or services. The obvious example is a director of a company, who may hold that office concurrently with a service contract. Percy itself was another example. Ms Percy was an ordained minister of the Church of Scotland who was appointed associate minister to a particular parish. This was undoubtedly an ecclesiastical office, but the House of Lords held, by a majority, that she also had a contract personally to execute work, thus enabling her to bring a claim for sex discrimination against the Board of Mission which had appointed her. It might be thought that there is a distinction between private or ecclesiastical offices, on the one hand, and public or statutory offices, on the other, and that the former may be held concurrently with a contract whereas the latter may not. After all, before the introduction of modern protection from unfair dismissal, public and statutory office holders might be better protected than others, under the line of cases beginning with Ridge v Baldwin [1964] AC 40. However, in Miles v Wakefield Metropolitan District Council [1987] AC 539, which concerned the statutory office of superintendent registrar of births, deaths and marriages, Lord Oliver of Aylmerton, at p 567, questioned whether the mere fact that the plaintiff was appointed to his office under the provisions of the [Registration Service Act 1953] necessarily precludes the existence of a parallel contract between him and the council for the carrying out of his statutory duties. As this court held in Preston (formerly Moore) v President of the Methodist Conference [2013] 2 AC 163, whether an office holder holds office under a legally binding contract depends upon the intentions of the parties: The mere fact that the arrangement includes the payment of a stipend, the provision of accommodation and recognised duties to be performed by the minister, does not without more resolve the issue. The question is whether the parties intended these benefits and burdens of the ministry to be the subject of a legally binding agreement between them (Lord Sumption, para 26). Earlier, when commenting on the Percy case, he had explained that The primary considerations are the manner in which the minister was engaged, and the character of the rules governing his or her service. But, as with all exercises in contractual construction, these documents and any other admissible evidence of the parties intentions fall to be construed against their factual background (para 10). Part of the background in that case was the spiritual purpose of the functions of a minister of religion, although it had been established in Percy that there was no presumption against the contractual character of their service. In Preston, there was no difference between the majority, led by Lord Sumption, and me, the sole dissenter, as to the nature of the exercise upon which we were engaged: we differed only in our interpretation of the facts. It is clear, therefore, what the question is: did the parties intend to enter into a contractual relationship, defined at least in part by their agreement, or some other legal relationship, defined by the terms of the statutory office of district judge? In answering this question, it is necessary to look at the manner in which the judge was engaged, the source and character of the rules governing her service, and the overall context, but this is not an exhaustive list. In looking at the manner in which the judge was engaged, it could be said that there was classic offer and acceptance: there was a letter offering appointment, upon the terms and conditions set out in the letter and accompanying memorandum, which the appellant was invited to accept and did accept. However, the manner of appointment is laid down in statute: under section 6 of the County Courts Act 1984, district judges are now appointed by Her Majesty on the recommendation of the Lord Chancellor; but under the Constitutional Reform Act 2005, the whole process of selection is in the hands of the Judicial Appointments Commission, applying the criteria laid down in that Act. Furthermore, there was nothing in the letter offering appointment or in the accompanying memorandum which was expressed in contractual terms: indeed, some provisions were expressed in terms of what the Lord Chancellor expected or regarded as essential rather than as contractually binding obligations. In looking at the content of the relationship, it could be said that the terms and conditions contained some provisions, for example, those relating to maternity and paternity and adoption leave, which are not derived from statute. It could also be said that deployment decisions, as in any other employment, may be the subject of some negotiation between the individual judge and the leadership judges in her area; but ultimately the Lord Chief Justice is responsible for the deployment of judges. The essential components of the relationship are derived from statute and are not a matter of choice or negotiation between the parties. Under section 6(5) of the 1984 Act, a district judge is to be paid such salary as the Lord Chancellor may determine with the concurrence of the Treasury, but this cannot later be reduced; nor, of course, can it be increased by individual negotiation, as opposed to later determination of what the remuneration for that office is to be. Judicial pensions are also governed by statute and are not a matter of individual negotiation. Under section 11 of the 1984 Act, district judges must leave office on reaching the age of 70 (with the possibility of extension thereafter); otherwise they hold office during good behaviour and may only be removed for misbehaviour or inability to perform the duties of the office by the Lord Chancellor with the concurrence of the Lord Chief Justice; disciplinary proceedings against them are governed by the Judicial Discipline (Prescribed Procedures) Regulations 2014 (SI 2014/1919). It is also noteworthy that the appellant had difficulty in identifying her employer. These proceedings were brought against the Ministry of Justice. However, the appellant was in fact appointed by the then Lord Chancellor, while later district judges are appointed by Her Majesty the Queen. Responsibility for the judiciary is in fact divided between the Lord Chancellor, as a Minister of the Crown, and the Lord Chief Justice, as Head of the Judiciary. Many of the matters of which the appellant complained related to deployment and workload and many of her complaints were directed towards the local leadership judges, although some were directed to senior officials in Her Majestys Courts and Tribunals Service. This fragmentation of responsibility has both statutory and constitutional foundations and highlights how different is the position of a judge from that of a worker employed under a contract with a particular employer. Finally, and related to that, there is the constitutional context. Fundamental to the constitution of the United Kingdom is the separation of powers: the judiciary is a branch of government separate from and independent of both Parliament and the executive. While by itself this would not preclude the formation of a contract between a Minister of the Crown and a member of the judiciary, it is a factor which tells against the contention that either of them intended to enter into a contractual relationship. Taken together, all of these factors point against the existence of a contractual relationship between a judge and the executive or any member of it. Still less do they suggest a contractual relationship between the judge and the Lord Chief Justice. Crown employment Section 191(1) of the 1996 Act provides that Subject to section 192 and 193, the provisions of this Act to which this section applies shall have effect in relation to Crown employment and persons in Crown employment as they have effect in relation to other employment and other employees or workers. Included among the provisions to which the section applies, in section 191(2)(aa), is Part IVA. There is a debate about whether including judges within Crown employment would bring with it all the listed protections given to employees and workers or only those given to limb (b) workers. Fortunately, it is not necessary for us to resolve that debate in order to decide this case. Section 191(3) provides that In this Act, Crown employment means employment under or for the purposes of a government department or any officer or body exercising on behalf of the Crown functions conferred by a statutory provision. Clearly, employment in this section cannot mean employment under a contract because it would then add nothing to the definition in section 230(3). The predecessor to section 191 was inserted into the Industrial Relations Act 1971 because historically Crown servants had not been seen to be employed under contracts of service and had not been able to complain of wrongful dismissal. The object was to enable them to complain of unfair dismissal and enjoy the other employment rights listed in section 191(2). Thus, argues the appellant, section 191 is apt to give her the protection of Part IVA even if she is not employed under a contract. The definition in section 191(3) has two limbs: employment under or for the purposes of a government department; and employment under or for the purposes of an officer or body exercising on behalf of the Crown functions conferred by a statutory provision. For the reasons given earlier, it is impossible to regard the judiciary as employed under or for the purposes of the Ministry of Justice. They are not civil servants or the equivalent of civil servants. They do not work for the ministry. It is slightly more plausible to regard them as working under or for the purposes of the Lord Chief Justice, who since the 2005 Act has had statutory responsibilities in relation to the judiciary: under section 7 of that Act, he is responsible for the maintenance of appropriate arrangements for the welfare, training and guidance of the judiciary of England and Wales (within the resources provided by the Lord Chancellor) and for their deployment and the allocation of work within the courts. As already noted, he also shares some responsibility for appointments, discipline and removal with the Lord Chancellor. But it is difficult to think that, by conferring these functions upon the Lord Chief Justice, the 2005 Act brought about such a fundamental change in the application of section 191. Judges do not work under and for the purposes of those functions of the Lord Chief Justice but for the administration of justice in the courts of England and Wales in accordance with their oaths of office. Mutatis mutandis, the same reasoning would apply to the identical definition of crown employment in article 236(3) of the Employment Rights (Northern Ireland) Order 1996. It is perhaps worth noting that section 83(2) and (9) of the Equality Act 2010, passed since the 2005 Act, defines employment as covering Crown employment as defined in section 191 of the 1996 Act. But it also makes express provision, in sections 50 and 51, prohibiting discrimination in relation to, among other things, appointment to public offices. These are defined to include officers appointed by or on the recommendation of a member of the executive (such as the Lord Chancellor) or by the Lord Chief Justice or Senior President of Tribunals. Thus judicial office holders are clearly protected by these provisions, which would have been quite unnecessary had they already been protected as persons in Crown employment. Sections 50 and 51 do not apply in Northern Ireland, but this does not affect the force of this point. Human rights The appellant first argued that the failure to extend the 1996 Acts protection against whistle blowing to judicial officers was a violation of her right to freedom of expression under article 10 of the ECHR. It is indeed possible to see that imposing certain detriments upon her as a result of her public interest disclosures would be an interference with her freedom of expression. It is not enough to say that judges are well protected against dismissal and other disciplinary action if they speak their minds. They are not so well protected against the sort of detriments which are complained about in this case bullying, victimisation and failure to take seriously the complaints which she was making. Be that as it may, however, there is a remedy for breach of the Convention rights, by way of an action under section 7(1) of the Human Rights Act 1998, which can result in an award of damages, if this is necessary to afford just satisfaction for the wrong done. But this would not have the effect of extending the specific protection of Part IVA of the 1996 Act to judicial or indeed other non contractual office holders. It would not enable the appellant to pursue the claim which she has made in the Employment Tribunal. The appellant also complains that the failure to extend the protection of Part IVA to judicial office holders is a violation of her rights under article 14 of the ECHR read with article 10. Article 14, it will be recalled, reads: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. This gives rise to four well known questions: (i) do the facts fall within the ambit of one of the Convention rights; (ii) has the applicant been treated less favourably than others in an analogous situation; (iii) is the reason for that less favourable treatment one of the listed grounds or some other status; and (iv) is that difference without reasonable justification put the other way round, is it a proportionate means of achieving a legitimate aim? The answer to question (i) is clearly yes. Indeed, not only do the facts fall within the ambit of the right to freedom of expression protected by article 10; unusually there may well have been a breach of that article in this case; but that is not required. The answer to question (ii) is also clearly yes. The applicant, and others like her, have been denied the protection which is available to other employees and workers who make responsible public interest disclosures within the requirements of Part IVA of the 1996 Act. She is denied protection from any detriment, which is much wider than protection from dismissal or other disciplinary sanctions. She is denied the possibility of bringing proceedings before the Employment Tribunal, with all the advantages those have for applicants. She is denied the right to seek compensation for injury to feelings as well as injury to her health. This is undoubtedly less favourable treatment than that afforded to others in the workplace employees and limb (b) workers who wish to make responsible public interest disclosures. It is no answer to this to say that, by definition, judicial office holders are not in an analogous situation to employees and limb (b) workers. That is to confuse the difference in treatment with the ground or reason for it. What matters is that the judicial office holder has been treated less favourably than others in relation to the exercise or enjoyment of the Convention right in question, the right to freedom of expression. She is not as well protected in the exercise of that right as are others who wish to exercise it. The answer to question (iii) is also clearly yes. An occupational classification is clearly capable of being a status within the meaning of article 14. Indeed, it is the very classification of the judge as a non contractual office holder that takes her out of the whistle blowing protection which is enjoyed by employees and those who have contracted personally to execute work under limb (b) of section 230(3). The constitutional position of a judge reinforces the view that this is indeed a recognisable status. The answer to question (iv) is also, in my view, clearly yes. The respondent argues that this is a case in which the courts should allow a broad margin of discretion to the choices made by Parliament, for two main reasons: first because this is an area of social policy in which the courts should respect the decisions of the democratically elected legislature unless they are manifestly without reasonable foundation; and second, because the status in question is not one of the particularly suspect grounds of discrimination, such as race or sex or sexual orientation, and the less favourable treatment is correspondingly easier to justify. There are several problems with this argument. The first is that, while it is well established that the courts will not hold a difference in treatment in the field of socio economic policy unjustifiable unless it is manifestly without reasonable foundation, the cases in which that test or something like it has been applied are all cases relating to the welfare benefits system: see R (RJM) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2008] UKHL 63; [2009] 1 AC 311 (income support disability premium); Humphreys v Revenue and Customs Comrs [2012] UKSC 18; [2012] 1 WLR 1545 (child tax credit); R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] UKSC 16; [2015] 1 WLR 1449 (benefit cap); Mathieson v Secretary of State for Work and Pensions [2015] UKSC 47; [2015] 1 WLR 3250 (child disability living allowance); R (MA) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2016] UKSC 58; [2016] 1 WLR 4550 (bedroom tax); R (HC) v Secretary of State for Work and Pensions (AIRE Centre intervening) [2017] UKSC 73; [2017] 3 WLR 1486 (benefits for children of Zambrano carers); R (DA) v Secretary of State for Work and Pensions (Shelter Childrens Legal Services and others intervening) [2019] UKSC 21; [2019] 1 WLR 3289 (revised benefit cap). It is also in that context that the test has been articulated by the European Court of Human Rights: see Stec v United Kingdom (2006) 43 EHRR 47. This case is not in that category, but rather in the category of social or employment policy, where the courts have not always adopted that test: see, for example, In re G (A Child) (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] 1 AC 173. The courts will always, of course, recognise that sometimes difficult choices have to be made between the rights of the individual and the needs of society and that they may have to defer to the considered opinion of the elected decision maker: see R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326, 381. But the second problem is that in this case there is no evidence at all that either the executive or Parliament addressed their minds to the exclusion of the judiciary from the protection of Part IVA. While there is evidence of consideration given to whether certain excluded groups should be included (such as police officers), there is no evidence that the position of judges has ever been considered. There is no considered opinion to which to defer. That leads on to the third problem, which is that no legitimate aim has been put forward for this exclusion. It has not been explained, for example, how denying the judiciary this protection could enhance judicial independence. Of course, members of the judiciary must take care, in making any public pronouncements, to guard against being seen to descend into the political arena. But responsible public interest disclosures of the sort which are protected under Part IVA do not run that risk. Indeed, the object of the protection was to give workers the confidence to raise malpractice within their organisation rather than placing them in a position where they feel driven to raise concerns externally. It is just as important that members of the judiciary have that confidence. They are just as vulnerable to certain types of detriment as are others in the workplace. To give the judiciary such protection might be thought to enhance their independence by reducing the risk that they might be tempted to go public with their concerns, because of the fear that there was no other avenue available to them, and thus unwillingly be drawn into what might be seen as a political debate. As no legitimate aim has been put forward, it is not possible to judge whether the exclusion is a proportionate means of achieving that aim, whatever the test by which proportionality has to be judged. I conclude, therefore, that the exclusion of judges from the whistle blowing protection in Part IVA of the 1996 Act is in breach of their rights under article 14 read with article 10 of the ECHR. Remedy The most difficult question in this case, therefore, is how to remedy the incompatibility of the exclusion of the judiciary from the protection of Part IVA of the 1996 Act with article 14 of the ECHR. In Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, the House of Lords held that the interpretive duty in section 3 of the Human Rights Act 1998 was the primary remedy. Section 3(1) reads: So far as it is possible to do so, primary legislation must be read and given effect in a way which is compatible with the Convention rights. In Ghaidan v Godin Mendoza it was also established that what is possible goes well beyond the normal canons of literal and purposive statutory construction. Philip Sales QC, for the Government, argued (at p 563) that section 3(1) required a similar approach to the duty to interpret domestic legislation compliantly with EU law, so far as possible, citing Litster v Forth Dry Dock Engineering Co Ltd [1990] 1 AC 546. Both Lord Steyn (paras 45 and 48) and Lord Rodger (paras 118 and 121) agreed that what was possible by way of interpretation under EU law was a pointer to what was possible under section 3(1), citing Litster as well as Pickstone v Freemans Plc [1989] AC 66. Lord Nicholls referred to the unusual and far reaching character of the obligation (para 30). He also emphasised that it did not depend critically on the particular form of words used, as opposed to the concept (para 31). Lord Rodger, too, said that to attach decisive importance to the precise adjustments required to the language of the particular provision would reduce the exercise to a game (para 123). The limits were that it was not possible to go against the grain of the legislation in question (para 121) or to interpret it inconsistently with some fundamental feature of the legislation (Lord Nicholls, at para 33, echoing In re S (Minors) (Care Order: Implementation of Care Plan) [2002] UKHL 10; [2002] 2 AC 291). There are two provisions which might be candidates for such interpretation. Most obvious is section 230(3)(b), which, it will be recalled, relevantly defines a worker as: an individual who has entered into or works under (or where the employment has ceased, worked under) (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. Not surprisingly, the appellant points out that the courts have found it possible to interpret this definition so as to include judicial office holders when required to do so by European Union law. In OBrien v Ministry of Justice (formerly Department for Constitutional Affairs), [2013] UKSC 6; [2013] 1 WLR 522, the question was whether part time judges were entitled to the protection against discrimination given to part time workers by the Part Time Workers Directive (Council Directive 97/81/EC) transposed into UK law by the Part Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551). The definition of worker in regulation 1(2) was identical to that in section 230(3) of the 1996 Act. Having determined that judges were workers for the purpose of European Union law, this court had no difficulty in holding that the Regulations applied to them. The respondent argues that to do this would cut across a fundamental feature or go against the grain of the 1996 Act. But it is hard to see why that should be so. To interpret section 230(3)(b) so as to include judicial office holders would not afford them all the rights afforded to workers under the 1996 Act, but only those rights afforded to limb (b) workers, most of which are inapplicable to judges. But in any event, the interpretation in this case would only relate to an exclusion which is incompatible with the Convention rights otherwise the section 3(1) power and duty does not apply. And the inclusion of judicial office holders within the Equality Act 2010, as well as within EU derived employment rights, shows that affording judges some of the rights of other workers does not offend against any fundamental constitutional principle. It is noteworthy that the Court of Appeal, in para 90, was inclined to think that: having regard to the strength of the interpretative obligation under section 3 of the 1998 Act it would be possible to read section 230(3) down so that it extended to an employment relationship of the kind found to exist in OBrien. It does not seem that the definition of a worker by reference to the existence of a contract, so as to exclude a mere office holder, is a fundamental feature of the legislation. I agree. It would not be difficult to include within limb (b) an individual who works or worked by virtue of appointment to an office whereby the office holder undertakes to do or perform personally any work or services otherwise than for persons who are clients or customers of a profession or business carried on by the office holder. The legislation contemplates disclosure to an employer or others responsible for the conduct in question, which in this case would be the leadership judges or the HMCTS or the Ministry of Justice, depending upon the nature of the conduct. It also prohibits both the employer and fellow employees from subjecting the whistle blower to any detriment, which again would have to embrace fellow judges and those in a position to inflict such detriments. None of this would go against the grain of the legislation. When considering whether the disclosures had been made in the public interest, it would of course be relevant to consider whether there were other more appropriate ways of trying to resolve the situation. This would include the judicial grievance procedures policies (currently, policy no 1 relates to grievances between judicial office holders and policy no 3 relates to grievances between judicial officer holders and HMCTS staff); however, the appellant did invoke the grievance procedure and the investigating judge, Tomlinson LJ, commented that it was not a suitable means of dealing with the sort of systemic failures which were being alleged. Bearing in mind, therefore, the parallel seen in Ghaidan v Godin Mendoza between section 3(1) and conforming interpretation in EU law, its strictures against attaching decisive importance to the precise adjustment needed to the language of the provisions, and the ease with which this court interpreted identical language to include judges as limb (b) workers in OBrien, I can reach no other conclusion than that the Employment Rights Act should be read and given effect so as to extend its whistle blowing protection to the holders of judicial office. The relevant provisions of the Employment Rights Act extend to both England and Wales and Scotland (section 244) but not Northern Ireland. However, the equivalent provisions of the Employment Rights (Northern Ireland) Order 1996 (as amended by the Public Interest Disclosure (Northern Ireland) Order 1998) are to the same effect: article 3(3) defines worker in the same times as section 230(3); articles 67A, 67B, 67C define protected disclosures, qualifying disclosures and those to whom such disclosures may be made in the same way as in Part IVA of the 1996 Act; and articles 70B and 71(1A) provide that a maker of a protected disclosure shall not be subjected to any detriment for doing so and for complaints to an employment tribunal. Those provisions, too, should be read and given effect so as to extend the protection given to whistle blowers to the holders of judicial office. I would therefore allow this appeal and remit the case to the Employment Tribunal on the basis that the appellant is entitled to claim the protection of Part IVA of the 1996 Act. |
The husband and wife (as it will be convenient to describe them notwithstanding the grant of a divorce) entered into a consent order dated 28 July 2010, by which they compromised their claims against each other for financial orders on the basis of a clean break between them. The wife wished to continue to live with the two children of the family, namely a girl then aged ten and a boy then aged eight, in the matrimonial home, which was held in the joint names of herself and the husband subject to a substantial interest only mortgage. Part of the order provided, by way of property adjustment, that the husband should transfer to the wife his legal and beneficial interest in the home subject to the mortgage. In return the husband was to be released from his covenants under the mortgage. His release from them was provided in undertakings given to the court by the wife which were recited as a prelude to the order. Thus she undertook at para 4.3 of the recitals to discharge all instalments payable under the mortgage; in any event to indemnify the husband against any liability under it; and to use her best endeavours to obtain the mortgagees agreement to release him from his covenants under it. Then, crucially, she undertook at para 4.4 of the recitals that, if the husband had not been released from his mortgage covenants by 30 September 2012, she would secure his release by placing the home on the market for sale and proceeding to sell it. The several other provisions of the order, including for the division between the husband and wife of responsibility for specified debts, are for present purposes irrelevant. On 18 November 2011 the wife issued an application which she described as being to vary her undertaking at para 4.4. In her statement in support of it she explained that she had not been able to secure the husbands release from his mortgage covenants and would not be able to do so by 30 September 2012. She said that, when she had given the undertaking at para 4.4, she had expected to be able to secure his release either by the provision instead by her brother or sister of guarantees to the mortgagee for the performance of her obligations under it or by her obtaining employment by reference to which she could persuade the mortgagee to accept her as the sole mortgagor; but that in the event neither the brother nor the sister had proved able to provide the guarantees and she had been unable to obtain employment. She explained that the two children were in fine schools in the vicinity of the home and that it would be gravely damaging to their interests for them to have to move home while still at school. In such circumstances she sought a variation of the undertaking at para 4.4. so as to postpone her obligation to secure the husbands release from his covenants under the mortgage by sale of the home from 30 September 2012 until (as she soon made clear) 15 August 2019, being the date of their sons 18th birthday. In 2012 the husband countered by contending, through counsel, that the court had no jurisdiction to hear the wifes application. He requested the court so to rule in the determination of a preliminary issue. In retrospect it is unfortunate that the court acceded to his request. As of now, in 2017, the merits or demerits of the wifes application have never been ventilated. On any view, albeit subject to the extent of prejudice suffered by the husband as a result of remaining a co mortgagor of the home, the wifes application for postponement of the sale for seven years was highly ambitious even if there was jurisdiction to hear it. But, unsatisfactory though it is, she has secured postponement for five of those years solely as a result of the continuing litigation in respect of the preliminary issue. So she is now able to present her request for postponement as being only for the two final years, being (so she says) more important than ever in the interests both of the parties daughter who is about to embark on the second and final year of her A level course and of their son who is about to embark on the first of them. On 15 January 2014 District Judge Chesterfield, sitting in the Watford County Court, concluded that the court had no jurisdiction to hear the wifes application and so ordered that it be dismissed. On 12 May 2014 HHJ Waller CBE upheld the district judges conclusion and dismissed the wifes appeal against his order. On 31 July 2015 the Court of Appeal (Gross and Kitchin LJJ, and McCombe LJ who gave the main judgment): [2015] EWCA Civ 833; [2016] 2 FLR 467 held that there was jurisdiction to hear the wifes application but that it was only a formal jurisdiction which existed only technically; that scope for its exercise was extremely limited indeed; and that, in the light of what the court had been told, there was no basis for its exercise upon the wifes application. Against the Court of Appeals dismissal of her second appeal the wife brings a third appeal to this court. All three lower courts adopted without demur the wifes description of her application as being to vary her undertaking. But her description betrays a conceptual confusion which it is as well to dispel as this early stage. An undertaking is a solemn promise which a litigant volunteers to the court. A court has no power to impose any variation of the terms of a voluntary promise. A litigant who wishes to cease to be bound by her (or his) undertaking should apply for release from it (or discharge of it); and often she will accompany her application for release with an offer of a further undertaking in different terms. The court may decide to accept the further undertaking and, in the light of it, to grant the application for release. Equally the court may indicate that it will grant the application for release only on condition that she is willing to give a further undertaking or one in terms different from those of a further undertaking currently on offer. In either event the courts power is only to grant or refuse the application for release; and, although exercise of its power may result in something which looks like a variation of an undertaking, it is the product of a different process of reasoning. In Cutler v Wandsworth Stadium Ltd [1945] 1 All ER 103 Morton LJ said at 105D E: the court does not vary an undertaking given by a litigant. If the litigant has given an undertaking and desires to be released from that undertaking, the application should be an application for release Litigants are not ordered to give these undertakings; they choose to give them, and an application to have an undertaking already given varied is wholly wrong in form. In my opinion these proceedings have been bedevilled by a failure to distinguish between the existence of the courts jurisdiction to release the wife from her undertaking (conditionally, on any view, upon her offering a further one in different terms) and the exercise of its jurisdiction. The preliminary issue has related only to its existence with the result that factors relevant to its exercise have not been the subject of investigation or argument. Nevertheless, influenced by a decision of the Court of Appeal in Omielan v Omielan [1996] 2 FLR 306 which will receive my careful consideration in paras 21 to 27 below, the lower courts have in my view looked over their shoulders at the ostensibly ambitious nature of the wifes application (being one of the factors relevant to exercise of the jurisdiction); and they have deployed it as a basis for denying the existence of the jurisdiction or, in the Court of Appeal, as a basis for concluding that the jurisdiction was no more than formal and technical (which, irrespective of what in this context those adjectives precisely mean, seems tantamount to a conclusion that, for practical purposes, the jurisdiction does not exist). In Russell v Russell [1956] P 283 the husband appealed against a judges refusal to release him from an undertaking that, unless he was out of work, he would not apply for a downwards variation of an order for maintenance in favour of the wife. Jenkins LJ said at 294: any undertaking given to the court is capable of being discharged by the court whenever it appears to the court that circumstances have arisen which make that course a proper one in the interests of justice. He repeated at 297 that it was always competent for the court to release a person from an undertaking as an exercise of its discretion in the interests of justice. In the light of what follows, however, it is worthwhile to note that, in proposing that the appeal be dismissed, Jenkins LJ there proceeded to explain that the husband had wholly failed to show any such change in circumstances as would warrant release. In Kensington Housing Trust v Oliver (1997) 30 HLR 608 the Court of Appeal stressed the universality of the jurisdiction to grant release from an undertaking. A tenant had caused flooding of flats underneath her flat. As a result the landlord had obtained an order for possession of it but it had undertaken to the court to offer the tenant specified alternative accommodation at basement or ground floor level before seeking to enforce the order. When, following further flooding in breach of a reciprocal undertaking which the tenant had given to the court, the landlord applied for release from its undertaking, a recorder held that the court lacked jurisdiction to grant release from it. The Court of Appeal held, however, that the recorder did have jurisdiction to grant release and that the court should itself exercise it. Both Butler Sloss LJ at 612 and Judge LJ at 616 quoted the statement of principle by Jenkins LJ in the Russell case, set out above. Butler Sloss LJ held at 612 that the principle applied to all civil litigation and at 613 that the fact that the undertaking was recorded as a prelude to a consent order was irrelevant. Judge LJ held at 617 that the principle was not confined to matrimonial proceedings. Thorpe LJ held at 614 that it applied in the fields both of family law and of civil law. Other than in the decisions of the Court of Appeal in Omielan, which pre dated the Kensington Housing Trust case, and in the present case, the universality of the jurisdiction to grant release from an undertaking has, it seems, never been doubted. But, outside the realm of undertakings given in proceedings for financial orders, there has been debate about the criteria by which the jurisdiction should be exercised. For, in the Kensington Housing Trust case, the Court of Appeal, applying the reference by Jenkins LJ in the Russell case to the interests of justice, appeared to hold that the sole criterion was whether it would be just to grant release. Giving the leading judgment, with which both Thorpe and Judge LJJ agreed, Butler Sloss LJ said at 613: I am in no doubt, therefore, that an undertaking wherever recorded which is accepted by the court can be discharged by the court at any stage if it is just to do so. In Mid Suffolk District Council v Clarke [2006] EWCA Civ 71, [2007] 1 WLR 980, the Court of Appeal considered whether it was correct to say that the jurisdiction fell to be exercised solely by reference to what was just. The council had taken proceedings against a farmer whose production of swill, for feeding to pigs, was emitting a smell which local residents found scarcely tolerable. Rather than suffer the making of an injunction against him, the farmer had undertaken not to cause a public nuisance at his premises. The duration of the undertaking was not limited in time. Thereafter the council took committal proceedings in which the farmer admitted that he had broken the undertaking by the continued emission of smells. The judge duly fined him but then decided to release him from part of his undertaking by limiting its further duration to two years. The Court of Appeal allowed the councils appeal. Lloyd LJ noted at para 20 that, as both parties had accepted, the court had jurisdiction to grant release from an undertaking, in whole or in part, and that the jurisdiction was discretionary. Both he and Buxton LJ then addressed the criteria by which the jurisdiction should be exercised. Having considered the remarks of Butler Sloss LJ in the Kensington Housing Trust case, both Lloyd LJ at para 17 and Buxton LJ at paras 55 and 56 held that it was no doubt necessary for a grant of release to be just but that it had also to be predicated on a significant change of circumstances, which in the present case did not exist. It is, I suppose, inconsistent with the admitted existence of a discretionary jurisdiction to say that it can never be exercised unless a particular fact, such as a significant change of circumstances, is established. If a discretionary jurisdiction is shackled in that way, the result is, instead, that the jurisdiction does not even exist unless the fact is established. For all practical purposes, however, the Court of Appeal in the Mid Suffolk case gave valuable guidance. I summarise it as being that, unless there has been a significant change of circumstances since the undertaking was given, grounds for release from it seem hard to conceive. By reference only to the reasoning in the cases of Russell, Kensington Housing Trust and Mid Suffolk, one would confidently conclude that there was a full jurisdiction to hear the wifes application for release, albeit that its exercise in her favour would be likely to attract lively debate. There is, however, a completely different line of reasoning. In my view it neatly leads to the same conclusion although, for reasons which I will explain, it led the courts below to the opposite conclusion. It relates to sections 24A and 31 of the Matrimonial Causes Act 1973 (the Act). Section 24A provides: (1) Where the court makes a property adjustment order, then, on making that order , the court may make a further order for the sale of such property as may be specified in the order, being property in which either or both of the parties to the marriage has or have a beneficial interest (4) Where an order is made under subsection (1) above, the court may direct that the order shall not take effect until the occurrence of an event specified by the court Section 31 provides: (1) Where the court has made an order to which this section applies, then, subject to the provisions of this section , the court shall have power to vary the order (2) This section applies to the following orders under this Part of this Act, that is to say any order made under section 24A (1) above for (f) the sale of property; . In exercising the powers conferred by this section the (7) court shall have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of 18, and the circumstances of the case shall include any change in any of the matters to which the court was required to have regard when making the order to which the application relates, It is worthy of note that, in my view correctly, Parliament did not in subsection (7) or elsewhere make a change of circumstances a condition for exercise of the jurisdiction to vary. Nevertheless, unless there has been a significant change of circumstances since the order was made, grounds for variation of it under section 31 seem hard to conceive. Both the district judge and the circuit judge held that the wifes undertaking in para 4.4 of the recital could instead have been framed as an order for the sale of the home pursuant to subsection (1) of section 24A of the Act, albeit subject to a direction pursuant to subsection (4) that it should not take effect unless by 30 September 2012 the wife had failed to secure the husbands release from his covenants under the mortgage. In the Court of Appeal neither party argued that the two judges had fallen into error in that respect. Nevertheless the court held that the undertaking could not have been framed as an order under section 24A. In paras 29 and 34 of his judgment McCombe LJ based his reasoning in this respect on the admitted fact that the wifes undertakings in para 4.3 of the recital, namely to discharge the mortgage instalments etc, could not have been framed as orders. He held that, since para 4.4 was linked to para 4.3, it followed that the undertaking in para 4.4 was likewise not susceptible of being framed as an order. Kitchin LJ agreed with the judgment of McCombe LJ, as did Gross LJ although he expressed doubts on this point. It is important to note, however, that at para 41 McCombe LJ observed that, even if he had held that the undertaking in para 4.4 could have been framed as an order for sale, he would still have concluded that in the circumstances the jurisdiction to release the wife from it was no more than formal and technical. Counsel for the husband realistically accepts that he cannot defend that part of the Court of Appeals reasoning in which it held that the undertaking in para 4.4 could not have been framed as an order for sale. With respect, the fact that the undertakings in para 4.3 could not have been framed as orders in no way precluded the making of a conditional order for sale in the terms set out above. In circumstances in which an undertaking could have been framed as an order, it would be illogical for answers to questions about the existence and exercise of the jurisdiction to grant release from it to be different from answers to questions about the existence and exercise of the jurisdiction to vary any such order. In L v L [2006] EWHC 996 (Fam), [2008] 1 FLR 26, the husband had accepted an obligation to make periodical payments to the wife but the obligation had been expressed as an undertaking on his part rather than as an order by consent for periodical payments pursuant to section 23(1)(a) of the Act. Such an order would have been variable under section 31(2)(b) of the Act. The husband subsequently sought to be released from his undertaking on the basis that, in return, the court would make an order for periodical payments against him in favour of the wife on different terms. But he cast his application for release as an application for variation under section 31(2)(b). Munby J declined to strike his application out. He held at para 113 that his entitlement to apply for variation is not in any way affected either by the fact that the order was a consent order or by the fact that the relevant provisions are contained in undertakings rather than in the curial part of the order. In the present case, therefore, the equivalence of the wifes undertaking at para 4.4 with an order for sale under section 24A of the Act, variable under section 31(2)(f) of it, seems clearly to confirm the existence of the courts jurisdiction to hear her application for release from it. But this conclusion the husband disputes. He does so by reference to the decision of the Court of Appeal in the Omielan case cited at para 6 above. In the Omielan case the husband and wife entered into a consent order which related in particular to their home, vested in their joint names, in which the wife wished to continue to reside with the children of the family. Part of the order was a property adjustment order: it was, specifically, a variation of settlement order under which the proportions of the beneficial ownership of the home were recast so as to become 25% for the wife and 75% for the children. But there was also an order for sale of the home under section 24A of the Act. It provided that the home be sold but only on the occurrence of any one of four trigger events, including the event that the wife had cohabited with another man for at least six months. Shortly after the order was made the husband and wife executed a deed of trust under which they declared themselves to be trustees of the home on the above terms. Subsequently, on discovering that the wife had cohabited with another man for at least six months, the husband applied for an order that the sale of the home should take place at once; and the wife countered with an application under section 31(1) and (2)(f) of the Act for the order for sale of the home to be varied so as to postpone it until the youngest child, then aged nine, attained the age of 18. In the Omielan case the Court of Appeal was clearly correct to allow the husbands appeal against a judges refusal to dismiss the wifes application for variation. There were patently no grounds for exercising the jurisdiction to vary the order for sale. In a judgment with which Butler Sloss and Peter Gibson LJJ agreed, Thorpe LJ pointed out at 313 that the vested beneficial interest of the children in reversion had, once the wife had cohabited for six months, become an interest in possession; and that she was seeking to put it back into reversion. But, coupled with that feature, there was (so I would add) the absence of any evidence of a relevant change of circumstances since the order was made: for the fresh circumstance of the wifes cohabitation was a specified ground for triggering the sale and could hardly be deployed as a ground for further postponing it. The trouble is, however, that, instead of allowing the husbands appeal in terms of a refusal to exercise the jurisdiction to vary the order for sale, the Court of Appeal in the Omielan case preferred to hold that the jurisdiction to vary it did not exist. In this regard Thorpe LJ referred at 310A to 311G to the following three authorities as most in point. (i) The first was Dinch v Dinch [1987] 1 WLR 252, in which the House of Lords made no reference to section 24A of the Act. (ii) The second was Thompson v Thompson [1986] Fam 38, in which an order had been made in 1981 for the home not to be sold until the youngest child had attained the age of 17 or further order. The Court of Appeal inevitably allowed the appeal of the wife, who was living in the home with the children, against a judges determination that he had no jurisdiction to entertain her subsequent application for an order for its sale prior to that childs 17th birthday; and the court remitted her application for the jurisdiction to be exercised. The court held at 53 that, even though the property adjustment order had been made before section 24A came into force, it provided the vehicle by which the wife could apply for the further order which the property adjustment order had envisaged. (iii) The third was Taylor v Taylor [1987] 1 FLR 142, in which an order had been made for the wife to have exclusive occupation of the home and on its sale to receive 40% of the net proceeds. A recorder had acceded to a subsequent application by the husband under section 24A for the immediate sale of the home. The Court of Appeal upheld the wifes appeal against the order for sale. But it expressly rejected her contention that the recorder had had no jurisdiction to make an order under section 24A. She alleged that it constituted an impermissible variation of such part of the property adjustment order as had conferred on her a right to occupy the home. But the court held that the effect of any order under section 24A on the property adjustment order was relevant to the discretionary exercise of the jurisdiction, which the recorder had not properly conducted, rather than to the existence of the jurisdiction conferred by the section when literally construed: see the judgments of Sir John Arnold P at 144F and 146D F and of Ralph Gibson LJ at 147B D. In the Omielan case Thorpe LJ proceeded to articulate a statement of principle which in my view is hard to square with the decisions in the Thompson case and, in particular, in the Taylor case. For there is an obvious correlation between the jurisdiction to vary an order for sale and the jurisdiction to make such an order in the first place; and his narrow view of the former was predicated on his narrow view of the latter. He said at 312H: Section 24A is a purely procedural section inserted into the statute to clarify or expand the courts power of implementation and enforcement. Any power to vary [an order made under] such a procedural enactment must be construed to be equally limited to matters of enforcement, implementation and procedure. In other words section 31(2)(f) gives the court jurisdiction to revisit the territory of the ancillary order under section 24A but not the territory of the primary order under section 24 which it supports. Prior to stating the above Thorpe LJ had stressed the fact that, for strong reasons of public policy, orders for property adjustment and (subject to para 26 below) for payment of a lump sum are not variable under section 31 of the Act. He was understandably concerned that the variation of an order for sale might, by the back door, amount to a variation of the property adjustment order which it had accompanied. It was, however, bold for the Court of Appeal to hold that, when Parliament had provided an ostensibly unrestricted jurisdiction to vary an order for sale, the jurisdiction was nevertheless restricted; and equally bold for it to hold that the jurisdiction was restricted by reference to territories, namely that it was restricted to the territory of the order for sale as opposed to the territory of the property adjustment order. It is worthwhile to note that an order for payment of a lump sum is occasionally variable even if, as is likely, the variation will directly prejudice the interests of the payee. Thus section 31(2)(d) of the Act expressly empowers the court to vary an order for payment of a lump sum by instalments. In the words of Bodey J (with whom Schiemann and Sedley LJJ agreed) in Westbury v Sampson [2001] EWCA Civ 407, [2002] 1 FLR 166, at para 18, the subsection not only empowers the court to re timetable / adjust the amounts of individual instalments, but also to vary, suspend or discharge the principal sum itself, provided always that this latter power is used particularly sparingly, given the importance of finality in matters of capital provision. Indeed, although there is no jurisdiction under section 31 to vary an order for a single payment of a lump sum, there is even an inherent jurisdiction in the court to direct a modest extension of the time for its payment provided in the order: Masefield v Alexander (Lump Sum: Extension of Time) [1995] 1 FLR 100. With respect to the Court of Appeal in the Omielan case, I cannot subscribe to its determination of that appeal by reference to the non existence of the jurisdiction to vary the order for sale rather than to a refusal to exercise it. Where Parliament has conferred jurisdiction on a court, I see no scope for a court to say that part of it does not exist. Nor in my view can the existence of jurisdiction sensibly be left to a demarcation of territories. I find the concept of different territories hard to apply to the terms of a financial order, which are usually interlinked and which, in the case of an order for sale under section 24A of the Act, can be made only as an accompaniment to an order for property adjustment or lump sum payment. I wonder whether underneath the concept of different territories lies no more than a rough and ready distinction between an apparently minor variation and an apparently major one. At all events the demarcation of territories within the order is no proper criterion for identifying the existence of a jurisdiction. Understandably the lower courts felt the need to identify the territory of the wifes application for release; and each concluded that it fell within the territory of the order for transfer to her of the equity in the home. There is no need to seek to determine whether their conclusion was correct in this regard. I would suggest, however, that perhaps it merited greater consideration than they saw fit to give to it. For insight into the territory of the wifes application might have been gained by seeking to identify the effect on the husband of the proposed postponement of the sale of the home. Since any resulting prejudice to the husband is on any view likely to be a highly relevant circumstance in the future disposal of the wifes application, it may be helpful to make three points in this regard. The first is obvious: the situation in the present case is unlike the more usual situation in which the respondent to the application for postponement of the sale (or a third party, or third parties as in the Omielan case) has any interest in its proceeds. So the inquiry into prejudice to the husband requires focus elsewhere, in particular into such prejudice as might flow from his remaining liable under his mortgage covenants. Perhaps the most obvious prejudice of that sort would be a call to pay under the mortgage. But, although not noticed in any of the judgments below, the second point is that, with the assistance at times of income support, the wife has discharged all the mortgage instalments in accordance with her undertaking, with the result that the husband has not been, and appears unlikely to be, called upon to make any payment under the mortgage notwithstanding his continued liability under it. That leaves third what may or may not prove to be substantial resulting prejudice in the form of a reduced capacity to obtain another mortgage loan for deployment in the purchase of a home for himself. In 2012 he disclosed mortgage promises from the Halifax of an advance of 180,000 in the event that he was released from his existing mortgage covenants and of only 117,000 in the event that he was not released from them. It follows that no inquiry has yet been conducted into what, even if those figures are reliable, he might have achieved with the larger advance but could not achieve with the smaller one. Nor has an inquiry yet been conducted into the likelihood that, if released from his covenants, he would have purchased, or would now purchase, a home of his own in the light of his previous cohabitation for about two years with a partner in her own home and of his present cohabitation with a second partner in rented accommodation. I propose that this court should allow the wifes appeal; should hold that jurisdiction exists to hear her application; and should remit to HHJ Waller, in the light of his past experience as the Senior District Judge of the Principal Registry, Family Division, the difficult and urgent inquiry into whether the jurisdiction should be exercised. In the light of the equivalence of the wifes undertaking with an order for sale, his inquiry will be conducted in accordance with section 31(7) of the Act, set out in para 15 above. He will give first consideration to the welfare while minors of the two children; but it is a consideration which may be outweighed by other factors. He will have regard to all relevant circumstances including in particular, so I suggest, whether the wife can establish a significant change of circumstances since her undertaking was given and whether, and if so to what extent, the husband has suffered, and is likely to continue to suffer, prejudice by remaining liable under his mortgage covenants. The husband, so this court was told, recently made an open offer to the wife that he would accede to the further postponement of the sale of the home until their sons 18th birthday on condition that she undertook to pay him 30% of the net proceeds of the sale. The wife has rejected it. It is not for this court to judge whether it would be appropriate to attach a condition of that character to the release of the wife from her undertaking. It seems that the parties cannot even agree upon the value of the home and thus upon the figure which 30% of the net proceeds would represent. If, however, the court finds that the husband has suffered prejudice as a result of the delay in selling the home, and/or would be likely to suffer prejudice as a result of any further delay, it is possible that it might favour compensating him by asking the wife to make provision for him out of the ultimate net proceeds as a condition of release. Since drafting the above, I have had the benefit of reading in draft the judgment of Lord Hughes. My respectful comments on it are as follows: a) I acknowledge the difficulty in some cases of exercising the power under section 31 of the Act to vary an order for sale under section 24A in the light of the absence of any power under it to vary an order either for property adjustment under section 24 of it or (subject to para 26 above) for payment of a lump sum under section 23(1)(c) of it. b) The variation of an order for sale, which is no more than an order for the conversion of one form of property into another, can never directly affect the allocation of property between the husband and wife in an order for property adjustment or lump sum. c) But it may have an indirect effect on the allocation, in particular in a case (unlike the present) in which a postponement of the date of sale would postpone a partys receipt into his possession of the capital allocated to him. Another example (also unlike the present) would be an order that the sale should proceed at a specified price. d) In determining whether, and if so how, to exercise its jurisdiction to vary an order for sale, a court should place in the balance any indirect effect of the suggested variation on the order for property adjustment or lump sum; and the effect might in some cases precipitate the dismissal of the application. But in my view there is no way in which this proposition can properly be expanded. e) In particular I, for my part, cannot subscribe to the acid test articulated by Lord Hughes in para 54, namely whether the application is in substance to vary or alter the final [capital] order or is to support it by working out how it should be carried into effect. This test is a reiteration in different words of the test of territories suggested, albeit as a demarcation of the jurisdiction itself, in the Omielan case. f) If, when applying the acid test, the court concludes that the application is in substance to vary the final capital order, it must, so it is said, be dismissed without wider inquiry. But this would run counter to Parliaments instruction in section 31(7) to have regard to all the circumstances. These include the welfare of the two children in the present case, to whom therefore Lord Hughes makes no reference even though their welfare is supposed to be the courts first consideration. g) Furthermore the acid test would in my view be difficult to apply in practice and would generate collateral dispute. Take this very application. Lord Hughes has no doubt that is in substance an application by the wife to vary the final capital order. But, in circumstances in which the husband stands to receive nothing upon the sale, I myself do not so regard it. h) The wifes application was indeed at first to postpone the sale by seven years. But five of those years have been spent in addressing the husbands denial of any jurisdiction to entertain it; and, were this court to determine that there is no need to remit it for hearing because it is now bound to fail, it should confront the reality that the application is now for a postponement of two years. i) An informal indication of the likely outcome of the applications for financial orders, given by the district judge prior to hearing evidence, should not carry weight sufficient to figure in this courts analysis. j) The court proceedings to date have never progressed to the point at which the wife has been able to present her case. We cannot assess the strength of it. k) It seems odd that this court should pre empt the conventional inquiry so as to leave the wife obliged to effect the immediate sale of the home in circumstances in which the husband has himself conceded its further postponement, albeit subject to a condition which it may or may not prove to be appropriate to put to her as the price of release. LORD HUGHES: (dissenting) I respectfully agree with Lord Wilsons insightful analysis of the difference between the existence of jurisdiction (power) in the (i) the nature of undertakings and the machinery by which the obligation which arises under them can be altered, namely by discharge either with or without requiring as a condition for such discharge the giving of a substitute undertaking in different terms; and (ii) court and the principles on which, if it exists, it ought to be exercised. I also agree that the present order, whilst framed by way of undertakings, could equally have been structured as an order for sale under section 24A, subject to one or more conditions pursuant to section 24A(4) and/or consequential or supplementary provisions under subsection (2). Exactly the same effect could have been achieved by such route(s). It follows that the remaining question in this case is: what are the principles for the exercise of the jurisdiction to vary an order for sale under section 24A of the Matrimonial Causes Act, or its equivalent achieved via undertakings? I do not think that it can be right to leave the exercise of that jurisdiction in quite the place that Lord Wilson does. It is one thing to say that the jurisdiction to vary an order for sale under section 24A is given by section 31(2)(f), as clearly it is and always has been. It is another to say that it follows that the exercise of that jurisdiction is open ended. In particular, to say that an order for sale under section 24A (or an undertaking to like effect) can be modified whenever the applicant demonstrates a significant change of circumstances since the order was made is, as it seems to me, too wide a gateway for variation. It would be likely to intrude upon an underlying clean break where, as is very often the case, that is what the order for sale is designed to serve. It may also operate as a regrettable deterrent to the inclusion in court orders of a provision for deferred sale, when that kind of provision is of real practical use to parties and to courts. It is trite to record that the scheme for financial provision after divorce contained in the 1973 Act seeks to combine two features. First, it aims to give the courts as flexible a set of powers as is practicable to re organise the financial affairs of parties when their marriage or partnership has collapsed. Such flexibility is necessary in order to achieve justice between the parties in the very wide range of different factual circumstances which may exist. It is needed to protect the more disadvantaged of the parties. It is particularly called for because whilst the marriage was successful it is very likely that many, perhaps most, couples will have treated their finances with great informality, and with much less regard for who owns what and for the source of expenditure than would be the case as between partners engaged in a commercial venture. Second, however, the Act aims to achieve finality in the re organisation of financial affairs when it can. That means avoiding continuing financial dependence between those who are now not happy together if this is not unavoidable. It also means putting as early an end as one can to litigation between them. This last is a goal of general application to all litigation but it is particularly important in the context of soured relationships, where the tendency to continue to ventilate old disputes may be especially strong and where the ordinary constraints of pragmatism are especially likely to be overcome by emotion. If not thus tempered by finality, the courts protective flexibility can easily become an unwitting tool for prolonged and painful litigation. The Act thus deals both with income provision, which is generally of necessity by way of continuing orders, and with capital or property allocation. Orders for continuing provision are necessarily ones which the court needs power to vary if circumstances change. The payers income may rise or fall; the recipients needs may wax or wane. Orders for capital or property allocation require no such power to vary. For the latter, the aim to bring finality prevails. A clean break is to be achieved where it can, although obviously it is not always possible. For this reason, the broad scheme of the Act has been for 40 years that continuing orders are subject to a power to vary, but that orders for capital provision are not. Orders for periodical payments (section 23(1)(a), (b), (d) and (e)) can be varied: see section 31(2)(a) to (c). Property transfer orders (section 24) cannot. Lump sum orders (section 23(c) and (f)) cannot ordinarily be varied, but only if they are given a continuing element by way of direction for payment by instalments (see section 31(2)(d)). The House of Lords confirmed as long ago as Minton v Minton [1979] AC 593 that this was the scheme of the Act. That case concerned an application for periodical payments made by a spouse after a previous order by consent had settled her capital claims by transfer to her of the former matrimonial home and had provided for nominal periodical payments only until that transfer was accomplished, whereupon they were to cease. There was thus no continuing order to be varied, and the House held that there was similarly no jurisdiction to entertain a second application after the first had been dismissed or, as there, ordered by consent to come to an end. At 608E Lord Scarman gave expression to the principle in terms which are now very well known: Once an application has been dealt with upon its merits, the court has no future jurisdiction save where there is a continuing order capable of variation or discharge under section 31 of the Act There are two principles which inform the modern legislation. One is the public interest that spouses, to the extent that their means permit, should provide for themselves and their children. But the other of equal importance is the principle of the clean break. The law now encourages spouses to avoid bitterness after family breakdown and to settle their money and property problems. An object of the modern law is to encourage each to put the past behind them and to begin a new life which is not overshadowed by the relationship which has broken down. Subsequently, this scheme of the Act was reinforced by provisions encouraging clean breaks, where possible, also in relation to periodical payments. Section 25A, inserted by the Matrimonial Proceedings and Property Act 1984, contains three subsections with this design. By subsection (1) the court must consider whether it is appropriate so to use its powers to make financial provision orders in such a way as to terminate the financial obligations of the parties towards each other as soon as just and reasonable. Subsection (2) requires the court to consider whether any periodical payments order ought to have a definite term set to it, to enable the recipient to adjust to termination of dependence on the other party. Subsection (3) spells out the power of the court to dismiss an application for periodical payments and to couple with the dismissal a direction that no further application may be made. It is well established law that if an application for financial provision is dismissed, no subsequent application can be made for that provision: L v L [1962] P 101 and Minton v Minton. In Miller v Miller [2006] UKHL 24; [2006] 2 AC 618 at para 130 Baroness Hale aptly described these provisions as devised to encourage and enable a clean break settlement. The question raised by the present case, as also by other situations, is in what circumstances is an order to be treated as in substance a continuing one, subject to the fullest power of variation in the interests of flexibility, and when is it to be treated as a clean break order, which should be final? That involves considering the nature and purpose of an order for sale made under section 24A. The power in section 24A to make an order for sale was introduced into the 1973 Act by the Matrimonial Homes and Property Act 1981 following the recommendation of the Law Commission (Law Com No 99, 13 February 1980) Family Law Orders for sale under the Matrimonial Causes Act 1973. The Commissions report made clear why this was done. It was that sometimes when operating the 1973 Act courts wished to order the sale of an asset in order to facilitate a financial provision order of a capital nature. There had been debate whether it was or was not necessary to employ the rather cumbersome machinery of a separate application under section 17 of the Married Womens Property Act 1882 (see for example Ward v Ward and Greene [1980] 1 WLR 4), but in any event that kind of application was probably not available when the asset to be sold was in the sole beneficial ownership of one party, so that some different device would have to be found to insist on a sale. The new provision was designed to put the power beyond doubt and to make it available to the court whether a party asked for it or not: see section 5 of the Commissions report. At para 9 the Commission gave examples of the kind of situation in which an order for sale is useful. Chiefly, it envisaged it being used when an asset needed to be sold to enable a lump sum order to be satisfied, particularly if the money was to come from realisation of the matrimonial home. Another case was that of a spouse who ought to be given a share of capital assets in a family business but had no claim to run it; in such a situation a transfer of shares would not achieve the aim but an order that some of them be sold and the proceeds paid over would. These examples still hold good, indeed the more so now that the principles of sharing and compensation are recognised (see Miller). The Commission summarised its proposal at para 8: Accordingly we propose that the power to order sale should be available whenever the court, in proceedings for divorce, judicial separation or nullity makes a lump sum, transfer or settlement of property, variation of settlement, or secured periodical payments order that is to say whenever it makes an order which involves capital assets. The key characteristic of the order for sale is thus that it is ancillary to a capital order. It is an aid to carrying such an order out. The description of section 24A by Thorpe LJ in Omielan v Omielan [1996] 2 FLR 306 at 312 as purely procedural may possibly involve modest oversimplification. The section gave a power which in some cases went somewhat beyond what might have been achieved by other routes such as the Married Womens Property Act; that was the whole point. But that description was nevertheless apt and was borrowed from the judgment of Oliver LJ in Thompson v Thompson [1986] Fam 38 at 53B. In Thompson a property adjustment (variation of settlement) order under section 24 had been made, by consent, before the commencement of section 24A. It had modified the trust for sale of the jointly owned matrimonial home by providing, in the familiar Mesher v Mesher [1980] 1 All ER 126 type form, that the wife and children should occupy it and that it should not be sold until the youngest child reached the age of 17, or completed his education, or further order. Quite soon afterwards, and well before the child had reached 17, the wife, who wished to move house, sought an order for earlier sale. It was the foundation of her argument that her application was for an order working out or giving effect to the original order but did not seek a variation of its substance (see 40G). The County Court judge had felt he had no jurisdiction to entertain the application because it amounted to varying a section 24 order. The Court of Appeal held that he had, because it did not. The Courts primary decision was that independently of the advent of section 24A, the order sought by the wife did not amount to an impermissible variation of the original order and that there was, accordingly, no jurisdictional obstacle to adjudicating upon it. Oliver LJ was at pains to formulate the question in the case as whether an application made under the liberty to apply reserved in a common form Mesher order is an application to vary the order, or an application for the working out of the order (46H). He held that whilst such an application might amount to an impermissible variation, it did not necessarily do so. The question was, in each case, which it was. He held, plainly correctly if I may say so, that orders deferring sale of jointly held property, in the common Mesher form, have an obvious need for scope to adjust them to work out the order. Whilst an application further to delay sale would, he held, ordinarily amount to an impermissible variation, an application for an earlier sale need not do so, and often would not. He instanced examples such as the resident spouse going bankrupt, or wishing to emigrate, or one of the residents becoming incapacitated. It would no doubt have been different if it had been the husband who had sought an earlier sale, thus significantly altering the protection given to the wife and children by the original order; that did not arise, but would, as it seems to me, plainly be the kind of application which would be treated under the approach of Oliver LJ as in substance one to vary the final property adjustment order, and as such one which therefore ought not to be entertained. It was necessary to address the then new section 24A only because it was argued that, notwithstanding the stipulation in the consent order for liberty to apply, the only source of jurisdiction to direct the husband to concur in the sale was found in the non matrimonial relief framework of section 30 Law of Property Act 1925, whilst the value of the house was outside the financial limits within which such power was available to the County Court. Concluding that that argument was correct, the court went on to hold that the new section 24A power to order sale was the kind of procedural provision which could be exercised in a case where the substantive order had been made before its commencement, without improper retrospectivity. It was in this context that Oliver LJ observed at 51H 52A that if the original order had been made after the commencement of section 24A there could have been no question of jurisdictional limits (ie the financial limits on the County Court). The jurisdiction being spoken of was a jurisdiction to make a new order for sale; variation of an order for sale which had already been made did not arise. There is accordingly nothing in the judgments in Thompson inconsistent with the approach subsequently adopted in Omielan, providing that the latter must be seen correctly as a statement of the basis on which a jurisdiction is to be exercised, rather than as defining the existence of the jurisdiction. On the contrary, the whole basis of Thompson was to identify the difference between substantive variation of the original order, which is not permitted, and further order to work out or give effect to the original order, which is. What the Court of Appeal subsequently held in Omielan is that exactly the same principles still need to be applied when considering section 31(2)(f). Thompson was applied in Taylor v Taylor [1987] 1 FLR 142. The original order was again made before the commencement of section 24A. It was not a common form Mesher order, because it fixed the beneficial interests of the spouses in the former matrimonial home, charged the property with the wifes two fifths interest, and gave her the occupation of it, but said nothing about whether or when it could or should be sold and the interests realised. The husband applied, something over 11 years afterwards, for an order for immediate sale. The Recorder had made such an order, ostensibly taking the view that such gave effect to the original order, but he had heard no evidence and given no consideration to any competing argument. The wifes appeal was thus allowed and the case was remitted for re hearing. Her additional argument that there was no jurisdiction to make a section 24A order for sale in relation to a pre commencement original order failed by the application of Thompson. Giving (extempore) judgment in the Court of Appeal, Sir John Arnold P expressly reserved any question of the basis on which the jurisdiction to make a (subsequent) section 24A order ought to be exercised. There was likely to be in that case an open question whether the original order, which Ralph Gibson LJ described as poorly drafted, had been intended to be a Mesher type order with sale after some deferred period contemplated, or had been meant to give the wife indefinite occupation of the house; thus there was an open question whether, in the terms used in Thompson, the application was to work out and give effect to the original order or was to vary it. Referring back to the approach in Thompson, the President said this of the argument that there should be no order for sale because the application was made not by the wife, who had the right of occupation, but by the husband who sought to bring that right to an end: While it may of course be a matter highly relevant to the exercise of discretion who makes the application, it cannot define, it seems to me, the jurisdictional limits of the section itself It is of course right that there is available to the wife in the present case an argument based on the observations in Thompson v Thompson to the effect that where the party with the right of occupation is not the applicant, the discretion will never be exercised in favour of a sale such as to defeat the right of occupation. Similarly, Ralph Gibson LJ, agreeing, summarised his conclusion as follows at p 147: Upon the reading of Thompson v Thompson . there is jurisdiction in the court to hear the application of the respondent for an order for sale under section 24A of the 1973 Act, but the discretion to make the order will not be exercised if the consequence would be to displace vested rights that is to say, rights vested under the order previously made. (emphasis supplied) As Lord Wilson says at para 24, there is an obvious correlation between the power to make a section 24A order for sale subsequently to the original order and the power subsequently to vary one made in the original order. The same principles ought to apply to the exercise of each of these powers. Both in Thompson and in Taylor the acid test was seen to be whether the power was being invoked to give effect to, and carry out, the original order, or was impermissibly to vary it. Thompson was also applied by the House of Lords in Dinch v Dinch [1987] 1 WLR 252. That was a case of a common form Mesher type order deferring sale of the former matrimonial home during the minority of the children and giving the wife occupation meanwhile. When the stipulated time arrived and the husband sought sale, the wife, who had powerful and legitimate complaints that the husband had failed to comply with periodical payments orders in her favour and had caused her some hardship, responded with counter applications for further postponement of sale, for a further transfer of property order in relation to the house, and for a lump sum. Those applications, which had been granted in part in the Court of Appeal, failed on the principles explained in Minton and similar cases, as well as on the basis of Thompson. They failed despite very considerable sympathy for the wife, who had a strong case on the general merits. There was no reference to section 24A, perhaps surprisingly, but perhaps because the original order had been pre commencement and the husbands entitlement to sale was sufficiently demonstrated by it; he needed no new section 24A order. But the principled approach to applications which are in substance to vary a final capital settlement was plainly stated by the House. Lord Oliver, with whom all their Lordships agreed, said this (at p 263) One has, as it seems to me, simply to look at the order and any admissible material available for its construction, and determine what the court intended or, in the case of a consent order, what the parties intended to effect by the order. If the conclusion is that what was intended was a final and conclusive once and for all financial settlement, either overall or in relation to a particular property, then it must follow that that precludes any further claim to relief in relation to that property. These three cases of Thompson, Taylor and Dinch were cited to the Court of Appeal in Omielan. As Thorpe LJ said, giving the judgment of himself and of Peter Gibson and Butler Sloss LJJ, none of the three was directly in point upon section 31(2)(f). But the principles which they enunciated were relied upon by that court for its decision. For the reasons largely set out above, I think that they were relevant, although what they led to was not the absence of jurisdiction, but clear principle on which the jurisdiction should be exercised. Given the terms of section 31(2)(f), it is impossible to say that there is no power to vary a section 24A order such as the one in the present case. I agree that in Omielan the court fell into this error. The judgment contains the following (at 312): section 31(2)(f) must be construed within the statutory context, namely that when post divorce capital adjustments have been incorporated in a final order, whether or not by consent the court has no jurisdiction to revisit the territory, in the absence of an element that might vitiate any court order such a fraud, misrepresentation, or material non disclosure. This cardinal principle was strongly maintained by Lord Oliver in both Thompson and Dinch. (emphasis supplied) As has been seen, in neither Thompson nor Dinch did the court say that there was no jurisdiction (there to make a subsequent section 24A order), and in Taylor it held that there was. What it said was that the jurisdiction could not be exercised so as effectively to vary the substantive original final capital order. But the force of those earlier cases, as also of the Minton line of authority, is not diminished by mischaracterising them as defining the jurisdiction rather than setting out the principles on which it is to be exercised. Thorpe LJ went on, correctly, to say that the principles underlying the earlier cases in relation to the making of (subsequent) section 24A orders must apply equally to applications to vary orders under that section. He said this: It is manifest to me that the considerations that dictated the conclusion in Dinch should equally dictate the conclusion in the present appeal. The same pointer is to be derived from both Thompson and Taylor. Section 24A is a purely procedural section inserted into the statute to clarify or expand the courts power of implementation and enforcement. Any power to vary [under] such a procedural enactment must be construed to be equally limited to matters of enforcement, implementation and procedure. That of course repeats the mischaracterisation of the principle. But if it is treated, as the earlier cases require, as a statement of the right approach to the exercise of the jurisdiction, it is, in my view, both firmly based on authority and correct in principle. It is of course true that on the particular facts of Omielan, there was the additional factor that the agreed (and ordered) trigger for sale had come about, and there had vested in the children beneficial interests in the former matrimonial home. Those were, in that case, powerful additional reasons why any attempt to vary the original order was doomed to failure. But the principle derived from the earlier lines of authority, and confirmed by the structure of the Act, does not depend on such additional factors. The outcome should, and clearly would, have been the same in the commoner case where the beneficial interests in the property are confined to the husband and wife and are already vested, and it should have been the same if the wifes application to delay sale had been made before the trigger event rather than after it. In all these instances, the effect of variation would be to undo a final capital order, whether made by consent or not. Any variation application under section 31 is governed, inter alia, by section 31(7). This requires the court to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family under 18. A change in any of the factors which are made by section 25 material to the making of the original order is stipulated to be among all the circumstances of the case. There is nothing in this which requires the discarding of the principles, derived from Minton, Thompson, Taylor and Dinch, that the power to vary must not be used in a way which amounts to a disguised variation of a final capital order and an evasion of the rule that there can be no second application for capital orders, both of which are inherent, and in some instances explicit, in the terms of the Act itself. In particular, the interests of the children will have been first consideration at the time of the making of the original order: see section 25(1). Any order, whether following a contested hearing or a settlement, must be endorsed by the court, whose approval is no rubber stamp. The compatibility of any final order with the interests of the children can, and indeed must, be assumed. A change in the section 25 circumstances is but one of the factors relevant to an application to vary. It can perfectly properly become relevant only when there is no evasion of the rule against variation of final capital settlements. It is after all well established that, barring the kind of supervening event considered in Barder v Calouri [1988] AC 20, which is not suggested here, there is no power either to entertain a second application for a capital order, or to vary such an order, even if the calculations on which it was based have proved to have been misjudged by one party: see for example, amongst many other cases, the kind of events considered in Myerson v Myerson (No 2) [2009] EWCA Civ 282; [2010] 1 WLR 114. There may of course be difficult marginal cases where there is scope for real argument whether the new order sought is (permissibly) to work out or enforce the original order or (impermissibly) to vary it. Some cases of deferred sale orders may well give rise to this difficulty. It would be a mistake here to attempt to anticipate the kind of situations which might fall on one side of the line or the other. So long as the principles are kept firmly in mind that (1) the section 24A order has always been devised as ancillary to a capital order and (2) that final capital orders cannot be varied in their substance (whether or not there is a change of circumstance), so that (3) the acid test is whether the application is in substance to vary or alter the final order or is to support it by working out how it should be carried into effect, then cases ought to be capable of resolution and there should be sufficient certainty for those, on both sides, who are subject to the orders. If, on the other hand, the undoubted power to vary under section 31(2)(f) is taken to authorise a review of all the circumstances whenever there is a section 24A order, it is very difficult to see what weight judges who are asked to vary an order ought to accord to the fact that it was made as an ancillary to a final capital settlement. To say that that is one of the circumstances of the case poses, but wholly fails to answer, that question. It seems to me inevitable that if this is the position, the utility of an order for sale will be very much diminished. Orders for sale, and particularly orders for deferred sale, are not a universal panacea for matrimonial financial strife, but they can be very useful and are much resorted to. If a party is being advised in delicate negotiations about the settlement of the matrimonial finances, she will have to be told that if there is an order for sale, she is exposed to an application, at any time before the sale takes place, on the grounds at least of a suggested change of circumstances. Of course, such an application may fail. Sometimes its failure may be attended by adverse orders for costs. But the risk of further litigation, not necessarily confined to a first instance hearing, will always be there. It is very likely that she will not wish to run it, but instead will stand out for something which does not involve an order for sale, for then the capital order will indeed be final. The extremely lengthy litigation which has ensued in the present case is no doubt exceptional, but all applications take time to be dealt with, and sometimes much time. The same considerations will, perhaps to a lesser extent, be present to the minds of judges considering the best form of order to make. It is not in the general interest of spouse litigants, whether potential occupiers of the property concerned or out of occupation spouses awaiting sale, that this constraint should operate on the ancillary orders devised by the Law Commission in 1980 and operated ever since on the basis explained in Thompson, Taylor, Dinch and (although there mischaracterised) in Omielan. It should be recorded that Mr Hockman QC, for the wife in the present case, accepted the general principle that the power to vary a section 24A order should not be exercised in such a manner as to alter the substance of the original capital order. His case was confined to the argument that the wifes present application would not do so, because the beneficial interests in the proceeds of sale were not affected, the husband having transferred the whole of his interest to the wife as part of the settlement. In my view, his concession was realistic, although if Lord Wilson is right it went further than was needed, but his argument was not. Although there may be difficult marginal cases, I cannot for myself see that the present is one of them. This seems to me to be one where there is no doubt that the application is one which amounts to an attempt to vary, not to carry into effect, the originally agreed and court endorsed order. Other forms of settlement were plainly available, and indeed an indication was given by the District Judge that sale of the house looked inevitable. As it was, by agreement, sale was directed at a fixed date, not on the occurrence of a trigger event, unless in the meantime the husband was released from his liability under the mortgage. In effect he gave up all interest in the house and in return was to be relieved by a specific deadline of a substantial outstanding liability in relation to it. An application to extend the date by a month or two because the finances to release the husband were unexpectedly held up might well have been an application to carry the order into effect. But the application was to extend the period from two years to nine. Even if the wife is able to point to some change in her circumstances, that is no justification for re opening a final property settlement. Of course, if the correct rule of law is that the husband must face an open ended application to vary, he will indeed have to address exactly what difference it has made to him, over the past five years, to remain liable on a substantial mortgage. But it takes little imagination to understand that for all except the very wealthy such a liability makes a real impact on ones credit rating and ability to borrow, for any purpose, not necessarily for housing. It does not seem likely that the continuing liability has made no difference at all to his personal planning. In any event, whatever may have been the exact impact on him, the purpose of the original order was to give certainty and freedom of financial decision, in the face of competing cases about what should happen to the house and whether it was inevitable that the wife and children needed to move. The application has always been such as to remove the certainty which was the aim of the order. It seems to me that the Court of Appeal was right to hold that the application was bound to fail. For those reasons, I would myself dismiss the appeal and uphold the decision of the Court of Appeal, although on somewhat different grounds from those stated by it. |
There are two issues in this case, both of them simple to state but neither of them simple to answer. First, what is the test for deciding whether a person lacks the mental capacity to conduct legal proceedings on her own behalf (in which case the Civil Procedure Rules require that she has a litigation friend to conduct the proceedings for her)? Second, what happens if legal proceedings are settled or compromised without it being recognised that one of the parties lacked that capacity (so that she did not have the benefit of a litigation friend and the settlement was not approved by the court as also required by the CPR)? Can matters be re opened long after the event or does the normal rule of English law apply, which is that a contract made by a person who lacks capacity is valid unless the other party to the contract knew or ought to have known that she lacked that capacity in which case it is voidable (the rule in Imperial Loan Co Ltd v Stone [1892] 1 QB 599)? These issues are of very considerable importance, particularly in personal injury cases. On the one hand, there is the need to protect people who lack capacity from making settlements which are disadvantageous to them. On the other hand, people are assumed to have capacity to make their own decisions and should only be deprived of the right to do so in clear cases. There is also a public interest in upholding bargains which everyone, but particularly the other party, thought were valid when they were made and in putting an end to litigation. The spectre looms of many personal injury claims which insurers thought had been settled long ago being reopened on the basis of an incapacity which they had no reason to suspect at the time. The real culprits, they would say, are the claimants original legal advisers (if she had any) against whom she will almost always have a claim for professional negligence. The history of this case On 25 June 1999, there was a road accident on a dual carriageway near the entrance to a roundabout in Goldthorpe (which is roughly half way between Doncaster and Barnsley in South Yorkshire). Mr Burgin, who was riding a motorcycle in the offside lane, struck Ms Dunhill, who was crossing the road having emerged from between parked vehicles in the nearside lane. She suffered a severe closed head injury along with soft tissue injury to both legs. On 13 May 2002, shortly before the limitation period ran out, she issued a claim for damages in the Barnsley county court. She claimed still to be suffering from a complete loss of the senses of smell and taste, some hearing loss, forgetfulness, headaches, personality change, low moods and tearfulness, anxiety, mood swings, occasional suicidal ideation and self mutilation. She claimed general damages for pain, suffering and loss of amenity, and special damages (totalling 2,262.92) for travelling expenses and 10 hours care a day for six months followed by one hour a day for two years, the total claim being limited to 50,000. It was accompanied by two reports from a consultant surgeon specialising in accident and emergency medicine. Mr Burgin denied liability and alternatively alleged contributory negligence. The case was listed for a trial on the issue of liability at the Sheffield county court on 7 January 2003. Ms Dunhill was at court, accompanied by a mental health advocate, and represented by counsel and a trainee solicitor. One of her witnesses to the accident did not arrive and negotiations took place towards a settlement. The claim was eventually compromised for the total sum of 12,500 with costs. This was embodied in a consent order, which was signed by both counsel and placed before the judge. This provided that (i) the defendant pay the claimant the sum of 12,500 in full and final settlement of her claim by 28 January 2003; (ii) the defendant pay the claimants costs, to be the subject of detailed assessment if not agreed; and (iii) there be detailed assessment of the claimants community legal service costs. On any view this was a gross undervaluation of her claim, which her current advisers would put at over 2,000,000 on a full liability basis and the defendants would put at around 800,000. In July 2006, Mrs Dunhill sought the advice of new solicitors. In December 2008, nearly six years after the consent order was made, her litigation friend issued proceedings on her behalf for professional negligence against her former solicitors and counsel. Those proceedings have been stayed pending further order. On 11 February 2009, her litigation friend issued the present proceedings. These took the form of an application in the original action, seeking (i) a declaration that the claimant did not have capacity at the time of the purported settlement of the matter on 7 January 2003, and (ii) that the consent order be set aside and directions given for the further conduct of the claim. Such applications are known as Masterman Lister proceedings, after the case of Masterman Lister v Brutton & Co (Nos 1 and 2) [2002] EWCA Civ 1889, [2003] 1 WLR 1511. It was agreed between the parties that there should first be a trial of whether or not the compromise and consent order made on 7 January 2003 required the approval of the court. This depended on two issues: (i) whether Mrs Dunhill was a patient within the meaning of Part 21 of the Civil Procedure Rules, which regulates the procedure to be adopted in proceedings involving children and (as the Rules then were) patients; and (ii) what the consequences were if she was such a patient, specifically whether this meant that the compromise and consent order should have been approved by the court under CPR 21.10. The defendant has not sought retrospective approval of the settlement. Issue (i) was tried by Silber J in February 2011: [2011] EWHC 464 (QB). The parties were agreed that the test of whether a person was a patient was whether she had the mental capacity to conduct the proceedings. They further agreed that this was to be judged by reference to her capacity to make the decisions likely to be required of her in the course of the proceedings, a test derived from the judgment of Chadwick LJ in Masterman Lister. But they disagreed as to whether this test was to be applied to the proceedings which she had actually brought, on the advice of her legal representatives, or whether it was to be applied to the proceedings as they might have been brought had her lawyers given her different advice. If it was the former, then the most difficult decision she had to take was whether to accept the sum which was offered on 7 January 2003, so in practice the question was whether she was able to understand matters well enough to make that decision. If it was the latter, the defendant concedes that she did not have the capacity to conduct the larger and much more complicated claim which should have been brought. Silber J decided that capacity was to be judged by reference to the decisions which the claimant was actually required to take in the action as drafted and not to the decisions which she might have been required to take had it been differently framed. In practice this meant whether she had capacity to make the compromise on 7 January 2003. He held that, on the evidence, the presumption that she did have that capacity had not been rebutted: [2011] EWHC 464 (QB), para 97. In the light of that decision, issue (ii) did not arise. The claimant appealed on the point of law. The Court of Appeal held that the judge should not have confined himself to the actual decision required of her on 7 January 2003, but should have considered her capacity to conduct the proceedings as they should have been framed. Ward LJ concluded at [2012] EWCA Civ 397, para 29: Since capacity to conduct proceedings includes . the capacity to give proper instructions for and to approve the particulars of claim, the claimant lacked that capacity. For her to have capacity to approve a compromise she needed to know . what she was giving up and, as is conceded, she did not have the faintest idea that she was giving up a minor fortune without which her mental disabilities were likely to increase. As a result, the case was remitted to the High Court to determine issue (ii). This was now framed as whether CPR 21.10 has any application where the claimant has brought a claim in contravention of CPR 21.2, so that in the eyes of the defendant and the court she appeared to be asserting that she was not under a disability? No doubt this reformulation was intended by the defendant to hammer home that the general rule in contract is that laid down in Imperial Loan Co Ltd v Stone. Bean J decided that where a civil claim is issued, the Civil Procedure Rules are incorporated into any agreement made to settle the case and that CPR 21.10(1) required that this settlement be approved by the court irrespective of how matters appeared at the time. Hence the settlement was void, the court order should be set aside and the case should go for trial: [2012] EWHC 3163 (QB); [2012] 1 WLR 3739. Between the hearing before Bean J in early October 2012 and his judgment in November 2012, this court had given the defendant permission to appeal against the decision of the Court of Appeal on issue (i). Accordingly Bean J certified, with the parties consent, that the conditions were met for a leapfrog appeal under sections 12 to 16 of the Administration of Justice Act 1969 on issue (ii). This was in order that both issues could be heard together if this court gave the defendant permission to appeal on issue (ii), which it duly did in March 2013. The whole question of the proper approach to the problem is therefore before this court. As so often happens, the parties do not agree on precisely how the issues should be formulated and new arguments have been introduced to bolster the decisions reached in the courts below. The defendant, in particular, has a sense of grievance at the way in which the issues and the arguments have shifted over time. But in this court we have to do our best to arrive at the right result and thus to allow all relevant arguments to be deployed before us unless this would be unfair to an opposing party. There is no unfairness here. Everyone has been well aware from the outset of what the underlying questions are and each party has had sufficient time to respond to all the arguments deployed. Indeed we are grateful to them for the assistance which we have received. The test of capacity In 2002 when this claim was launched and 2003 when it was compromised, CPR 21.1(2)(b) to the Civil Procedure Rules 1998 (SI 1998/3132 (L 17)) defined a patient as a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of managing and administering his own affairs. This was much the same definition as that in Order 80, rule 1, of the former Rules of the Supreme Court, which referred to his property and affairs; this phrase also used to appear in Part VII of the Mental Health Act 1983 as the definition of those over whose property and affairs the Court of Protection might take control; and in section 38(2) of the Limitation Act 1980 as the definition of those under a disability in respect of whom limitation periods did not begin to run. It suggests a global inability to manage and administer all ones property and affairs, whereas of course a person may be able to manage some of his affairs but not others. The general approach of the common law, now confirmed in the Mental Capacity Act 2005, is that capacity is to be judged in relation to the decision or activity in question and not globally. Hence it was concluded in Masterman Lister that capacity for this purpose meant capacity to conduct the proceedings (which might be different from capacity to administer a large award resulting from the proceedings). This was also the test adopted by the majority of the Court of Appeal in Bailey v Warren [2006] EWCA Civ 51, [2006] CP Rep 26, where Arden LJ specifically related it to the capacity to commence the proceedings (para 112). It would have been open to the parties in this court to challenge that test, based as it was mainly upon first instance decisions in relation to litigation and the general principle that capacity is issue specific, but neither has done so. In my view, the Court of Appeal reached the correct conclusion on this point in Masterman Lister and there is no need for us to repeat the reasoning which is fully set out in the judgment of Chadwick LJ. Under the Rules as amended when the Mental Capacity Act 2005 came into force (the Civil Procedure (Amendment) Rules 2007 (SI 2007/2204 (L20)), patients in rule 21.1(1)(a) has been replaced by protected parties, and in rule 21.1(2)(d) a protected party is defined as a party, or intended party, who lacks capacity to conduct the proceedings. Thus the current test is stated in the same terms as that which was applicable to these proceedings. The current rule 21.1(2)(c) defines lacks capacity to mean lacks capacity within the meaning of the 2005 Act. Given that the courts had already arrived at a test of capacity on which the 2005 Act test was closely modelled, it seems unlikely that this has introduced any differences between the old and the new law. But that question does not arise in this case, where the issue is what is meant by the proceedings which the party must have the capacity to conduct. This is a question of construing the Rules. Rule 21.2(1) provides that a protected party must have a litigation friend to conduct proceedings on his behalf. By rule 21.4(3), a litigation friend must be someone who can fairly and competently conduct proceedings on behalf of the patient. This in itself suggests a focus on proceedings in general rather than on the proceedings as framed. Furthermore it applies right at the start of any proceedings. Indeed, as will be seen later, rule 21.10 applies to claims which are settled before any proceedings have begun. Read as a whole, therefore, rule 21 posits a person with a cause of action who must have the capacity to bring and conduct proceedings in respect of that cause of action. The proceedings themselves may take many twists and turns, they may develop and change as the evidence is gathered and the arguments refined. There are, of course, litigants whose capacity fluctuates over time, so that there may be times in any proceedings where they need a litigation friend and other times when they do not. CPR 21.9(2) provides that when a party ceases to be a patient (now, a protected person) the litigation friends appointment continues until it is ended by a court order. But a party whose capacity does not fluctuate either should or should not require a litigation friend throughout the proceedings. It would make no sense to apply a capacity test to each individual decision required in the course of the proceedings, nor, to be fair, did the defendant argue for that. There are, of course, statements in the cases which might suggest a different approach. In Masterman Lister, Kennedy LJ (para 18) quoted with approval the test described by Boreham J in the limitation case of White v Fell (unreported) 12 November 1987 (which the best efforts of counsel in this case have been unable to find for us): To have that capacity she requires first the insight and understanding of the fact that she has a problem in respect of which she needs advice . Secondly, having identified the problem, it will be necessary for her to seek an appropriate adviser and to instruct him with sufficient clarity to enable him to understand the problem and to advise her appropriately . Finally, she needs sufficient mental capacity to understand and make decisions based upon, or otherwise give effect to, such advice as she may receive. Applied to the facts of this case, this could suggest that, having identified a problem and gone to a lawyer, all that is needed is the capacity to understand and make decisions based upon the actual advice given by that lawyer. The same might be said of the test as stated by Chadwick LJ at para 75 of Masterman Lister: For the purposes of Order 80 and now CPR Pt 21 the test to be applied, as it seems to me, is whether the party to legal proceedings is capable of understanding, with the assistance of such proper explanation from legal advisers and experts in other disciplines as the case may require, the issues on which his consent or decision is likely to be necessary in the course of those proceedings. Equally, of course, those words could be read in the opposite sense, to refer to the advice which the case required rather than the advice which the case in fact received. In truth, such judicial statements, made in the context of a different issue from that with which we are concerned, are of little assistance. But they serve to reinforce the point that, on the defendants argument, the claimants capacity would depend upon whether she had received good advice, bad advice or no advice at all. If she had received good advice or if she had received no advice at all but brought her claim as a litigant in person, then she would lack the capacity to make the decisions which her claim required of her. But if, as in this case, she received bad advice, she possessed the capacity to make the decisions required of her as a result of that bad advice. This cannot be right. I would hold, therefore, that the test of capacity to conduct proceedings for the purpose of CPR Part 21 is the capacity to conduct the claim or cause of action which the claimant in fact has, rather than to conduct the claim as formulated by her lawyers. Judged by that test, it is common ground that Mrs Dunhill did not have the capacity to conduct this claim. The effect of incapacity It follows that Mrs Dunhill should have had a litigation friend when the proceedings were begun, as required by CPR 21.2(1). As Kennedy LJ pointed out in Masterman Lister, at para 30, Order 80 and CPR Pt 21 are worded in such a way as to indicate that in that event the litigation is ineffective and decisions made in the course of litigation are invalid see for example, Order 80, rr 2(1) and 10, CPR rr 21.2(1) and 21.10(1), but CPR r 21.3(4) does suggest a solution. It provides: Any step taken before a child or patient has a litigation friend, shall be of no effect, unless the court otherwise orders. Kennedy LJ went on to say that Provided everyone has acted in good faith and there has been no manifest disadvantage to the party subsequently found to have been a patient at the relevant time I cannot envisage any court refusing to regularise the position (para 31). But of course, everything must depend upon the particular facts. It might be appropriate retrospectively to validate some steps but not others. In this case, we have not been asked to validate anything, but no doubt we could do so of our own motion if we thought it just. I would not think it just to do so. While every other step in the proceedings might be capable of cure, the settlement finally disposing of the claim is not. For obvious reasons, we have not been asked retrospectively to validate the settlement and consent order made on 7 January 2003. CPR 21.10(1) relevantly provides: Where a claim is made (a) by or on behalf of a child or patient [now protected party] (b) against a child or . patient [now protected party], no settlement, compromise or payment and no acceptance of money paid into court shall be valid, so far as it relates to the claim, by, on behalf of or against the child or patient [now protected party], without the approval of the court. The embodiment of this settlement in a consent order did not constitute the approval of the court for the purpose of this rule. The purpose of the rule is to impose an external check on the propriety of the settlement and the accompanying practice direction sets out the evidence which must be placed before the court when approval is sought (see now 21PD.6). Given the finding that Mrs Dunhill was a patient at the time, does this automatically mean that the settlement and court order are of no effect? The defendant makes two arguments that the rule does not have that effect. The first is that the rule only applies where the patient (or protected party) has a litigation friend. Only then is the other party to the settlement put on notice that the settlement requires the approval of the court. Despite the particulars of injury given in the Particulars of Claims in this case, it has never been suggested that this defendant either knew or ought to have known of the claimants lack of capacity. As a general proposition, the other party is unlikely to be in a position to know the details of his opponents mental faculties unless these are fully explored in medical reports to which he has access. The problem with the defendants argument is that it involves writing words into the rule which are not there. If anything, the words hint at the reverse, as they refer to a claim made by or on behalf of a patient or protected party. As CPR r 21(2)(a) says, it is the task of a litigation friend to conduct proceedings on behalf of a patient or protected person. Although there are other circumstances in which a claim may be made on behalf of a child or protected party, the inclusion of by suggests proceedings conducted by the patient herself. Equivalent wording is not used in relation to claims made against a patient or protected person; but clearly the same rule must apply to settlements made by or on behalf of claimants or defendants. Defendants who lack capacity require as much protection as claimants against improvident settlements. To disapply the rule where there was no litigation friend would in each case require the words having a litigation friend to be written into the rule. Furthermore, in Dietz v Lennig Chemicals Ltd [1969] 1 AC 170, the House of Lords held that the compromise rule embodied in the predecessor to CPR 21.10(1) applied to the settlement of a claim made on behalf of a child before any proceedings were begun. Following this decision, in Drinkall v Whitwood [2003] EWCA Civ 1547, [2004] 1 WLR 462, Simon Brown LJ pointed out that the claim in CPR 21.10 must mean the cause of action rather than any proceedings in which the claim is asserted. This is clear from the wording of CPR 21.10(2), which provides the procedure whereby settlements made before proceedings are begun are approved by the court (that is, as pointed out in Dietz, by a simplified process rather than having to issue a claim in the ordinary way): Where (a) before proceedings in which a claim is made by, or on behalf of, or against a child or patient [now, protected party] (whether alone or with any other person) are begun, an agreement is reached for the settlement of the claim; and (b) the sole purpose of proceedings on that claim is to obtain the approval of the court to a settlement or compromise of the claim, the claim must (i) be made using the procedure set out in Part 8 (alternative procedure for claims); and (ii) include a request to the court for approval of the settlement or compromise. The claim at the end of (a) must necessarily predate the commencement of proceedings. If the claim in CPR 21.10(2) predates the commencement of proceedings, there is no reason why the claim in CPR 21.10(1) should not also do so. If there are not yet any proceedings, there can be no litigation friend. There is no obvious way to read a limitation to cases where the party lacking capacity has a litigation friend into CPR 21.10(1) as it applies to proceedings which have already been started but not as it applies where proceedings have not yet begun. Nor would it make any practical sense to do so. The other party is, if anything, in a rather better position to assess whether his opponent may lack capacity to conduct the proceedings after they have begun than he is beforehand. Dietz and Drinkall were both cases in which the defendant wished to resile from the compromise of a childs claim which had not yet been finally approved by the court. In Bailey v Warren, the Court of Appeal held that there was no reason to distinguish between claims involving children and claims involving patients in this respect. Hence a settlement made before proceedings began by a person who lacked capacity to conduct proceedings on his claim required the approval of the court under CPR 21.10(1) (although in that case the court gave the settlement its approval). In Bailey v Warren, the Court of Appeal also rejected the defendants second argument. This is of a more fundamental nature than his argument upon the construction of the Rules, although he uses it to bolster his construction argument, for he says that without the limitation for which he contends the rule would be ultra vires. This argument was foreshadowed by Chadwick LJ in Masterman Lister, at para 68: To my mind it is not self evident that rules 10 and 12 [the predecessors to CPR 21.10(1) and 21.11] have any application where the plaintiff brings a claim in contravention of rule 2 so that, in the eyes of the defendant and the court, he is asserting that he is not under a disability. If rules 10 and 12 were intended to apply in such a case (which I doubt) then it would be open to question whether the rule making body had power to change the substantive law expounded in Imperial Loan Co Ltd v Stone [1892] 1 QB 599 and Hart v OConnor [1985] AC 1000. In Imperial Loan Co Ltd v Stone [1892] 1 QB 599, the Court of Appeal held that a contract made by a person who lacked the capacity to make it was not void, but could be avoided by that person provided that the other party to the contract knew (or, it is now generally accepted, ought to have known) of his incapacity. As Mr Rowley points out on behalf of the defendant, this rule is consistent with the objective theory of contract, that a party is bound, not by what he actually intended, but by what objectively he was understood to intend. The rule in Imperial Loan was applied by the Judicial Committee of the Privy Council in Hart v OConnor [1985] AC 1000, a case from New Zealand, where the issue was whether this only applied if the contract was fair. Overruling prior New Zealand authority to the contrary in Archer v Cutler [1980] 1 NZLR 386, but consistently with the decision of the High Court of Australia in McLoughlin v Daily Telegraph Newspaper Co Ltd (No 2) (1904) 1 CLR 243, the Board held that a contract made by a person who was ostensibly sane could not be set aside simply because it was unfair but only if there was equitable fraud which would also avail a sane person. This rule, it is argued, applies just as much to the settlement of civil claims as it does to any other sort of contract. Once the parties to ordinary civil litigation have reached agreement, it is not for the court to interfere in their bargain. If they desire to embody it in a consent order, they can do so simply by having it entered and sealed by a court officer under CPR 40.6(2). They do not have to submit it for the approval of any judicial officer. In this case, it was simply a matter of courtesy to show the order to the judge, who had (no doubt) been waiting patiently or getting on with other business while the negotiations were proceeding. Matrimonial proceedings are different, because the parties cannot oust the jurisdiction of the court, and so if they want their agreement embodied in a court order, they cannot avoid at least a degree of judicial scrutiny. Neither the Rules of the Supreme Court nor the Civil Procedure Rules can change the substantive law unless expressly permitted so to do by statute: see In re Grosvenor Hotel Ltd (No 2) [1965] Ch 1210. Thus, it is argued, section 1 of the Civil Procedure Act 1997 gave the Civil Procedure Rule Committee power to make rules governing the practice and procedure to be followed in the civil courts and as further provided in Schedule 1 to the Act. Paragraph 4 of that Schedule provides that the Rules may modify the rules of evidence, thus showing that where it is intended that the Rules could modify the substantive law, express provision is made for this. The comment made by Chadwick LJ in Masterman Lister was obiter dictum, because it was there held that the claimant did not lack capacity to litigate. In Bailey v Warren, it was pointed out that the cases of Dietz and Drinkall had not been cited in Masterman Lister. Dietz is of particular relevance, because it was there argued (on behalf of the party who was trying to uphold the unapproved settlement) that the compromise rule as embodied in the Rules of the Supreme Court, Order 80, rule 11 (the predecessor to CPR 21.10(1)) was ultra vires (see counsels reply at p 179). This argument was dealt with by Lord Pearson (with whom Lord Reid and Lord Pearce certainly agreed) as follows, at p 189: There was a suggestion made in the course of the argument that the Compromise Rule, if it meant what it appears to say if invalid means of no legal effect is ultra vires. I do not accept that suggestion. When the claim of an infant or other person under disability is before the court, the court needs, for the purpose of protecting his interests, full control over any settlement compromising his claim. In my view, the making and re making of the Compromise Rule were valid exercises of the rule making power under the Judicature Acts, which is now contained in section 99 of the Act of 1925. Mr Rowley rightly points out that Dietz was a childs claim, where the common law of contract is different, so their Lordships did not have to address their minds to the position of persons who lacked capacity. In practical terms, of course, it is a great deal easier to know whether one is dealing with a child than it is to know whether one is dealing with a patient or protected party. But the fact that a childs contracts may be avoided in rather wider circumstances than may the contracts of a patient or protected party does not alter the fact that both are subject to the same compromise rule and for the same reasons. It did not occur to the Court of Appeal to distinguish between them in Bailey v Warren. It is fair to say that Lord Pearson gives no reason for his acceptance that the compromise rule is within the powers of the rule making body. Given that it applies to claims compromised before proceedings are brought, it is carving out a substantial but quite specific exception to the common law rule in Imperial Loan Co Ltd v Stone. Nevertheless, we are bound by Dietz unless there is a very good reason to depart from it. Mr Melton, on behalf of the claimant, also points out that paragraph 1 of Schedule 1 to the Civil Procedure Act 1997 expressly provides that Among the matters which Civil Procedure Rules may be made about are any matters which were governed by the former Rules of the Supreme Court or the former county court rules . This could certainly be read as conferring an express power to make rules of court modifying the substantive law to the extent that the previous rules did so, whether or not those rules were within the powers which the previous rule making bodies had been given. Agency Having reached the conclusion that the Compromise Rule is intra vires and applies to this case, there is no need to address a further argument made on behalf of Ms Dunhill. This is to the effect that counsel was acting as her agent, rather than a mere messenger, when making the settlement on 7 January 2003. It has been held that the principals incapacity terminates a contract of agency, whether or not it is known to the agent (Yonge v Toynbee [1910] 1 KB 215), and this must logically apply also to the initial formation of a contract of agency. This means that the agent lacks any actual authority to make a contract on behalf of the incapacitated principal, whether or not the other party to the contract knows of the incapacity. Thus, it is said, the rule in Imperial Loan Co Ltd v Stone does not apply to a contract concluded by an agent on behalf of a principal who lacks the capacity to make it. Nor, it is said, could there be any apparent authority if the principal lacked capacity at the time of making the initial representation as to the agents authority, again whether or not the other party knew of this. Reliance is placed, in particular, upon a passage in Bowstead & Reynolds on Agency (19th ed, (2010) para 2 009). This argument has led the current editor of that work, Professor Peter Watts, to reconsider and disavow what is there stated. The authorities are indeed in a state of some confusion, as is amply demonstrated by A.H Hudson at (1959) 37 Canadian Bar Review 497. It would be most unwise for this court to express any opinion, one way or another, as to the present state of the law. Fortunately, the issue does not arise. Policy Much was made in the course of argument of the competing policy arguments, some of which I touched upon at the outset of this judgment. In particular, Mr Rowley emphasised the need for finality in litigation, the stresses and strains which prolonged litigation places upon both litigants and the courts, the difficulty of re opening cases such as this so long after the event, and the alternative protection given to the parties by their legal advisers, who should bear the consequences of their own mistakes. Against this Mr Melton emphasised the disadvantages of claims for professional negligence when compared with claims for personal injuries, principally the discount for the chance that the claim might not have succeeded and the inability to make a periodical payments order. He also points out that lack of insight is a common feature in head injury cases, so that the parties should be encouraged to investigate capacity at the outset. A litigant in person would, of course, have no legal advisers against whom to make a claim, but the legal position cannot differ according to whether or not a party is, or is not, represented by lawyers. Policy arguments do not answer legal questions. But to the extent that they are at all relevant to the issues before us, the policy underlying the Civil Procedure Rules is clear: that children and protected parties require and deserve protection, not only from themselves but also from their legal advisers. The notes to Order 80 in the last (1999) edition of the Supreme Court Practice stated that among the objects of the compromise rule was to protect minors and patients from any lack of skill or experience of their legal advisers which might lead to a settlement of a money claim for far less than it is worth, a sentiment which has been carried forward into the current edition of Civil Procedure. Conclusion I would therefore dismiss both appeals and uphold the order made by Bean J. On the test properly to be applied, Ms Dunhill lacked the capacity to commence and to conduct proceedings arising out of her claim against Mr Burgin. She should have had a litigation friend from the outset and any settlement should have been approved by the court under CPR 21.10(1). We have not been invited to cure these defects nor would it be just to do so. The consent order must be set aside and the case go for trial. |
This appeal is about compulsory acquisition of private property by local authorities under the Town and Country Planning Act 1990 (the 1990 Act) in connection with the development or re development of land. It raises for the first time, in the context of compulsory acquisition, a number of controversial issues which have arisen in the context of planning permission, including these: how far a local authority may go in finding a solution to problems caused by the deterioration of listed buildings; to what extent a local authority may take into account off site benefits offered by a developer; and what offers (if any) made by a developer infringe the principle or policy that planning permissions may not be bought or sold. The Raglan Street site is a semi derelict site situated immediately to the west of, and just outside, the Wolverhampton Ring Road, which encircles the Wolverhampton City Centre retail, business and leisure core. Sainsburys Supermarkets Ltd (Sainsburys) owns or controls 86% of the site and Tesco Stores Ltd (Tesco) controls most of the remainder. Sainsburys and Tesco each wish to develop the Raglan Street site. Outline planning permission has been granted to Tesco, and the local authority has resolved to grant outline planning permission to Sainsburys. Tesco controls a site in the Wolverhampton City Centre known as the Royal Hospital site, which is about 850 metres away from the Raglan Street site on the other side of the City Centre. The Royal Hospital site is a large site with a number of listed buildings which are in poor condition. It has been an objective of Wolverhampton City Council (the Council) over several years to secure the regeneration of the Royal Hospital site. Tescos position has been that it was not financially viable to develop the Royal Hospital site in accordance with the Councils planning requirements and its space requirements on the site for the Primary Care Trust. It offered to link its scheme for the Raglan Street site with the re development of the Royal Hospital site and said that this would amount to a subsidy at least equal to the loss it would sustain in carrying out the Royal Hospital site development. The Council accepted that the Royal Hospital site would not be attractive to developers if it were restricted to the Councils scheme. Even on optimistic assumptions, there did not appear to be a level of profit available which would make the site an attractive proposition when weighed against the risks. Development was unlikely to take place for the foreseeable future unless Tescos proposals were brought forward through a cross subsidy from the Raglan Street site. In January 2008 the Council approved in principle the making of a compulsory purchase order (CPO) under section 226(1)(a) of the 1990 Act in respect of the land owned by Sainsburys at the Raglan Street site to facilitate a development of the site by Tesco. In resolving to make the CPO, the Council took into account Tescos commitment to develop the Royal Hospital site (and indeed passed a resolution which indicated that one of the purposes of the CPO was to facilitate the carrying out of the Royal Hospital site development). Sainsburys wishes to develop the Raglan Street site and claims that it is illegitimate for the Council, in resolving to make a CPO of the Sainsburys land on the Raglan Street site, to have regard to the regeneration of the Royal Hospital site to which Tesco will be committed if it is able to develop the Raglan Street site. Elias J dismissed the claim by Sainsburys for judicial review of the Councils decision, and the Court of Appeal dismissed an appeal in a judgment of Sullivan LJ, with whom Ward and Mummery LJJ agreed: [2009] EWCA Civ 835. Compulsory purchase Section 226 of the 1990 Act (as amended) provides: (1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area (a) if the authority think that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land, or (b) which is required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated. (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re development or improvement is likely to contribute to the achievement of any one or more of the following objects (a) the promotion or improvement of the economic well being of their area; (b) the promotion or improvement of the social well being of their area; (c) the promotion or improvement of the environmental well being of their area. CPOs made by a local authority under section 226 must be confirmed by the Secretary of State. If the owner of the land which is the subject of a CPO objects to the order, the Secretary of State will appoint an independent inspector to conduct a public inquiry. The inspectors report and recommendation will be considered by the Secretary of State when a decision whether or not to confirm the CPO is taken. Where land has been acquired by a local authority for planning purposes, the authority may dispose of the land to secure the best use of that or other land, or to secure the construction of buildings needed for the proper planning of the area: section 233 (1). Compulsory acquisition by public authorities for public purposes has always been in this country entirely a creature of statute: Rugby Joint Water Board v Shaw Fox [1973] AC 202, 214. The courts have been astute to impose a strict construction on statutes expropriating private property, and to ensure that rights of compulsory acquisition granted for a specified purpose may not be used for a different or collateral purpose: see Taggart, Expropriation, Public Purpose and the Constitution, in The Golden Metwand and the Crooked Cord: Essays on Public Law in Honour of Sir William Wade QC, (1998) ed Forsyth and Hare, 91. Denning MR said: In Prest v Secretary of State for Wales (1982) 81 LGR 193, 198 Lord I regard it as a principle of our constitutional law that no citizen is to be deprived of his land by any public authority against his will, unless it is expressly authorised by Parliament and the public interest decisively so demands and Watkins LJ said (at 211 212): The taking of a person's land against his will is a serious invasion of his proprietary rights. The use of statutory authority for the destruction of those rights requires to be most carefully scrutinised. The courts must be vigilant to see to it that that authority is not abused. It must not be used unless it is clear that the Secretary of State has allowed those rights to be violated by a decision based upon the right legal principles, adequate evidence and proper consideration of the factor which sways his mind into confirmation of the order sought. Recently, in the High Court of Australia, French CJ said (in R & R Fazzolari Pty Ltd v Parramatta City Council [2009] HCA 12, at [40], [42], [43]): Private property rights, although subject to compulsory acquisition by statute, have long been hedged about by the common law with protections. These protections are not absolute but take the form of interpretative approaches where statutes are said to affect such rights. The attribution by Blackstone, of caution to the legislature in exercising its power over private property, is reflected in what has been called a presumption, in the interpretation of statutes, against an intention to interfere with vested property rights The terminology of presumption is linked to that of legislative intention. As a practical matter it means that, where a statute is capable of more than one construction, that construction will be chosen which interferes least with private property rights The facts It was originally envisaged by Tesco that the Royal Hospital site would be a suitable location for a scheme which made provision for a superstore whilst retaining and restoring much of the fabric of the former Royal Hospital buildings. In January 2001, Sainsburys applied for outline planning permission to redevelop the Raglan Street site for a mixed use development comprising retail uses, residential, leisure, parking and associated highway and access works. The application was called in by the Secretary of State and, following a public inquiry, planning permission was granted on November 12, 2002. In early 2005 Sainsburys informed the Council that it no longer intended to develop the Raglan Street site, because it had agreed to sell its interests in the Raglan Street site to Tesco, which was developing a revised scheme. Sale documentation was agreed and engrossments circulated for execution. In addition, Tesco acquired interests in the Raglan Street site owned by third parties. On June 28, 2005 the Councils Cabinet (Resources) Panel reported on the proposed Tesco scheme, and said that the grant of permission would be linked to obligations relating to the Royal Hospital site. The Panel approved in principle the use of compulsory purchase powers to assemble the Raglan Street site should the need arise. This was on the then understanding that the interests of Sainsburys would be transferred to Tesco by agreement and that any CPO would be required only to acquire minor interests within the site. On November 3, 2005 Tesco entered into a conditional sale agreement with the Council, which provided for the sale of the Councils interest in the Raglan Street site to Tesco and for the Council to use its compulsory purchase powers, if necessary, to facilitate the acquisition of outstanding interests in the site. The agreement also imposed an obligation on Tesco to carry out and complete works of demolition and repairs at the Royal Hospital site before the commencement of works at the Raglan Street site. This agreement was replaced in July 2009 by a conditional agreement for lease. Following exchange of the agreement with the Council and its acquisition of third party interests in the Raglan Street site, Tesco sought an exchange of its agreement with Sainsburys. This did not happen because Sainsburys decided that it did in fact wish to redevelop the Raglan Street site, and to submit a fresh planning application for re development of the site. In accordance with its obligations in the agreement with the Council, Tesco submitted planning applications to the Council for the development of both the Royal Hospital site (in April 2006) and the Raglan Street site (in July 2006). In October 2006, Sainsburys submitted a planning application for a new scheme for re development of the Raglan Street site. Both applications for the re development of the Raglan Street site proposed a supermarket with parking and a petrol filling station, private flats, sheltered housing and small commercial units. The main differences between the schemes were that the Tesco supermarket was more than 50% larger than Sainsburys, and the Sainsburys scheme proposed retail warehouses and a leisure centre. Outline planning permission was recommended for both schemes. On December 6, 2006 the Councils Cabinet noted that Tesco and Sainsburys were unable to agree on how the site should be developed and resolved to approve in principle the use of CPO powers in relation to the Raglan Street site if necessary, subject to a further report to Cabinet setting out all relevant factors including the criteria for selecting the preferred re development scheme. Each of the applications by Sainsburys and Tesco for development of the Raglan Street site came before the Councils Planning Committee on March 13, 2007 when it was resolved to grant both applications subject to various requirements. In the report to Committee concerning the application by Tesco, the Case Officer said: Initially Tesco indicated that they wished the development of the Royal Hospital site to be linked to the grant of permission for the development of Raglan Street. However, when their agents were asked how such a linkage could legitimately be made, they were unable to make a suggestion. There is therefore no such linkage for Committee to consider. Tescos application for planning permission for development of the Raglan Street site was therefore considered without reference to the benefits of re development of the Royal Hospital site. Planning permission for the Tesco proposal at the Raglan Street site was granted on July 22, 2009, which was also the date of a new conditional agreement for lease between the Council and Tesco replacing the conditional agreement for sale of November 3, 2005. The agreement gives the Council an option to purchase Tescos interest in the Royal Hospital building. One of the terms is that, once certain works have been carried out by Tesco, then Tesco will make a balancing payment to the Council which is to be used solely in connection with the completion of the Royal Hospital building works: Sch. 1. On June 27, 2007, in order to decide whose land to acquire compulsorily to facilitate the development of the Raglan Street site, the Councils Cabinet resolved to invite both Sainsburys and Tesco to demonstrate the extent to which their respective development proposals met the Councils objectives for the Raglan Street area. It also resolved that Sainsburys and Tesco be advised that the Councils preferred outcome remained that the parties would negotiate with each other to resolve the impasse. On January 30, 2008 a report was presented to the Councils Cabinet which, having set out the statutory background and relevant advice in ODPM Circular 06/2004, Compulsory Purchase and the Crichel Down Rules, stated: The remaining sections of this report consider the two Schemes against the legal and policy tests set out in the Act and the Circular and compare them with each other. There is no doubt that both the Tesco and Sainsburys schemes would fulfil the statutory purpose of facilitating the carrying out of development, re development or improvement on or in relation to the land. The report noted that both schemes for the Raglan Street site were acceptable in planning terms. The report went on to describe the circumstances relating to the development of the Royal Hospital site by Tesco. Tesco was no longer seeking planning permission for a retail store on the site. The Council had promoted a proposal by Tesco for a mixed use development comprising housing, offices, primary care centre and administrative offices, retail, financial services and professional offices and food and drink uses, together with associated parking. It would provide accommodation for a Primary Care Centre and offices for the Primary Care Trust. The report said that Tescos position was that a Royal Hospital site development in accordance with the Councils aspirations was not viable and that the return to a developer in a scheme according with the Councils aspirations (including 20% affordable housing content) would involve a substantial loss, which would mainly be caused by the refurbishment of the listed building element for the Primary Care Trust. The scheme would be viable only through a cross subsidy from the development of the Raglan Street site. The report went on to say that whilst there was disagreement between Tesco and Sainsburys about the viability of the Royal Hospital site development, it was clear that Tesco was unlikely to carry out its scheme unless it was selected as the operator of the store at Raglan Street and were thus able to cross subsidise the Royal Hospital site development. The report concluded: both Schemes would bring appreciable planning benefits and would promote and improve the economic, social and environmental well being of the City. However, the Tesco Scheme enjoys a decisive advantage in that it will enable the development of the RHS to be brought forward in a manner that is consistent with the Councils planning objectives for that site. Making a CPO for the Tesco Scheme will therefore result in a significantly greater contribution to the economic, social and environmental well being of the Councils area than would making a CPO for the Sainsburys Scheme. On this basis, and subject to the satisfactory resolution of the matters identified in the Recommendations set out at the beginning of this report, there is a compelling case in the public interest to make a CPO to enable the Tesco Scheme to proceed. In accordance with the recommendation made in the report, the Councils Cabinet resolved to approve the principle of the making of a CPO of land owned by Sainsburys to facilitate the carrying out of (i) Tescos development proposals for the Raglan Street site and (ii) a mixed use retail, office and residential development of the Royal Hospital site, subject to, amongst other matters, Tesco producing satisfactory evidence of a commitment to the carrying out of the development of the Royal Hospital site before consideration be given to a resolution to authorise the making of the CPO. The Cabinet decision of January 30, 2008 was referred to the Councils Scrutiny Board and on February 19, 2008 the Board resolved that the report be received and noted. The issues In the absence of agreement between Sainsburys and Tesco, the only way in which the Raglan Street site can come forward for re development is through the exercise of compulsory purchase powers. Section 226(1)(a) provides that the local authority has power to acquire compulsorily any land in its area if it thinks that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land. A local authority may use its powers of compulsory purchase to assemble a site for development by a preferred developer: Standard Commercial Property Securities Ltd v Glasgow City Council (No 2) [2006] UKHL 50, 2007 SC (HL) 33, at [6]. It is common ground that the compulsory acquisition of the outstanding interests in the Raglan Street site would facilitate the carrying out of development, re development or improvement on the land under either the Tesco scheme or the Sainsburys scheme such that the test in section 226(1)(a) is met. So also it is common ground that both schemes of re development on the Raglan Street site would promote and improve the economic, social and environmental well being of the city and therefore satisfy the requirement in section 226(1A) that a local authority must not exercise the power unless it thinks that the development, re development or improvement is likely to contribute to the achievement of the well being objects set out in the subsection. It is also agreed that the re development of the Royal Hospital site as proposed would bring well being benefits to the Councils area, but Sainsburys says that, contrary to the approach of the Court of Appeal, those well being objects are not within section 226(1A), because they do not flow from the proposed re development of the Raglan Street site. The issues on this appeal are these: (1) Whether, on a proper construction of section 226(1A), the Council was entitled to take into account, in discharging its duty under that subsection, a commitment by the developer of a site part of which was to be the subject of a CPO to secure (by way of cross subsidy) the development, re development or improvement of another (unconnected) site and so achieve further well being benefits for the area. (2) Whether the Council was entitled, in deciding whether and how to exercise its powers under section 226(1)(a), to take into account such a commitment by a developer. On the first issue, relating to the interpretation and application of section 226(1A), the Court of Appeal, differing from Elias J, found in favour of the Council and Tesco. On the second issue, relating to section 226(1)(a), Elias J found in favour of the Council and Tesco, but the Court of Appeal did not find it necessary to decide the point because of its conclusion on section 226(1A). The judgments of Elias J and the Court of Appeal Section 226(1A) Elias J decided that, contrary to the argument of the Council and Tesco, on a proper construction of section 226(1A), the Royal Hospital site benefits did not fall within its ambit. They would have been well being benefits in relation to a CPO of that site, but in order to fall within section 226(1A) in relation to the development of the Raglan Street site, the benefits must flow from the development of the Raglan Street site alone, since that was the site covered by the CPO. The fact that a link between the two developments could be achieved by an agreement under section 106 of the 1990 Act did not entitle the Council to treat what were in reality well being benefits resulting from development of the Royal Hospital site as if they were generated by development of the Raglan Street site. The Court of Appeal held that the Council was entitled to take the Royal Hospital site benefits into account because they fell within section 226(1A). Whilst section 226(1)(a) focused the local authoritys attention on what was proposed to take place on the CPO site itself and required the authority to be satisfied that the CPO would facilitate the re development of the CPO site, section 226(1A) required it to look beyond the benefits that would accrue on the CPO site and to consider whether and to what extent the re development of the CPO site would bring well being benefits to a wider area. If the carrying out of the re development of a CPO site was likely to act as a catalyst for the development or re development of some other site or sites, then such catalytic effects were capable of falling within the scope of section 226(1A). The financial viability of a proposed re development scheme would be a highly material factor, and the proposed re development of a CPO site might have to be cross subsidised. It would be surprising if the potential financial implications of redeveloping the CPO site, including the possibility of cross subsidy as a result of facilitating its re development, were immaterial for the purposes of any consideration of the extent to which the carrying out of the re development would be likely to contribute to wider well being benefits. The possibility of one development cross subsidising another highly desirable development was capable of being a material consideration in the determination of a planning application under section 70(2) of the 1990 Act: R v Westminster City Council, ex parte Monahan [1990] 1 QB 87. The proposed cross subsidy was a material consideration in the light of the Councils obligation under section 226(1A) to take wider, off site well being benefits into account and in the light of the significance of financial viability and economic well being in the CPO context. Section 226(1)(a) Elias J held that for the purposes of section 226(1)(a), when choosing between two developments either of which would in principle be facilitated by a CPO, the Council was entitled to have regard to all the benefits which would flow from the development when determining in whose favour the CPO should be exercised, including any off site benefits achieved by means of an agreement linking the development of the Raglan Street site to development of the Royal Hospital site. The Court of Appeal decided that it was not necessary to rule on the alternative submission by the Council and Tesco that the Royal Hospital site benefits were material considerations under section 226(1)(a) in any event. The CPO context There is no doubt that where a body has a power of compulsory acquisition which is expressed or limited by reference to a particular purpose, then it is not legitimate for the body to seek to use the power for a different or collateral purpose: Simpsons Motor Sales (London) Ltd v Hendon Corporation [1964] AC 1088, at 1118, per Lord Evershed. In Galloway v Mayor and Commonalty of London (1866) LR 1 HL 34, 43, Lord Cranworth LC said that persons authorised to take the land of others cannot be allowed to exercise the powers conferred on them for any collateral object; that is, for any purposes except those for which the Legislature has invested them with extraordinary powers. In Clunies Ross v Commonwealth of Australia (1984) 155 CLR 193, 199 the High Court of Australia said that the statutory power to acquire land for a public purpose could not be used to advance or achieve some more remote public purpose, however laudable. See also Campbell v Municipal Council of Sydney [1925] AC 338, 443 (PC). So also the familiar rules on the judicial control of the exercise of legislative powers apply in the CPO context as elsewhere: see e.g., among many others, Hanks v Minister of Housing and Local Government [1963] 1 QB 999 (Megaw J); Prest v Secretary of State for Wales (1982) 81 LGR 193 (CA) (as explained in de Rothschild v Secretary of State for Transport (1988) 57 P & CR 330); Chesterfield Properties plc v Secretary of State for the Environment (1997) 76 P & CR 117 (Laws J). Nor can it be doubted that off site benefits may be taken into account in making a CPO. Standard Commercial Property Securities Ltd v Glasgow City Council (No 2) [2006] UKHL 50, 2007 SC (HL) 33 was a decision on the Scottish compulsory purchase provisions in the Town and Country Planning (Scotland) Act 1997, which are similar to, but not identical with, the equivalent provisions in the 1990 Act. Section 191 provided in substance that where land is acquired or appropriated by a planning authority for planning purposes, the authority might dispose of such land to any person to secure the best use of the land, and that the land could not be disposed of otherwise than at the best price or on the best terms that could reasonably be obtained. The property in question was in a run down part of Bath Street and Buchanan Street, Glasgow. Proposals for re development of the site by the developer contained a strong element of planning gain. The issue was whether the planning authority, exercising its compulsory purchase powers to redevelop a site, had acted ultra vires by entering into a back to back agreement with the developer in which the Council had agreed to transfer the land to the developer in return for the developer indemnifying the Council for the money expended in assembling the site and making it available. In effect the developer was to be put in the same position as if it had itself exercised the power of compulsory acquisition: [14]. It was held that the words best terms permitted disposal for a consideration which was not the best price, and so terms that would produce planning benefits and gains of value to the authority could be taken into account as well as terms resulting in cash benefits. It was accepted that the local authority could use its powers to assemble the site for development by a preferred developer: [6]. Lord Hope (at [39]) and Lord Brown (at [70]) also accepted that account could be taken by a planning authority of the wider, off site planning gains which would result from the exercise of its compulsory purchase powers. But these were benefits directly related to the site, and directly flowing from the development, and the decision does not help in the solution of the present appeal. Other contexts All parties, especially Sainsburys, relied on authorities relating to planning applications, and in particular on those relating to the extent to which conditions attached to a planning permission must relate to the development; and the extent to which off site benefits (whether under a section 106 agreement or not) are other material considerations to which the authority must have regard under section 70(2) of the 1990 Act in deciding whether to grant or refuse planning permission (or to impose conditions). In the Court of Appeal Sullivan LJ did not think that a read across from the limitations on the exercise of the section 70(2) power was appropriate in the context of section 226. In summary, Sainsburys position was (a) the cases on the legitimate scope of planning conditions were relevant, from which it followed that the only off site benefits which could be taken into account were those which fairly and reasonably related to the development in relation to which the CPO power was being exercised, that is the Raglan Street development; (b) the cases on section 70(2) also proceeded on the basis that there had to be a connection between the benefits and the permitted development; (c) a potential cross subsidy was relevant only where there was a composite development. The position of the Council and Tesco was that the Court of Appeal was right to say that there should not be a read across from the planning permission cases to CPO cases, but in any event the authorities showed that financial considerations, including off site benefits through cross subsidies, were relevant, and were essentially a matter for evaluation by the planning authority. It is necessary to note, at the outset, the relevant legal differences between this case and the cases in which similar questions have previously arisen. The first is that there is a difference between the exercise of powers of compulsory acquisition and the exercise of powers to control development and grant planning permission, which is rooted in the deep seated respect for private property reflected in the decisions cited above. The second is that both compulsory acquisition and planning control are solely creatures of statute, and that while the provisions which are relevant on this appeal are contained in one statute, the 1990 Act, the statutory provisions are different. The relevant provisions of section 226 have been set out above, and it is only necessary to repeat that section 226(1)(a) gives the local authority power to acquire compulsorily if the authority think that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land and does not contain, by contrast with section 70(2) on planning applications, any express reference to the authority having regard to any other material considerations. Nevertheless the policies underlying planning permission and acquisition for development purposes are similar, and considerable assistance can be obtained from the learning in the case law on planning permissions. Fairly and reasonably relate and material considerations In Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 QB 554 (reversed on other grounds [1960] AC 260) Lord Denning said (at 572) in relation to what is now section 70(1)(a) of the 1990 Act: Although the planning authorities are given very wide powers to impose such conditions as they think fit, nevertheless the law says that those conditions, to be valid, must fairly and reasonably relate to the permitted development. Pyx Granite had the right to quarry in two areas of the Malvern Hills. The company required permission to break fresh surface on one of the sites. Conditions attached to the planning permission relating to such matters as the times when machinery for crushing the stone could be used and the control of dust emissions were held valid. The facts do not appear fully in the judgments, but it seems that the equipment was on the part of the land under the control of the company which was not the land in respect of which the application for permission related, but they could properly be regarded (for the purposes of the Town and Country Planning Act 1947, section 14) as expedient in connection with the permitted development. Lord Denning said (at 574): It would be very different if the Minister sought to impose like conditions about plant or machinery a mile or so away. Lord Dennings formula that the conditions must be fairly and reasonably related to the development was approved in Newbury District Council v Secretary of State for the Environment [1981] AC 578, 599 (Viscount Dilhorne), 607 (Lord Fraser), 618 (Lord Scarman), 627 (Lord Lane). Viscount Dilhorne said (at 599): It follows that the conditions imposed must be for a planning purpose and not for any ulterior one, and that they must fairly and reasonably relate to the development permitted. Also they must not be so unreasonable that no reasonable planning authority could have imposed them As Lord Hoffmann said in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 772, as a general statement this formulation has never been challenged. See e.g. Grampian Regional Council v Secretary of State for Scotland, 1984 SC (HL) 58, at 66. In the Newbury case itself it was held that the Secretary of State was entitled to come to the conclusion that a condition imposed by a local authority requiring the removal of existing substantial buildings was not sufficiently related to a temporary change of use for which permission was granted. The effect of the adoption of the Pyx Granite/Newbury formula was to put severe limits on the powers of planning authorities: Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 772 3. Conditions requiring off site roadway benefits were held to be unreasonable in, for example, Hall & Co Ltd v Shoreham by Sea UDC [1964] 1 WLR 240 (ancillary road condition held to be Wednesbury unreasonable); Bradford Metropolitan City Council v Secretary of State for the Environment (1986) 53 P & CR 55 (where it was suggested that it would make no difference if they were included in a section 106 agreement); cf. Westminster Renslade Ltd v Secretary of State for the Environment (1983) 48 P & CR 255 (not legitimate to refuse a planning application because it did not contain provisions for the increase of the proportion of car parking space subject to public control: the absence of a benefit not a reason for refusing planning permission where the benefit could not have been lawfully secured by means of a condition). Section 70(2) of the 1990 Act provides that in dealing with an application for planning permission, the local planning authority shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations. There are two decisions of the Court of Appeal, and a decision of the House of Lords, which have a bearing on the questions on this appeal: R v Westminster City Council, ex parte Monahan [1990] 1 QB 87 (CA); R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society (1993) 67 P & CR 78 (CA); Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 (HL). They deal with one or more of the following questions: the extent to which financial considerations are material considerations in planning decisions; what connection (if any) is required between the development site and off site benefits for the purpose of material considerations; and the respective roles of the planning authorities and the courts in determining what considerations are relevant and what connection with off site benefits is necessary. R v Westminster City Council, ex parte Monahan and R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society are both cases in which Lord Dennings fairly and reasonably relate formula in relation to conditions was extended to, or discussed in connection with, the issue of material considerations under section 70(2). In that context the decisions have been superseded by the decision in the Tesco case, but they contain valuable discussion by some distinguished members of the Court of Appeal on questions of some relevance to the determination of this appeal. In Monahan Lord Dennings formula was discussed in a case involving enabling development, i.e. development which is contrary to established planning policy, but which is occasionally permitted because it brings public benefits which have been demonstrated clearly to outweigh the harm that would be caused. The decision also discusses the question of the extent to which the provision of off site benefits by the developer may be material. In Plymouth one of the issues was the extent to which off site planning benefits promised by a section 106 agreement were material considerations. R v Westminster City Council, ex parte Monahan In R v Westminster City Council, ex parte Monahan [1990] 1 QB 87 the Royal Opera House, Covent Garden Ltd, applied for planning permission and listed building consents to carry out a re development, the central objective of which was to extend and improve the Opera House by reconstruction and modernisation to bring it up to international standards, and to develop the surrounding area consistently with that project. Parts of the site were proposed to be used for the erection of office accommodation, which would be a departure from the development plan. The planning authority granted permission for the whole proposed development on the basis that the desirable improvements to the Opera House could not be financed unless the offices were permitted. The applicants sought judicial review of that decision on the ground, inter alia, that the fact that a desirable part of a proposed development would not be financially viable unless permission were given for the other part was not capable of being a material consideration for the purposes of what is now section 70(2) of the 1990 Act in granting planning permission for the development as a whole. It was held that financial considerations which fairly and reasonably related to the development were capable of being material considerations which could be taken into account in reaching that determination; and that the local planning authority had been entitled, in deciding to grant planning permission for the erection of the offices, to balance the fact that the improvements to the Opera House would not be financially viable if the permission for the offices were not granted against the fact that the office development was contrary to the development plan. On this appeal Sainsburys accepts that in the context of section 70(2) the possibility of one development cross subsidising another desirable development is capable, in limited circumstances, of being a material consideration, and that Monahan is such a case, where both developments formed part of one composite development. The Council and Tesco say that Monahan supports their position because the Court of Appeal held the consequence of the financial viability of the proposed opera house development to be a relevant factor in the planning authoritys determination. Kerr LJs reasoning was essentially this: (1) in composite or related developments (related in the sense that they can and should properly be considered in combination) the realisation of the main objective may depend on the financial implications or consequences of others; (2) provided that the ultimate determination is based on planning grounds and not on some ulterior motive, and that it is not irrational, there would be no basis for holding it to be invalid in law solely on the ground that it has taken account of, and adjusted itself to, the financial realities of the overall situation; (3) financial considerations may be treated as material in appropriate cases: Brighton Borough Council v Secretary of State for Environment (1978) 39 P & CR 46; Sosmo Trust Ltd v Secretary of State for the Environment [1983] JPL 806. He concluded (at 117) by agreeing with Webster Js conclusion at first instance. Webster J had said: It seems to me to be quite beyond doubt [but] that the fact that the finances made available from the commercial development would enable the improvements to be carried out was capable of being a material consideration, that is to say, that it was a consideration which related to the use or development of the land, that it related to a planning purpose and to the character of the use of the land, namely the improvements to the Royal Opera House which I have already described, particularly as the proposed commercial development was on the same site as the Royal Opera House and as the commercial development and the proposed improvements to the Royal Opera House all formed part of one proposal. The fairly and reasonably related to the development formula was applied by Kerr LJ (at 111), and Staughton LJ (at 122) (who also agreed that there was a composite or related development). There was some discussion in the Monahan decision of the limits of what could be taken into consideration, by reference to two hypothetical examples. The first example (which Kerr LJ said was an extreme example) was the case of the development of an undesirable office block in Victoria which was said to be necessary to generate the finance for a desirable development in Covent Garden. Kerr LJ said that a combination of this nature would be unlikely to be properly entertained as a single planning application or as an application for one composite development, and that such a case would involve considerations of fact and degree rather than of principle: at 117. Nicholls LJ dealt with this point by saying (at 121): The second hypothetical example, the swimming pool at the other end of the city, was dealt with by Staughton LJ (at 122): I am not persuaded by this reductio ad absurdum argument. Circumstances vary so widely that it may be unsatisfactory and unwise to attempt to state a formula which is intended to provide a definitive answer in all types of case. All that need be said to decide this appeal is that the sites of the commercial development approved in principle are sufficiently close to the opera house for it to have been proper for the local planning authority to treat the proposed development of the office sites, in Russell Street and elsewhere, and the proposed improvements to the opera house as forming part of one composite development project. As such it was open to the planning authority to balance the pros and cons of the various features of the scheme. It was open to the authority to treat the consequence, for the opera house works, of granting or withholding permission for offices as a material consideration in considering the part of the application which related to offices. The other extreme arises from the axiom of Lloyd LJ in Bradford City Metropolitan Council v Secretary of State for the Environment [1986] 1 EGLR 199, 202G that planning permission cannot be bought and sold. Suppose that a developer wished to erect an office building at one end of the town A, and offered to build a swimming pool at the other end B. It would in my view be wrong for the planning authority to regard the swimming pool as a material consideration, or to impose a condition that it should be built. That case seems to me little different from the developer who offers the planning authority a cheque so that it can build the swimming pool for itself provided he has permission for his office development. Where then is the line to be drawn between those extremes? In my judgment the answer lies in the speech of Viscount Dilhorne in Newbury District Council vs Secretary of State for the Environment [1981] AC 578, 599, which Kerr LJ has quoted. Conditions imposed must fairly and reasonably relate to the development permitted, if they are to be valid. So must considerations, if they are to be material. The ratio of the decision in Monahan is that where there are composite or related developments (related in the sense that they can and should properly be considered in combination), the local authority may balance the desirable financial consequences for one part of the scheme against the undesirable aspects of another part. In R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society (1993) 67 P & CR 78, at 88, Hoffmann LJ observed that the Monahan decision concerned what was treated as a single composite development, and held that there was a sufficient nexus between the office development and the Opera House improvements to entitle the planning authority to say that the desirability of the latter fairly and reasonably related to the former, because of (1) the financial dependency of the one part of the development on the other and (2) their physical proximity. The Monahan decision demonstrates, if demonstration were necessary, that financial considerations may be relevant in planning decisions. In Sosmo Trust Ltd v Secretary of State for the Environment [1983] JPL 806 (cited on this point with approval by Kerr LJ in Monahan at 116) Woolf J accepted that the consequences of the financial viability or lack of financial viability of a development were a potentially relevant factor: the true question was not whether a development would be viable but what the planning consequences would be if it were not viable: see at 807. See also Sovmots Investments Ltd v Secretary of State for the Environment [1977] QB 411, 425, per Forbes J (for further proceedings see [1977] QB 411; [1979] AC 144). R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society Ltd The restrictive approach of the courts to conditions was one of the factors which led planning authorities to rely on planning obligations in attempting to secure planning gain. This led directly to the question whether planning authorities were entitled to treat benefits secured by way of a planning obligation as a material consideration in deciding whether to grant planning permission. In R v Plymouth City Council, ex parte Plymouth and South Devon Co operative Society Ltd (1993) 67 P & CR 78 it was held that the planning authority could (against the opposition of the Co op) take into account offers by Tesco and Sainsburys to enter into section 106 agreements providing for substantial off site benefits. The off site benefits included an offer by Sainsburys of a payment of 1 million for infrastructure which would enable a separate site to be made available for industrial use, and an offer by Tesco of a park and ride facility on another site. The Co ops position was that a consideration was only material to the question of whether to grant planning permission, if it was necessary to the grant of permission, i.e. overcame some objection to the proposed development which would otherwise mean that permission could not be granted. It was held that although the benefits had to be planning benefits and fairly and reasonably relate to the development, they did not have to be necessary. This is a decision in which there was a connection between the development and the off site benefits. All members of the court (Russell, Evans and Hoffmann LJJ) accepted (at 82, 84, 87 88) that the off site benefits related to the superstore development applications. The offer of 1 million by Sainsburys for infrastructure would help to compensate for the reduction in the pool of resources for employment land. The park and ride facility offered by Tesco would counteract the increase in traffic caused by the superstore development: at 82 83; 90 91. Tesco Stores Ltd v Secretary of State for the Environment But, although it has not been expressly over ruled and the result would be the same today, the reasoning of the Plymouth decision can no longer stand, based as it was on the fairly and reasonably related to the development test: see at pp. 81 82, 87, 89 90. In Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 there were rival plans for the development of superstores on different sites in Witney, Oxfordshire, by Tesco and Sainsburys (in conjunction with Tarmac). At an inquiry into proposals to alter the Witney local plan by building a new link road to relieve traffic congestion and a food superstore in the town centre, the inspector approved the proposal for a link road and rejected that for a town centre superstore. Tesco offered to provide full funding for the link road. The Secretary of State allowed the Sainsburys/Tarmac appeal, and dismissed Tescos application: the funding offer was not fairly and reasonably related in scale to the development; although there was a tenuous relationship between the funding of the link road and the proposed foodstore because of a slight worsening of traffic conditions (a 10% increase) the link was not needed. But if it were to be taken into account, then because of the tenuous nature of the connection, the partial contribution was too limited to affect the ultimate decision. The House of Lords confirmed that the Secretary of State had fulfilled his duty by taking the offer into account but according it very little weight. It was held that a planning obligation offered under section 106 of the 1990 Act by a developer was a material consideration for the purposes of section 70(2) of the Act if it was relevant to the development; and that the weight to be given to such an obligation was a matter entirely within the discretion of the decision maker. Tescos offer to fund the link road was sufficiently related to the proposed development to constitute a material consideration under section 70(2). For the purposes of this appeal, the importance of this decision is the light it throws on the nature of the necessary link between the development and the off site benefit. The House of Lords held that the Pyx Granite/Newbury test for planning conditions was not applicable in the context of the question whether section 106 obligations were material considerations under section 70(2). Lord Keith of Kinkel said (at 764, 770): Sir Thomas Bingham MR in the course of his judgment in this case said that material in [section 70(2)] meant relevant, and in my opinion he was correct in this. It is for the courts, if the matter is brought before them, to decide what is a relevant consideration. If the decision maker wrongly takes the view that some consideration is not relevant, and therefore has no regard to it, his decision cannot stand and he must be required to think again. But it is entirely for the decision maker to attribute to the relevant considerations such weight as he thinks fit, and the courts will not interfere unless he has acted unreasonably in the Wednesbury sense An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission. If it has some connection with the proposed development which is not de minimis, then regard must be had to it. But the extent, if any, to which it should affect the decision is a matter entirely within the discretion of the decision maker and in exercising that discretion he is entitled to have regard to his established policy. All members of the appellate committee agreed with Lord Keiths opinion, and the ratio of the decision is that for the purposes of section 70(2) any benefit whose connection with the development is more than de minimis will be a material consideration, but that the weight to be given to any particular material consideration is entirely a matter for the decision maker. It has often been said that planning permissions should not be bought or sold: see Bradford Metropolitan City Council v Secretary of State for the Environment (1986) 53 P & CR 55, 64, per Lloyd LJ (on which see Plymouth at 84, per Evans LJ; Monahan at 122, per Staughton LJ; Tesco, at 765, per Lord Keith of Kinkel, and 782, per Lord Hoffmann); and accepted as a matter of policy in ODPM Circular 05/2005, Planning Obligations, para B6 (reflecting its predecessors): The use of planning obligations must be governed by the fundamental principle that planning permission may not be bought or sold. It is therefore not legitimate for unacceptable development to be permitted because of benefits or inducements offered by a developer which are not necessary to make the development acceptable in planning terms Responding to the point that the approach in the Plymouth decision leads to the prospect of the sale and purchase of planning permissions, Lord Hoffmann contrasted cases in which there was a sufficient connection between the development and a planning obligations and those in which they were quite unconnected. He said (at 782): This reluctance of the English courts to enter into questions of planning judgment means that they cannot intervene in cases in which there is sufficient connection between the development and a planning obligation to make it a material consideration but the obligation appears disproportionate to the external costs of the development. R vs Plymouth City Council, Ex parte Plymouth and South Devon Co operative Society Ltd, 67 P & CR 78, was such a case, leading to concern among academic writers and Steyn LJ in the present case that the court was condoning the sale of planning permissions to the highest bidder. My Lords, to describe a planning decision as a bargain and sale is a vivid metaphor. But I venture to suggest that such a metaphor (and I could myself have used the more emotive term auction rather than competition to describe the process of decision making process in the Plymouth case) is an uncertain guide to the legality of a grant or refusal of planning permission. It is easy enough to apply in a clear case in which the planning authority has demanded or taken account of benefits which are quite unconnected with the proposed development. But in such a case the phrase merely adds colour to the statutory duty to have regard only to material considerations. In cases in which there is a sufficient connection, the application of the metaphor or its relevance to the legality of the planning decision may be highly debatable. I have already explained how in a case of competition such as the Plymouth case, in which it is contemplated that the grant of permission to one developer will be a reason for refusing it to another, it may be perfectly rational to choose the proposal which offers the greatest public benefit in terms of both the development itself and related external benefits. Conclusions There is no doubt that in the light of the report of January 30, 2008, the Council had purportedly resolved in principle to make the CPO for the purpose of facilitating both the development of the Raglan Street site and that of the Royal Hospital site. That would be sufficient to vitiate the resolution. But Elias J and the Court Appeal accepted that there would be no point in quashing the resolution on that ground alone, since a more felicitously worded resolution could be passed if the benefits to be derived from the development of the Royal Hospital site were relevant under section 226(1)(a) or section 226(1A). What can be derived from the decisions in the planning context, and in particular the Tesco case, can be stated shortly. First, the question of what is a material (or relevant) consideration is a question of law, but the weight to be given to it is a matter for the decision maker. Second, financial viability may be material if it relates to the development. Third, financial dependency of part of a composite development on another part may be a relevant consideration, in the sense that the fact that the proposed development will finance other relevant planning benefits may be material. Fourth, off site benefits which are related to or are connected with the development will be material. These principles provide the answer to the questions raised in Monahan about the development in Victoria or the swimming pool on the other side of the city. They do not, as Kerr LJ thought, raise questions of fact and degree. There must be a real connection between the benefits and the development. Given the similar context, there is no reason why similar principles should not apply to compulsory acquisition for development purposes provided that it is recognised that, because of the serious invasion of proprietary rights involved in compulsory acquisition, a strict approach to the application of these principles is required. There must be a real, rather than a fanciful or remote, connection between the off site benefits and the development for which the compulsory acquisition is made. What is the connection in the present case? The expression cross subsidy has been much used by Tesco and the Council. The expression bears a special meaning in this case. Its most common use is in the competition field, where it usually connotes improper allocation of costs in different product or geographic markets, which may result in predatory pricing or other anti competitive activity. Here all it means is that Tesco says that (a) the Councils requirements for the Royal Hospital site have the result that Tesco cannot develop it profitably; and (b) Tesco will undertake its development if it can develop the Raglan Street site. Tesco says that the consequence of (a) and (b) is that the Raglan Street site development will cross subsidise the Royal Hospital site development. But the only connections between the proposed Raglan Street site and Royal Hospital site developments are that (a) Tesco says that it will develop the latter if it can develop the former; (b) it has contractually agreed to perform building works on the Royal Hospital site if it acquires the Raglan Street site. The commercial effect will be that the deficiency on the Royal Hospital site will be made up, or cross subsidised, by the Raglan Street site development. Nothing in the papers before the Court suggests that this will be done by any direct subvention from the income or capital proceeds of the Raglan Street site, but this would not in any event make a difference. It is entirely a matter for Tesco how it funds any loss from, or presents any lower return from, the Royal Hospital site. This is only a connection in the sense that either (a) the Council is being tempted to facilitate one development because it wants another development; or (b) Tesco is being tempted to undertake one uncommercial development in order to obtain the development it wants. The crucial question is whether that is a connection which the Council is entitled to take into consideration under section 226(1)(a) or section 226(1A). To take the latter first, Elias J was right to hold that section 226(1A) was not the crucial provision for the purposes of this case. It does not answer the prior question of what matters can be taken into consideration. The power of compulsory acquisition must be capable of being exercised under section 226(1)(a) before the limitation in section 226(1A) applies. Once it applies the local authority must think that the development will contribute to the achievement of the well being benefits. Section 226(1A) does not permit the Council to take into account a commitment by the developer of a site part of which was to be the subject of a CPO to secure the development, re development or improvement of another (unconnected) site and so achieve further well being benefits for the area. The Council was entitled to come to the view for the purposes of section 226(1A) that the Raglan Street site development would contribute to well being in its area, but not on the basis of the benefits which would derive from the Royal Hospital site development. The Raglan Street site development will not, in any legally relevant sense, contribute to the achievement of the well being benefits flowing from the Royal Hospital site development. But that matters little since the crucial question is whether the Council was entitled to take it into account under section 226(1)(a). There can be no doubt that, even if there is no express reference in section 226(1)(a) to the local authority taking into account material considerations (by contrast with section 70(2)), only relevant matters may be taken into account. For the reasons given above, the claimed financial connection between the two sites was not such as to amount to a relevant matter. It is true, as Sullivan LJ said (at [34]), that the financial viability of a proposed re development scheme would be a highly material factor, and that a proposed re development of a CPO site might have to be cross subsidised. But Sullivan LJ was wrong to conclude that it followed that a cross subsidy from a CPO site to another site was a material consideration. The fact that a conditional agreement for sale linked the obligation to carry out works on the Royal Hospital site was not a relevant connection. Nor do I consider, despite the views of Lord Phillips and Lord Hope to the contrary, that a different result on this appeal is required by the fact that Sainsburys and Tesco were in competition for the site, and that the Council is proposing to dispose of the land to Tesco under section 233. They accept that the Council was not entitled to take the benefits from the Royal Hospital site development into account in making the CPO, but consider that the opportunity for re development of the Royal Hospital site would be a relevant matter to be taken into account by the Council in exercising the power of disposal to Tesco under section 233. First, as a matter of principle it is impossible to put into separate compartments the exercise by the Council of its power of compulsory purchase of Sainsburys property, and the exercise of the Councils power to dispose of Sainsburys property to Tesco, and then to conclude that the Royal Hospital site development may not be taken into account for the former, but can be taken into account for the latter. It is wrong for the Council to deprive Sainsburys of its property because the Council will derive from disposal of that property benefits wholly unconnected with the acquisition of the property. Second, although it is plain that the power of compulsory purchase may be used to assemble a site for a preferred developer, there is nothing in Standard Commercial Property Securities Ltd v Glasgow City Council (No 2) [2006] UKHL 50, 2007 SC (HL) 33 which supports the proposition that unconnected benefits may be taken into account by a local authority in deciding whether property should be compulsorily acquired for the purpose of disposing of it to a preferred developer. The background to the appeal was a competition between developers for the right to develop a run down part of Buchanan Street, Glasgow. Two developers in particular were keen to develop the site, Atlas Investments and Standard Commercial, each of which owned part of the site. The Council, when inviting all the owners and occupiers of the land on the site to submit proposals for re development, said that successful submissions should seek a mix of activities and functions which would bring added activity to the area outside normal retailing hours, and encouraged applicants to allocate a budget to the cost of integrating public art into the development and include improvements to the relevant areas of adjoining streets, and so contribute to the transformation of Glasgow City Centre. Those were the wider planning gain benefits to which Lord Hope referred in his opinion: [39]. Similarly Lord Brown (at [70]) referred to the Councils desire to obtain economic and social benefits for Glasgow. But it is clear from Lord Hopes opinion in that decision, as he accepts in his judgment on this appeal, that the benefits which the developers were invited to confer were related to the site, and the immediately adjoining area. There is nothing in the decision to support the conclusion that in this case the promise to develop the Royal Hospital site would have been a material consideration in a disposal under section 233. I would therefore allow the appeal, and make an order declaring that the opportunity for re development of the Royal Hospital site is not a lawful consideration in deciding whether to make a CPO in relation to the Raglan Street site. LORD WALKER In agreement with Lady Hale, Lord Mance and Lord Collins, I would allow this appeal. I agree with the reasons set out in the full judgment of Lord Collins, supported by the shorter judgments of Lady Hale and Lord Mance. But in view of the difference of opinion within the Court I will try to summarise my reasons in my own words. This appeal is concerned with compulsory acquisition of land for planning purposes (that being the general ambit of both paragraphs (a) and (b) in section 226(1) of the Town and Country Planning Act 1990 the 1990 Act). The land is to end up, not in public ownership and used for public purposes, but in private ownership and used for a variety of purposes, mainly retail and residential. Economic regeneration brought about by urban redevelopment is no doubt a public good, but private to private acquisitions by compulsory purchase may also produce large profits for powerful business interests, and courts rightly regard them as particularly sensitive. To the authorities mentioned by Lord Collins in paras 9 to 11 of his judgment might be added the famous split of the United States Supreme Court in Kelo v City of New London, Connecticut 545 US 469 (2005), discussed in Gray & Gray, Elements of Land Law, 5th Edition (2009) paras 11.2.6 and 11.2.7. The case of Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603 mentioned by Lord Collins was also in substance largely a private to private acquisition, although the local authority used a declaration of trust to give the acquisition a better appearance. Where a local authority is considering exercising powers of compulsory purchase for planning purposes, planning considerations must be central to the decision making process. The public purse is to be protected against improvidence, but the local authority should not be exercising its powers in order to make a commercial profit. In Standard Commercial Property Securities Ltd v Glasgow City Council 2007 SC (HL) 33, Lord Brown, at para 75, described that proposition as deeply unattractive. Section 233 of the 1990 Act differs from its Scottish counterpart in that subsection (3) expressly contemplates a disposal for a consideration less than the best that can reasonably be obtained, though only with the consent of the Secretary of State. But both in Scotland and in England a back to back arrangement (under which the local authority makes neither a commercial loss nor a commercial gain from its participation, using section 226 powers, in a scheme of comprehensive urban redevelopment) is standard practice. The dominant aim is betterment in planning terms. That to my mind is why the issue of what would be material considerations for the purposes of deciding an application for planning permission is also relevant to a decision to exercise powers of compulsory acquisition under section 226. The quality of the proposed redevelopment of the site is of crucial importance. Its larger impact on the authoritys area is also an essential element in the decision making process, because of section 226 (1A). In common with all the members of the Court I consider that section 226(1A) has the effect of imposing an extra requirement which is a necessary but not a sufficient condition for the exercise of powers under 226(1). Section 226(1A) does not qualify, still less act as a substitute for, the requirements of the preceding subsection. But the exercise of powers of compulsory acquisition, especially in a private to private acquisition, amounts to a serious invasion of the current owners proprietary rights. The local authority has a direct financial interest in the matter, and not merely a general interest (as local planning authority) in the betterment and well being of its area. A stricter approach is therefore called for. As Lord Collins says in his conclusions at para 71 of his judgment, a real (rather than a fanciful or remote) connection must be shown between any off site benefits and the proposed redevelopment for which a compulsory purchase order is proposed. Lord Brown has posed a rhetorical question in para 182 of his judgment. After referring to the Standard Commercial case he has commented, it is surely implicit in that decision and indeed in the respective legislative requirements in both England and Scotland in effect to get what I called the best overall deal available that, by the same token as a cash bidding match would have been possible, so too would have been an offer of other benefits, however extraneous. Why ever not? With great respect to Lord Brown I think that he has answered his own question in the passage of his speech in Standard Commercial at para 75: I find deeply unattractive the proposition that, almost inevitably at the expense of some beneficial aspect of the development scheme, the authority should be seeking to make a profit out of the exercise of its statutory powers of acquisition. A cash bidding match, or the exaction of extraneous benefits, has superficial attractions as a tie breaker, especially if there are two contenders, both with very deep pockets, like Tesco and Sainsbury. The merits of their respective schemes are closely matched, as appears from the summary in para 11 of the officers recommendation document dated 30 January 2008. It is true that the Tesco scheme is said in the summary to offer more jobs, but the Sainsbury scheme might create an unspecified number of extra jobs through re use or development of its St Georges Parade site (para 6.6). The Tesco scheme would be delivered by a well resourced operator but the detailed consideration of delivery (para 7) ranked the two contenders as equally capable. Tescos only apparently decisive advantage was (para 11.3) the offer of cross funding for the RHS development. Since their proposals are such that there is little, if anything, to choose between them in planning terms, why should not the local authority look to some substantial extraneous benefit which one contender offers, rather than having to make the difficult choice of a winner between contenders whose proposals are equally satisfactory on planning grounds? The answer is simply that it is not the right way for a local authority to make a decision as to the exercise of its powers of compulsory purchase, any more than it could choose a new chief executive, from a short list of apparently equally well qualified candidates, by holding a closed auction for the office. As Lord Keith said in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, 770, An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission. The fact that an exercise of powers of compulsory acquisition and a back to back disposal to a developer are prearranged is unobjectionable (see Lord Rodger in Standard Commercial at para 53). But that does not mean that the proper consideration of the exercise of powers of compulsory acquisition under section 226 of the 1990 Act can be telescoped into the exercise of powers of disposal under section 233. On this point I am in full agreement with the judgment of Lady Hale. For these reasons I would allow this appeal and make the declaration proposed by Lord Collins. LADY HALE I agree that this appeal should be allowed, for the reasons given by Lord Collins, together with the further reasons given by Lord Walker and Lord Mance. Lord Phillips and Lord Hope also agree with the reasoning of Lord Collins, on the points upon which he differs from Lord Brown, but they disagree in the result. As I understand it, they consider that the extraneous benefit offered by Tesco, although it would not normally be a relevant consideration in the compulsory purchase decision, would be a relevant consideration when the Council came to dispose of the land under section 233(1) of the Town and Country Planning Act 1990. Accordingly, as in practice the decisions may be taken simultaneously, that consideration can be read back into the decision compulsorily to purchase the Sainsbury land under section 226(1). For the reasons given by Lord Mance, I find it difficult to accept that proposition. It puts the cart before the horse. The council have nothing to dispose of unless they have acquired the land, whether voluntarily or compulsorily. They can only acquire the land compulsorily under section 226(1)(a) if the authority think that the acquisition will facilitate the carrying out of development, redevelopment or improvement on or in relation to the land. The matters to be taken into account in making that decision have to be relevant to that purpose. I agree, as Lord Mance puts it at para 98 of his judgment, that the considerations admissible in relation to compulsory purchase are no wider than those admissible in relation to the grant of planning permission. Although the grant of planning permission is a useful analogy, it is a different exercise. The considerations material to that exercise are also material, but in a rather different way, to the compulsory purchase decision. Thus, under the former version of section 226(1) (quoted by Lord Phillips at para 121 of his judgment), the considerations which would be material to the grant of planning permission for development on the land were also material to whether the land was suitable for development. That was a sine qua non for compulsory purchase to secure development. This seems obvious. It cannot be proper to deprive a person compulsorily of his land in order to secure something which will not be allowed to take place. Under the new version of section 226(1), the permissibility of some development (together with a reasonable prospect of its actually taking place) should be a sine qua non for compulsory acquisition in order to facilitate it. The question does not arise in this case, because we are agreed that the extraneous benefit to the Royal Hospital site would not be relevant to the grant of planning permission for this site, any more than it is relevant to the compulsory purchase decision. Acquiring the whole of the Raglan Street site would facilitate the development of that site (although it is worth noting that Sainsbury have so much of the site that they could carry out a development, albeit a less satisfactory one, without further compulsory acquisition). Persuading Tesco to carry out a wholly unrelated development upon another site elsewhere in the city, desirable though that may be for the City and people of Wolverhampton, does nothing to facilitate the development of the Raglan Street site. Rather, it is the other way round. It is difficult to understand why the fact that Sainsbury also wish to develop the Raglan Street site should make any difference. If it would not be permissible to take into account the extraneous benefit when deciding compulsorily to purchase land from an unwilling owner who did not himself wish to develop it, it seems even less permissible to take it into account as against an unwilling owner who does. In the former situation, a development which would not otherwise take place would be facilitated; in the latter, it would not be facilitated because the development would take place in any event. (I might comment that Sainsbury would probably never have found themselves in this mess if they had not twice changed their mind about whether to develop this site.) The case of Standard Commercial Property Securities Ltd v Glasgow City Council [2006] UKHL 50, 2007 SC (HL) 33 is entirely consistent with this view. A council can agree to assemble a site for development, using their compulsory purchase powers if necessary, and to sell it to their chosen developer. It makes sense, but it is not essential, to conduct the two exercises in tandem. But the considerations relevant to the selection of the developer in that case were all relevant to the development of that site. The selection criteria adopted (and carefully graded) by the council were all directly related to the quality of the development of the site and the feasibility of the would be developers carrying it out (see Lord Hope, at para 22). There were no subsidiary planning obligations involved, still less any wholly extraneous benefits offered. In any event, the battle was not about the selection criteria, but about whether the proposed terms of disposal were the best obtainable and there was no evidence that they were not. Even if it were permissible to take a wholly extraneous benefit into account when deciding to whom to sell the land, it does not follow that it is permissible to take that benefit into account when deciding compulsorily to deprive a person of their land. Finally, I agree that section 226(1A) operates as a limitation on the power defined by section 226(1)(a). It is therefore necessary first to consider whether the acquisition will facilitate the development of the land; and only if it will do that, to consider whether the development itself will contribute to the promotion or improvement of the economic, social or environmental well being of the area. LORD MANCE I consider that this appeal should be allowed. I agree with the reasons given by Lord Collins, supplemented by those given by Lord Walker and Lady Hale, and wish to add only a few comments on one aspect, relating to the basis upon which Lord Phillips and Lord Hope (and Lord Brown in an alternative) come in their judgments to an opposite result. Like Lord Phillips (paras 134 135), I agree with Lord Collinss conclusion that a planning authority, when considering a planning application, is only entitled to take into account a planning obligation which the applicant offers if that obligation has some connection with the relevant development, apart from the fact of its offer. I also consider that there is a useful analogy between the grant of planning permission and the exercise of a power of compulsory purchase under section 226(1)(a) of the Town and Country Planning Act 1990, and that the considerations admissible in relation to the latter power are, in the respect mentioned in the previous sentence, no wider than those admissible in relation to the former. In this case, the (decisive) attraction of Tescos proposal in respect of the Raglan Street site consisted of Tescos offer to use the profits to subsidise the wholly unconnected development by it of the Royal Hospital site, elsewhere in Wolverhampton, which the City Council wished to see take place. Lord Phillips accepts in para 138, for reasons which I have summarised in the previous paragraph, that, had Sainsbury been here simply an owner who was unwilling to sell his land, it would not have been legitimate for Wolverhampton City Council to take this attraction into account in deciding to exercise its powers of compulsory purchase to facilitate Tescos scheme in respect of the Raglan Street site. Likewise, he accepts (para 140) that, if Sainsbury and Tesco had been seeking in competition with each other to develop a site in the ownership of a third party, then, too, it would not been admissible for the City Council to decide compulsorily to purchase the third party site because of the attraction of Tescos offer to develop a wholly unconnected site. However, Lord Phillips and Lord Hope consider that it makes all the difference that, in this case, Sainsbury and Tesco were in competition for the same site (in fact owned or controlled as to 86% by the former and 14% by the latter). I cannot accept that distinction. On its logic, it should make no difference if Sainsbury owned and wanted itself to develop the whole Raglan Street site: Tesco, if it wanted to develop that site, could, by offering to devote part of the profits to the Royal Hospital project, still legitimately induce the City Council compulsorily to purchase Sainsburys property in order to sell it to Tesco for the Raglan Street development. Lord Phillipss reference (para 147) to the fact that the compulsory purchase of land owned by one or the other is involved as really peripheral in a case where there are rival developers goes far towards accepting this conclusion. Alternatively, if some way of avoiding this conclusion exists, the logic must still be that Tesco, by acquiring only one house on the proposed Raglan Street site, could alter fundamentally the considerations admissible in relation to a decision whether compulsorily to purchase Sainsburys property, rather than Tescos, in order to facilitate the development of the Raglan Street site. In either case, I do not think it right to describe as motivated by commercial rivalry (para 147) the wish of a landowner in Sainsburys position to develop its own land or its wish to have any decision to compulsorily purchase its land for the benefit of some other developer made by reference to factors having at least some connection with its land. The error in my view lies in divorcing the exercise of the power of compulsory purchase from the property to which it relates. Two different exercises of that power are here in issue relating to two different pieces of land. When a planning authority exercises compulsory purchase powers to promote a particular development, it does this in relation to specific property and only so far as necessary. In the present case, if Sainsburys scheme is preferred on its admissible planning merits, then only Tescos property will be compulsorily purchased, and vice versa. The Councils first decision is therefore which development it prefers, and that will determine whose property is compulsorily purchased. The Councils decision which development it prefers must be taken having regard to considerations which are admissible in the context of the development for which property is to be compulsorily purchased. Thus, when deciding whether compulsorily to purchase Sainsburys property, it was not admissible to have regard to Tescos offer relating to the unconnected development of the Royal Hospital site. If the Raglan Street site had already been in Council ownership, and there were two interested developers, the Council could of course take into account under section 233 any inducement offered by either whether in terms of price or some unconnected benefit (such as an undertaking to develop the Royal Hospital site) as Lord Hope says in para 155. But that is for the very reason that the only relevant decision would then relate to the disposal of the Councils own property. Where the Council is deciding whether compulsorily to purchase third party property under section 226(1)(a), the interests of the third party mean that the Council must have regard only to considerations which are admissible in the context of the development for which such property is required. Standard Commercial Property Securities Ltd v Glasgow City Council [2006] UKHL 50; 2007 SC (HL) 33, to which Lord Phillips and Lord Hope refer, does not in my view support the conclusion which they reach. It was a case where the Glasgow City Council took its decision which development to prefer on grounds which related scrupulously to the merits of the proposed development, without reference to unconnected factors: see e.g. paras 21 to 23, per Lord Hope, para 50, per Lord Rodger and para 73, per Lord Brown. There was, as Lord Hope notes in para 155 in his present judgment, a strong element of planning gain involved in the potential development. But it was planning gain related to the development, not to some entirely unconnected development, so that the case has no analogy with the present. The issue before the House arose because all potential developers were required to provide an indemnity for Glasgow City Councils costs in effecting the compulsory purchase: paras. 22, 50 and 73; and it was this feature which the losing developer criticised. There was some discussion of the possibility that the rival developers might have been invited to enter a bidding match in terms of the price to be paid: para. 41, per Lord Hope, para. 62, per Lord Rodger and paras. 72 73, per Lord Brown. In paras. 41 and 72, Lord Hope and Lord Brown both expressed their difficulty in understanding how such a bidding match would work. At most, one might read into the discussion in Standard Commercial Property a tacit assumption that such a bidding match might have been permissible if possible, but that does not make the case authority on a point which was evidently not argued in that case, any more than it was in fact argued on the present appeal. The focus in Standard Commercial Property was on whether the terms on which the Glasgow City Council was proposing to dispose of the property, once compulsorily acquired, met the requirements of s.191(3) of the Town and Country Planning (Scotland) Act 1997. S.191(1) provided that that any land acquired and held for planning purposes could be disposed of to such person, in such manner and subject to such conditions as might appear expedient to secure purposes mentioned in s.191(2), viz the best use of that or other land, etc. S.191(3) provided that any land so disposed of should only be disposed of at the best price or on the best terms that can reasonably be obtained. The requirements of s.191(1) and (2) on the one hand and of s.191(3) on the other were, as Lord Hope said at para. 34 separate and distinct. The issue before the House was, as Lord Hope made clear throughout paras. 31 42, simply whether the proposed terms of disposal fell within s.191(3). It is material to think about the consequences if Standard Commercial Property were to be treated as any sort of authority that a planning authority may, when deciding whether compulsorily to acquire property belonging to one landowner (A), have regard to the price offered for the land by potential developer (B). There would seem to be no logical reason to limit these consequences to situations where (A) and (B) are in competition, or to situations where the potential development extends beyond (A)s property and includes some property already owned by (B). If, in any situation, (B) were to offer to re purchase (A)s property from the planning authority on terms giving the planning authority a profit, once the planning authority acquired it by compulsory purchase from (A), why would that be illegitimate? Yet (A) would have little or no means of countering such an inducement. (A) could not offer any corresponding profit in respect of land which it already owned. And it could not be legitimate for (A) to offer the local authority a share in the profit it hoped to make from developing its own land, in order to induce the local authority to refrain from compulsorily purchasing its land for the benefit of (B). That would amount to buying a local authoritys exercise of its discretion. It might be suggested that if, as here, (B) owned some land which it was desired to include in an overall development, then (A) might counter (B)s offer in respect of (A)s land, by offering the planning authority a profit on the re sale of (B)s land, if it were compulsorily to acquire that land rather than (A)s. Apart from the evident inappropriateness of any such bidding war, (B)s relevant land holding might (as here) be much smaller in area, and, unless it is supposed that (A) could legitimately offer a ludicrously high price for (B)s land, the financial attraction for the planning authority of (A)s offer could not match that of (B)s. So far, I have spoken only in terms of a bidding match relating to the price to be paid by the developer for the property to be compulsorily purchased. That was the only situation to which any discussion at all was addressed in Standard Commercial Property. The present case concerns the further question whether a proposed developer could influence the exercise by a planning authority of a discretion (viz. whose property compulsorily to purchase and for the benefit of which of two potential developers) by offering some benefit wholly unconnected with any property the subject of the proposed development. In this context, it seems to me even clearer that Standard Commercial Property cannot lend support to Tescos case on this appeal. For these reasons, I do not regard Standard Commercial Property as justifying a conclusion that, as soon as rival developers are competing to develop a single site, part owned by each, considerations become material which would be immaterial if the whole site had been owned by one of them or by a third party. If the discussion in the judgments in that case lends any support to Tescos case, the point did not arise for decision and was not argued there, any more than it was on the appeal in the present case. As a matter of principle, in my opinion, there is no basis on which the fact that Sainsbury and Tesco were, in a broad sense, rival developers in respect of the same overall site, can or should alter fundamentally the considerations admissible when the City Council came to consider which development it should prefer, and which property it should, therefore, compulsorily acquire to facilitate such development. Any such decision fell to be made by reference, and only by reference, to considerations having some connection with the proposed development, and not by reference to any entirely unconnected inducement which might be held out by one of the rival developers. Like Lord Collins, Lord Walker and Lady Hale, I would therefore allow Sainsburys appeal. LORD PHILLIPS Introduction The facts of this appeal are set out in detail in the judgment of Lord Collins. In essence they are simple. The issue that they raise is not. As every shopper knows Sainsbury and Tesco are rivals. Each owns a chain of supermarkets. Each is anxious to open a supermarket on a site at Wolverhampton (the Site). To this end Sainsbury has acquired 86% of the site and Tesco has acquired 14%. These figures ignore, as shall I for it has no materiality, the fact that Wolverhampton City Council (the Council) owns a very small part of the Site. Sainsbury and Tesco have each prepared a development plan for the Site. The plans are very similar. Tesco has obtained planning permission for its plan and Sainsbury is in a position to do the same. The Council is anxious that one or other development plan should be implemented, for it will be likely to contribute to the well being of the area. The problem is that neither of the rivals is prepared to give way, and in so doing to sell its portion of the Site to the other. To resolve this impasse the Council is prepared to use its powers of compulsory purchase to buy the land of one of the rivals and sell it to the other. Those powers are conferred by the following sections of the Town and Country Planning Act 1990 (the Act). 226. Compulsory acquisition of land for development and other planning purposes. (1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area (a) if the authority think that the acquisition will facilitate the carrying out of development, re development or improvement on or in relation to the land or; (b) which is required for a purpose which it is necessary to achieve in the interests of the proper planning of an area in which the land is situated. (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re development or improvement is likely to contribute to the achievement of any one or more of the following objects (a) the promotion or improvement of the economic well being of their area; (b) the promotion or improvement of the social well being of their area; (c) the promotion or improvement of the environmental well being of their area. 233. Disposal by local authorities of land held for planning purposes. (1) Where any land has been acquired or appropriated by a local authority for planning purposes and is for the time being held by them for the purposes for which it was so acquired or appropriated, the authority may dispose of the land to such person, in such manner and subject to such conditions as appear to them to be expedient in order (a) to secure the best use of that or other land and any buildings or works which have been, or are to be, erected, constructed or carried out on it (whether by themselves or by any other person), or (b) to secure the erection, construction or carrying out on it of any buildings or works appearing to them to be needed for the proper planning of the area of the authority. (3) The consent of the Secretary of State is required where the disposal is to be for a consideration less than the best that can reasonably be obtained It is common ground, and rightly so, that the statutory requirements of section 226 are satisfied, so that the Council has statutory power compulsorily to purchase the land owned by either of the rivals. There is little, if anything, to choose between the rival development plans. The Council has, however, decided to prefer Tesco. Its intention is compulsorily to purchase Sainsburys land and to sell this to Tesco. Its reason for this decision is as follows. Tesco own another site in Wolverhampton, the Royal Hospital site (RHS). This is run down and crying out for regeneration. The Council wishes Tesco to redevelop this in a way which Tesco contends is uneconomic. Tesco has, however, agreed to enter into an obligation to redevelop the RHS in accordance with the Councils wishes provided only that the Council prefers Tesco in the competition for the development of the Site. This obligation has been described as involving a cross subsidy of the RHS redevelopment from the Site development. The Council has regarded this obligation as decisive in preferring Tesco to Sainsbury in the competition for the development of the Site. The issue raised by this appeal is whether Tescos undertaking to develop the RHS in accordance with the Councils wishes is a matter to which the Council can properly have regard when deciding upon a scheme for developing the Site that involves the compulsory purchase of Sainsburys land. RHS redevelopment The RHS is about half a mile away from the Site, on the other side of the city centre. When Tesco applied for planning permission for the development of the Site, it sought initially to link this with the redevelopment of the RHS. It was, however, unable to demonstrate any connection between the two, and ultimately accepted that there was no linkage for the Planning Committee to consider. The reality is that there is no connection between the development of the Site and the RHS development other than Tescos agreement to proceed with the latter if granted the former. The cross subsidy I am puzzled by the nature of the so called cross subsidy. Under what is commonly described as a back to back agreement Tesco has agreed to indemnify the Council in relation to the cost to the Council of compulsorily purchasing Sainsburys 86% of the Site. Tesco has further agreed to re develop the RHS at what Tesco contends will be a commercial loss. Tesco states that it will be able to afford this because of the cross subsidy that will be available if it is permitted to develop the Site. It is thus implicit that Tesco anticipates that development of the Site will result in an economic benefit that will enable it to entertain a loss making venture. That economic benefit should, however, be reflected in the price that Tesco, as a willing buyer, would be prepared to pay to Sainsbury, as a willing seller, if Sainsburys land were to be sold directly to Tesco in an open market transaction. That, as I understand the position, is precisely the amount to which Sainsbury will be entitled from the Council as compensation for the compulsory acquisition of their land see Waters v Welsh Development Agency [2004] UKHL 19, [2004] 1 WLR 1304, at paras 17 and 18. If Tesco has to pay the Council this amount under the back to back agreement it is not easy to see how there will remain to Tesco any surplus economic benefit to fund a loss making venture at the RHS. Be this as it may, that is precisely what Tesco has agreed to do. Accordingly I approach this appeal on the basis that the compulsory purchase of Sainsburys land will procure for the Council the benefit, not merely of the development of the Site, but of the re development of the RHS under the obligation that Tesco has agreed to assume. I shall describe this, by way of shorthand, as the RHS benefit. An analysis of the issues The basic issue raised by this appeal is whether the RHS benefit is a legitimate, or material, consideration to which the Council can have regard when deciding whether to acquire Sainsburys land by compulsory purchase in the particular context of the competition that exists between Sainsbury and Tesco for this development. This basic issue subdivides into two separate questions: ii) i) Would the RHS benefit be a material consideration in deciding whether compulsorily to purchase Sainsburys land if Sainsbury was not competing for the development? Is the RHS benefit a material consideration in deciding whether to award the development to Sainsbury or Tesco? If the first question is answered in the affirmative, the second question must necessarily also be answered in the affirmative. A negative answer to the first question will not, however, necessarily require a negative answer to the second. Would the RHS benefit be a material consideration in deciding whether compulsorily to purchase Sainsburys land if Sainsbury was not competing for the Development. The statutory power of compulsory purchase can only lawfully be used for the purpose for which the power has been conferred. In Galloway v London Corpn (1866) LR 1 HL 34 at p. 43 Lord Cranworth LC said: The principle is this, that when persons embarking in great undertakings, for the accomplishment of which those engaged in them have received authority from the Legislature to take compulsorily the lands of others, making to the latter proper compensation, the persons so authorized cannot be allowed to exercise the powers conferred on them for any collateral object; that is, for any purposes except those for which the Legislature has invested them with extraordinary powers. Section 226(1)(a) and 226(1A) confers the power compulsorily to purchase land, but to justify the exercise of that power the council must be able to show that this is clearly in the public interest: I regard it as a principle of our constitutional law that no citizen is to be deprived of his land by any public authority against his will, unless it is expressly authorised by Parliament and the public interest decisively so demands (my emphasis), per Lord Denning MR in Prest v Secretary of State for Wales (1982) 81 LGR 193 at p. 198. In this case it is common ground that the requirements of section 226 are satisfied and that if (i) there was no competing scheme and (ii) Tesco was not prepared to provide the RHS benefit, the public interest would none the less justify the compulsory purchase of Sainsburys land in order to enable Tesco to carry out the development. If, however, this were not the case, would the offer by Tesco of the RHS benefit be a material consideration to which the council could have regard when deciding whether the exercise of their power of compulsory purchase was justified? The ambit of section 226(1A). Section 226(1A) of the Act sets out preconditions to the exercise of the power of compulsory purchase. The development facilitated by the compulsory purchase must be likely to contribute to the improvement of the economic, social or environmental well being of the area. The Court of Appeal held that because the compulsory purchase of Sainsburys land would result in the RHS benefit which, in its turn, would contribute to the economic, social or well being of the area, this, of itself, satisfied section 226(1A). It necessarily followed that the RHS benefit was a material consideration to which the council could have regard when considering the compulsory purchase of Sainsburys land. This finding differed from that of Elias J at first instance. I consider that Elias J was correct and the Court of Appeal wrong. The reasoning of the Court of Appeal appears from the following passages of the only reasoned judgment, which was delivered by Sullivan LJ: 26. Though convoluted, subsection 226(1A) is expressed in deliberately broad terms: likely to contribute to the achievement of[the well being]objects. It is not prescriptive as to the manner in which the carrying out of redevelopment upon a CPO site might make a contribution to such wider benefits. Mr Lockhart Mummery accepted that one of the more obvious ways in which the carrying out of redevelopment on a CPO site might, at least in principle, be capable of bringing economic/social/environmental benefits to a wider area would be if the redevelopment was likely to act as the catalyst for the development or redevelopment of some other site or sites within the authoritys area. 27. Such a catalytic effect might be direct, e.g. because redeveloping the CPO site would be likely to enable the occupier of another, run down site in the authoritys area to relocate onto the CPO site, thus enabling the run down site to be redeveloped. Or it might be indirect, e.g. because the increased attractiveness after redevelopment of a hitherto run down CPO site was likely to make other sites in the area more attractive for development or redevelopment. It was common ground that such catalytic effects were capable of falling within the scope of section 226(1A). 28. In the present case the Report makes it plain that the Defendant was satisfied that facilitating the carrying out of the Interested Partys scheme for the redevelopment of the RSS would, by reason of the proposed cross subsidy, act as the catalyst for the redevelopment of the RHS site in a manner which would contribute to the economic social and environmental well being of its area. 29. In my judgment subsection 226(1A) is concerned with all of the consequences that are likely to flow from the process of the carrying out of redevelopment on the CPO site, and these are not confined to what might be described as the impact of there being new bricks and mortar on the redeveloped site. Thus, disturbance during the redevelopment process and the need to relocate existing occupiers on the one hand, and the job opportunities that would be created during the carrying out of the redevelopment on the other, would both be capable of being relevant (the one negative, the other positive) for the purposes of section 226(1A). In these passages Sullivan LJ equates the development in section 226 (1A) with the process of the carrying out of redevelopment. I think that this is questionable. He describes the Site development as acting as a catalyst for the RHS redevelopment, by reason of the cross subsidy. This is a misuse of language. Section 226(1A) focuses primarily, if not exclusively, on whether the development will be likely to enhance the economic, social or environmental well being of the area once it is completed. The subsection cannot be satisfied by an agreement by a developer to fund a second development that has no physical, geographical or other connection with the development that the compulsory purchase is designed to facilitate. This conclusion gives effect to the natural meaning of the language of section 226(1A). In the Court of Appeal Mr Lockhart Mummery QC for Sainsbury submitted that the same conclusion should be reached by applying, by analogy, decisions on what constitute material considerations in the context of planning applications. Sullivan LJ held that these decisions could not be so applied, at least directly, and Mr King QC for the Council and Mr Katkowski QC for Tesco have supported his approach. Both Lord Brown and Lord Collins have relied on decisions in relation to planning applications in reaching their conclusions, albeit that they have differed as to their effect. Is the analogy between compulsory purchase and planning permission in the present context a fair one? The analogy between compulsory purchase and planning permission. I agree with Lord Brown and Lord Collins that it is appropriate in this case to draw an analogy, when considering whether the RHS benefit is a material consideration, with certain decisions relating to the grant of planning permission. The issue in this case is whether it is legitimate, when considering the benefits that will flow from a development that is the object of compulsory purchase, to have regard to a particular benefit offered by the developer. The relevant planning cases deal with the question of when it is legitimate, when considering a planning application, to have regard to benefits offered by the developer. Each case raises the question of what can legitimately be considered when assessing how the public interest is affected by the development of land. The analogy is obvious. There is a further point. Section 226 of the Act was amended by the Planning and Compulsory Purchase Act 2004, which inserted subsection (1A). In its previous form it included, by section 226(2)(c), a requirement that a local authority, when considering whether land was suitable for development, redevelopment or improvement, should have regard to any other considerations which would be material for the purpose of determining an application for planning permission for development on the land. While this provision was deleted by the 2004 Act it none the less illustrates the fact that the test of materiality in relation to planning permission can also be relevant in the context of compulsory purchase. The planning obligation offered by Tesco in the present case is the RHS benefit. Could that have constituted a material consideration on Tescos application for planning permission, notwithstanding that it had no other connection with the proposed development of the Site? Considerations that are material to the grant of planning permission The history of planning permission shows an ambivalence on the part of the legislature, the executive and the judiciary in respect of the extent to which it is legitimate for a local authority to exact planning gain from a developer as a condition of the grant of planning permission. Lord Hoffmann traced this history in some detail at pp. 771 to 777 of his speech in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759. I shall attempt a rather shorter summary, at least in relation to the earlier part of the history. At the beginning of the 20th Century, apart from some public health legislation, there were no planning controls over the use that an individual could make of his own land. A comprehensive system of planning control over the use of land was first introduced by the Town and Country Planning Act 1947. Since then there have been a series of legislative changes seeking, inter alia, to balance the private rights of owners of land against the public interest in the control of the environment, culminating with the Planning Act 2008, which allows for a new Community Infrastructure Levy. A particular problem has been the extent to which it is legitimate to require developers to take responsibility for the off site consequences of their developments. For present purposes, the most significant provision in force is section 70 of the Town and Country Planning Act 1990. This provides: 70. Determination of applications: general considerations. (1) Where an application is made to a local planning authority for planning permission (a) subject to sections 91 and 92, they may grant planning permission, either unconditionally or subject to such conditions as they think fit; or (b) they may refuse planning permission. (2) In dealing with such an application the authority shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations. Some of the relevant authorities deal with the criteria of the material considerations to which subsection (2) requires the local authority to have regard. Others relate to the scope of the power to impose conditions. In relation to each of these, the following observations of Lord Denning in Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 QB 554 at p. 572 are relevant: The principles to be applied are not, I think, in doubt. Although the planning authorities are given very wide powers to impose such conditions as they think fit, nevertheless the law says that those conditions, to be valid, must fairly and reasonably relate to the permitted development. The planning authority are not at liberty to use their powers for an ulterior object, however desirable that object may seem to them to be in the public interest. As Lord Hoffmann observed in Tesco at p. 772 As a general statement, this formulation has never been challenged. A decision that is particularly relevant in relation to material considerations is R v Westminster City Council, Ex p Monahan [1990] 1 QB 87. The facts of that case have been set out and analysed by Lord Collins at paras 51 to 59 of his judgment. In short the Court of Appeal held that it was a material consideration, when considering a composite development, that one part of it, which was undesirable having regard to relevant planning considerations, would provide a necessary cross subsidy for the development of the other part, which was highly desirable. Lord Collins in his analysis at para 58, identifies the fact that the case concerned composite or related developments as a relevant part of the Court of Appeals reasoning. At para 70 he identifies the need for such a connection or relationship as being a requirement of law. Lord Brown, in para 176 of his judgment, disagrees. He comments that it was expressly recognised that no discernable legal principle would have supported the need for such a connection. I align myself with Lord Collins analysis. The passage from the judgment of Nicholls LJ, quoted by Lord Brown and Lord Collins at paras 169 and 56 of their respective judgments, and the passage from the judgment of Staughton LJ quoted by Lord Collins at para 57, demonstrate that each of those judges saw the need for a relationship between the undesirable and the desirable developments other than the simple fact that the one would subsidise the other. The suggestion by Kerr LJ that the significance of the distance between developments involved considerations of fact and degree rather than of principle does not withstand analysis. If the distance matters, then the reason why it matters must be a matter of principle. The relevant principle appears to me to be that a cross subsidy between two developments cannot be considered unless there is some independent reason for considering the two developments together. Whether that is a rational principle is another matter. If it is acceptable that an undesirable development should be permitted in order to subsidise a desirable development it is not easy to see why there should be an inflexible requirement that one should be in proximity to, or have some other nexus with, the other. A close nexus between the subject matter of a planning condition and the development in relation to which it is imposed has been required by the courts. Lord Hoffmann in Tesco at p. 772 referred to the triple requirement for a valid planning condition laid down by the House of Lords in Newbury District Council v Secretary of State for the Environment [1981] AC 578: i) ii) iii) It must be for a planning purpose and not for any ulterior one; It must fairly and reasonably relate to the permitted development; It must not be Wednesbury unreasonable: [1948] 1 KB 233. Lord Hoffmann went on to refer to the Shoreham case [1964] 1 WLR 240 as illustrating the very strict way that the courts gave effect to these requirements, so that conditions requiring contribution to the external costs generated by a development were not permitted. As Lord Hoffmann explained, this gave rise to the introduction of planning agreements, which were replaced in their turn by planning obligations. Section 106 of the Act provides: Planning Obligations. (1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to in this section and sections 106A and 106B as a planning obligation), enforceable to the extent mentioned in subsection (3) (a) restricting the development or use of the land in any specified way; (b) requiring specified operations or activities to be carried out in, on, under or over the land; (c) requiring the land to be used in any specified way; or (d) requiring a sum or sums to be paid to the authority. This section is in very general terms and, in particular, no express restriction or qualification is placed on the undertaking to pay money to the authority. In these circumstances two separate questions arise. The first is whether, and if so what, implicit restrictions exist as to the nature of planning obligations that can lawfully be incurred. The second is the extent to which planning obligations that have been undertaken are material considerations to which the authority must have regard under section 70 of the Act. There are two relevant decisions that relate to the latter question. The first is R v Plymouth City Council, Ex p Plymouth and South Devon Co operative Society Ltd (1993) 67 P & CR 78. Lord Brown has set out the facts of this case at para 170 of his judgment. The issue was whether generous planning obligations (benefits) offered by Tesco and Sainsbury, there as here rival applicants for a development, were material considerations to which the planning authority could have regard, notwithstanding that they went well beyond anything that the authority would have been able properly to require by way of planning conditions as being necessary. The Court of Appeal applied the Newbury triple requirement, but held that there was no requirement that the benefits should be necessary, albeit that they had, fairly and reasonably, to relate to the development. As to that requirement, this was satisfied in the case of financial contributions to works off site designed to accommodate demands generated by the development. In that case Lord Hoffmann remarked at p. 90: Materiality is an entirely different matter, because there is a public interest in not allowing planning permissions to be sold in exchange for benefits which are not planning considerations or do not relate to the proposed development. He was subsequently in Tesco at p. 778 to say that the parallel between the Newbury triple requirement and the materiality of planning obligations was by no means exact. This brings me to the Tesco case, which is the most important decision in the context of this appeal. Once again the material facts have been summarised by Lord Brown and Lord Collins at paras 173 and 63 66 of their respective judgments. What Tesco established was that the second test in Newbury does not apply to planning obligations. These, to constitute material considerations, do not have fairly and reasonably to relate to the relevant development. It is enough if they have a connection to it that is not de minimis. The requirement for such a connection none the less remains. Lord Brown has concluded at para 174 of his judgment that this connection is satisfied by an offer to cross subsidise another development that is otherwise unconnected with the development for which planning permission is sought. He comments that such an offer could not sensibly be regarded as an attempt to buy planning permission, a phrase he takes from the judgment of Lord Keith at p. 770. Lord Brown differs from Lord Collins, who concludes at para 70 that the authorities, and Tesco in particular, establish that there must be a real connection between benefits undertaken by a planning obligation and the development to which the planning application relates. Here I align myself once again with Lord Collins. Lord Browns conclusions are at odds with the passage in Lord Keiths judgment from which he has borrowed a phrase. The full passage reads: An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission (Emphasis mine). All members of the Committee agreed with the judgment of Lord Keith. Lord Brown has quoted a passage from the judgment of Lord Hoffmann at p. 779C D in which he says that section 106 does not require that the planning obligation should relate to any particular development, and Lord Keith made a similar observation at p. 769B. These observations related, however, to the legality, not the materiality, of planning obligations. My conclusion in relation to the effect of the authorities is as follows. When considering the merits of an application for planning permission for a development it is material for the planning authority to consider the impact on the community and the environment of every aspect of the development and of any benefits that have some relevance to that impact that is not de minimis that the developer is prepared to provide. An offer of benefits that have no relation to or connection with the development is not material, for it is no more than an attempt to buy planning permission, which is objectionable in principle. Tesco was right, on its application for planning permission, to drop any attempt to link the development of the Site with the RHS development. These principles can properly be applied, by analogy, to a simple case where a local authority is considering whether the public interest justifies the compulsory purchase of land for the purpose of facilitating a development. The development itself must be justified in the public interest and it would be wrong in principle for the local authority to be influenced by the offer by the chosen developer to provide some collateral benefit that has no connection of any kind with the development in question. Thus if, in this case, Sainsbury was not a rival seeking to develop the Site but simply an owner who was unwilling to sell his land, it would not be right to treat Tescos offer of the RHS benefit as a consideration that was material to the decision of whether or not to purchase Sainsburys land. Is the RHS benefit a material consideration in deciding whether to award the development to Sainsbury or Tesco? The principle that permits a planning authority to have regard to planning gain that has some connection with a proposed development, but not to planning gain that has no such connection, is not entirely rational. It becomes less rational in a situation where two developers are competing for the grant of planning permission in circumstances where the grant to one or the other is justifiable, but not to both. That was believed to be the position in Plymouth, although ultimately planning permission was granted to both the rivals, being once again Sainsbury and Tesco. In Plymouth each of the rivals was anxious to be permitted to build a supermarket. In competing for planning permission each offered to embellish its development with an array of expensive add ons, described by Lord Brown at para 170 of his judgment. These no doubt enhanced the attraction of each of the rival schemes from the viewpoint of the public and the local authority. But the possibility must exist that the cost of these embellishments might have been spent to better advantage in providing alternative planning gain in the local authoritys area that had no connection with the proposed development. The reality is that the rivals were, to use a description adopted by Lord Hoffmann in Tesco, competing for the development as in an auction. If an auction is to be permissible there might be something to be said for permitting the local authority to identify, for consideration by the rival bidders, its most urgent planning needs, whether or not connected with the development. I make this observation only by way of a stepping stone to considering the more complicated issue raised by the facts of this case. The Councils decision involves the exercise of two statutory powers. The first is the power of compulsory purchase conferred by section 226 of the Act. The second is the power to sell the land compulsorily purchased, which is conferred by section 233. The purposes of the sale of the land described in section 233 differ from the purposes of the purchase described in section 226. Had the Site been in the ownership of a third party who was unwilling to sell it, and had Tesco and Sainsbury been competing to develop it, the Council would have had two separate decisions to make. First whether compulsorily to purchase the land. Secondly to which of the two rivals to sell it for the purpose of the development. The law that I have analysed suggests that, when making the first decision under section 226, the Council would have been bound to disregard benefits that might be obtainable from either of the developers that were unconnected to the development. But in choosing to which of the two rivals to sell the land for development under section 233 the Council would have been entitled, and perhaps bound, to negotiate the best deal available. The terms of section 233 would seem wide enough to have permitted the Council to treat as material Tescos offer to throw into the bargain the RHS benefit. These conclusions receive some support from Standard Commercial Property Securities Ltd v Glasgow City Council [2006] UKHL 50; 2007 SC (HL) 33. Lord Collins has set out some of the complicated facts of this case at para 40 of his judgment. That case had these features in common with the present. Glasgow City Council wished to develop a run down area of the city, parts of which were owned by rival developers. The Council had decided compulsorily to purchase the entire Site and to sell it on back to back terms to one of the rival developers. The other developer challenged the deal on the basis that back to back terms did not represent the best deal. This the Council were bound to achieve under section 191 of the Scottish Act, which closely resembles section 233 of the Act. Lord Collins rightly remarks that there was in that case no offer of benefits unconnected to the development, but I do not think that this robs it of all relevance. Of significance is that in that case, as in this, the council first decided in principle that the facts justified the use of its powers of compulsory purchase, before turning to choose between the rival developers. It is also significant that the House of Lords held that, at the stage of choosing the developer, the Council was not simply concerned with achieving the object of the compulsory purchase, but was also entitled to have regard to purely commercial considerations. Lord Hope described the position as follows at para 34: section 191 seeks to do two things. On the one hand it seeks to regulate those aspects of the transaction which are intended to secure the purposes set out in subsection (2). These purposes are to secure the best use of the land and the proper planning of the area. On the other it seeks in addition to protect the public purse in the manner indicated by subsection (3). These are separate and distinct requirements, although they must both be read in the light of what section 191 seeks to achieve. The prohibition in subsection (3) directs attention to one issue, and to one issue only. This is the commercial implications of the transaction for the planning authority. It is to the best commercial terms for the disposal of the land, not to what is best designed to achieve the overall planning purpose, that the authority must direct its attention at this stage. But the words best terms permit disposal for a consideration which is not the best price. So terms that will produce planning benefits and gains of value to the authority can be taken into account as well as terms resulting in cash benefits. I can summarise the position as follows. (1) In deciding whether to exercise its powers of compulsory purchase for the purpose of development the Council is not permitted to have regard to unconnected benefit that it may derive from the carrying out of the development, but: (2) in deciding who shall carry out the development and, thus, to whom the land will be sold for that purpose, the Council is entitled, and perhaps bound, to have regard to unconnected benefit offered by the developer. The problem is how to have regard to these principles in a case such as the present where the rival developers each owns part of the Site needed for the development. I have concluded that the proper approach should be as follows. The Council should first decide, in the case of each of the rivals, whether compulsory purchase of his land would be approved to enable the development to proceed, disregarding any unconnected benefit that might accrue and on the premise that he was simply an unwilling seller rather than a rival developer. In the result of an affirmative answer being given in each case, the Council should then decide which developer to prefer having regard to all considerations material to that choice, including the amount of the Site already owned by each developer and any benefits offered by either developer, whether or not connected to the development. The fact that this may, in effect, involve an auction between the two developers for the benefit of the community does not seem to me to be inherently objectionable. In the present case this is what the Council did. The Council was not influenced by the RHS benefit when deciding in principle to use its power of compulsory purchase. In deciding to purchase whatever land was necessary for the development of the Site the Council had regard only to the proper objects of compulsory purchase. The choice of developers necessarily also determined which land would be compulsorily purchased, but the decision had already been taken to purchase whatever land would be necessary having regard to the choice of developer. To summarise, the RHS benefit was not a consideration that was material to the decision to use the power of compulsory purchase, but it was very material to the decision which developer to select, and this in its turn determined whose land was to be compulsorily purchased. In these circumstances I have reached the conclusion that the RHS benefit was a consideration that was material to the decision that determined simultaneously the developer and the land to be purchased. It cannot be said that the decision compulsorily to purchase Sainsburys land was influenced by a consideration that was not material. The decision that I have reached at laborious length was felicitously stated by Elias J in a single paragraph and I propose to conclude my judgment by quoting this: In my judgment when deciding which development should receive their support, the Council could have regard to all the benefits accruing from the proposed development, including any off site benefits achieved by way of a section 106 agreement. It seems to me that there are really two stages in the process. First, can a CPO lawfully be made in favour of a particular development? That must be determined by focusing solely on the benefits flowing from the development itself and the RHS benefits could not be taken into account at that stage. Second, if the power can lawfully be exercised, but there is more than one potential party in whose favour it could be exercised, to which development should the Council lend its support? At that stage I can see no reason why the Council should not have regard to its wider interests. It has established that there is in principle a proper basis in law for interfering with the rights of either of two (or more) owners of land on the site by compulsorily purchasing their interests; I see no reason why it should not select which landowner should be so affected by considering the overall benefits to the Council which the respective developments would provide. The reality in this case is that the real issue is which developer should be preferred by the Council, which is in the position of being able to choose between the two. The fact that the compulsory purchase of land owned by one or the other is involved is really peripheral. Each purchased its land in the hope of being able to use it for the purpose of the development. Each shares the intention that its land should be used for the development. In resisting the compulsory purchase of its land each is motivated by commercial rivalry, not by any objection to the land being used for the proposed development. It would be unfortunate if the rigid application by analogy or principles of planning law were to rob the local community of the additional benefit of the redevelopment of the RHS. I have not found it necessary to reach such a result. For these reasons I would dismiss this appeal. LORD HOPE Reduced to its essentials, this case is about two decisions that the Council took to facilitate the development at Raglan Street. The first was whether they should exercise their powers of compulsory acquisition to enable the development. The second was as to the choice of developer. The first decision was taken in the exercise of the powers conferred on the Council by section 226 of the Town and Country Planning Act 1990, as amended. The second, as Lord Phillips has said (see para 140, above), was about the exercise of two statutory powers. I put it in this way, as I think Lord Phillips does too, simply to indicate the context in which each of these powers was being exercised. The cart and the horse if I may adopt Lady Hales analogy (see para 91) go together, like a horse and carriage, at this stage of the exercise. The site was not in the sole ownership, or under the sole control, of either developer. They were in competition with each other for its development, so the exercise of compulsory powers to acquire the interest in the land vested in one or other of them was inevitable. Just as inevitable is the fact that the purpose of the exercise of those powers was to enable the Council to dispose of the interest that was to be acquired to the preferred developer. Section 226 is concerned with the acquisition of the interest in the land, not its disposal. The power to dispose of land that has been acquired or appropriated is set out in section 233 of the 1990 Act. The compulsory acquisition of land can only be permitted if it is within the powers of the statute. Great care must be taken to see that those powers are not resorted to unless the statute permits this and that the acquisition is necessary for the purpose that the statute contemplates. The issue on this part of the case is whether the Council were entitled to take into account, in discharging their duty under section 226(1A) to consider the well being benefits for the area, Tescos commitment to secure by way of cross subsidy the development of the Royal Hospital site. For the reasons that Lord Phillips and Lord Collins give, I would hold that they were not entitled to do so. Section 226(1)(a) provides that the authority have power to acquire land compulsorily if they think that it will facilitate the carrying out of development, re development or improvement on or in relation to the land. The reference to the land in this paragraph is to the land which is to be the subject of the compulsory purchase order. Section 226(1A) places a limitation on the exercise of the power under section 226(1)(a). These two provisions must be read together. The contribution by the development, re development or improvement that section 226(1A) refers to must be on the land that the authority is proposing to acquire compulsorily. The situation in this case is that there was no physical connection of any kind between the two sites. Development of the Royal Hospital site could not contribute anything to the carrying out of development on the Raglan Street site in any real sense at all. They were not part of the same land. There is no doubt that the development of the Royal Hospital site would bring well being benefits to the Councils area of the kind that section 226(1A) refers to. But to fall within that subsection they had to be benefits that flowed from the Raglan Street development, not anywhere else. It follows that the Council were not entitled to conclude that the work which Tesco were willing to undertake on the Royal Hospital site would contribute to the well being of the area resulting from its development of the site at Raglan Street for the purposes of section 226(1A). At first sight that might seem to be the end of the case. The report which was presented to the Councils Cabinet on 30 January 2008 stated that the Tesco and Sainsburys schemes for the Raglan Street site would both fulfil the purpose referred to in section 226(1)(a). Addressing itself to the choice that had to be made between the two schemes, it went on to describe the circumstances relating to the development of the Royal Hospital site by Tesco and to refer to the decisive advantage which Tesco enjoyed over Sainsburys if the development of that site was taken into account. It concluded by recommending that there was a compelling case in the public interest to make a compulsory purchase order to enable the Tesco scheme to go ahead. As regards the exercise of the power to acquire the land compulsorily, if looked at in isolation, this was to stray into forbidden territory. In my opinion however it would be unrealistic to stop there. The legality of the use of compulsory powers to enable the Raglan Street development to proceed has not been called into question. As the report said, both schemes satisfied the requirements of section 226(1)(a), and it has never been doubted that the carrying out of either of them on that site would contribute to the achievement of the well being of the area. If the land had been in the ownership of a third party, there would have been no need to say more. The reason why the report went further was the Council had to make a choice between the two developers. Although the report did not say so in terms, it is plain that the assumption on which it was proceeding was that, having acquired the land, the Council would dispose of it to the preferred developer. The surrounding circumstances show that it was never the Councils intention to develop the land themselves or to retain it in their ownership. This part of the report was as much concerned with the exercise of the power to dispose of the land as with the exercise of the power to acquire it. The power of disposal under section 233 confers a wide discretion on the local authority. They may dispose of the land to such person, in such manner and subject to such conditions as appear to them to be expedient to secure the best use of that or other land or the proper planning of their area. Like section 191 of the Town and Country Planning (Scotland) Act 1997 which is in very similar terms, that is its primary objective: see Standard Commercial Property Securities Ltd v Glasgow City Council 2007 SC (HL) 33, para 32. It was held in that case that the council, when considering whether to use compulsory powers in conjunction with a sale of the land under a back to back agreement to the preferred developer, were entitled to have regard to the wider benefits that were expected to flow from the contribution that the preferred developer would make to the redevelopment, the proposals for which were to contain a strong element of planning gain. There was to be a requirement to include improvements to other areas of the urban block within which the site to be acquired compulsorily was situated: see paras 38, 39. The value of the planning gain was something that the council was entitled to take into account in its assessment of whether the disposal was achieved on the best commercial terms. The focus in that case was on the terms on which the council proposed to make the assembled site available to the preferred developer. Its facts differ from those in the present case, so I am not to be taken as suggesting that it provides direct authority for the view which I take here. But it does illustrate the extent of the power of disposal that is conferred by this section on the local authority, and it shows how the authority may legitimately have regard to the way the land will be disposed of before it decides to acquire it compulsorily: taking them both together, like the horse and carriage to which I referred earlier. The council decided to use its compulsory powers to purchase the site with a view to its disposal by means of a back to back agreement to achieve the development. The site was part of an urban block within which properties owned by the first petitioners and the second respondents were situated. Each had their own interests and their own agendas which were in competition with each other and, as in this case, their proposals had to be evaluated. The preferred developer was expected to achieve a scheme that would enhance the wider area within which the site itself was situated. Regard was to be had to benefits which it would provide that were extraneous to the site itself, and extraneous too to each of the properties that were to be acquired compulsorily. Among other things, it was to commit itself to supporting an order for regulating traffic on adjacent streets and to provide details of a financial commitment to the areas environmental enhancement. The whole thing was seen as a single package. The acquisition of the properties and their disposal to a developer who would achieve these benefits were each part of the same exercise: for a more complete account of the facts, see 2005 SLT 144, paras 1 16. I would take from that case the proposition that it is legitimate for the acquiring and disposing authority which has to choose between competing proposals for development to have regard to planning benefits that lie outside the perimeter of the site itself. It has not been suggested that it would have been an improper use of the section 233 power for the Council to take account of Tescos commitment to develop the Royal Hospital site in the assessment as to whether a disposal of the land to Tesco was preferable to disposing of it to Sainsburys. I can see no reason why that should be so if the land was already in the Councils ownership and they were faced with a competition between two or more developers who had no interest in the land at all. It was not possible in this case for the Council to take these two decisions separately, each without reference to the other. The choice as to whose land to acquire was inevitably linked to the choice of the developer to whom the land was to be disposed of when it was acquired. Section 226 does not concern itself with choices of that kind. To say that it prohibits them would be to read a limitation into the section which is not there. It would unduly inhibit the exercise of the power of compulsory acquisition in a case such as this, where a site that is in need of development is in divided ownership, the owners are in competition with each other for its development and there are sound planning reasons beyond those that section 226(1A) refers to for regarding the proposal of one developer as preferable to that of the other. I would not regard the opportunity that this particular situation gives for achieving planning gain in the wider public interest as transgressing the rule that the power of compulsory purchase can only be used for the purpose for which the power has been conferred. The contrary view risks making it impossible for projects for urban renewal which can only be achieved by using compulsory powers to assemble the site for redevelopment to include measures for improvements in the public interest which lie outside the sites perimeter. As Lord Phillips says (see para 147), it would be unfortunate if a rigid application of the compulsory purchase principles to proposals of that kind were to rob the community of such benefits. For these reasons, and those of Lord Phillips with which I agree and in respectful agreement too with what Elias J said at first instance [2009] EWHC 134 (Admin), para 38, I would dismiss the appeal. LORD BROWN Are a local planning authority, when deciding how to exercise their compulsory purchase powers, precluded in all circumstances, as a matter of law, from taking into account public planning benefits (however substantial and obvious) which would result, not directly from the development to be facilitated by the proposed land acquisition, but rather from a contractual obligation attaching to that development? That, crucially, is the issue arising on this appeal. Take the facts of this very case, already fully recounted in the judgment of Lord Collins, but which may conveniently and sufficiently be summarised as follows. Two rival supermarket chains, Sainsburys and Tesco, each own part of a site which is ripe for development (the Site). Each wishes to develop the Site as a supermarket and each has (or is about to obtain) planning permission for such development. There is really nothing to choose between their respective proposals. Neither is willing to sell its share of the Site to the other. In these circumstances it is agreed by all that the local planning authority (Wolverhampton) must inevitably exercise their compulsory purchase powers under section 226 of the Town and Country Planning Act 1990 (as amended) (the 1990 Act). The question then becomes: who should be chosen to carry out the development of the Site and whose land, therefore, should be compulsorily acquired for the purpose? Should Sainsburys land be acquired so that Tesco may develop the Site or vice versa? The issue more particularly arising is whether, in deciding to choose Tesco as the developer, Wolverhampton acted unlawfully in taking into account Tescos commitment, if chosen, to redevelop the Royal Hospital site, another site in Wolverhamptons area some half a mile away (the RHS), redevelopment which Wolverhampton are anxious to promote but which Tesco would not be prepared to undertake save by way of cross subsidy? It so happens that one of the two rival chains (Sainsburys) owns 86% of the site, the other (Tesco) 14%. But it is not suggested that this disparity between their respective interests affects the question of law at issue. The same question would arise even if each owned exactly half the site. Plainly the disparity is itself a material consideration and one, indeed, which ultimately could prove decisive in Sainsburys favour. For present purposes, however, as Mr Lockhart Mummery QC for Sainsburys expressly acknowledged, it can be ignored. Section 226 of the 1990 Act provides so far as material: 226(1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area (a) if the authority think that the acquisition will facilitate the carrying out of development, redevelopment or improvement on or in relation to the land; . (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re development or improvement is likely to contribute to the achievement of any one or more of the following objects (a) being of their area; (b) of their area; (c) well being of their area. the promotion or improvement of the social well being the promotion or improvement of the environmental the promotion or improvement of the economic well For present purposes the effect of those provisions in combination can be summarised quite simply as follows: A local authority can (subject to confirmation by the Secretary of State) compulsorily acquire land if they think, first, that this will facilitate its development (section 226 (1)(a)) and, secondly, that this development is likely to contribute to the economic and/or social and/or environmental well being of their area (section 226(1A)). In the present case it seems to me self evident that both of these pre conditions are fully satisfied in respect of each proposed development scheme so that Wolverhampton have a discretion to make whichever CPO they regard to be appropriate, whether of Sainsburys land or of Tescos land. The question, I repeat, is whether, in choosing whose land to acquire, Wolverhampton can take into account the additional benefit to their area which would result from Tescos commitment, if they are enabled to develop the Site, also to develop the RHS. It was the Court of Appeals conclusion below that Wolverhampton were indeed legally entitled to take account of the proposed cross subsidy which would enable (and commit) Tesco to redevelop the RHS and that this entitlement arose directly under section 226(1A). This subsection, the Court of Appeal held (para 33), imposes on local planning authorities an express obligation to have regard to such off site, or external benefits. Elias J at first instance had held to the contrary (para 35) that, to fall within section 226(1A), well being benefits had to be generated by the development of the Site itself, not by some contractually linked external development. In the only reasoned judgment in the Court of Appeal, Sullivan LJ (at paras 42 and 44) agreed with Elias J that, to fall within section 226(1A) the benefit in question must flow from the re development of [the Site]. However . [t]he likelihood of the re development of a CPO site leading, whether because of cross subsidy or for any other reason, to the development or re development of other sites in the authoritys area is precisely the kind of wider benefit that subsection (1A) requires the authority to consider. [Section 226 (1A)] ensures that wider well being benefits are not ignored, but are always treated as material considerations . I have to say that on this particular issue, in common with the majority of this Court, I prefer Elias Js view to that of the Court of Appeal. That, however, does not seem to me the real issue in the case. Section 226(1A), I repeat, does no more than specify a precondition (additional to that in section 226(1)(a)) which has to be satisfied before any power of compulsory acquisition can be exercised. No one doubts that it was satisfied here. Wolverhampton accordingly had a discretion under the section. The critical question then arising is whether the further public benefit which Tesco was offering was or was not a material consideration which Wolverhampton could take into account when deciding how to exercise that discretion. Elias J held that it was. The Court of Appeal, having concluded (wrongly as I believe) that this further benefit had to be regarded as material by virtue of section 226(1A), chose not to deal with the question whether the benefit would in any event have been a material consideration, section 226(1A) apart. As to this Sullivan LJ merely observed that section 226(1A) does not purport to cut down the considerations that are capable of being material under subsection 226(1)(a). And that at least must be right: to stipulate, as section 226(1A) does, that the authority must not exercise their compulsory purchase powers unless they think that the development itself is likely to contribute to the well being of their area (whether because it will act as a catalyst for other development or provide employment or stimulate other beneficial activity in the area or whatever else) is by no means to stipulate that, the condition being satisfied, this exhausts all the considerations to which the authority can have regard and they must shut their mind to all other possible external benefits which the exercise of their compulsory purchase powers would bring. In addressing the question whether such external benefits are capable of being material considerations in the exercise of compulsory purchase powers under section 226(1)(a), it seems to me helpful to begin by examining what the position would be in the broadly analogous situation of a planning authority considering rival applications for planning permission. Suppose that the competition between the rival supermarket chains was not, as here, as to which should be preferred as developers of a single site by reference to the exercise of the authoritys powers of compulsory purchase, but rather as to which should be granted planning permission assuming that each owned a suitable site but there was room in the area only for one supermarket the very situation which arose in Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 (between, as it happens, the same competing developers as here). Would an offer such as that made here by Tesco to develop the RHS (probably by way of a planning obligation under section 106 of the 1990 Act) be a material consideration within the meaning of section 70(2) of the 1990 Act? If it would, then it is difficult to see why it should not be material also for section 226 (1)(a) purposes. If, on the other hand, it would not, then the Court would need to be persuaded that wider financial benefits are to be regarded as material considerations when exercising compulsory purchase powers than when determining planning applications. Before going to the House of Lords decision in Tesco itself it is instructive to take note of two earlier Court of Appeal authorities R v Westminster City Council ex parte Monahan [1990] 1 QB 87 (Monahan) and R v Plymouth City Council ex parte Plymouth and South Devon Cooperative Society Ltd (1993) 67 P & CR 78 (Plymouth) the essential backdrop to the speeches in Tesco. Lord Collins having dealt with these at some length, I content myself with the briefest summary of each. Monahan was the Royal Opera House case in which the planning authority were held entitled to have granted permission for an office development notwithstanding that it involved a major departure from the development plan because that would cross subsidise the refurbishment of the listed opera house. Nicholls LJ recorded (p.121) that counsel for the planning authority (Mr Sullivan QC) frankly accepted that he could discern no legal principle which distinguished between (a) what happens within one building, (b) what happens on two adjoining sites and (c) what happens on two sites which are miles away from each other but continued: All that need be said to decide this appeal is that the sites of the commercial development approved in principle are sufficiently close to the opera house for it to have been proper for the local planning authority to treat the proposed development of the office sites . and the proposed improvements to the Opera House as forming part of one composite development project. As such it was open to the planning authority to balance the pros and cons of the various features of the scheme. As to what the position would have been had the proposed office block been in Victoria, Kerr LJ similarly suggested that all such cases would . involve considerations of fact and degree rather than of principle. Plymouth (like Tesco which followed it) involved competitive planning applications by Sainsburys and Tesco, the Councils original intention having been to allow one store only to be built. Each company was therefore invited to say why it should be preferred and both were told that the Council would take into account any community benefits offered (provided they were justifiable in land use planning terms the Councils published policy). Sainsburys offer included the construction of a tourist information centre on the site, an art gallery display facility, a work of art in the car park, a bird watching hide overlooking the river, an 800,000 contribution to the establishment of a park and ride facility in the neighbourhood, and up to 1 million for infrastructure works to make a different site suitable for industrial use. Tesco offered financial contribution to a crche, a wildlife habitat, a water sculpture, and in addition it offered to sell the Council a site for a park and ride facility. Both offers were by way of section 106 agreements. In the event, both applications were granted, doubtless to the satisfaction of Sainsburys and Tesco but not that of the Co operative Society who promptly challenged both planning permissions on the ground that the Council had taken into account immaterial considerations. The Co operative Society argued that not merely must a community benefit offered under a section 106 agreement satisfy the three tests laid down by the House of Lords in Newbury District Council v Secretary of State for the Environment [1981] AC 578 (following Pyx Granite Co Ltd v Ministry of Housing and Local Government [1958] 1 QB 554) by which the legality of a section 70 condition is to be judged namely (i) that it has a planning purpose, (ii) that it fairly and reasonably relates to the permitted development and (iii) that it is not Wednesbury unreasonable but it must also be necessary in the sense of overcoming what would otherwise have been a planning objection to the development. In the leading judgment rejecting this argument and stating that the only question is whether [the section 106 agreement] fairly and reasonably related to the development, Hoffmann LJ said (90) that the only benefits which gave pause for thought were the two substantial sums offered by Sainsburys as a contribution to work to be done away from the site. The park and ride facility, however, would tend to reduce both traffic heading for the store and use of Sainsburys own car park by people not actually shopping there. As for the 1 million offer, this was not simply to pay the council 1 million. It was to contribute up to 1 million to the actual cost of infrastructure works undertaken by the council within a period of two years at a specific site. (91). As we shall shortly see, the supposed requirement that section 106 offers, like imposed section 70 conditions, have to fairly and reasonably relate to the permitted development (a requirement held satisfied in Plymouth) did not survive the decision of the House of Lords in Tesco to which I now come. Tesco (like Plymouth at the initial stage) concerned rival applications by Sainsburys and Tesco to develop their respective sites (Sainsburys in conjunction with Tarmac), there being room in Witney for one store only. Notwithstanding that Tescos application included an offer of 6.6 million to fund in its entirety a new link road, the Secretary of State (who had to decide which of the two proposals to allow) chose to grant Sainsburys application. Tesco appealed on the ground that the Secretary of State had failed to take account of a material consideration, namely their 6.6 million offer. Albeit the appeal failed, it did so not on the basis that the offer was an immaterial consideration but rather because, although material, the Secretary of State had been entitled to give it little or no weight and to prefer Sainsburys proposal because the Secretary of State thought its site marginally more suitable (Lord Hoffmann, 783). The following features of Tesco seem to me of particular importance: (1) The 6.6 million offer was held to be a material consideration notwithstanding that the Secretary of State shared his inspectors view that the relationship between the proposed new development and the funding of the link road was tenuous (the development being likely to result only in slight worsening of traffic conditions). (2) The only reasoned speeches were given by Lord Keith of Kinkel (with whom the other members of Committee agreed) and Lord Hoffmann. Both of them recognised that, contrary to the Court of Appeals assumption in Plymouth, the second Newbury test has no application to section 106 agreements. As Lord Hoffmann observed (779C D): [S]ection 70(2) does not apply to planning obligations. The vires of planning obligations depends entirely upon the terms of section 106. This does not require that the planning obligation should relate to any particular development. As the Court of Appeal held in Good v Epping Forest District Council [1994] 1 WLR 376, the only tests for the validity of a planning obligation outside the express terms of section 106 are that it must be for a planning purpose and not Wednesbury unreasonable. Nevertheless, for a planning obligation to be a material consideration which can legitimately be taken into account in granting planning permission, it has to have some connection with the proposed development which is not de minimis (Lord Keith, 770B); it cannot be quite unconnected with the proposed development (Lord Hoffmann, 782D). (3) Were it otherwise, said Lord Keith (770A), it could be regarded only as an attempt to buy planning permission. Lord Hoffmann put it rather differently (782D E). The metaphor of bargain and sale, he suggested, although vivid: is an uncertain guide to the legality of a grant or refusal of planning permission. It is easy enough to apply in a clear case in which the planning authority has demanded or taken account of benefits which are quite unconnected with the proposed development. But in such a case the phrase merely adds colour to the statutory duty to have regard only to material considerations. In cases in which there is a sufficient connection, the application of the metaphor or its relevance to the legality of the planning decision may be highly debatable. I have already explained how in a case of competition such as the Plymouth case, in which it is contemplated that the grant of permission to one developer will be a reason for refusing it to another, it may be perfectly rational to choose the proposal which offers the greatest public benefit in terms of both the development itself and related external benefits. In Tesco itself, Lord Hoffmann then observed (782G H), the Secretary of State had in substance accepted the argument that Tescos offer to pay for the whole road was wholly disproportionate and it would be quite unfair if [Sainsburys] was disadvantaged because it was unwilling to match this offer. That, said Lord Hoffmann, is obviously defensible on the ground that although it may not maximise the benefit for Witney, it does produce fairness between developers. However, Lord Hoffmann continued (783A C), so too was Tescos argument (that only if they offered the whole cost of the link road would it be constructed) a perfectly respectable one. Importantly, he then said this: [T]he choice between a policy which emphasises the presumption in favour of development and fairness between developers, such as guided the Secretary of State in this case, and a policy of attempting to obtain the maximum legitimate public benefit, which was pursued by the local planning authority in the Plymouth case, lies within the area of discretion which Parliament has entrusted to planning authorities. It is not a choice which should be imposed upon them by the courts. (4) (5) Lord Hoffmann had earlier (780F G) emphasised the distinction to be made between materiality and weight: The law has always made a clear distinction between the question of whether something is a material consideration and the weight which it should be given. The former is a question of law and the latter is a question of planning judgment, which is entirely a matter for the planning authority. Provided that the planning authority has regard to all material considerations, it is at liberty (provided that it does not lapse into Wednesbury irrationality) to give them whatever weight the planning authority thinks fit or no weight at all. The fact that the law regards something as a material consideration therefore involves no view about the part, if any, which it should play in the decision making process. Let me in the light of those authorities return to the question I posed at para 168: would an offer such as Tesco made to Wolverhampton, had it been made in a planning context have been, as a matter of law, a material consideration? To my mind the correct answer to that question should be yes, although plainly the weight (if any) to be given to it would be entirely for the planning authority. And the reason the answer should be yes is quite simply because such an offer could not sensibly have been regarded as an attempt to buy planning permission (Lord Keith); on the contrary, it would in my view have had a sufficient connection with the proposed development (Lord Hoffmann), not de minimis (Lord Keith). The proposition that planning consent cannot be bought or sold, although stated nearly a quarter of a century ago to be axiomatic (by Lloyd LJ in City of Bradford Metropolitan Council v Secretary of State for the Environment (1987) 53 P & CR 55, 64), needs to be understood for what it is, essentially a prohibition against the grant of a planning permission for what would otherwise be unacceptable development induced by the offer of some entirely unrelated benefit. What it is not is a prohibition against, for example, the grant of permission for a development which is contrary to local planning policy on the basis that it needs to be economically viable to ensure that the site does not remain derelict see Sosmo Trust Ltd v Secretary of State for the Environment [1983] JPL 806, where, indeed, Woolf J held that no Secretary of State could reasonably have regarded the economic factor in that case as irrelevant. Nor, of course, did the principle prevent office development being permitted in Monahan essentially because the proposed refurbishment of the Opera House was financially dependant upon it. Monahan, it must be noted, is not authority for the proposition that, but for the development there forming part of one composite development project, the office building would not have been permitted. As was expressly recognised, no discernible legal principle would have supported such a view. In any event Monahan is not binding on this Court. That aside, Tesco later established that offers such as that in Monahan to refurbish the Opera House do not have to fairly and reasonably relate to the permitted development (as at the time of Monahan would have been supposed). Had Tesco in the present case offered (uneconomically) to redevelop the RHS to the benefit of the public in consideration of some planning advantage elsewhere in Wolverhamptons area, it is difficult to see why Wolverhampton would have been legally obliged to refuse. Still less does the principle prevent rival developers, in competitive situations such as arose in Plymouth and Tesco, seeking to outbid each other as to the external benefits their proposals would bring with them as both those cases amply demonstrate. It is surely one thing to say that you cannot buy a planning permission (itself, as I have sought to show, only in a narrow sense an absolute principle); quite another to say that in deciding as between two competing developers, each of whose proposals is entirely acceptable on planning grounds, you must completely ignore other planning benefits on offer in your area. Let it be assumed, however, contrary to my view but as I understand every other member of this Court to have concluded, that, had the present issue arisen in the context of rival applications for planning permission, Tescos offered redevelopment of the RHS would have had to be characterised as a wholly unconnected planning benefit and so not a material consideration under section 70. That majority view, as Lord Phillips himself points out at paragraph 139, is not entirely rational even in a non competitive planning context; less rational still where two developers are competing for the grant of planning permission in circumstances where the grant to one or the other is justifiable, but not to both. Is that approach nonetheless to apply equally in the present context or, as I contemplated at paragraph 168, is the position that wider financial benefits are to be regarded as material considerations when exercising compulsory purchase powers than when determining planning applications? The Court of Appeal thought that the case for regarding Tescos RHS offer as a material consideration was stronger in the CPO context than had it been made in a planning context. They thought this, first, because of the wide (to my mind over wide) construction they put upon section 226(1A) itself (para 33); secondly, because they regarded financial viability as yet more important in the CPO context than in the planning context (paras 34 40); and, thirdly, because, whereas planning authorities (subject only to the Secretary of States call in powers) are free to grant any planning permissions they wish, CPOs must be confirmed by the Secretary of State (who can therefore prevent any misuse of the local authoritys compulsory acquisition powers) (para 41). Whilst I have difficulty with that reasoning, I nevertheless agree with Lord Phillips and Lord Hope that, even assuming that Tescos RHS offer would not have been a material consideration had Wolverhampton been determining a planning application, it was nonetheless material in the context of the decisions the Council were in fact required to take here. These were, first, whether Wolverhampton should compulsorily acquire land to facilitate the development of the Site (for which both rival developers had the requisite planning permission) and, if so, second, whose land should be acquired should it be Tescos land to enable Sainsburys to develop the Site or vice versa (ie who should be the preferred developer)? I understand all of us to agree that Wolverhampton were amply entitled to exercise their section 226 power of compulsory acquisition here: as I noted at paras 164 and 165 above, self evidently both the section 226(1)(a) and the section 226(1A) conditions were satisfied and the development of the Site was only going to take place if Wolverhampton did indeed exercise this power. As Lord Hope observes, however, this power could not be exercised until Wolverhampton had also decided the second question before them: which of the two developers to choose. There seems to me no basis in authority or reason for holding that in reaching this second decision Wolverhampton were required to ignore the off site benefit (unconnected though I am now assuming it to be) on offer from Tesco. I would on the contrary hold it to be a material consideration for the purposes of deciding which of the rival developers to prefer and whose land, therefore, should be the subject of compulsory purchase under section 226. That is precisely what was held at first instance here and I can but echo Lord Phillips plaudits for the passage in Elias Js judgment which he quotes in full at paragraph 146. It is essentially on this basis, rather than by reference to Wolverhamptons power of disposal of acquired land under section 233, that for my part I would hold Tescos offer to have been a material consideration (even assuming that it would not have been so in the planning context). I think it difficult for Tesco to invoke section 233 here. True, section 233 would to my mind plainly entitle a planning authority to have regard to an off site benefit such as Tesco offered here in deciding how to exercise their section 233 power. (Although, as Lady Hale and Lord Mance point out, no wholly extraneous benefits were offered or considered in Standard Commercial Property Securities Ltd v Glasgow City Council [2007] SC (HL) 33, it is surely implicit in that decision and, indeed, in the respective legislative requirements in both England and Scotland in effect to get what I called there (para 68) the best overall deal available that, by the same token as a cash bidding match would have been possible, so too would have been an offer of other benefits, however extraneous. Why ever not? I do not regard this as inconsistent with what I said at paragraph 75 of my judgment in Standard Commercial quoted by Lord Walker at para 85: my quarrel there was with the disappointed developers submission that the planning authority should itself have initiated a bidding war. It is quite another thing to say that they are precluded by law from accepting offers of money or other extraneous benefits when they come to dispose of a compulsorily acquired development site.) My difficulty with section 233, however, is, as Lady Hale points out, that it puts the cart before the horse. Unless and until the Secretary of State confirms a section 226 compulsory purchase order, the local authority has no land to dispose of. I do not see the Council here, therefore, as entitled to have regard to their section 233 powers when exercising their section 226 powers. I would be concerned also that on this approach the Council might be statutorily obliged to accept Tescos offer in order to obtain the best overall deal available instead of merely being required to regard it as a material consideration, it being a matter for the Council (and, in subsequent confirmation proceedings, the Secretary of State) to give it such weight, if any, as they thought right. (Indeed, as I observed earlier (at para 162), it might be that the Secretary of State, unlike Wolverhampton, will regard Sainsburys substantial larger interest in the site as the determining factor here rather as the Secretary of State in the Tesco case, thought it only fair to Sainsburys to give no weight to Tescos wholly disproportionate 6.6m offer to fund the link road (see para 173(4) above). That, however, in this case as in that, would be entirely a matter for the planning authorities, not for this Court.) All that said, I do not regard section 233 as central to either Lord Phillips or Lord Hopes reasoning in this case. Still less did it colour Elias Js approach; indeed, section 233 finds no mention whatever in his judgment. Really what it all comes to is this. It is irrational and unsatisfactory that (in the view of the majority) Tescos offer here would have had to be ignored in a competitive planning context. It is quite unnecessary and (as Lord Phillips and Lord Hope observe) would be unfortunate if this irrationality were carried over into the compulsory purchase context within which the present issue arises. In the result I would answer the question I posed in paragraph 160: no, not even if the benefits are wholly unconnected with the proposed development, and dismiss this appeal. As indicated, I would do so essentially for the reasons given by Elias J at first instance rather than those given by the Court of Appeal. |
The first and principal question before us is whether the parties right of prorogation, to opt in to the jurisdiction of an EU country which would not otherwise have jurisdiction to determine a childs future, contained in article 12 of Council Regulation (EC) No 2201/2003 (Brussels II Revised), can apply to a child who is habitually resident outside the European Union. If the answer to that question is yes, then the second question is whether that is what has happened in this case. That depends both upon the interpretation of the criteria for opting in and upon an evaluation of what these parties did. The first question is a good deal easier to answer than the second. The facts The child in question was born on 27 July 2000 and is now aged nine. He was born in this country and is a British citizen. His mother originates from India but has lived in this country for many years. His father originates from Pakistan. Both are British citizens. They married in Pakistan on 28 October 1999 and later lived together in this country. They separated in September 2002 and divorced in 2003. As is common, no orders were made about the child in the course of the divorce proceedings. In this case there were already care proceedings on foot about the child. He was taken to hospital on 1 November 2001 and found to have several fractures to his arms. The local authority began proceedings on 6 November 2001 and a split hearing was directed. At the fact finding hearing in May 2002, District Judge Brasse found that the injuries were non accidental and that the father had caused them. However, at the welfare hearing in December 2002, he reviewed that finding in the light of the new evidence which had emerged during the welfare inquiries and decided that the mother had been responsible. At the final hearing on 22 May 2003, he made an order that the child should live with his father and have supervised contact with his mother in accordance with an agreement made between the local authority and the mother. He also made a supervision order for 12 months. That concluded the care proceedings. It is an automatic condition of all residence orders that the child is not to be taken out of the jurisdiction without either the written consent of every person who has parental responsibility for the child or the leave of the court: Children Act 1989, s 13(1). In mid 2004 the father applied for leave to take the child to live in Pakistan with the fathers mother and sister. On 16 September 2004, Hedley J granted that leave. At the same time, the father (who was represented by counsel at the hearing) gave the conventional undertaking to return the child to this jurisdiction when ordered to do so by the court. The order also provided for interim contact with the mother until the child left the jurisdiction. The father took him to Pakistan on 22 December 2004 and he has lived there ever since. It is common ground that, whatever the precise legal test to be applied, he is now habitually resident in Pakistan. His father returned to this country some months later. His mother has visited him in Pakistan and he has visited his parents here. The relevant parts of the Brussels II Revised Regulation applied from 1 March 2005. On 31 October 2007 the mother, acting in person, issued an application in the Principal Registry of the Family Division for a contact and prohibition order, seeking to enforce telephone contact and as much contact as possible and to stop the paternal grandparents encouraging the child to call them mum and dad. It is common ground between the parties that this is when the relevant proceedings began for the purposes of the jurisdictional questions before us. At the first directions hearing on 5 November 2007, both parties attended, acting in person, and the matter was adjourned to a conciliation hearing on 12 December 2007. Again, both attended that hearing acting in person and an agreed order for contact was made. Among other things, the father agreed to facilitate the child visiting the UK if possible on an annual basis during his school holidays and seeing his mother then. On 15 April 2008, the mother issued a further application, seeking to enforce and vary the contact order so as to ensure that the child was in the UK to facilitate contact and a local authority assessment of the possibility of unsupervised contact. The matter eventually came before Hedley J on 17 June 2008. The parties were still acting in person. At that stage it appeared uncontentious that the child should come back here in 2009, possibly for more than a visit; but the parties were hopelessly divided about 2008. Hedley J remarked that it was unusual for the Court to be retaining jurisdiction as the child was living in Pakistan, but that the Court undoubtedly does have jurisdiction because both parties have not only submitted to the jurisdiction but have actually invoked it on a number of occasions (para 29). He directed that CAFCASS appoint a guardian for the child. He also ordered the father to bring the child into the jurisdiction in June and July 2009, the child to have reasonable contact with the mother, and the mother to be at liberty to visit the child in Pakistan. She spent about three weeks there in the summer of 2008 and saw the child then but she has not seen him since. The CAFCASS guardian reported in January 2009 that his provisional view was that the child should visit this country every other year and the mother visit Pakistan in the intervening years. The matter came back before the High Court on 2 March 2009. By this time both parties were legally represented. A position statement filed by counsel on the fathers behalf stated that The court has retained jurisdiction in this case and the father accepts the Courts jurisdiction and that The father accepts the court has retained jurisdiction to make orders directed towards himself in relation to contact. He had, however, changed his mind about bringing the child to this country in 2009 and undertook to issue an application to set aside Hedley Js order that he should do so. This he duly did on 4 March 2009. At a directions hearing on 12 March 2009, Black J for the first time questioned whether the court did indeed have jurisdiction to make orders relating to the child. That issue was tried before HHJ Barnett, sitting as a deputy High Court judge, on 5 and 6 May 2009. It was then common ground between counsel that Brussels II Revised did not apply. On 28 May 2009 HHJ Barnett held that the court did not have jurisdiction under the Family Law Act 1986. However he also held that if the court did have jurisdiction he would not have granted a stay on the ground of forum non conveniens. The childs guardian considered that the English court was the most appropriate forum to decide the issues between the parents, both of whom were resident here. The mother appealed and for the first time it was argued on her behalf that article 12 of Brussels II Revised applied. One can only feel sympathy for the Court of Appeal, confronted as they were with a novel and at first blush surprising argument. Thorpe LJ found it obvious that HHJ Barnett had reached the right result and would have been dismayed had it been necessary to set aside his very sensible conclusion: [2009] EWCA Civ 965, para 35. The House of Lords gave permission to appeal to this Court over the long vacation. The law As amended following the implementation of Brussels II Revised, section 2 of the Family Law Act 1986 reads as follows: (1) A court in England and Wales shall not make a section 1(1)(a) order with respect to a child unless (a) it has jurisdiction under the Council Regulation, or (b) the Council Regulation does not apply but (i) the question of making the order arises in or in connection with matrimonial proceedings or civil partnership proceedings and the condition in section 2A is satisfied, or (ii) the condition in section 3 of this Act is satisfied. The council regulation is Brussels II Revised. A section 1(1)(a) order includes a section 8 order made by a court in England and Wales under the Children Act 1989, other than an order varying or discharging such an order. Section 2A need not concern us as there are no continuing matrimonial proceedings between the parties, nor were any orders made in connection with them. Section 3 gives jurisdiction on the basis that the child is either habitually resident in England and Wales on the date of the application or (if there was no application) of the order, or was present here on that date and not habitually resident in another part of the United Kingdom. It will be noted that, if Brussels II Revised applies, it governs the situation. If some other EU country (excluding Denmark for this purpose) has jurisdiction under the Regulation, then this country does not. But if Brussels II Revised applies and gives this country jurisdiction, it will give jurisdiction even though the residual jurisdictional rules contained in the 1986 Act would not. Only if Brussels II Revised does not apply at all will the residual rules in the 1986 Act come into play. The basic rule in Brussels II Revised governing jurisdiction in childrens cases is in article 8.1: The courts of a Member State shall have jurisdiction in matters of parental responsibility over a child who is habitually resident in that Member State at the time the court is seised. But that is subject to articles 9, 10 and 12. We are concerned with article 12, which deals with Prorogation of jurisdiction. It is worth quoting article 12 in full, although articles 12.1 and 12.2 are not directly relevant in this case, because the answer to the first question must apply equally to the prorogation covered by article 12.1 as it does to the prorogation covered by article 12.3: at least one of the spouses has parental responsibility in the judgment allowing or refusing the application for divorce, 1. The courts of a Member State exercising jurisdiction by virtue of Article 3 on an application for divorce, legal separation or marriage annulment shall have jurisdiction in any matter relating to parental responsibility connected with that application where: (a) relation to the child; and (b) the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by the spouses and by the holders of parental responsibility, at the time the court is seised, and is in the superior interests of the child. 2. The jurisdiction conferred in paragraph 1 shall cease as soon as: (a) legal separation or marriage annulment has become final; (b) in those cases where proceedings relating to parental responsibility are still pending on the date referred to in (a), a judgment in these proceedings has become final; (c) for another reason. 3. The courts of a Member State shall also have jurisdiction in relation to parental responsibility in proceedings other than those referred to in paragraph 1 where: (a) the child has a substantial connection with that Member State, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that Member State or that the child is a national of that Member State; and (b) the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child. 4. Where the child has his or her habitual residence in the territory of a third State which is not a contracting party to the Hague the proceedings referred to in (a) and (b) have come to an end Convention of 19 October 1996 on jurisdiction, applicable law, recognition, enforcement and co operation in respect of parental responsibility and measures for the protection of children, jurisdiction under this Article shall be deemed to be in the childs interest, in particular if it is found impossible to hold proceedings in the third State in question. The first question Can article 12 apply at all where the child is lawfully resident outside the European Union? In my view it clearly can. There is nothing in either article 12.1 or article 12.3 to limit jurisdiction to children who are resident within the EU. Jurisdiction in divorce, nullity and legal separation is governed by article 3 of the Regulation, which lists no less than seven different bases of jurisdiction. It is easy to think of cases in which a court in the EU will have jurisdiction under article 3 but one of the spouses and their children will be resident outside the EU. A court in England and Wales would have jurisdiction if the petitioning mother were living with the children in the USA and the respondent father were living in this country. A court in England and Wales would have jurisdiction if the petitioning father had lived here for at least a year and the respondent mother were living with the children in the USA. A court in England and Wales would have jurisdiction if the spouses were living here but their children were living in the USA. In some of these cases the spouses might well wish to accept the jurisdiction of the English court to decide matters relating to parental responsibility so that their childrens future could be decided in the same jurisdiction as their status, property and finances. Professor Rauscher is quite clear that the new rule not only applies to children residing in a Member State which is not the forum State (as Article 3 Brussels II did) but also to children residing in Non Member States (T Rauscher, Parental Responsibility Cases under the new Council Regulation Brussels IIA, The European Legal Forum, 1 2005, 37 46 at p 40). There is nothing to differentiate article 12.3 from article 12.1 in this respect. This view of the matter is confirmed, if the third State which is referred to in article 12.4 means a non Member State. The term third State occurs only twice in Brussels II Revised. Article 61 provides that: As concerns the relation with the Hague Convention of 19 October 1996 on Jurisdiction, Applicable law, Recognition, Enforcement and Co operation in Respect of Parental Responsibility and Measures for the Protection of Children, this Regulation shall apply: (a) where the child concerned has his or her habitual residence on the territory of a Member State; (b) as concerns the recognition and enforcement of a judgment given in a court of a Member State on the territory of another Member State, even if the child concerned has his or her habitual residence on the territory of a third State which is a contracting Party to the Convention. If third State in article 61 referred to some other Member State, there would be no need for paragraph (b) because paragraph (a) would cover all cases. But in any event, both article 61 and article 12.4 are looking at the relationship between the Regulation and the 1996 Hague Convention. 16 countries have so far ratified that Convention, half within and half outside the EU (the UK has signed but not ratified; Pakistan has done neither). If the child is habitually resident in a third State which is a party to the 1996 Convention, the Regulation applies to the recognition and enforcement in one Member State of a judgment given in another Member State. If the child is habitually resident in a third State which is not a party to the Convention, article 12.4 lays down a presumption that it will be in the interests of the child for the EU State to assume jurisdiction if the parties have agreed to accept it. All of this makes sense if the third State lies outside the EU but would add nothing if it lies within it. Indeed, why limit the presumption in article 12.4 to the rare case where there are three EU States involved but not apply it to the more common situation where there are two? Nor does the reference in article 12.4 to the impossibility of holding proceedings in the third State make much sense within the EU. Professor Rauscher predicts that Most cases under Article 12(3) will probably feature strange situations of habitual residence particularly with children being nationals of a Member State but residing farther abroad in countries with unreliable judicial structures (loc cit, p 41). There is no case law on the meaning of third State in Brussels II Revised. For what it is worth, the Practice Guide to the Regulation states that the option of voluntarily accepting the jurisdiction of a Member State is not limited to situations where the child is habitually resident within the territory of a Member State (p 45). Reunite have helpfully also drawn our attention to other sources emanating from the EU which define the term to mean a State outside the EU: see, for example, the Community Research and Development Information Service (CORDIS), which uses the term Third State to mean a state that is neither a Member State nor an Associated State. This merely reinforces the conclusion arrived at on ordinary principles of construction that article 12 can apply to children who are habitually resident outside the EU. The second question The second question is whether the criteria in article 12.3 are made out. Paragraph (a) of article 12.3 requires that the child have a substantial connection with the Member State in question, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that State or that the child is a national of that State. This is clearly satisfied in this case. At the time these proceedings began, both parents were habitually resident in the United Kingdom and the child was and is a British national. More complicated questions arise under paragraph (b) of article 12.3. This can be broken down into two components: first, that the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised; and second, that the jurisdiction of the court is in the best interests of the child. Each of these raises interesting subsidiary questions. At the time the court is seised The most difficult questions are posed by the words at the time the court is seised. The first is whether they refer to a moment in time or, as held by the Court of Appeal, to any time while the proceedings are continuing. As a general proposition, it should be clear at any particular point during the proceedings, and preferably from the outset, whether or not the court has jurisdiction. Certainly a party who has once accepted jurisdiction should not be able to withdraw it at any time before the conclusion of the case. Acceptance of jurisdiction must include acceptance of the courts decision whatever it may be. Otherwise there would be no point in submitting to the courts jurisdiction. This provides that: It is clear from article 16 that a court is seised at a particular moment in A court shall be deemed to be seised: (a) at the time when the document instituting the proceedings or an equivalent document is lodged with the court, provided that the applicant has not subsequently failed to take the steps he was required to take to have service effected on the respondent; or (b) if the document has to be served before being lodged with the court, at the time when it is received by the authority responsible for service, provided that the applicant has not subsequently failed to take the steps he was required to take to have the document lodged with the court. From this it is clear that the time of seisin is fixed when the document initiating the proceedings is lodged with the court or, if it has to be served before lodging, is received by the authority responsible for service, although in each case the court may not actually be seised if the applicant does not take the steps required to inform either the respondent or the court. There has to be a fixed time of seisin for the purpose of the rule in article 19, that the court second seised of divorce, separation or nullity proceedings shall decline jurisdiction in favour of the court first seised. There was some debate about what constituted the proceedings in this case. In one sense, no order about the upbringing of a child is ever final. The parties can always agree to make different arrangements or bring the matter back to court for the court to do so. But the reality in this case was that there were care proceedings brought by the local authority in 2002 which were concluded by the residence, contact and supervision orders made in 2003. There were then private law proceedings brought by the father to enable him to take the child abroad to live which were concluded by the orders made by Hedley J on 16 September 2004. There were then new proceedings brought by the mother in 2007, the object of which was to make provision for her contact with the child which had not been done in the 2004 order. It is common ground between the parties that these are the proceedings for this purpose and in my view that is correct. It follows, therefore, that the court became seised of this matter on 31 October 2007. But the next question is what do those words describe? Do they, as had been assumed by all before the hearing in this Court, describe the time at which the parties have accepted jurisdiction? Or do they, as proposed by Mr Setright QC on behalf of the interveners Reunite, describe the parties whose acceptance is required? In other words, does article 12.3(b) mean the jurisdiction of the courts was accepted when the proceedings began by all those who were then parties? Or does it mean the jurisdiction of the courts has been accepted at any time after the proceedings have begun by all those who were parties when they began? There is much to be said for Mr Setrights interpretation, both linguistically and in practice. He draws our attention to the German text of article 12.3(b), which begins alle Parteien des Verfahrens zum Zeitpunkt der Anrufung des Gerichts . However, given what to us is the reverse word order of most German sentences, it would be unwise to place too much reliance upon this. The French, Italian and Spanish texts follow the same word order as the English and are therefore equally ambiguous. Another linguistic clue could be the particular tense used in the English text. Has been accepted is more consistent with the possibility of later acceptance of jurisdiction. If it had been intended to limit acceptance to the exact time of seisin, it would have been more natural to use the words was accepted. Once again, however, it might be unwise to place too much reliance upon the precise tense chosen in the English text, given that other European languages do not have the same variety of ways of referring to something which has happened in the past. The practical attraction of Mr Setrights argument is that this interpretation would enable the court considering whether there has been unequivocal acceptance of jurisdiction to take into account the parties conduct after as well as before the proceedings have begun. Given that the court may be seised before the respondent knows anything about the proceedings (as may well have happened here), it should be possible for the respondent to accept jurisdiction expressly or in an unequivocal manner by the way in which he reacts to the proceedings when he learns about them. If the respondent is indeed content to accept the jurisdiction of the court it should be possible for him to indicate that, either expressly or by his conduct, even though he had not addressed his mind to the matter before the court became seised. Otherwise the scope of both article 12.1 and article 12.3 would be limited (in the vast majority of cases) to cases where there was a written agreement in place when the proceedings were instituted. Admittedly, this was said by the Court of Appeal in Bush v Bush [2008] EWCA Civ 865, [2008] 2 FLR 1437, at para 53, to be the paradigm case but there is no reason why it should be virtually the only case. Prorogation of jurisdiction under article 17 of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 was limited to agreements in writing or in a form which accords with the practice of the international trade or commerce in question. Prorogation under article 12 is not so limited. It is clearly contemplated that conduct other than express agreement can constitute unequivocal acceptance of the jurisdiction. Furthermore, as Lord Collins demonstrates at paragraph 53, there is no reason in principle why there should not be acceptance of jurisdiction after the proceedings have began. Professor Rauscher accepts that jurisdiction must be accepted at the time the court is seised but argues that too literal an interpretation would render article 12.1 almost useless. The parties to a divorce proceeding wont even think about jurisdiction as to parental responsibility before the court is seised. Therefore a more liberal interpretation is advisable. The wording should probably be understood in the sense of at the time the court has been seised, thereby excluding any binding prorogation before the case has been brought to court. (p 40) So now we have a suggestion that prior agreement is not the paradigm case and the parties conduct once the proceedings have begun is what matters. After all, the parallel with agreements under the Brussels Convention is not close in matrimonial and family cases, where it is less common (and in some cases not possible) to have a binding agreement between spouses or parents before proceedings have begun. There is, however, another way of achieving much the same result. Article 16 fixes which is first in time for priority purposes under article 19. But it contains within itself the possibility that apparent seisin may not mature into actual seisin unless the applicant later effects service or lodges the document with the court. Whether this is regarded as a condition defeasant makes no difference: the result in the actual decision depends upon what happens later. It might be possible to take a similar approach to prorogation, so that the apparent seisin when the application is lodged does not mature into actual seisin until the respondent is served and has an opportunity to indicate whether or not he accepts jurisdiction. This too would be consistent with the English use of has been rather than was. As will become apparent shortly, we do not need to resolve this question in this particular case, because we have unequivocal acceptance of the jurisdiction both before and after the proceedings were begun. Moreover, it may not matter much in practice. Even if the words at the time the court is seised qualify the parties acceptance, and refer only to the precise date when the proceedings are initiated rather than to once they have begun, the court is entitled to look at the parties conduct after the proceedings have begun in order to decide whether they had accepted jurisdiction at the time the proceedings did begin. There is nothing unusual about this. Courts often take into account later behaviour as evidence of an earlier state of affairs. Whichever is the correct interpretation, the acceptance in question must be that of the parties to the proceedings at the time when the court is seised. Later parties cannot come along and upset the agreement which the original parties have made. In this case, as it happens, the child was later made a party to the proceedings. Brussels II Revised rightly places great stress on the importance of the voice of the child in proceedings about his future: see paragraph 19 of the Preamble and article 11.2 dealing with the return of children under the Hague Convention on the Civil Aspects of International Child Abduction 1980. But the way in which the child is heard will depend upon national procedures. As was made plain by the House of Lords in In re D (A Child) (Abduction: Rights of Custody) [2006] UKHL 51, [2007] 1 AC 619, para 60, there are different ways of doing this, ranging from full scale legal representation of the child, through independent expert reporting, to a face to face interview with the judge. It is not usually necessary for the child to become a full party to proceedings between his parents, although of course it can and should be done in an appropriate case. The participation of the child is aimed at helping the court decide what outcome to the proceedings will be in the best interests of the child. It is usually less relevant to questions of jurisdiction. Acceptance The father expressly accepted the courts jurisdiction in the position statement put before the court by his counsel for the hearing on 2 March 2009. This is scarcely surprising, as all his conduct up until that time had been consistent with this stance. He appeared before the court in response to the mothers application. He participated in a conciliation appointment on 12 December 2007 and consented to the order then made. He participated in the hearing before Hedley J on 17 June 2008. At that stage he was acting in person. But the solicitors who had appeared for him in the care proceedings and their aftermath then came on the record for the purpose of his application to set aside Hedley Js order that he bring the child back into the jurisdiction in 2009. No objection was then taken to the courts jurisdiction. Far from it. Counsel was instructed for the hearing before the Deputy High Court Judge on 2 March 2009 and expressly accepted jurisdiction on his behalf. All of this conduct indicates his acceptance of jurisdiction both expressly and in an unequivocal manner from the outset of the proceedings. He recanted only when the court itself indicated that there might not be any basis upon which there could be jurisdiction. But there was also a binding prior acceptance. On 16 September 2004, with the benefit of legal advice, he gave an undertaking to the court to return the child to this jurisdiction when called upon to do so. The object of the proceedings was to enable him to take the child to live in Pakistan and thus lawfully to establish a habitual residence outside the jurisdiction. Yet at the same time he was undertaking to bring the child back when required by the court to do so. This inevitably involved accepting the courts jurisdiction to make an order in relation, not only to him, but to the child. In my view, the jurisdiction of the English courts has been accepted by the father, both expressly and otherwise in an unequivocal manner. This is so whatever interpretation is placed upon article 12.3, but the diversity of views expressed by this court indicates that the interpretation is not acte clair and may have to be the subject of a reference to the European Court of Justice in another case. But I would favour an interpretation which catered both for a binding acceptance before the proceedings began and for an unequivocal acceptance once they had begun. In the best interests of the child The final requirement in article 12.3 is that the jurisdiction of the English courts should be in the best interests of the child. Nothing turns, in my view, on the difference between the best interests of the child in article 12.3, the superior interests of the child in article 12.1 and the childs interest in article 12.4. They must mean the same thing, which is that it is in the childs interests for the case to be determined in the courts of this country rather than elsewhere. This question is quite different from the substantive question in the proceedings, which is what outcome to these proceedings will be in the best interests of the child? It will not depend upon a profound investigation of the childs situation and upbringing but upon the sort of considerations which come into play when deciding upon the most appropriate forum. The fact that the parties have submitted to the jurisdiction and are both habitually resident within it is clearly relevant though by no means the only factor. In this case there are two reasons to conclude that the exercise of jurisdiction in this country would be in the childs interests. The first is the presumption in article 12.4. Although expressed as a deeming provision, no one suggests that this is irrebuttable. But it makes sense. If the child is habitually resident in a country outside the EU which, like Pakistan, is not a party to the 1996 Hague Convention on jurisdiction, applicable law, recognition, enforcement and co operation in respect of parental responsibility and measures for the protection of children, then even if the EU country in question is a party to that Convention, there would be no provision for recognition and enforcement of one anothers orders. If, therefore, the parties have accepted the jurisdiction of an EU State, it makes sense for that State to determine the issue. The difficulty or otherwise of holding the proceedings in the third State in question are obviously relevant. It is not suggested that it would be impossible to hold these proceedings in Pakistan, but while neither party has had difficulty with the proceedings here, the mother would certainly face difficulties litigating in Pakistan. The other factor in this case is the very proper stance taken by the childs guardian ad litem. When the issue of forum non conveniens was ventilated before HHJ Barnett in the High Court, the guardian took the view that on balance it would be better for the case to be heard here. The nub of the issue is the contact which the child should have with his mother in this country. Any continuing risks associated with that contact will be better assessed here and any safeguards will need to be put in place here. Inquiries in Pakistan can be made through international social services or other agencies. Of course, the difficulties of enforcement must also be taken into account. But it must be borne in mind that contact orders have always been enforced in personam, against the person to whom they are addressed. Unlike residence orders, they are not enforced by the physical transport of the child from one place to another. The court is bound to view with some scepticism the protestations of a father, who has the benefit of an order that the child is to live with him, that he will be unable in practice to secure the childs compliance with an order for contact with the mother. It may be so but it is not very likely. But this is to anticipate the outcome of the courts investigation into what will be in the best interests of this child as he grows up. Is he to make a clean break from the past and be cut off from his mother and his mothers family indefinitely? Or should he be enabled to have a relationship with both sides of his heritage and in due course to form his own opinions of his mother? If the latter, how practically can that be facilitated? All of that lies in the future. There are many conclusions which the court hearing this case might reach. Among them is an order that it would be better for the child to make no order at all: Children Act 1989, s 1(5). But this is not a refusal of jurisdiction (cf Owusu v Jackson (Case C 281/02) [2005] QB 801). It is a positive conclusion, reached after the court has exercised its jurisdiction to hear and determine the case, that in all the circumstances it will be better for the child to make no further order about his future. It is impossible at this stage to speculate upon how likely that will be. The Pakistan Protocol Thorpe LJ was understandably troubled about the implications for the Pakistan Protocol if the English courts were to accept jurisdiction in respect of a child who was habitually resident in Pakistan. We have had the benefit of an intervention from Reunite, an organisation with great knowledge and experience in the field of international child abduction, and represented by lawyers who also have knowledge and experience of how these things work on the ground. The UK Pakistan Judicial Protocol on Children Matters is not an international agreement between States. It is an understanding first reached in January 2003 between the then President of the Family Division of the High Court in England and Wales and the then Chief Justice of the Supreme Court of Pakistan, supplemented in September 2003 by guidelines for judicial co operation to which Judges from the Court of Session in Scotland and the High Court in Northern Ireland were also party. It was agreed that in normal circumstances the welfare of a child is best determined by the courts of the country of the childs habitual/ordinary residence (para 1). Hence, if a child is wrongfully removed from his country of ordinary residence, the courts of the country to which he is taken should not ordinarily exercise jurisdiction save for the purpose of sending the child back (para 2). The same should apply if a child is brought from one country to the other for the purposes of contact, and is then wrongfully retained (para 3). This very largely reflects the principal provisions of the Hague Convention on Child Abduction. Neither of the two substantive paragraphs is directly applicable to this case. There has been no abduction or wrongful retention. We are concerned only with a very limited exception, in far from normal circumstances, to the general statement in paragraph 1. The two can, as Mr Setright pointed out, complement one another. The courts in Pakistan might welcome the fact that the courts in England had investigated the situation here and put in place safeguards which would enable the child to visit his mother and other members of his family in this country in safety. The Protocol would operate to secure his prompt return to Pakistan after any such visit. Alternatively, the court in this country might, after beginning its investigation, conclude that, had this been a case within the EU, it would have been appropriate to invoke the procedure in article 15 of Brussels II Revised, for requesting the courts of another Member State which is better placed to hear the case to assume jurisdiction. The Protocol, with the associated Guidelines for judicial co operation, provides the ideal vehicle for achieving this outside the EU. In the view of Reunite, therefore, far from undermining the Protocol, article 12 can work harmoniously with it. In any event, it has to be acknowledged that the proper interpretation of the Brussels II Revised Regulation cannot be affected by the terms of a private agreement between the judiciaries of one Member State and a non Member State. Conclusion For these reasons, therefore, I would allow this appeal and declare that the courts of England and Wales have jurisdiction in this case. I agree with Lady Hale that the appeal should be allowed and that the I agree with Lady Hale that the appeal should be allowed, for the reasons LORD HOPE given by her and by Lord Collins. LORD COLLINS declaration proposed by her should be made. There is something to be said for the view that the proceedings began with the fathers application in mid 2004 for leave to take the child to live in Pakistan. If that view were right, then the proceedings would have commenced before the Brussels II Revised Regulation (Council Regulation (EC) 2201/2203) became applicable in March 2005. The then existing Brussels II Regulation (Council Regulation (EC) 1347/2000) did not deal with matters of parental responsibility outside the context of matrimonial proceedings, and the court would have had jurisdiction on the basis of the then habitual residence or presence of the child in England: Family Law Act 1986, sections 2 and 3. But as a matter of English law, the mothers application in 2007, was treated, and is to be treated, as a new proceeding. Since it was issued after the Brussels II Revised Regulation became applicable, there must be a basis of jurisdiction in that Regulation. The general rule under the Brussels II Revised Regulation is that the Member State in which the child has his or her habitual residence has jurisdiction in matters of parental responsibility: Article 8(1). In the present case it is common ground that the child is habitually resident in Pakistan, where his residence reflects integration in a social and family environment: In re A (Case C 523/07) [2009] 2 FLR 1, at para 38. Consequently, the English court will have jurisdiction only if one of the exceptions to the general rule applies. The only potentially relevant exception is in Article 12 (which is set out in full by Lady Hale at para 16). Article 12 deals with prorogation of jurisdiction in matters of parental responsibility both in matrimonial proceedings and in separate proceedings. These are not matrimonial proceedings, and the only available basis of jurisdiction, if any, is in Article 12(3). Where there has been a submission to the jurisdiction within the terms of Article 12(3), the court will have jurisdiction if it is in the best interests of the child. Where the child has his or her habitual residence in the territory of a third State which is not a party to the Hague Convention of 1996, jurisdiction under Article 12 shall be deemed to be in the childs interest, in particular if it is impossible to hold proceedings in the third State in question: Article 12(4). There is no significance in the difference between best interests in Article 12(3) and superior interests in Article 12(1). Other language versions use the identical term for both: suprieur in French, superiore in Italian, and superior in Spanish. It is also plain from the context and from other language versions that shall be deemed means no more than shall be presumed and that the presumption is rebuttable: est prsume/si presume/se presumir. Lady Hale has shown that third State means a State which is not a Member State for the purposes of the Brussels II Revised Regulation. On Article 12(4) see Professor Alegria Borrs, in Brussels II bis: its Impact and Application in the Member States (ed. Boele Woelki and Gonzales Beilfuss, 2007), 3 at 14 15. The question is whether the jurisdiction of the [English court] has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised. The difficulty arises from the use of the words at the time the court is seised. Does the use of those words in the place in which they occur mean that it is necessary that the acceptance of jurisdiction by all parties must take place, or must have taken place, at the time the court is seised, which by Article 16 is, in a case of this kind, the time when the document instituting the proceedings is lodged with the court . ? Or are those words intended simply to identify the parties at the time the court is seised whose acceptance of jurisdiction is required, as the German version of the Regulation (but not the English, French, Italian, or Spanish versions) suggests? The answer to this question must be found in the light of Article 12 as a whole in the context of the Regulation as a whole, and in the light of the instruments which preceded it. The Brussels Convention and the Brussels I Regulation (Council Regulation (EC) 44/2001) each contain sections on prorogation of jurisdiction by prior agreement (Article 17 and 23 respectively) and by appearance after the proceedings have commenced (Articles 18 and 24). They both show that, as is obvious, there is no reason in principle why there should not be acceptance of jurisdiction after the commencement, or service, of proceedings. The basic rule of jurisdiction in the 1996 Hague Convention is the habitual residence of the child; but where the courts of a Contracting State are exercising jurisdiction in matrimonial proceedings, they may take measures directed to the protection of a child habitually resident in another Contracting State if at the a time of commencement of the proceedings, one of his or her parents habitually resides in that State and one of them has parental responsibility in relation to the child, and b the jurisdiction of these authorities to take such measures has been accepted by the parents, as well as by any other person who has parental responsibility in relation to the child, and is in the best interests of the child. (Article 10) A draft Convention on jurisdiction and the recognition and enforcement of judgments in matrimonial matters was approved by the EU Council on 28 May 1998 ([1998] OJ C221), but was superseded by the Brussels II Regulation in 2000. Neither the draft Convention nor the Brussels II Regulation contained provision for matters of parental responsibility outside the context of matrimonial proceedings. Article 3(2) of the draft Convention (in the same terms as what became Article 3 of the Brussels II Regulation) provides that the courts of a Member State have jurisdiction in relation to matters of parental responsibility where the child is habitually resident in another Member State and (a) at least one of the spouses has parental responsibility in relation to the child and, (b) the jurisdiction of the courts has been accepted by the spouses and is in the best interests of the child. This provision was modelled on Article 10(1) of the Hague Convention: see the Report by Professor Alegria Borrs on the draft Convention, para 38. It is therefore apparent that there was no suggestion that the acceptance of jurisdiction under Article 3 of the draft Convention or of the Brussels II Regulation had to be prior to, or at the time of, commencement of the proceedings. The Commission proposal for what became the Brussels II Revised Regulation was presented on 17 May 2002: COM(2002) 222 final/2. The proposal in relation to what became Article 12(1) in the Regulation provided for jurisdiction in matters of parental responsibility where the child was habitually resident in one of the Member States, at least one of the spouses had parental responsibility in relation to the child and if the jurisdiction of the courts has been accepted by the spouses and is in the best interests of the child (Article 12(1)(c)). The proposal in relation to what became Article 12(3) provided that the courts of a Member State would have jurisdiction where all holders of parental responsibility have accepted jurisdiction at the time the court is seised (Article 12(2)(a)), where the child had a substantial connection with that State (in particular where one of the holders of parental responsibility was habitually resident there, or the child was a national) and jurisdiction was in the best interests of the child. Article 12(4) of the draft provided: For the purposes of this Article the appearance of a holder of parental responsibility before a court shall not be deemed in itself to constitute acceptance of the courts jurisdiction. The draft contained in Article 16 the same provision as to date of seisin as the Regulation. This suggests that the Commissions intention was to require acceptance of jurisdiction at or before the date of seisin, and the Commissions Practice Guide on the Brussels II Revised Regulation (pp 16 17), which is of course not authoritative, expresses the view (in relation to both Article 12(1) and Article 12(3)) that it is at the time the court is seised when the judge has to determine whether the relevant parties have accepted the jurisdiction either explicitly or otherwise unequivocally. If this is the correct interpretation of Article 12(1) and Article 12(3) it leads to a result which does not commend itself to common sense. There is no reason in principle why there should not be provision for acceptance of jurisdiction after the commencement of proceedings, as Article 18 of the Brussels Convention and Article 24 of the Brussels I Regulation show. In Bush v Bush [2008] EWCA Civ 865, [2008] 2 FLR 1437, para 53 I expressed the view that the paradigm case for acceptance of jurisdiction would be actual agreement by the parents at the time the matrimonial proceedings were instituted. The question in that case was not the time when acceptance of jurisdiction was to be tested but whether the steps taken by the father amounted to an acceptance of the jurisdiction of the English court. Lady Hale has referred (at 29) to Rauscher, Parental Responsibility Cases under the new Council Regulation Brussels IIA, in European Legal Forum (E) I 2005, 35 at 40. He points out, in relation to Article 12(1) that if at the time the court is seised is to be understood literally, only an acceptance before the relevant steps under Article 16 are taken would be sufficient. In practice such an interpretation would render Article 12(1) almost useless. The parties to a divorce proceeding will not think about jurisdiction as regards parental responsibility before the court is seised. He suggests a more liberal interpretation, so that it would be understood in the sense of at the time the court has been seised, thereby not requiring prorogation before the case has been brought to court. As soon as the case is pending, consensus can be achieved (and other holders of parental responsibility must also agree). He suggests the same solution for Article 12(3). Another way of approaching Article 12 is to treat the words at the time the court is seised as qualifying the words by the holders of parental responsibility in Article 12(1) and the words all the parties to the proceedings in Article 12(3). In each case this would be a sensible construction, and would be consistent with the approach in the Brussels Convention, the Brussels I Regulation, the Hague Convention, and the Brussels II Regulation. It would also be consistent with the German version of the Brussels II Revised Regulation. It is well established that provisions of EU law must be interpreted and applied uniformly in the light of the versions in all the official languages: see, among many others, Dirk Endendijk (Case C 187/07) [2008] ECR I 2115, at paras 22 24. In the context of Article 18 of the Brussels Convention the European Court adopted the French version as being more in keeping with the objectives and spirit of the Convention: Elefanten Schuh GmbH v Jacqmain (Case 150/80) [1981] ECR 1671, at para 14. This solution is an attractive one, but it is by no means an inevitable or a clear one, and, if the appeal depended on whether it was right, it would be necessary to make a reference to the European Court under Articles 68 and 234 of the EC Treaty. But it is not necessary for this important question to be decided because on the facts it is clear that as at the date the court was seised with the mothers proceedings in 2007, the father had unequivocally accepted the courts jurisdiction in his own prior application and that everything he did after the mothers application confirmed his acceptance of the jurisdiction. The mother has plainly accepted the jurisdiction of the court by making her application in October 2007. Nor can there be any doubt that the father has in an unequivocal manner accepted the jurisdiction of the English court to deal with matters of parental responsibility. On his own application in 2004 he gave an undertaking to the court to return the child from Pakistan to England if ordered by the court so to do. When the mother issued her own application in 2007, the father attended a hearing when an agreed order for contact was made. He appeared at a hearing in 2008 before Hedley J when it was ordered that the mother could visit the child in Pakistan, and that he should bring the child to England in June/July 2009. Finally, counsel stated in March 2009 on the fathers behalf that he accepted the courts jurisdiction, and that the court retained jurisdiction to make contact orders directed to him. All of those steps confirmed what was apparent and inevitable when the mother issued her application, namely that the father was already subject to the jurisdiction of the court and had accepted it in relation to matter of parental responsibility. There was, therefore, in the circumstances of the case an unequivocal acceptance of the courts jurisdiction at the date of seisin. I also agree with Lady Hale that the appeal should be allowed and that the LORD KERR declaration proposed by her should be made. I wish to say but a few words on the approach to the interpretation of article 12.1 and 12.3 of Council Regulation (EC) No 2201/2003. I consider that the interpretation discussed by Lord Collins in paragraph 62 of his judgment (which was that advanced by Mr Setright QC on behalf of the intervener) is the correct one. The structure of both article 12.1 and article 12.3, if closely examined, support that conclusion, in my opinion. Article 12.1 (b) provides that the courts of a Member State exercising jurisdiction by virtue of article 3 on an application for divorce etc shall have jurisdiction in relation to any matter relating to parental responsibility connected with the application where at least one of the spouses has parental responsibility in relation to the child and: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by the spouses and by the holders of parental responsibility, at the time the court is seised, and is in the best interests of the child. If it had been intended that the words, at the time the court is seised should qualify the words, accepted expressly or otherwise in an unequivocal manner, the composition of the sentence would surely have been different. To achieve that result the provision should have read thus: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner at the time that the court is seised by the spouses and by the holders of parental responsibility and is in the best interests of the child. The juxtaposition of the phrase, at the time the court is seised with the preceding, the holders of parental responsibility and the enclosing of the phrase referring to the timing by commas indicate that the time that the court is seised was intended to refer to the holders of parental responsibility, in my opinion. That this should be so is entirely to be expected. The holders of parental responsibility may change from time to time. It is important that those who purport to consent to the jurisdiction of the court should be those who hold that responsibility at a time when the court is seised of the proceedings. Self evidently, spouses do not need to be identified in any temporal dimension and the words, at the time the court is seised have no reference to them. The position is at least equally clear in relation to article 12.3 (b). Under this provision the courts of a Member State shall have jurisdiction in relation to parental responsibility where the child has a substantial connection with that Member State and: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child. If it had been intended that the words, at the time the court is seised should refer to the timing of the acceptance of jurisdiction, it appears to me that the structure of the sentence best suited to achieve that result would be as follows: the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner at the time the court is seised by all the parties to the proceedings and is in the best interests of the child. This interpretation would be, as Lord Collins suggests, sensible and would accord with the spirit of the Brussels Convention, the Brussels I Regulation, the Hague Convention, and the Brussels II Regulation. It also avoids the spectre, identified by Professor Rauscher, of rendering article 12. 1 virtually ineffectual. I am afraid that I could not be sanguine about the workability of article 12.1 or 12.3 if the interpretation advanced by the respondent is accepted. Although I am reasonably firm in my opinion that the proper construction of these provisions is as Mr Setright submitted it should be, I agree with Lady Hale and Lord Collins that it is not necessary for a final view on the question to be reached in the present case. This is so because it is clear that the father had unequivocally accepted the jurisdiction of the court when, in 2007, it was indisputably seised of the proceedings. As has been pointed out, moreover, his subsequent attitude to the proceedings evinced unambiguous acceptance of the courts jurisdiction. LORD CLARKE I agree with Lady Hale that this appeal should be allowed and that we should make a declaration that the courts of England and Wales have jurisdiction in this case. I entirely agree with the reasoning and conclusions of Lady Hale and Lord Collins as to the meaning of third State, as to the use that can properly be made of post seisin evidence to demonstrate unequivocal acceptance at the time of seisin, as to the fathers unequivocal acceptance at that time on the facts and as to the best interests of the child. Those conclusions are sufficient for this appeal to be decided by declaring that the English court has jurisdiction. The only point which has caused me some concern, and which I wish briefly to address in this judgment, is the true construction of article 12.3(b) of the Brussels II Revised Regulation. Lord Collins has considered article 12.3(b) in some detail. I entirely agree with paragraphs 47 to 58 of his analysis. I also agree with him that the questions whether the relevant acceptance of jurisdiction must be before the court is seised or whether it can be later and, if so when, are important questions and, if the appeal depended upon the answers, (subject to what I say below) may have to be referred to the European Court of Justice. It is perhaps for this reason that Lord Collins does not express a concluded view on the point. As stated above, I agree with him and Lady Hale that the outcome of the appeal does not depend upon the answers to these questions. I add a few words of my own because I am less concerned than Lady Hale and Lord Collins about what I regard as the natural construction of article 12.3(b). Indeed it seems to me that there is much to be said for the conclusion that that construction is acte clair. As I see it, the natural construction of article 12.3(b) construed in its context and having regard to its provenance as set out by Lord Collins at paragraphs 57 and 58 is that the relevant acceptance of jurisdiction must be before the court is seised. The question is what is meant by the expression at the time the court is seised in articles 12.1 and 12.3 of Brussels II Revised. For present purposes the relevant provision is article 12.3, which provides: 3. The courts of a Member State shall also have jurisdiction in relation to parental responsibility in proceedings other than those referred to in paragraph 1 where: (a) the child has a substantial connection with that member State, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that Member State or that the child is a national of that Member State and (b) the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child. Article 12.1(b) is in very similar terms. Until after Mr Setright QC had made his submissions, it had been contended by Mr Baker QC on behalf of the mother that the expression the time the court is seised in both article 12.1 and article 12.3 meant the specific point when the court is seised as defined by article 16 of the Regulation. Mr Baker submitted that that construction was to be preferred to that of the Court of Appeal, which held, as Thorpe LJ put it at para 28, that the court was seised throughout the continuance of the proceedings. Article 16 has been set out by Lady Hale. It identifies the time when a court shall be deemed to be seised. It is plain that it is describing a particular moment and not a period of time. Thus in both (a) and (b) it provides for a particular moment when the court is seised, namely either when the document instituting the proceedings is lodged with the court or, if the document has to be served before being lodged with the court, when it is received by the authority responsible for service. In each case there is a proviso (or condition defeasant), namely that the applicant has not subsequently failed to take steps he was required to take, in the first case to have service effected on the respondent and in the second case to have the document lodged with the court. As Lady Hale says, the importance of having a fixed time when the court is seised is explained by article 19 because, if the court first seised has jurisdiction, the court second seised must decline jurisdiction. It is thus important to know in each case when the court is seised and which is the court first seised. Mr Bakers submission was based on the natural construction of the article construed in its context, which includes articles 16 and 19. While I entirely agree with Lady Hale that evidence of subsequent events may (and often will) assist the court to decide what the position was at the moment identified as the time the court is deemed to be seised under article 16, I see nothing in the language of article 12.3 (or the equivalent language of article 12.1) to suggest that, if the court was not seised in accordance with article 16 at the time the document instituting the proceedings is lodged, it can somehow become seised at a later date. The only provision affecting the position as at the date of seisin is the proviso in article 16, which might defeat the seisin. However, subject to that, as I see it, there is no scope for later seisin. Once jurisdiction is acquired, the court has jurisdiction throughout the proceedings. It appears to me that in principle no one should commence proceedings of any kind unless the court has jurisdiction or will have it at the moment it is seised of the proceedings. Otherwise the court is being asked to exercise jurisdiction which it does not have. This is of particular importance in this context because, where the court first seised has jurisdiction, under article 19 a court second seised must decline jurisdiction, once it is established that the court first seised has jurisdiction. Article 16 makes it clear that whether it has jurisdiction is to be tested as at the time of seisin as defined by article 16. Any other conclusion seems to me to be likely to lead to confusion. Although Mr Setright submitted that in both article 12.1(b) and article 12.3(b) the words at the time the court is seised identify the parties, I do not think that that is a convincing reading of the language. It is much more natural to read the expression as requiring the acceptance of jurisdiction at the time the court is seised. All the articles of the Regulation relate to the moment of seisin. This seems to me to be implicit in articles 3, 6 and 7 and explicit in articles 8, 12, 13 and 14. Moreover, as Lord Collins demonstrates at paragraphs 57 and 58, the provenance of article 12 strongly supports this approach. Thus the Commission proposal in relation to what became article 12(3) provided that the courts of a Member State would have jurisdiction where all holders of parental responsibility have accepted jurisdiction at the time the court is seised. The Commissions Practice Guide is to the same effect. Although I quite understand that the point was not argued, it is I think of some note that this conclusion is consistent with a dictum of Lawrence Collins LJ in Bush v Bush [2008] EWCA Civ 865, [2008] 2 FLR 1437 at para 53. As he puts it paragraph 60 above, the paradigm case for acceptance of jurisdiction would be actual agreement by the parents at the time proceedings were instituted. In addition it seems to me that the words has been accepted support the same approach. Thus, as I read them, both article 12.1(b) and 12.3(b) require that the jurisdiction of the courts has been accepted at the time the court is seised as defined in article 16. I respectfully disagree with Lady Hale at paragraph 27 that the expression has been accepted is more consistent with the possibility of later acceptance of jurisdiction. On the contrary, it seems to me to support the proposition that the acceptance must be before the seisin. Various other solutions have been suggested. The Court of Appeal suggested that the parties can reach agreement at any time after seisin. This might be months or years after the moment identified in article 16. I do not see how such an approach fits with articles 16 and 19. Mr Setrights construction does not seem to me to be a convincing reading of the language. Nor to my mind is that of Professor Rauscher quoted by Lady Hale at paragraph 29. The expression at the time the court is seised appears not only in article 12 but also in article 8, where it surely relates to the time the court is seised as defined in article 16, and does not mean has been seised. Further, if is seised means has been seised, it is not easy to see why the Court of Appeals approach, namely that it means during the whole period of seisin, is wrong. The problem with it is that stated above, namely that it does not readily fit in with the approach of the Regulation to the court first seised. Lady Hale suggests at paragraph 30 that article 16 fixes which proceedings are first in time for priority purposes but contains the possibility that apparent seisin may not mature into actual seisin unless the applicant effects service or lodges with the court. The suggestion is that a similar approach might be taken to prorogation so that the apparent seisin when the application is lodged does not mature into actual seisin until the respondent is served and has an opportunity to indicate whether or not he accepts jurisdiction. It is also suggested that that would be consistent with the English use of has been rather than was. For my part, I find those suggestions difficult to accept. The Regulation could no doubt have so provided but it did not. As I see it, as stated above, the way article 16 works is that there is seisin on the date identified subject to a condition defeasant. That is not a case of apparent seisin maturing into actual seisin but there being actual seisin, which would take priority over any subsequent seisin, unless there was no service or lodgement. This would be known to the respondent immediately and the position would thus be clear immediately and, absent a failure of the kind expressly specified in article 16, the seisin would have priority over seisin in another jurisdiction before service or lodgement. I do not see how this can readily be applied to article 12.1(b) or article 12.3(b). On the face of it the court would have no jurisdiction at the moment of seisin; yet the suggestion must I think involve the proposition that the court would have jurisdiction retrospectively if at some future moment the jurisdiction was unequivocally accepted. By then another court might be seised and have jurisdiction as the court first seised. Is it really to be supposed that that other court would be required to decline jurisdiction under article 19 even though at the time it was seised no other court was seised? My answer to that question would be no. I appreciate that it is contemplated that the respondent would take a stance immediately and that the position would be much as occurs (or occurred) under, for example, article 23 of the Brussels Convention and article 24 of the Brussels I Regulation which are referred to by Lord Collins at paragraph 53. I also appreciate the force of the point that it is very odd for an unconditional appearance, which of course takes place after seisin, to be a ground of jurisdiction in, say, the Brussels I Regulation and not in the Brussels II Revised Regulation. However, in article 24 of Brussels I appearance is a free standing ground of jurisdiction, whereas there is no equivalent provision in the Brussels II Revised Regulation. I fully understand the concerns expressed by Lady Hale and Lord Collins (and indeed Professor Rauscher) that article 12 will or may be of limited value if it does not extend to post seisin acceptance or agreement. However, it seems to me that the concerns are somewhat overstated. As I see it, the time for parties to decide in what jurisdiction to proceed in matters relating to parental responsibility is before issuing the relevant proceedings. It is at that time that questions of jurisdiction should surely be considered, if only in order to decide where to issue the relevant process. It seems to me to be desirable that parents considering proceedings should be advised that that is the time to make an appropriate agreement. I agree with Lord Collins that that is the paradigm case and it seems to me that the problem should be tackled at the outset rather than that proceedings should be started without jurisdiction in the hope that the other party (or parties) will agree later or do something which could be construed as unequivocal acceptance of jurisdiction. The concerns expressed can I think be resolved in this way. If an express agreement to jurisdiction is made or there is an unequivocal acceptance of jurisdiction after the court is seised and, by that time, proceedings have been commenced in a court in another Member State and that court has become seised, article 19 will operate to give exclusive jurisdiction to that second court. This is on the basis that at the time the first court was seised it did not have jurisdiction and there is nothing in the Regulation to provide for retrospective seisin; so that for the purposes of the Regulation the court first seised is the second court. The parties legitimate interests are however protected by article 15, which gives the court having jurisdiction as to the substance of the matter a power to transfer all or part of the case to a court of another Member State if it concludes that such a court is in a Member State with which the child has a particular connection and that it would be better placed to hear the case or part of it. If, on the other hand, there is no court of another Member State that has jurisdiction under the Regulation, I can at present see no reason why the applicant should not issue fresh proceedings and rely upon the agreement or unequivocal acceptance in those proceedings to satisfy article 12.3(b). In this way the court will have jurisdiction at the time of seisin, which to my mind is what the Regulation intended. As I see it, in this way the concerns expressed by the Court of Appeal, Lady Hale, Lord Collins and others can be allayed. In particular in a case of this kind, where there is no other Member State which could have jurisdiction, the court in which the respondent has unequivocally accepted jurisdiction will have jurisdiction, albeit in proceedings commenced thereafter. I appreciate that these are all questions for decision in another case. I express provisional views upon them in the hope that they may help to resolve potential issues in the future without the delay inevitably involved in a reference to the European Court of Justice. In the meantime, I agree that the appeal in this case should be allowed. |
This is a reference of a devolution issue which has arisen in proceedings in the Sheriff Court of Lothian and Borders at Edinburgh. It was required by the Lord Advocate under paragraph 33 of Schedule 6 to the Scotland Act 1998. The respondent, to whom I shall refer as B as his case has not yet gone to trial, has been charged on summary complaint with housebreaking with intent to steal and having in his possession a controlled drug contrary to section 5(2) of the Misuse of Drugs Act 1971. He pled not guilty and was admitted to bail. A trial diet was fixed for 10 October 2011. By letter dated 1 August 2011 his solicitor gave notice of his intention to raise a devolution issue in terms of paragraph 1 of Schedule 6 to the Scotland Act 1998. The issue was described in his Devolution Minute in these terms: (a) Article 6(3)(c) of the European Convention on Human Rights provides: Everyone charged with a criminal offence has the following minimum rights: To defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require. (b) That in the Minuters case he was interviewed by the police. The Minuter was offered legal assistance prior to the interview but declined. This was done without recourse to a solicitor. Access to a solicitor should be automatic when someone has been detained in police custody. (c) Accordingly the Minuters right to a fair trial under article 6 has been breached if the Crown choose to lead evidence of the Minuters police interview. The Lord Advocate understood the propositions in para 2(b) of the Minute to have been based on the observations of the High Court of Justiciary in Jude v HM Advocate [2011] HCJAC 46, 2011 SLT 722. In para 34 of his opinion, with which all the other members of the Appeal Court agreed, the Lord Justice Clerk (Gill) said that he could not see how a person could waive his right to legal advice when he had not had access to legal advice on the point. In view of the importance of the question raised by this observation the Lord Advocate invited the sheriff to refer the issue to this court, which the sheriff has now done. The reference The questions that were referred by the sheriff did not appear to focus the issue in sufficiently precise terms. So, at the Courts request, an amended version was agreed between the parties. The following are the questions in their amended form: (i) whether it would necessarily be incompatible with article 6(1) and 6(3)(c) of the European Convention on Human Rights for the Lord Advocate to lead and rely upon evidence of answers given during a police interview of a suspect in police custody (whether voluntarily, as a detainee under section 14 of the Criminal Procedure (Scotland) Act 1995 or after arrest and prior to charge) who, before being interviewed by the police: had been informed by a police officer of his Salduz/article 6 rights of access to legal advice; and without having received advice from a lawyer, had stated that he did not wish to exercise such rights. (ii) whether it would be compatible with the respondents rights under articles 6(1) and 6(3)(c) of the ECHR for the Lord Advocate, at the trial of the respondent, to lead and rely upon evidence of answers given by the respondent during a police interview conducted with him between 10 and 11 July 2011 in circumstances where, prior to such interview taking place, the respondent was informed by a police officer of his Salduz/article 6 rights of access to legal advice and, without having received advice from a lawyer, indicated: verbally to police officers prior to being interviewed; in writing by signing a solicitor access recording form (SARF); and verbally at the start of the interview that he did not wish to exercise such rights. The first question raises an issue of principle, which is focused by the word necessarily. The second question is directed to the facts of this case. The Convention issue which it raises, and to which the argument was directed, is focused by the words without having received advice from a lawyer. I agree with Lord Hamilton that the task for this court is to identify as best it can the requirements which the Strasbourg court has set for the making of an effectual waiver of Convention rights (see para 78, below). I emphasise the words the Strasbourg court, as they indicate the proper limits of the jurisdiction that was given to this court by the Scotland Act 1998. It may be, as Lord Kerr makes clear in his judgment, that the way interviews with suspects are currently conducted in Scotland is in need of improvement. But I do not think that this should be done by giving a more generous scope to the Convention rights than that which is to be found in the jurisprudence of the Strasbourg court. The structure of the Scotland Act, section 57(2) of which places such a tight fetter on the powers of the Lord Advocate as head of the system of criminal prosecution in Scotland, is an important factor in the determination of how we should perform our task. As Lord Rodger of Earlsferry declared in HM Advocate v Scottish Media Newspapers Ltd 2000 SLT 331, 333, the Lord Advocate simply has no power to move the court to grant any remedy which would be incompatible with the European Convention on Human Rights: see also HM Advocate v Robb 2000 JC 127, 131, per Lord Penrose. This is in sharp contrast to the position under the Human Rights Act 1998, section 8(1) of which provides that in relation to an act of a public authority which it finds unlawful the court may grant such relief or remedy as it considers just and appropriate. The absolute nature of the fetter which section 57(2) imposes affects cases in the past (other than closed cases) as well as this one, and it will affect all cases in the future. This makes it especially important for us to avoid laying down fixed rules that may impede the prosecution of crime in the public interest, unless they have been clearly identified as such by the court in Strasbourg. We are, after all, dealing here with implied rights which are open, in principle, to modification or restriction so long as this is not incompatible with the right to a fair trial. It is not the purpose of article 6 to make it impracticable to bring those who are accused of crime to justice: Montgomery v HM Advocate 2001 SC (PC) 1, 29, [2003] 1 AC 641, 673; Dyer v Watson 2002 SC (PC) 89, 133, [2004] 1 AC 379, 429 per Lord Rodger of Earlsferry. There is no treaty provision which expressly governs the circumstances in which a Convention right may or may not be taken to have been waived. The rules, if there are to be rules, must be found in the judgments of that court. It should be remembered, too, that there is a difference between an absolute rule and a guiding principle. The virtue of a guiding principle is that its application will depend on the facts and circumstances of each case. If that is as far as Strasbourg has taken the point on waiver, we should be content with that. We should not try to push it further by creating a system which is fenced in by fixed rules. A descent to that level of detail is contrary to the approach that the court itself has adopted. The President of the court, Sir Nicolas Bratza, said in a paper which he gave in Edinburgh in March 2011 that the Strasbourg court has been careful, in general, to leave the national authorities to devise a more Convention compliant system without itself imposing specific requirements on the State: [2011] EHRLR 505, 510. The facts The respondent was detained at 2057 hrs on 10 July 2011 under section 14 of the Criminal Procedure (Scotland) Act 1995 on suspicion of housebreaking with intent to steal. He was cautioned and made no reply. He was searched and found to be in possession of a substance which he said was cannabis. He was then taken to a police station, where he arrived at 2130 hrs. He was then advised that he had been detained under section 14 and that he was under no obligation to answer any questions other than to give his name and address, which he then did. At 2145 hrs he was told of his rights under sections 15 and 15A of the 1995 Act, as amended by the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010, section 1(4). He was told that he was entitled to have intimation of his detention and of the place where he was being detained sent to a solicitor. In reply he gave the name of a firm of solicitors, Central Criminal Lawyers. He was asked whether he wished to have intimation sent to anyone else, to which he replied no. He was also told that he had the right for a private consultation with a solicitor before being questioned by the police and at any time during questioning. He was asked whether he wished a private consultation with a solicitor before being questioned, to which he replied no. These questions and replies were noted on a pro forma detention form. At 2335 hrs the following statement was read out and signed by him immediately before the start of his interview: You have chosen not to have a private consultation with a solicitor. Signing this in no way prevents you from changing your decision at a later time. His interview began at 2336 hrs on 10 July 2011. It continued until 0032 hrs on 11 July 2011. At the start of the interview he was asked whether he had been offered a consultation with a solicitor prior to the interview. He confirmed that this was correct. He was also asked whether it was correct that he had declined that interview and stated that he was happy to be interviewed without a lawyer being present or having a private consultation. He replied that this too was correct. He was then questioned about the alleged housebreaking with intent to steal, which ultimately became the first charge in the summary complaint. In the course of that interview he made statements in relation to that matter which were incriminating. At 0021 hrs on 11 July 2011 he was cautioned and arrested for housebreaking with intent to steal. He made no reply. The interview then continued in relation to the matter which ultimately became the second charge on the summary complaint. Before he was asked any questions about it the respondent confirmed that when he was first taken into custody he was found in possession of a herbal substance which he stated was cannabis. He was also asked whether he wished to consult with a solicitor before the police continued with the interview, to which he replied no. He was then questioned in relation to that matter between 0024 hrs and 0032 hrs. At 0032 hrs he was cautioned and arrested for a contravention of section 5(2) of the Misuse of Drugs Act 1971. He again made no reply. I am grateful to Lord Hamilton for the references he has made in paras 74 and 75 to the current legislation and to section 4 of the Manual of Guidance of Solicitor Access produced by the Association of Chief Police Officers in Scotland (ACPOS Manual) which was published in January 2011. They are an important part of the background. The issue in this case At no stage either before or during the police interview did the respondent receive advice from a lawyer on the question whether he should exercise his right of access to a solicitor before being questioned or during the questioning. Nor was he given an opportunity to seek legal advice on this matter before he decided whether or not he should exercise it. The question is whether he can be taken to have validly waived his right of access to a lawyer without having received advice from a lawyer on this point. In other words, does article 6(1) read with article 6(3)(c) of the Convention require, as a rule, that a person must have had legal advice before he can be taken to have waived that right? It does not say so expressly. But, as is abundantly clear from the jurisprudence of the Strasbourg court, the article is to be interpreted broadly by reading into it a variety of other rights to which the accused person is entitled to give effect, in a practical way, to the right to a fair trial: see Brown v Stott 2001 SC (HL) 43, p 74C E; [2003] 1 AC 681, 719 F G. As those rights are not set out in absolute terms in the article, they are open to modification or restriction so long as they are not incompatible with the right to a fair trial. The ruling by the Grand Chamber in Salduz v Turkey (2008) 49 EHRR 421 illustrates how this is done. In para 55, it said: Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right. In Ambrose v Harris (Procurator Fiscal, Oban) [2011] UKSC 43, 2011 SLT 1005, [2011] 1 WLR 2435 the issue which the court had to decide was whether the right of access to a lawyer prior to police questioning which was established in Salduz applies only to questioning which takes place when the person has been taken into police custody. In para 25 of my judgment in Ambrose I said: The domestic law test for the admissibility of the answers that were given to the questions put by the police is whether or not there was unfairness on the part of the police. The fact that the person did not have access to legal advice when being questioned is a circumstance to which the court may have regard in applying the test of fairness, but it is no more than that. There is no rule in domestic law that says that police questioning of a person without access to legal advice who is suspected of an offence but is not in custody must always be regarded as unfair. The question is whether a rule to that effect is to be found, with a sufficient degree of clarity, in the jurisprudence of the Strasbourg court. That approach to the issue was supported by the majority of the court in that case, and I would apply the same approach to the questions raised by this reference too. There is no rule in the domestic case law that says that a detainee cannot ever waive his right to legal advice when he is being questioned by the police when he has not had access to legal advice on the question whether or not he should waive that right, and that police questioning in such circumstances must always be regarded as unfair. The question is whether a rule to that effect is to be found, with a sufficient degree of clarity, in the jurisprudence of the Strasbourg court. Mr Scott QC for the respondent acknowledged in his written case that there is, as yet, no clear and constant jurisprudence of the Strasbourg court that says that legal advice is a necessary safeguard in order to ensure that any waiver is valid. He did not depart from that position in his oral argument, at the outset of which he said that it was not his position that a waiver was bad simply because it was given without legal advice, as had been indicated by the Appeal Court. He submitted that legal advice was none the less the most effective of the possible safeguards for ensuring that a waiver is knowing and intelligent and that, in certain circumstances, it may be the minimum safeguard to ensure a valid waiver. His position was that the first question in the reference should be answered in the negative; and that we should answer the second question, which is directed to the facts of this case, in the negative also. For the Crown, the advocate depute also submitted that the first question should be answered in the negative. But she submitted that the second question should be answered in the affirmative. Notwithstanding the position which Mr Scott adopted in the course of his very able argument, I think that the Strasbourg jurisprudence needs to be examined with some care to see whether it provides any support for the Lord Justice Clerks statement in Jude v HM Advocate 2011 SLT 722, para 32 that the argument for the Crown that the appellants right of access to a lawyer was capable of being waived failed because their consent to be interviewed was not informed by legal advice. He returned to this point in para 34, where he said: Furthermore, a valid waiver can proceed only on the basis of an informed decision. Since the right allegedly waived was that of access to legal advice, I cannot see how any of the appellants could waive that right when, ex hypothesi, he had no reason to think that he had any such right and had not had access to legal advice on the point (cf Millar v Dickson 2002 SC (PC) 30; Pfeifer v Austria (1992) 14 EHRR 692; Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009) The respondent in this case did have reason to think that he had a right of access to legal advice, as his detention took place after the decision in Cadder v HM Advocate [2010] UKSC 43, 2011 SC (UKSC) 13 and he was told that he had a right to a consultation with a solicitor before he was interviewed. But the question whether his decision not to exercise that right was an informed decision is directly in point in his case, as it is in many other cases which are still pending where this issue has been raised as a devolution issue in the sheriff courts and the High Court of Justiciary. The Strasbourg cases It is convenient to examine the jurisprudence of the Strasbourg court as it has developed over time in three stages. In the first group there is the jurisprudence which formed the basis of the discussion of this issue in Millar v Dickson 2002 SC (PC) 30; [2002] 1 WLR 1615. The second consists of the jurisprudence on which the court relied when commenting on this issue in Salduz. The third is the jurisprudence since Salduz. It has, of course, to be borne in mind when looking at this jurisprudence that the rights which are said to have been waived may vary in importance according to the circumstances of each case. The right which we are dealing with in this case is the right of the detainee to have access to legal advice prior to and during his interview by the police while in police custody. And the test of whether the waiver is effective may vary in intensity according to whether it was express or is said to have been implied from the actings of the applicant. This is a case where the waiver that is in question was an express waiver, not one that is said to have arisen by implication. So care needs to be taken when looking at cases where the right said to have been waived was a different right, such as the right to an independent and impartial tribunal, and where the right to legal assistance was not declined expressly as it was in this case and in Scotland it always will be, if the practice of offering it which has been adopted in the light of Cadder and the requirements of section 15A of the 1995 Act is properly carried out. The factual background has always been important to the approach that the Strasbourg court has taken to implied rights. Dicta in a case with one set of facts may not be a safe guide to what it would make of a case with facts that were materially different, and the domestic court too should be aware of these differences. (a) the first group In Millar v Dickson 2002 SC (PC) 30 the question was whether the appellants had waived their right to an independent and impartial tribunal under article 6 of the Convention by appearing before the temporary sheriffs without objecting to their hearing their cases on the ground that they did not meet this requirement. Drawing on such jurisprudence as was to be found in the judgments of the Strasbourg court at that time, Lord Bingham of Cornhill said in para 31: In most litigious situations the expression waiver is used to describe a voluntary, informed and unequivocal election by a party not to claim a right or raise an objection which it is open to that party to claim or raise. In the context of entitlement to a fair hearing by an independent and impartial tribunal, such is in my opinion the meaning to be given to the expression. That the waiver must be voluntary is shown by Deweer v Belgium (1980) 2 EHRR 439, where the applicants failure to insist on his right to a fair trial was held not to amount to a valid waiver because it was tainted by constraint (para 54, p 465). In Pfeifer and Plankl v Austria (1992) 14 EHRR 692 there was held to be no waiver where a layman had not been in a position to appreciate completely the implication of a question he had been asked (para 38, p 713). In any event, it cannot meaningfully be said that a party has voluntarily elected not to claim a right or raise an objection if he is unaware that it is open to him to make the claim or raise the objection. The words voluntary, informed and unequivocal capture the essence of what is needed for a waiver of any kind to be valid. I said in Millar v Dickson, para 53 that the Strasbourg jurisprudence showed that, unless the person was in full possession of all the facts, an alleged waiver of the right to an independent and impartial tribunal must be rejected as not being unequivocal. It could also be said to have been uninformed. No evidence was produced by the prosecutor in that case, on whom the onus lay, to show that the appellants were aware of the system which had been developed by the executive for making and not renewing the sheriffs appointments. The judgment in Deweer v Belgium (1980) 2 EHRR 439 was directed to the first part of Lord Binghams test. The applicant paid a fine under protest, following an order by the public prosecutor for the provisional closure of his butchers shop unless it was paid by way of settlement. The decision in his case shows that to be effective a waiver must have been voluntary, not tainted by constraint. The judgment in Pfeifer and Plankl v Austria (1992) 14 EHRR 692 provides authority for the requirement that the election by which the right is said to have been waived must be informed. In the absence of his counsel, Mr Pfeifer waived his right under national law to have two investigating judges who later presided at his trial disqualified. He then complained that he had been denied an impartial trial in violation of article 6(1). In para 38 of its judgment in his case the court referred to articles of the Code of Criminal Procedure which required the investigating judges to inform the president of the trial court of the circumstances entailing their disqualification, and to the fact that there was no provision of Austrian law which defined the procedure to be followed for a defendant expressly to waive his right to be tried by a court whose composition was in accordance with the law. It stressed that this was a right of essential importance and that its exercise could not depend on the parties alone. It went on to note that, when the applicant was told by the presiding judge, in the absence of his lawyer, that the investigating judges were disqualified, there was put to him a question which was essentially one of law, whose implication Mr Pfeifer as a layman was not in a position to appreciate completely. A waiver of rights expressed there and then in such circumstances appears questionable, to say the least. The fact that the applicant stated that he did not think it necessary for his lawyer to be present makes no difference. The decision in that case shows that regard must be had to the character or nature of the right when a decision is made as to whether the person was given sufficient information about that right for him to make an informed decision as to whether or not he should waive it. The requirement that the waiver of a right guaranteed by the Convention must be unequivocal was emphasised in Oberschlick v Austria (1991) 19 EHRR 389, to which Lord Bingham referred in Millar v Dickson, para 31; see also para 55. That was a case where a journalist was convicted by a court which regarded itself as bound by the opinion of the court of appeal which had remitted his case to the lower court for trial after it had been dismissed by that court. The judge who presided over the court of appeal was the same judge as had presided over it on the first occasion, contrary to the code of criminal procedure. The journalist complained that the court of appeal on the second occasion was not an independent and impartial tribunal. The argument that he had impliedly waived that right because he had not raised this objection at the hearing of his appeal was rejected, on the ground that neither he nor his counsel were aware until well after the hearing of all the circumstances that provided grounds for objecting to the tribunal on the grounds of impartiality: Oberschlick, para 51. In Jones v United Kingdom (2003) 37 EHRR CD269 the applicant was absent and unrepresented throughout his trial. The Fourth Section said at p CD278 that before he could be said to have impliedly through his conduct waived his right it must be shown that he could reasonably have foreseen what the consequences of his conduct would be. This could not be done at the time of his trial as it had not yet been clearly established under English law that it was possible to try an accused in his absence throughout, so it could not be said that he had unequivocally and intentionally waived his rights. His application was held to be inadmissible on other grounds. This first group of cases provides ample support for the proposition that, in order to be effective as a waiver of a Convention right, the acts from which the waiver is to be inferred must be voluntary, informed and unequivocal. But they do not go more deeply into the question as to what is needed for the waiver to be informed in the context of an alleged waiver of a right such as that which is in issue in this case, where the person is first told what the right is and then says in terms that he does not want to exercise it. In Oberschlick and Jones the applicant did not have the information, and in Pfeifer the question that was put to him about disqualification raised an issue of law whose implication he was not in a position fully to appreciate. (b) the second group The second group of cases consists of those that the Grand Chamber relied on in Salduz v Turkey (2008) 49 EHRR 421. The applicant in that case did not have access to a lawyer because the offence which he was accused of having committed fell within the jurisdiction of the state security courts. The system in force at that time did not permit him to have access to a lawyer when he made his statements to the police, to the public prosecutor and to the investigating judge. But he had signed a form in which it was stated that he had been reminded of his right to remain silent. In para 59 of its judgment the Grand Chamber made these comments on this aspect of the case: The Court further recalls that neither the letter nor the spirit of article 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial. However, if it is to be effective for Convention purposes, a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance. Thus, in the present case, no reliance can be placed on the assertion in the form stating his rights that the applicant had been reminded of his right to remain silent. Reference was made in support of these observations to Sejdovic v Italy (2004) 42 EHRR 360, para 36, Kolu v Turkey (Application No 35811/97) (unreported) given 2 August 2005, para 53 and Colozza v Italy (1985) 7 EHRR 516, para 28. In Sejdovic v Italy the applicant was tried in his absence and convicted of manslaughter. He was held by the Italian authorities to have waived his right to appear at his trial because after the killing he had become untraceable. In para 33 the Court said: The Court re iterates that neither the letter nor the spirit of article 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial; however, any such waiver must be made in an unequivocal manner and must not run counter to any important public interest. In para 35 it said that to inform someone of a prosecution brought against him was a legal act of such importance that it must be carried out in accordance with procedural and substantive requirements capable of guaranteeing the exercise of the accuseds rights. In para 36 it said that, even supposing that the applicant was indirectly aware that criminal proceedings had been opened against him, it could not be inferred that he had unequivocally waived his right to appear at his trial. As for the question of safeguards, It remains to be determined whether the domestic legislation afforded him with sufficient certainty the opportunity of appearing at a new trial. It held that that safeguard was absent, as the remedy that the criminal procedure code provided did not guarantee with sufficient certainty that the applicant would have the opportunity of appearing at a new trial to present his defence. The reference to the right to take part in the trial in para 59 of the judgment in Salduz appears to have been copied from Sejdovic v Italy. It is consistent with the view that the Grand Chamber had expressed in para 54 about the importance of the investigation stage, which was the stage at issue in the Salduz case, for the preparation of the criminal proceedings as a whole. I would take from the judgment in Sejdovic that the requirement that a waiver must be made in an unequivocal manner applies to waivers that are alleged to have been made expressly as much as to implied waivers, and that the reference in Salduz, para 59 to the alleged waiver of a right being attended by minimum safeguards commensurate to its importance applies to them too. But the right under consideration in Sejdovic was the applicants right to present his defence at his trial, and the fact that he had no guarantee that he could do this at any new trial made it all the more difficult for the Court to hold that for him to be deemed to have waived his right to appear satisfied the requirements of article 6 of the Convention. In Colozza v Italy (1985) 7 EHRR 516, para 28 the court said that, to be effective, the alleged waiver must be established in an unequivocal manner. In that case it was alleged the applicant had impliedly waived his rights because he did not appear at his trial. But it was held that an examination of the facts did not provide a sufficient basis for saying that the waiver was unequivocal, as there was no evidence that he had been made aware of the opening of the criminal proceedings against him. All that had happened was that notifications of the trial had been lodged with the investigating judge and subsequently with the registry of the court. In Kolu v Turkey (Application No 35811/97), according to the minutes, the applicant was asked by the investigating authorities if he required a lawyer, said that he did not want one and then proceeded to make several incriminating statements in answer to the questions that were put to him: para 19. He complained that he had not the benefit of a lawyer and that the minute had been drafted after, not during, his questioning: para 48. In para 53 the court said that it found it difficult to believe the statement in the minutes that he had refused the assistance of a lawyer. It reaffirmed, under reference to Colozza v Italy, para 28, that to be effective a waiver of the benefit of the guarantees under article 6 had to be shown to have been unequivocal, which was not so on the facts of that case. Sejdovic and Colozza were cases of implied waiver. In Kolu it was express. The right that was in issue in Sejdovic and Colozza was the right to take part in the trial. They do not provide a basis for reading into the ruling in Salduz a requirement that the accused must have had legal advice on the point before he can be held to have waived his right of access to a lawyer before being questioned while in police custody. In Kolu the point might have been taken, as that was a case where the applicants complaint was that he had been denied access to a lawyer when he was being questioned. It might have been said, if the court had wanted to make the point, that the argument that he had waived that right was unsustainable because he had not received legal advice on the question whether he should waive it. The court did not take that opportunity. It relied instead on the rule that a waiver, to be effective, must be unequivocal. (c) the third group The third group of cases consists of a selection from an increasingly large number of decisions of the Strasbourg court on waiver since the Grand Chambers judgment on 27 November 2008 in Salduz. It has been stressed repeatedly that, to be effective, a waiver must be established in an unequivocal manner and attended by the minimum safeguards commensurate to the importance of the right. But in none of these cases did the court say that waiver of a right under article 6 was necessarily incomplete because the applicant had not received legal advice as to whether or not he should waive it. It was not suggested that the court has said this in any other case that might have been selected for consideration in this group. The case which comes closest on its facts to this one is Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009, which is the only case in this group that was mentioned by the Lord Justice Clerk in his opinion at para 34. The applicant was arrested on suspicion of aggravated robbery. He asked for the assistance of a lawyer during his interrogation, but this was disregarded by the investigator who proceeded to question him. It was argued that his decision then to confess his guilt to the investigator constituted an implied waiver of his right to counsel. The court found that his statements, made without having had access to counsel, did not amount to a valid waiver of his right. counsel: In paras 77 78 of Pishchalnikov the court said, with reference to the right to 77. A waiver of the right, once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right. Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be. 78. The Court considers that the right to counsel, being a fundamental right among those which constitute the notion of fair trial and ensuring the effectiveness of the rest of the foreseen guarantees of article 6 of the Convention, is a prime example of those rights which require the special protection of the knowing and intelligent waiver standard. It is not to be ruled out that, after initially being advised of his rights, an accused may himself validly waive his rights and respond to interrogation. However, the Court strongly indicates that additional safeguards are necessary when the accused asks for counsel because if an accused has no lawyer, he has less chance of being informed of his rights and, as a consequence, there is less chance that they will be respected. As for the facts of that case, the court said in para 79 that, when an accused had invoked his right to be assisted by counsel during his interrogation, a valid waiver of that right could not be established by showing only that he responded to further police questioning even if he had been advised of his rights. In para 80 it went on to say this: Furthermore, the Court does not rule out that, in a situation when his request for assistance by counsel had been left without adequate response, the applicant who, as it follows from the case file, had had no previous encounters with the police, did not understand what was required to stop the interrogation. The Court is mindful that the applicant may not have had sufficient knowledge, experience, or even sufficient self confidence to make the best choice without the advice and support of a lawyer. It is possible that he did not object to further questioning in the absence of legal assistance, seeing the confession (true or not) as the only way to end the interrogation. Given the lack of legal assistance the Court considers it also unlikely that the applicant could reasonably have appreciated the consequences of his proceeding to be questioned without the assistance of counsel in a criminal case concerning the investigation of a number of particularly grave criminal offences. The reasoning in para 80 shows that the Strasbourg court is sensitive to the facts of the case when it is addressing this issue. I do not find in any of these paragraphs a basis for holding that, as a rule, an accused must have had access to legal advice on the question whether or not he should waive his right to consult a solicitor before being interviewed by the police. But there are indications in the judgment that, in determining what safeguards are necessary, account should be taken of the importance of the right. Account should also be taken of the fact that, for a variety of reasons which will vary from case to case and may depend on the gravity of the offences which he is suspected of having committed, the accused may not have appreciated the consequences of his agreeing to be questioned in the absence of a solicitor. Pishchalnikov is, of course, distinguishable on its facts because the investigator ignored the applicants request for a lawyer. The court noted in para 80 that there was no evidence that the confessions which the applicant made during his further interrogation had been initiated by him. It was a blatant example of a person who was facing a serious charge being denied the very right which he had made it plain he wished to exercise. It was also a case in which the waiver that was in question was an implied waiver. The decision in Pishchalnikov does not tell us what view the court would have taken if the applicant had been advised by the authorities that he had a right to a lawyer and he had then told them expressly, of his own free will, that he did not wish to exercise that right. But guidance as to how the court is likely to see a case of that kind is to be found in Yolda v Turkey (Application No 27503/04) (unreported) given 23 February 2010. The applicant in Yolda was charged with belonging to an illegal organisation. He was informed of his rights by the public prosecutor and by the judge who placed him on remand. He signed a form which told him that he had the right to appoint a legal representative who could be present when his statement was taken. It also told him that he could benefit from the legal assistance of a legal representative appointed by the bar association if he was not in a position to appoint one. He stated that he understood his rights but that he did not wish to be assisted a lawyer. The court recalled the declaration in Salduz, para 59 that, in order to be effective for the purposes of the Convention, any waiver of the right to take part in the trial must be established unequivocally and be surrounded by a minimum of guarantees as to its seriousness. Applying those principles to the facts of the case in para 52, it noted that he had been reminded of his right to legal assistance, that he refused it and that it clearly emerged from his statements taken whilst in custody that his decision to waive his right to legal assistance was freely and voluntarily made: Hence, the applicants waiver of this right was unequivocal and surrounded by a minimum guarantee. This decision indicates that where it is shown that the accused, having been informed of his rights, states that he does not want to exercise them, his express waiver of those rights will normally be held to be effective. The minimum guarantees are that he has been told of his right and that the waiver was freely and voluntarily made. The minority said in their dissenting judgment that a procedural choice made without a lawyer being able to inform and advise him could not be free and informed, but the court did not accept this argument. The same approach was taken in two other cases in this group. In Galstyan v Armenia (2007) 50 EHRR 618 the applicant was arrested when he was on his way home from a protest rally. He was made aware of his rights and expressly declined a lawyer. The Court held that, as it was his own choice not to have a lawyer, the authorities could not be held responsible for the fact that he was not represented in the proceedings against him. In para 91 it said that, while the nature of some rights safeguarded by the Convention was such as to exclude a waiver of entitlement to exercise them, the same could not be said of other rights. A person had a choice under article 6(3)(c) of defending himself in person or through legal assistance, so it would normally not be contrary to the requirements of that article if an accused was self represented in accordance with his own free will. There was no evidence in that case that his choice was the result of any threats or physical violence or that he was tricked into refusing a lawyer. In Sharkunov and Mezentsev v Russia (Application No 75330/01) (unreported) given 10 June 2010, in which it held that there had been no violation of the right to legal assistance, the court reiterated at para 106 that neither the letter nor the spirit of article 6 prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial but that, to be effective for Convention purposes, the waiver must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance. In Paskal v Ukraine (Application No 24652/04) (unreported) given 15 September 2011 the applicant, who had a university degree in law and at the material time was serving as a police officer, was arrested on suspicion of having taken part in a robbery. He signed a procedural rights notification form and noted that he wished to appoint a lawyer whom he named as his advocate. He was then questioned, without a lawyer being present, about the robbery just after he had explicitly expressed that wish. It was argued that this was a case of an implied waiver. The Court said that it had been mindful in a number of its judgments of the vulnerable position of a suspect vis vis the investigative authorities and had emphasised the paramount importance of access to a lawyer before the first questioning as a means to counter the imbalance between the parties. Recalling the Grand Chambers observations in Salduz, para 59 that neither the letter nor the spirit of article 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial, as long as a waiver of the right is given in an unequivocal manner and was attended by safeguards commensurate to its importance, it addressed the question whether the waiver constituted an act of the applicants free will and informed procedural choice: para 77. The fact that the applicant was a policeman and a lawyer himself might not mean that he was not vulnerable and in need of an advocates support. But the level of his expertise could not be discounted in assessing whether his consent to participate in the particular questioning was well informed. The court concluded that the waiver was effective as he was not coerced to give any statement in defiance of his will: para 78. But a different view might be taken if there is reason to believe that the applicant was not able to act freely or did not understand his rights. In Talat Tun v Turkey (Application No 32432/96) (unreported) given 27 March 2007 the applicant did not ask for a lawyer. But the court noted in para 60 that he had in effect stated that he was not able to act freely because he was being threatened with ill treatment and that it was not possible to hold that he could reasonably have foreseen the consequences of his not requesting the assistance of a lawyer in criminal proceedings where he was at risk of being sentenced to death as he did not have any formal education and was from a humble background: see also Duman v Turkey (Application No 28439/03) (unreported) given 23 March 2010, para 48; Lopata v Russia (Application No 72250/01) (unreported) given 13 July 2010, para 135. In Plonka v Poland (Application No 20310/02) (unreported) given 31 March 2009 the applicant signed a form acknowledging that she had been informed of her right to be assisted by a lawyer during her questioning by the police and the prosecution authorities. But it was held that her assertion in the form that she had been reminded of her right to remain silent and to be assisted by a lawyer could not be considered reliable as she was suffering from alcoholism and was in a vulnerable position as the time of her interview: para 37 38. Bortnik v Ukraine (Application No 39582/04) (unreported) given 27 January 2011 is another case of this type. In aman v Turkey (Application No 35292/05) (unreported) given 5 April 2011 the applicant, who was accused of being a member of an illegal organisation and faced a heavy penalty, had an insufficient knowledge of Turkish and was without the help of an interpreter. The Court held that she could not reasonably have appreciated the consequences of accepting to be questioned without the assistance of a lawyer in a criminal case concerning the investigation of particularly grave offences. The waiver may come too late, as in Zaichenko v Russia (Application No 39660/02) (unreported) given 18 February 2010, where the relevant incriminating statement was made before the applicant was advised of his right to remain silent: see para 53. No mention was made in this group of cases of a rule that an applicant who has acted of his own free will must have access to legal advice on the question whether or not he should waive his right before he can be held to have waived that right. But they do show that a different view might be taken if there is reason to believe that the applicant was not able to act freely or that he did not understand the right that was being waived. Comparative jurisprudence The main source of comparative jurisprudence on the issue of waiver by a suspect of the right of access to a lawyer while being questioned by the police is to be found in decisions of the US Supreme Court. Although the Strasbourg court has not referred to Miranda v Arizona 384 US 436 (1966) in any of its judgments, there are signs that it and subsequent cases that the ruling in Miranda have given rise to have influenced the thinking of the Strasbourg court as it develops the principles described in Salduz: see Ambrose v Harris (Procurator Fiscal, Oban) 2011 SLT 1005, paras 52 53. Judge de Meyer noted in his dissenting opinion in Imbrioscia v Switzerland (1993) 17 EHRR 441, 460 that the expression knowingly and intelligently had been used as long ago as 1966 in Miranda and that the principles there defined belong to the very essence of a fair trial. The issue of waiver was raised in Miranda in a series of cases where decisions of the courts below were reversed because the accused had not been told of his rights before being questioned while in custody by the police. At p 475 the court said: 52 54 An express statement that the individual is willing to make a statement and does not want an attorney followed closely by a statement could constitute a waiver. But a valid waiver will not be presumed simply from the silence of the accused after warnings are given or simply from the fact that a confession was in fact eventually obtained. A statement we made in Carnley v Cochran, 369 US 506, 516, 82 S Ct 884, 890, 8 L Ed 2d 70 (1962) is applicable here: Presuming waiver from a silent record is impermissible. The record must show, or there must be an allegation and evidence which show, that an accused was offered counsel but intelligently and understandingly rejected the offer. At p 479 it summarised the prerequisites for an effective waiver in these terms: [The suspect] must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires. Opportunity to exercise these rights must be afforded to him throughout the interrogation. After such warnings have been given, and such opportunity afforded to him, the individual may knowingly and intelligently waive these rights and agree to answer questions or make a statement. But unless and until such warnings and waiver are demonstrated by the prosecutor at trial, no evidence obtained as a result of interrogation can be used against him. The phrase intelligently and understandingly does not appear in any of the judgments of the Strasbourg court. But the phrase knowing and intelligent was used in Pishchalnikov, para 77, and it is not far away from Lord Binghams proposition in Millar v Dickson 2002 SC (PC) 30, para 31 that the expression waiver is used to describe a voluntary, informed and unequivocal election by a party not to claim a right or raise an objection which it is open to that party to claim or raise. In North Carolina v Butler 441 US 369 (1979) at p 373 the Court said that an express written or oral statement of waiver of the right to remain silent or of the right to counsel is usually strong proof of the validity of that waiver, but that it was not inevitably either necessary or sufficient to establish waiver: The question is not one of form, but rather whether the defendant in fact knowingly and voluntarily waived the rights delineated in the Miranda case. As was unequivocally said in Miranda, mere silence is not enough. That does not mean that the defendants silence, coupled with an understanding of his rights and a course of conduct indicating waiver, may never support a conclusion that a defendant has waived his rights. The courts must presume that a defendant did not waive his rights; the prosecutions burden is great; but in at least some cases waiver can be clearly inferred from the actions and words of the person interrogated. The phrase used here was knowingly and voluntarily. But the words used in these various formulations of the test all carry with them the idea that the waiver must have been an informed decision, based on an understanding of what the right is that is being waived. In Edwards v Arizona 451 US 477 (1981) the Court returned to the question what was needed for a valid waiver. At p 482 it said that it was reasonably clear under its cases that waivers of counsel must not only be voluntary, but must also constitute a knowing and intelligent relinquishment or abandonment of a known right or privilege. This was a matter which would depend in each case upon the particular facts and circumstances, including the background, experience and conduct of the accused. At p 483 the trial court was criticised for finding the accuseds admission to have been voluntary, without separately focusing on whether he had knowingly and intelligently relinquished his right to counsel. At p 484, recalling that in North Carolina v Butler it had strongly indicated that additional safeguards are necessary when the accused asks for counsel, it held that when an accused had invoked his right to have counsel present during custodial interrogation a valid waiver of the right cannot be established simply by showing only that he responded to further police initiated custodial interrogation. In that case, as Chief Justice Burger noted in a concurring judgment at p 488, when the accused said that he did not wish to speak to anyone he was told by the detention officer that he had to. The reference in this judgment to the need for additional safeguards can be compared with the Strasbourg courts requirement that a waiver must be attended by minimum safeguards commensurate to its importance which first made its appearance in Salduz, para 59. In Oregon v Elstad 470 US 298 (1985) the respondent argued that he was unable to give a fully informed waiver of his rights because he was unaware that his unwarned prior statement could not be used against him: p 316. He suggested that the officer at the Sheriffs headquarters should have added an additional warning to those given to him at the Sheriffs office to cure this deficiency. Delivering the opinion of the court, Justice OConnor said at p 316 that such a requirement was neither practicable nor constitutionally necessary: Standard Miranda warnings explicitly inform the suspect of his right to consult a lawyer before speaking. Police officers are ill equipped to pinch hit [i.e. substitute] for counsel, construing the murky and difficult questions of when custody begins or whether a given unwarned statement will ultimately be held admissible This court has never embraced the theory that a defendants ignorance of the full consequences of his decisions vitiated their voluntariness. At p 316 the Court recalled that in California v Beheler 463 US 1121 (1983) it declined to accept the defendants contention that, because he was unaware of the potential adverse consequences of statements he made to the police, his participation in the interview was not voluntary. It concluded its discussion of this topic with these words: Thus we have not held that the sine qua non for a knowing and voluntary waiver of the right to remain silent is a full and complete appreciation of all of the consequences flowing from the nature and quality of the evidence in the case. More recently the word intelligent which was used by the court in Miranda has been brought back into the formula, and the court has explained that as a general rule the test will be satisfied if the choice is made with a full understanding of what the rights are. In Maryland v Shatzer (2010) 130 S Ct 1213, 1219 Justice Scalia, delivering the opinion of the court, said: To counteract the coercive pressure [of police questioning], Miranda announced that police officers must warn a suspect prior to questioning that he has a right to remain silent, and a right to the presence of an attorney. After the warnings are given, if the suspect indicates that he wishes to remain silent, the interrogation must cease. Similarly, if the suspect states that he wants an attorney, the interrogation must cease until an attorney is present. Critically, however, a suspect can waive these rights. To establish a valid waiver, the State must show that the waiver was knowing, intelligent and voluntary. And in Berghuis v Thompkins (2010) 130 S Ct 2250, 2262, Justice Kennedy said: Although Miranda imposes on the police a rule that is both formalistic and practical when it prevents them from interrogating suspects without first providing them with a Miranda warning. , it does not impose a formalistic waiver procedure that a suspect must follow to relinquish those rights. As a general proposition, the law can presume that an individual who, with a full understanding of his or her rights, acts in a manner inconsistent with their exercise has made a deliberate choice to relinquish the protection those rights afford. It has not been not suggested by the US Supreme Court in any of these cases that it was essential to a waiver of right to counsel that the accused should have had legal advice on the point as to whether or not he should waive it. The courts reasoning in Oregon v Elstad and the presumption to which Justice Kennedy referred in Berghuis v Thompkins seem to be in conflict with there being any such requirement. The Crown has drawn attention to the fact that few jurisdictions approach the question of waiver on the basis that legal advice on the consequences of the waiver is a prerequisite. The Supreme Court of Canada described what it has called the informational component of the right under section 10(b) of the Charter of Rights and Freedoms to retain and instruct counsel as relatively straightforward: R v Willier [2010] 2 SCR 429, paras 29 31. A person who waives a right must know what he or she is giving up if the waiver is to be valid. It is the duty of the police to inform the detainee of his or her right to retain and instruct counsel without delay and of the existence and availability of legal aid and duty counsel. This ensures that a detainee who persists on waiving the right of access to counsel has the information and will know what he or she is actually giving up: R v Bartle [1994] 3 SCR 173, 206; R v Prosper [1994] 3 SCR 236, 274, per Lamer CJ. But there is no indication in its decisions that the detainee must have had legal advice as to whether or not the right should be waived before the waiver can be held to be effective. Information obtained from Eurojust about the position in Member States of the EU suggests that the right to legal advice before being questioned can be waived without prior consultation with a lawyer in Austria, Sweden, Estonia, France and Malta. The courts in Germany and Poland have not decided whether the suspect needs to consult with a lawyer before a waiver can be held to be effective. In Bulgaria, the Czech Republic, the Netherlands and Spain the presence of a lawyer during interrogation is in certain circumstances compulsory. The Strasbourg court found support for the decision it took in Salduz from the fact that the principles which it outlined were in line with the generally recognised international human rights standards which are at the core of the concept of a fair trial: (2009) 49 EHRR 421, para 53. It appears to be clear that there is no generally internationally recognised human rights standard on the issue of waiver that would support the conclusion that access to legal advice is an essential prerequisite to an effective waiver by a detainee of the right of access to a lawyer when he is being questioned by the police. Discussion I do not think that the Strasbourg jurisprudence provides any support for the Lord Justice Clerks statement in Jude v HM Advocate 2011 SLT 722, para 32 that the argument for the Crown that the appellants right of access to a lawyer was capable of being waived failed because their consent to be interviewed was not informed by legal advice. The court has had the opportunity on a number of occasions to lay down a rule to that effect, but it has not taken it. The cases of Yolda v Turkey (Application No 27503/04), 23 February 2010, Galstyan v Armenia (2007) 50 EHRR 618, Sharkunov and Mezentsev v Russia (Application No 75330/01) 10 June 2010 and Paskal v Ukraine (Application No 24652/04) 15 September 2011 (see paras 32 34, above) are particularly instructive on this point, as they could not have been decided as they were if there had been a rule to that effect. The decisions of the US Supreme Court since Miranda do not lend encouragement to any suggestion that it would be appropriate for such a rule to be laid down. The wording of its observations in Oregon v Elstad 470 US 298 is a strong pointer in the contrary direction. I would hold therefore that the statements in Jude, paras 32 and 34 which indicate that there is such a rule should be disapproved. Where the accused, having been informed of his rights, states that he does not want to exercise them, his express waiver of those rights will normally be held to be effective. The minimum guarantees are that he has been told of his right, that he understands what the right is and that it is being waived and that the waiver is made freely and voluntarily. There is however a theme that runs through the Strasbourg courts decisions which indicates that access to a lawyer may well be a necessary prerequisite of a valid waiver in some cases. Talat Tun v Turkey (Application No 32432/96) 27 March 2007 and aman v Turkey (Application No 35292/05) 5 April 2011 (see para 35, above) provide illustrations of this point. The court must be alive to the possibility that the words of the caution, and advice that the detainee has the right to a private consultation with a solicitor before any questioning begins and at any other time during such questioning which is required by section 15A(3), may not be fully understood by everyone. Comprehending the Scottish caution: Do offenders understand their right to remain silent? David J Cooke and Lorraine Philip (1998) Legal and Criminological Psychology 13, was written some time ago and does not fully reflect current practice. But it serves as a warning that it should not be taken for granted that everyone understands the rights that are being referred to. People who are of low intelligence or are vulnerable for other reasons or who are under the influence of drugs or alcohol may need to be given more than standard formulae if their right to a fair trial is not to be compromised. Lord Carloway was appointed by the Cabinet Secretary for Justice to review key elements of Scottish criminal law and practice in the light of the decision in Cadder. The Carloway Review was published on 17 November 2011. Among the issues with which it deals and about which it makes recommendations is that of waiver: paras 6.1.41 6.1.47. The Association of Chief Police Officers in Scotland has already produced a manual of guidance of solicitor access: the ACPOS Manual which was published in January 2011. That guidance too is currently under review. I am conscious that anything we may say in this case may be overtaken by events, and I would not want in any way to restrict the scope of these reviews. But I would make two suggestions, while emphasising that in making them I am not intending to suggest that article 6 requires that these steps must, as a rule, be taken in every case. The first relates to the question whether the accused has been fully informed of the right of access to a lawyer. I suggest that, to minimise the risk of misunderstanding, the police should follow the practice indicated by para 6.5 of Code C of the Code of Practice for the Detention, Treatment and Questioning of Persons by Police Officers which was introduced in England in the light of the Police and Criminal Evidence Act 1984, as to the background to which see the editorial, Legal advice in police stations: 25 years on, in (2011) Crim LR 1. Para 6.5 states inter alia: If, on being informed or reminded of [the right of access to legal advice], the detainee declines to speak to a solicitor in person, the officer should point out that the right includes the right to speak to a solicitor on the telephone. If the detainee continues to waive this right the officer should ask them why and any reasons given should be recorded on the custody record or the interview record as appropriate. Offering the detainee the right to speak to a solicitor on the telephone may be relevant if the detainee is concerned about delay in securing the attendance of a solicitor at the police station. The giving of reasons may reveal that, although he has been given the standard caution and advice, the detainee has not fully understood what his rights are. It will provide an opportunity for any obvious misunderstandings to be corrected. Failure to do that may be relevant to the question whether the waiver was knowing and intelligent or voluntary, informed and unequivocal, and thus to the question whether, in all the circumstances, the detainee was deprived of his right to a fair trial. Any reasons that are given should be recorded. But, as Justice OConnor observed in Oregon v Elstad 470 US 298 (1985) at p 316 (see para 41, above), police officers are ill equipped to substitute for counsel. So it would seem to be unwise for them to be encouraged to take the further step of offering advice to the detainee. Lord Kerr has made a powerful case for requiring steps to be taken to ensure that the accused has a clear understanding and insight as to the significance of dispensing with the services of a lawyer. He would require the steps indicated by para 6.5 of Code C to be taken in every case, because without them a decision to waive cannot be said to have been voluntary, informed and unequivocal: see para 117, below. I recognise the force of his argument, and there is much to be said for this as a suggestion as to how the current practice should be improved. But best practice is one thing. An absolute rule, to which section 57(2) of the Scotland Act must always give effect, is quite another. I do not think that it can be said that an absolute rule to the effect that Lord Kerr contends for has been clearly identified by the Strasbourg court. Moreover, as the terms of the reference make clear, we have not been asked to make a declaration to that effect in this case. What we have been given by Strasbourg, as I see it, is a guiding principle as to what is needed for there to be an effective waiver. Its application in determining whether there will be, or has been, a fair trial will depend on the facts of each case. The second suggestion comes from the observation by the US Supreme Court in Miranda v Arizona 384 US 436, at p 473 in paras 41, 42 that, in order fully to apprise a person interrogated of the extent of his right under the system that it was laying down in that case, it is necessary to warn him not only that he has the right to consult with an attorney, but also that if he is indigent a lawyer will be appointed to represent him. The wording of the advice that, in accordance with the standard practice, the respondent was given when he was told of his right to consult with a solicitor prior to and during his questioning did not go on to advise him of the arrangements that might be made if he wanted to exercise that right and was unable to name a solicitor or was concerned about the cost of employing one. The fact that the respondent was able in this case to give an appropriate name when he was asked if he wished intimation of his detention to be sent to a solicitor suggests that he was under no misapprehension on this point. But it might be wise not to rely on assumptions about this, even in the case of those with previous experience of the criminal process. As for the facts of this case, Mr Scott submitted that the wording of the current safeguards was defective and that the Crown could not show that the respondent waived his rights knowingly and intelligently. The advocate depute, for her part, referred to various safeguards that were in place to ensure that the waiver met this standard. She said that there were no grounds for thinking that the respondent was vulnerable or had not been able to understand the caution. The fact that he had nominated a firm of solicitors with experience of criminal law and procedure showed that he was aware of his rights and of the significance of declining the offer of access to them before and during his questioning. I do not think that it would right for this court to reach a decision on these competing arguments as Lord Kerr would do. The issue has come before us as a reference which was directed to a particular issue on which our guidance was sought, and not as an appeal. It raises questions of fact and degree which ought properly to be dealt with in the trial court. I would remit the question whether for the Lord Advocate to lead and rely on the evidence of his interview would be incompatible with his Convention right to a fair trial to the sheriff for determination after he has heard all the evidence on this issue. Conclusion I would answer the first question in the reference in the negative. The jurisprudence of the Strasbourg court does not support the proposition that, as a rule, the right of access to legal advice during police questioning can only be waived if the accused has received advice from a lawyer as to whether or not he should do so. I would remit the second question to the sheriff. The answer to it must depend on whether, on a consideration of all the facts and circumstances, the sheriff is satisfied that it would be fair for the Lord Advocate to lead and rely upon evidence of the answers that the respondent gave during his police interview. LORD BROWN Having had the opportunity of reading in draft the judgments of Lord Hope, Lord Dyson and Lord Hamilton on the one hand and Lord Kerr on the other, I find myself in full agreement with the majority. I can briefly summarise why by reference to Lord Kerrs judgment at para 127, with much of which I agree but certain parts of which I cannot accept. At para 127(iii) Lord Kerr concludes that a purported waiver should not be regarded as effective [u]nless it is shown that the suspect had a proper insight into the significance of the decision to waive his right. This conclusion clearly derives from para 117 of Lord Kerrs judgment where he says that the suspect must have reasonable foresight of the consequences for him of [waiving his right to be advised by a lawyer before or during interview] and adds: I do not suggest that a suspect needs to be aware of every legal nuance that might arise in the course of his interview but he should be aware in a general sense that legal issues might arise and should have consciously decided that he is prepared to forego the advice that a lawyer might give on those issues either before or in the course of the interview. If by that is meant, as appears to be meant, that the suspect must realise more than that he will be asked questions by the police without the benefit of legal advice, to my mind Lord Kerr is asking too much. As Lord Hamilton says at para 94 of his judgment: The natural and legitimate inference in circumstances where the suspect has responded with a clear negative to the enquiry [whether he wishes to exercise his right to legal assistance] will be that he or she has a proper understanding, including an appreciation that in light of his or her answer legal assistance will not be made available for the purposes of the interview. Lord Dyson says much the same thing at para 70 of his judgment. It is surely obvious that the point of a lawyer is to advise on any legal issues that may arise and that if a suspect chooses to forego this right he will be questioned without the benefit of such advice. He surely does not have to be told in terms that, in this event, he may say something (or neglect to say something) which a lawyer, had he been present, might have advised him not to say (or, indeed, to say). At para 106 of his opinion Lord Kerr points to the fact that in Scotland a suspect accused of a sexual offence can supply the necessary corroboration to support an eventual conviction by asserting at interview that the sexual activity was consensual. But surely no one suggests that the suspect needs to be made aware of specific legal considerations of this nature before he can be said to have waived his right to legal advice. The other part of para 127 of Lord Kerrs judgment with which I respectfully disagree is the suggestion that within the minimum safeguards necessarily to be provided before a waiver can be regarded as knowing and intelligent, informed and unequivocal, are a question to the suspect as to why he has decided not to exercise his right to legal advice (and the recording of his answer) and informing him that a telephone consultation with a solicitor can be arranged. As to this I agree with what Lord Hope says at para 49 of his judgment. There is much to be said for introducing such further steps into the current practice (as in England and Wales) but I cannot accept that Strasbourg jurisprudence has already established an absolute rule to this effect. All agree that the first question in the reference should be answered in the negative. In common with the majority I too would remit the second question to the Sheriff for his decision on the facts. LORD DYSON I agree entirely with the judgment of Lord Hope. I add a few words of my own because the waiver issue is as important for the rest of the United Kingdom as it is for Scotland. The questions that were referred to this court by the Sheriff in the present case raise the issue of what is required by the European Convention on Human Rights (the Convention) for a valid waiver by an accused of the right of access to a lawyer prior to police questioning. This right, which was established in Salduz v Turkey (2008) 49 EHRR 421, is implicit in the right to a fair trial accorded by article 6 of the Convention. It is not in doubt that rights accorded by article 6 of the Convention can be waived. In Salduz itself, the Grand Chamber said: . neither the letter nor the spirit of art 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial. However, if it is to be effective for Convention purposes, a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance. The statement that a waiver is unequivocal and attended by minimum safeguards has been repeated as a mantra by the ECtHR in a number of cases. The court has given little further explicit guidance as to what is required for a valid waiver. As so often, in order to determine Strasbourgs approach to this question, it is necessary to examine the courts jurisprudence to see how guidance which has been expressed at a high level of generality is applied in practice. But it is fair to say that on a number of occasions the court has also said that the right to the assistance of a lawyer at police interview can only be validly waived if the accused could reasonably have foreseen the consequences of his decision. Thus, for example, in Pishchalnikov v Russia (Application No 7025/04 ) (unreported) 24 September 2009 (para 77), the court said that a waiver once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right. Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be. It is true that Pishchalnikov was not a case of express waiver and the accused had been denied a lawyer although he had requested one. But there cannot be a relevant difference between an express and an implied waiver; and it is difficult to see why the requirement of reasonable foresight of the consequences of a decision not to have a lawyer should depend on whether or not the accused requested a lawyer. It is common ground that the ECtHR has not gone so far as to say that there cannot be a valid waiver unless the accused has first been advised by a lawyer of the implications of not having the benefit of the assistance of a lawyer both before and during a police interview. It is accepted by Mr Scott QC that, although legal advice as to the desirability of having a lawyer to protect the interests of an accused at the interview stage is the most effective way of ensuring that his or her article 6 rights are protected, the Strasbourg jurisprudence does not mandate it. As Lord Hope points out, the ECtHR has had many opportunities to insist on such a requirement in every case, but has never done so. But how does a prosecuting authority prove (the burden being on it) that an accused had reasonable foresight of the consequences of a decision to be interviewed without the assistance of a lawyer? It has never been said by the ECtHR that it must be shown that an accused had reasonable foresight of all the consequences of such a decision. That would be tantamount to saying that no person (except perhaps an accused who has experience and understanding of criminal law and procedure) could waive the right to legal assistance without first having legal advice as to the wisdom of doing so. But as I have said, it is not in dispute that Strasbourg has never gone so far as to say this and its jurisprudence is not consistent with such an approach. As Lord Hope points out at paras 32 to 34, there are several decisions of the court where all that was required for the purposes of a valid waiver was proof that the accused had been informed that he had the right to have a lawyer present when he was interviewed and he refused to exercise that right. Thus in Yolda v Turkey, for example, the accused was informed of his right to be assisted by a lawyer while he was in custody and he refused a lawyers services. That was enough to persuade the court that the accused had sufficient foresight of the consequences of his decision to refuse the assistance of a lawyer to constitute a valid waiver. It was not necessary to go further and be satisfied that the accused understood precisely how the lawyer might have been able to assist him and from what pitfalls he might have been able to protect him. That could not have been done, not least because it would have been impossible to predict what course the interview would take. On the other hand, if there are reasonable grounds for believing that the accused is vulnerable in some way and that he does not understand in general terms that a lawyer might be able to assist him at the interview, then it is not enough for the police merely to ask him whether he wishes to have the assistance of a lawyer. Additional safeguards are necessary to ensure that such a person does not waive his right to legal assistance at the interview without a proper understanding of the significance of what he is doing. The most obvious way of achieving this is by the provision of legal advice on the question of legal assistance. Depending on the circumstances, however, there may be other ways of ensuring that the accused understands the implications of refusing the assistance of a lawyer at interview. It will be a question of fact in each case whether the accused can reasonably understand the implications of refusing the assistance of a lawyer at police interview. The ultimate question is what fairness demands in the particular case. Lord Hope has referred to a number of cases at para 35 where for one reason or another there were grounds for doubting whether an accused had sufficient understanding of the implications of refusing the assistance of a lawyer. Another case where the court held that the accused had not waived his article 6 rights because it had not been established that he would have understood the implications of his doing so is Panovits v Cyprus (Application No 4268/04) (unreported) 11 December 2008. At para 71, the court said: Moreover given the lack of assistance by a lawyer or his guardian, it was also unlikely that he could reasonably appreciate the consequences of his proceeding to be questioned without the assistance of a lawyer in criminal proceedings concerning the investigation of a murder The court had earlier emphasised the vulnerability of an accused minor and the imbalance of power to which he is subjected by the very nature of criminal proceedings (para 68). He was 17 years of age at the material time. I agree with what Lord Hope says at para 47. The court must be astute to the possibility that the implications of refusing the assistance of a lawyer may not be understood even by an apparently intelligent person. It will depend on all the circumstances, including the age, health and apparent intelligence of the person as well as the extent to which he or she appears to be in a state of stress and the likely length and complexity of the interview. But in a relatively simple case, where the accused appears to be intelligent and not especially vulnerable and he unequivocally and voluntarily refuses the offer of the assistance of a lawyer, the prosecution will usually be able to show that there has been a valid waiver. It is not necessary to show that the accused understood precisely what assistance could have been given but rejected it nevertheless. It is sufficient to show that the accused understood that the lawyer would or might be able to provide assistance at the interview stage which would or might be of benefit to him. The precise nature of the benefit does not matter. In most cases, this cannot be known in advance of the interview. It follows that (as is common ground) the first question must be answered in the negative. I agree with Lord Hope that, for the reasons he gives, the second question should be remitted to the Sheriff. LORD HAMILTON The first question in the reference as now adjusted before this court is (read short): Whether it would necessarily be incompatible with articles 6(1) and 6(3)(c) of [the Convention] for the Lord Advocate to lead and rely upon evidence of answers given during a police interview of a suspect in custody who, before being interviewed by the police (a) had been informed by the police officer of his Salduz/article 6 rights of access to legal advice; and (b) without having received advice from a lawyer, had stated that he did not wish to exercise such rights. It was accepted before us on either hand that the question so formulated fell to be answered in the negative. Mr Scott for the respondent conceded that on the basis of the jurisprudence of the Strasbourg Court as developed to date it could not be maintained that, in order effectually to waive his right of access to legal advice for the purposes of a police interview, the suspect must first actually have been in receipt of legal advice. In my view that concession was inevitable. While the domestic laws of certain of the Convention countries have laid down that, at least in some circumstances, the content of a police interview cannot be received in evidence unless the suspect has prior to the interview (or in its course) been in receipt of legal advice, the jurisprudence of the Court of Human Rights lays down no such requirement. In so far as the opinion of the Lord Justice Clerk in Jude, Hodgson and Birnie v HM Advocate 2011 SCCR 300; 2011 SLT 722, at paras 32 and 34 may be read (or misread) as laying down that actual receipt of legal advice prior to interview is a precondition of any effectual waiver, that opinion (with which the other judges concurred) is, in my respectful view, unsupported by the authorities apparently relied upon. The live issue before us is whether the arrangements put in place in Scotland following the amendment of the Criminal Procedure (Scotland) Act 1995 by the insertion of section 15A, an insertion made with effect from 30 October 2010 for the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010, are compliant with Convention jurisprudence. That amendment was itself consequential on the judgment of the Supreme Court in Cadder v HM Advocate 2011 SC (UKSC) 13. Section 15A provides: 15A Right of suspects to have access to a solicitor (1) This section applies to a person (the suspect) who (a) is detained under section 14 of this Act, (b) attends voluntarily at a police station or other premises or place for the purpose of being questioned by a constable on suspicion of having committed an offence, or is (c) arrested (but not charged) in connection with an (i) offence, and (ii) being detained at a police station or other premises or place for the purpose of being questioned by a constable in connection with the offence. (a) (2) The suspect has the right to have intimation sent to a solicitor of any or all of the following the fact of the suspects (i) detention, (ii) attendance at the police station or other premises or place, or (iii) arrest, (as the case may be), (b) the police station or other premises or place where the suspect is being detained or is attending, and (c) that the solicitors professional assistance is required by the suspect. (3) The suspect also has the right to have a private consultation with a solicitor (a) before any questioning of the suspect by a constable begins, and (b) at any other time during such questioning. (4) Subsection (3) is subject to subsections (8) and (9). In subsection (3), consultation means consultation by such (5) means as may be appropriate in the circumstances, and includes, for example, consultation by means of telephone. (6) The suspect must be informed of the rights under subsections (2) and (3) (a) on arrival at the police station or other premises or place, and (b) in the case where the suspect is detained as mentioned in subsection (1)(a), or arrested as mentioned in subsection (1)(c), after such arrival, on detention or arrest (whether or not, in either case, the suspect has previously been informed of the rights by virtue of this subsection). (7) Where the suspect wishes to exercise a right to have intimation sent under subsection (2), the intimation must be sent by a constable (a) without delay, or (b) if some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is necessary. In exceptional circumstances, a constable may delay the (8) suspects exercise of the right under subsection (3) so far as it is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders that the questioning of the suspect by a constable begins or continues without the suspect having had a private consultation with a solicitor. (9) Subsection (3) does not apply in relation to the questioning of the suspect by a constable for the purpose of obtaining the information mentioned in section 14(10) of this Act. Section 4 of the Manual of Guidance on Solicitor Access (2011) produced by the Association of Chief Police Officers in Scotland (ACPOS)in response to the enactment of section 15A states: 4.1 The [new section 15A] has been considered by many to be one of the most significant changes in Scots law for generations and the provision of solicitor access is at the heart of the change in the law. The right to access is one which can be waived, but the greatest of care must be taken if the suspect wishes to waive this right. Any waiver of the rights of a suspect must be an informed waiver, and must be fully recorded. 4.2 To ensure all suspects are fully informed in their decision, ACPOS consider that all suspects should be provided a specimen form of words, standardised in a manner like the common law caution, when offering a suspect their rights of solicitor access, as follows: You have the right to have a solicitor informed of your detention/voluntary attendance/arrest. Do you wish a solicitor advised of your detention? You also have the right to a private consultation with a solicitor before being questioned by police officers and at any time during questioning. Do you wish a private consultation with a solicitor before you are questioned? 4.3 Both these questions must be asked. 4.4 should be advised of the following on each occasion: If the answer to either of these questions is Yes, the suspect If you know a solicitor, they can be contacted on your behalf. Alternatively, another solicitor can be contacted for you. Which do you prefer? Your right is to a private personal consultation with a solicitor which can be in person or by telephone. In the first instance you will be provided the opportunity to speak with a solicitor by telephone to instruct them and seek advice. It is then your decision if you need a further private consultation with the solicitor. 4.5 The foregoing questions and statement are contained in the ACPOS Solicitor Access Recording Forms (SARFs). Two forms (respectively ACPOS SARF A and B) have been devised for the purpose of recording in writing the responses of the suspect to these enquiries. It should be acknowledged at the outset that compliance with these arrangements will not suffice in every case. Where the suspect is a child or a vulnerable adult, special arrangements may require to be put in place to ensure that his or her Convention rights are respected, due regard being had to the youth or vulnerability of the suspect in question. The Strasbourg jurisprudence also makes plain that, where an adult is vulnerable, the seriousness of the crime or crimes which he or she is suspected of having committed is also relevant. Where these are of a particularly serious nature (with particularly serious potential consequences in the event of a conviction) special care may be required to ensure that the suspects rights are respected. I do not endeavour in this opinion to express any view on what might be required in these special circumstances. It has recently been observed by this court that a national court should not, without strong reason, dilute or weaken the effect of Strasbourg case law; it is its duty to keep pace with it as it evolves over time; there is, on the other hand, no obligation on the national court to do more than that (Ambrose v Harris [2011] UKSC 43, 2011 SLT 1005, per Lord Hope at para 17, referring to the observations of Lord Bingham of Cornhill in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, at para 20). Lord Bingham had gone on to observe that it was open to member states to provide for rights more generous than those guaranteed by the Convention but that such provision should not be the product of interpretation of the Convention by national courts. Accordingly, the present task for this court is, by examination primarily of Strasbourg jurisprudence, to identify as best it can the requirements which the Strasbourg Court has set for the making of an effectual waiver of Convention rights, and in particular of the right, implicit in article 6(1) as read with article 6(3)(c), of access to legal advice prior to being questioned by the police as a suspect at a police station. The broad context in which this task falls to be undertaken is reasonably clear; the difficulty arises in the detailed application of the relative principles. In Salduz v Turkey (2009) 49 EHRR 421 the Grand Chamber of the Strasbourg Court held that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police (para 55). In Cadder v HM Advocate this court held that, notwithstanding other safeguards which Scots law and practice afforded a suspect in custody, application of Salduz in Scotland required that such a suspect, before being questioned by the police, have the right to be afforded legal advice (see especially per Lord Hope at paras 48 51, Lord Rodger at paras 92 93 and Lord Brown at para 108). The Strasbourg Court has repeatedly stated that the entitlement to the guarantees of a fair trial afforded under article 6, including the right of access to legal advice before questioning, can be waived, either expressly or tacitly (Salduz para 59, citing Kwiatkowska v Italy (Application No 52868/99) (unreported) given 30 November 2000). In Salduz at para 59 the Grand Chamber observed that if it is to be effective for Convention purposes, a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance. The Court had reiterated at para 50 that it did not follow from the terms of article 6 that that article had no application to pre trial proceedings. The Court did not, however, identify what these minimum safeguards might be. There have been a number of subsequent decisions of the Court touching on the issue of the waiver of Salduz rights. I take them in chronological order. In Plonka v Poland (Application No 20310/02) (unreported) given 31 March 2009 where the applicant signed a form acknowledging that she had been informed of her rights, including the right to be assisted by a lawyer and the right to refuse to testify (para 7), it was concluded that there had been no express waiver of her right to be represented by a lawyer during police questioning (para 36). It was observed, under reference to para 59 of Salduz, that the waiver must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance (para 37). The court noted that one of the specific features of the case was the applicants alcoholism and that she was in a vulnerable position at the time of the interview; the authorities should have taken this into account during questioning and in particular when apprising her of her right to be assisted by a lawyer (para 38). In these circumstances it was held that there had been no effectual waiver. In Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009 a case concerned with allegedly implied waiver the applicant had expressly requested legal advice but the questioning had proceeded without such legal advice being made available the Court (First Section) acknowledged (para 77) that a person might of his own free will, either expressly or tacitly, waive his article 6 rights. It continued: However, if it is to be effective for Convention purposes, a waiver of the right must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance A waiver of the right, once invoked, must not only be voluntary, but also constitute a knowing and intelligent relinquishment of a right. Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be. That is, in a case where a Convention right had been invoked by the suspect he had made a specific request for legal assistance a valid waiver of that right must be not only voluntary but a knowing and intelligent relinquishment. The Court continued at para 78: The Court considers that the right to counsel, being a fundamental right among those which constitute the notion of fair trial and ensuring the effectiveness of the rest of the foreseen guarantees of article 6 of the Convention, is a prime example of those rights which require the special protection of the knowing and intelligent waiver standard. It is not to be ruled out that, after initially being advised of his rights, an accused may himself validly waive his rights and respond to interrogation. However, the Court strongly indicates that additional safeguards are necessary when the accused asks for counsel because if an accused has no lawyer, he has less chance of being informed of his rights and, as a consequence, there is less chance that they will be respected. The Court went on to hold (para 79) that on the facts it was not convinced that the applicant, in a knowing, explicit and unequivocal manner, waived his right to receive legal representation during the interrogations . In Yolda v Turkey (Application No 27503/04) (unreported) given 23 February 2010 the majority of the court (Second Section) noted (para 51) that in order to be effective for the purposes of the Convention any waiver of the right to take part in the trial must be established unequivocally and be surrounded by a minimum of guarantees as to its seriousness. At para 52 the majority said while [the applicant] was entitled to legal assistance during his custody and although he was reminded of this right, the applicant refused legal assistance. It also clearly emerges from his statements taken whilst in custody that the interested partys decision to waive his right to legal assistance must be considered to have been freely and voluntarily made. The minority dissented in the first place on the assessment of the particular circumstances saying: We feel that the majority too easily accepted that the applicant voluntarily waived the guarantee of legal assistance. Its second ground of dissent that [a]ny procedural choice that a person accused of a crime who is held in custody may make without a lawyer being able to inform and advise him cannot be free and informed is clearly not settled Strasbourg law. In Duman v Turkey (Application No 28439/03) (unreported) given 23 March 2010 another case of purportedly express waiver the Court referred to the test in Poitrimol v France (1993) 18 EHRR 130 a case concerning the absence of the accused from his trial. The test for effectual waiver there identified was that it must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance see Poitrimol at para 31. In addressing the particular circumstances (the incriminating statements and participation in reconstructions of events all apparently preceded any purported waiver) the Court said that it was not convinced that the presence of an undated, pre printed and signed document in the case file demonstrates with certainty that the applicant was properly informed of his right to a lawyer and his right to remain silent (para 50). In Sharkunov and Mezentsev v Russia (Application No 75330/01) (unreported) given 10 June 2010 the Court (First Section) held (at para 107) that the circumstances of the case disclose that the second applicant expressly and unequivocally waived the right to legal assistance . Emphasis was placed on the contemporaneous recording of that waiver (para 104). In Bortnik v Ukraine (Application No 39582/04) (unreported) given 27 January 2011 another case of purportedly express waiver the Court (Fifth Section) said that to be effective for Convention purposes a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum standards commensurate to its importance (para 40). Reference was again made to Poitrimol. In Bortnik it was recognised that the applicant was afraid of possible ill treatment (para 41), suffered from chronic alcoholism and belonged to a socially disadvantaged group, factors which could lead to the conclusion that he was particularly vulnerable, legally ignorant and susceptible to outside influence (para 43). In these circumstances the Court found that the applicants waiver of legal representation at the initial stage (when self incriminating statements had been made) was not genuine (para 44). In aman v Turkey (Application No 35292/05) (unreported) given 5 April 2011 the applicant was of Kurdish origin and illiterate with limited knowledge of Turkish. While held in Turkish custody she was, according to the Government, before each questioning reminded of her rights as an accused, including her right to be assisted by a lawyer; she had refused legal assistance (para 28). She underwent questioning without such assistance. Although, according to the Government, the applicant had refused legal assistance, the Court appears to have treated the case as one of implied waiver by conduct submitting to questioning without legal assistance (see para 32, though compare para 33). The essence of the Courts decision (that there had been a violation of article 6) was that the applicant, having an insufficient knowledge of Turkish and being without the help of an interpreter, could not be said to have effectively waived the right to legal assistance whether expressly or tacitly. This review of the Strasbourg jurisprudence would appear to suggest that the relevant criterion, at least in the case of an express waiver, is whether the waiver is established in an unequivocal manner and is attended by minimum safeguards appropriate to its importance. This is the formulation used by the Grand Chamber in Salduz and in all other cases in which the effectiveness of an express waiver was in issue. In Pishchalnikov after recital of that criterion it was observed: A waiver of the right, once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right. But that was a case in which the applicant had specifically invoked his right to legal assistance and the issue was whether, having subsequently responded to questioning without having that assistance, he had impliedly waived his right to it. The need to focus on a knowing and intelligent relinquishment of the right may be more acute where the waiver is founded on an implication from conduct (in particular, conduct apparently inconsistent with a prior specific request) rather than on an express statement. The criterion, accordingly, against which the current practice in Scotland is, in my view, to be judged is whether the waiver is in an unequivocal manner and is attended by minimum safeguards commensurate to its importance. I acknowledge immediately that the right to legal assistance for the purposes of police interview is important. This is not limited to protection against the making of self incriminating responses. As Mr Scott pointed out, there will be cases in which it is in the interests of a suspect to give a full and early account of matters; this may, if consistent with his account at trial, support his credibility. On the other hand, an account at trial which is inconsistent with the suspects responses to the police at interview may damage his credibility as a witness at his trial. Legal advice as to whether to respond may be of real importance in relation to any subsequent trial. I also recognise that quite apart from any bullying or other coercive conduct by the police at interview (against which the common law provides its own safeguards) presence as a suspect in police custody may, for some at least, be an intimidating experience. Mr Scott, under reference to para 53 of Salduz and para 68 of Pishchalnikov emphasised the importance of equality of arms between investigating authorities and the accused. The suspect faced with questioning by the police in the absence of legal assistance of any kind may be at a disadvantage as against his questioners. It should not too readily be concluded that there has been an effective waiver of such assistance. There should, accordingly, be close scrutiny of cases where it is asserted that there has been such waiver. Such scrutiny by the Strasbourg Court is clear from consideration of the cases which have come before it. Where the alleged waiver is express and is contemporaneously recorded in writing or in some other form, it should not be difficult to decide whether the waiver is unequivocal or not. Provided the language used to inform the suspect of the right to legal assistance is simple and the subsequent enquiry as to whether or not the suspect wishes to exercise his or her right is likewise simply expressed, it should not in the ordinary case be difficult to conclude that the suspect has understood what he or she has been told and has responded to the enquiry with an understanding of what has been put to him or her. The natural and legitimate inference in circumstances where the suspect has responded with a clear negative to the enquiry will be that he or she has a proper understanding, including an appreciation that in light of his or her answer legal assistance will not be made available for the purposes of the interview. Where the suspect is a child or an adult who is vulnerable (whether because of mental difficulties, addiction to incapacitating substances or otherwise) additional safeguards may be required. Indeed the circumstances of such individuals may in some cases be such that a waiver of the right to legal assistance is not in practical terms possible. Special measures for such persons may be part of the minimum safeguards required. Other safeguards include, as mentioned above, that the information given and the question asked are simply expressed and the answer recorded contemporaneously. It is also to be expected and in the absence of indications to the contrary to be assumed that the oral communications to the suspect are clearly and deliberately expressed, not mumbled or rushed. In my view both the statement as to the suspects right to legal assistance and the question posed as to whether he wishes to exercise that right as set out in SARF A are clearly expressed. A negative answer to the question, duly recorded, will give rise in ordinary circumstances to the conclusion that the suspect has unequivocally waived his or her right to have legal assistance for the purposes of the prospective questioning. The safeguards include the contemporaneous recording of the whole procedure, including the names and ranks of the officer reading the statement and of the corroborating officer, and the informing of the suspect that signing the record in no way prevents him from changing his mind at any time. Provision is then made for the suspects signature. There is, in my view, nothing in Strasbourg jurisprudence in so far as developed to date which lays down more demanding minimum safeguards than are provided for in this procedure. That is not to say that the procedure could not be improved. A number of suggestions in that regard were made in the hearing before us. Lord Hope discusses these in his judgment. With his observations I agree. I also agree with his proposed disposal of this reference. The issue of whether or not it would be fair for the Crown to lead and rely upon the respondents answers at interview is, in my view, best decided in the whole relevant circumstances by the sheriff, informed by the judgments delivered in this court. LORD KERR Once again, regrettably, I find myself in disagreement with my colleagues about the impact of article 6 of the European Convention on Human Rights and Fundamental Freedoms on the right of suspects in Scotland to legal advice in advance of and during interview by police officers. At the outset, however, I should make clear that I agree with Lord Hope that there is no absolute rule to be deduced from Strasbourg jurisprudence to the effect that, in order to make a valid waiver of the right to be advised by a lawyer, a person under interrogation by a police officer must have received legal advice on whether he should waive the right. What Strasbourg jurisprudence makes unmistakably clear, however, is that this is a right of supreme importance and that such a right can only be regarded as waived where the waiver is indubitably given and the consequences of giving it are properly understood. Various formulae have been used to express this principle. Thus statements have been made that the waiver must be knowing and intelligent or informed Pfeifer and Plankl v Austria (1992) 14 EHRR 692; Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009; that it must be unequivocal Oberschlick v Austria (1991) 19 EHRR 389; Kolu v Turkey (Application No 3581/97) (unreported) 2 August 2005; Sejdovic v Italy (2004) 42 EHRR 360; Pishchalnikov v Russia; that the person purporting to make the waiver must have reasonable foresight of the consequences of the relinquishment of the right Jones v United Kingdom (2003) 37 EHRR CD269; and that it must be accompanied by safeguards commensurate with the importance of the right to access to legal advice Salduz v Turkey (2008) 49 EHRR 421; Pishchalnikov v Russia. In para 15 of his judgment Lord Hope has said that rights which are waived may vary in importance according to the circumstances of each case. This is, of course, true but, in my view, Strasbourg jurisprudence is clear that, whatever the level of importance of the right, it can only be waived if the person waiving it has a proper understanding of the implications of the waiver. I do not understand Lord Hopes suggestion (in para 16) that care is required when considering cases where the right was different from the right to legal assistance to imply that anything less than an understanding of the nature of the right and the possible repercussions of its waiver will suffice for it to be effective. In any event, there can be no doubt as to the fundamental importance of the right to counsel. Strasbourg has repeatedly made this clear see for instance para 78 of Pishchalnikov where it was stated that the right to counsel was a fundamental right among those which constitute the notion of a fair trial and ensuring the effectiveness of the rest of the foreseen guarantees of article 6 of the Convention. The right, according to the court was, a prime example of those rights which require the special protection of the knowing and intelligent waiver standard. The necessary level of understanding on the part of a person waiving a right of the consequences of the waiver has perhaps not been as explicitly spelled out as it might have been in the many cases in this area which Lord Hope has so fully reviewed. Perhaps the best statement on the question is to be found in Millar v Dickson 2002 SC (PC) 30. At para 33 of his opinion Lord Bingham set out a series of propositions which, he said, formed the basis of the High Courts finding that there had been a tacit waiver of the right to be tried by an independent and impartial tribunal. The second of the propositions was this: If knowledge of some material matter is absent, even an express intention to waive a right may readily be recognised as insufficient to constitute a binding abandonment of the right. Lord Bingham, in para 34, accepted the correctness of this proposition. He expressly rejected the third proposition which the High Court had set out. It was to this effect: In general, regardless of the knowledge or ignorance or misapprehension of an accused or his agent as to the law, knowledge of the law will be imputed to him. Of that statement, Lord Bingham said that ignorance of the law will not excuse unlawful conduct; but it cannot suffice to found a plea of waiver para 34. Knowledge of all material matters is therefore a prerequisite to a valid waiver and if the person waiving the right is ignorant of a salient aspect of the law, this will prevent the waiver from being effective. It was somewhat faintly suggested by the Lord Advocate that knowledge of the consequences of waiving a right was required only in cases of tacit or implied waiver. There is no logical basis for distinguishing express waiver from implied waiver in relation to this requirement. It was not suggested that an express waiver should be regarded as effective unless it was properly informed. In this context, being informed must mean being aware of what will or might happen if the right is not availed of. As Lord Hope said at para 58 of Millar, Strasbourg jurisprudence shows that, unless the person is in full possession of all the facts, an alleged waiver of the right must be rejected as not being unequivocal. Mere possession of the facts is not enough, of course. A clear understanding and insight as to their significance is surely an essential concomitant. It is not enough that an accused person receive information, he must have the wherewithal to understand what that information means to his case. Otherwise, the information is of no value. All of this must be seen against the accepted position that it is for the prosecuting authorities who seek to rely on an alleged waiver to establish that it is effective. They must show not only that the accused person was made aware of his right to legal counsel; not only that he or she had stated that he did not wish to avail of it or, alternatively, implicitly waived their entitlement to it; not only that he or she was given sufficient information about the circumstances in which legal assistance could be provided; but also that the accused person appreciated what was at stake. Obviously, direct evidence of the degree of understanding of the accused person will not usually be available. Conventionally, the prosecuting authorities will seek to establish this by reference to the safeguards that are in place to ensure that this had happened and it is no coincidence that Strasbourg jurisprudence emphasises the need for the presence of safeguards commensurate with the importance of the right. Before turning to the safeguards which, the Lord Advocate claims, were efficacious to achieve that, I should say something about the assertion of Miss Cherry QC on his behalf that the narrow base of the decision in Salduz should inform the debate as to whether the safeguards are sufficient. The "narrow base" from which Salduz rights are derived is, Miss Cherry contends, the need to protect the suspect from self incrimination. The rationale underlying the protection against self incrimination is one of protecting the suspect from coercion of his will by improper compulsion (physical or psychological) by the police authorities. That rationale of protecting the suspect against coercion of his will provides the context against which the ECtHR's requirements that a waiver of Salduz rights be unequivocal and be attended by minimum safeguards commensurate to its importance should be construed and applied, according to Miss Cherry. I do not accept these arguments. At para 52 of the Salduz judgment the court said: National laws may attach consequences to the attitude of an accused at the initial stages of police interrogation which are decisive for the prospects of the defence in any subsequent criminal proceedings. Now, true it is that in Scotland there is no statutory provision such as exists in the rest of the United Kingdom expressly permitting the tribunal of fact to draw adverse inferences against an accused because of his or her failure to mention in answer to police questioning facts on which they later relied. But it is not claimed that an accused who seeks to put forward on trial in Scotland a basis of defence that was not foreshadowed in his interviews with the police would not suffer a conspicuous disadvantage in consequence. Moreover, in Scotland, where corroboration of evidence that a sexual offence has been committed is necessary, a statement by an accused person that there was consensual sexual activity may supply (and, we were given to understand, frequently does supply) the needed corroboration. This is a paradigm example of national laws attaching consequences to the attitude of an accused at the initial stages of the investigation which have nothing whatever to do with his will being overborne by coercion. And it is clear that it was precisely this type of situation that was contemplated by the court in Salduz when it emphasised the importance of the need for access to legal advice at the early stage of the investigation. The narrow base argument is therefore plainly wrong. The need for a lawyer at the early stage of an investigation goes well beyond protecting the suspect from coercion of his will by improper compulsion. This much is unmistakably clear from what the court said in Salduz at para 54: the Court underlines the importance of the investigation stage for the preparation of the criminal proceedings, as the evidence obtained during this stage determines the framework in which the offence charged will be considered at the tria1. At the same time, an accused often finds himself in a particularly vulnerable position at that stage of the proceedings, the effect of which is amplified by the fact that legislation on criminal procedure tends to become increasingly complex, notably with respect to the rules governing the gathering and use of evidence. In most cases, this particular vulnerability can only be properly compensated for by the assistance of a lawyer whose task it is, among other things, to help to ensure respect of the right of an accused not to incriminate himself. (emphasis supplied) The efficacy of safeguards to ensure that a waiver of the fundamental right to legal assistance is effective is therefore not to be judged solely by reference to the need to protect a suspect from coercion of his will by improper compulsion. It must be judged against the backdrop of his need to understand the ways in which the absence of a lawyer might have an impact on the viability of his defence to criminal charges about which he is questioned by police. The advocate depute relied on the safeguards which currently exist under Scots law and which, she said, were commensurate with the importance of the right to legal assistance. These included the administration of the caution which, Miss Cherry pointed out, occurred at various stages of the arrest and interview process. Nothing in the caution advises the suspect of his or her rights to the services of a lawyer, however. Its focus is on conveying to the suspect the right to remain silent. In June 2010, pending the judgment of this court in Cadder v HM Advocate, the Lord Advocate issued guidelines to Chief Constables in Scotland as to the steps to be taken to provide a suspect with access to a solicitor prior to and during interview. The guidelines provided that individuals who attended voluntarily for interview by police, or were detained under section 14 of the Criminal Procedure (Scotland) Act 1995 for that purpose, or were interviewed by police between arrest and charge should first be offered (a) a private consultation with a solicitor prior to interview; and (b) solicitor presence/consultation during the interview. The Lord Advocate's Guidelines were withdrawn in January 2011 to coincide with the introduction of a new ACPOS Manual of Guidance on Solicitor Access. Nothing in these guidelines was directed to an investigation of the suspects understanding of the reasons that he might need to have a solicitor. Nor were they designed to elicit information about why a suspect might choose not to have a solicitor. Nor did they contain any means of discovering whether the suspect had any appreciation of the implications of waiving his right to a solicitor. The procedure that they prescribed consisted of a one way form of communication with the suspect contributing only an affirmative or negative response to the imparting of the information that he was entitled to have a solicitor. The capacity of the caution and the guidelines to supply safeguards commensurate with the right to legal assistance is intrinsically open to question given the absence of meaningful contribution to the process by the suspect. But the obvious shortcomings of this procedure are demonstrated by research carried out by David J Cooke and Lorraine Philip in 1998 about the level of understanding of suspects of even basic elements of the procedure then adopted by police officers. Although, as Lord Hope has pointed out, this paper was written some time ago and does not reflect current practice in that the caution then used has been changed, the effect of the results of the survey on the adequacy of the up to date procedure is unmistakable. The Cooke and Philip research showed that the question customarily posed after the caution had been administered, viz do you understand was valueless because of the tendency of suspects to acquiesce without any real level of understanding. That was troubling enough but overall it was found that there was a poor level of comprehension of the simple caution and, even when this was broken down into the simplest of sentences, the level of understanding remained low. The conclusions of the report are sobering: it would appear that within Scotland a significant proportion of young offenders are unlikely to comprehend their legal rights when these are presented to them in the form of the common law caution. If the purpose of reciting the caution is to truly inform an accused person of his/her rights rather than merely to record some legal niceties then a simplified caution is required. Simplifying the caution may not be sufficient (Scott, 1996): police officers require to be trained to deliver the caution more effectively. No challenge to the validity of these findings has been presented nor has it been suggested that they are not eminently relevant to contemporary experience. There is therefore no reason to suppose that todays suspects will be any more able to appreciate the importance of the right to legal assistance, much less the implications of relinquishing that right, in light of these findings. Certainly, in the absence of any inquiry whatever (whether of the suspect directly or, if they are capable of revealing it, by examination of the surrounding circumstances) as to why a suspect has decided to waive the right, it is, in my opinion, simply impossible to say that an intelligent, knowing decision has been made. The Criminal Procedure (Scotland) Act, 1995 was amended with effect from 30 October 2010 and this now provides for the right of a suspect to have a private consultation with a solicitor before and during questioning by a police officer. The suspect must be informed of this right but there is nothing in the legislation nor in the ACPOS Manual of Guidance on Solicitor Access which requires any contribution from the suspect beyond confirming that he understands that he has the right and indicating whether he wishes to avail of it. Lord Hope has made suggestions (in paras 49, 51 of the judgment in McGowan) as to how the current procedures might be improved. The first of these is to follow the practice indicated by para 6.5 of Code C of the Code of Practice for the Detention, Treatment and Questioning of Persons by Police Officers which was introduced in England to meet the requirements of the Police and Criminal Evidence Act 1984 (PACE). This requires a police officer to tell a suspect that he can speak to a solicitor by telephone if has refused initially to seek legal assistance. If the suspect continues to waive the right the police officer is then enjoined to ask the reason for this and to record the suspects reply. There are two obvious purposes behind these requirements in the Code. The first is to dispel the well known and widespread apprehension that suspects feel that if they elect to consult a solicitor this will delay their interview and prolong the period of their detention. The second is to obtain some insight into the reasons for not wishing to have the assistance of a lawyer so that misunderstandings can be corrected. Lord Hope makes it clear that he is not suggesting that these steps be taken in every case but, with respect, why should they not be? How can one have any insight into the reasons for waiving this fundamentally important right, if one does not ask why? If the decision to waive must be knowing and intelligent and, more pertinently, if the prosecuting authorities must be in a position to prove that it was such how can that be established if a bland refusal is all that one has to work on? Put simply, unless one knows why the decision to waive has been made, it cannot be said to be voluntary, informed and unequivocal. I can further explain my conclusion that some means of ascertaining why a suspect has chosen not to consult a solicitor is vital by reference to those cases emanating from Strasbourg post Salduz where this issue has been considered. First, Pishchalnikov at para 77 where the court said: A waiver of the right, once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right. Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be. Of course, that statement was made in the context of implied waiver but for the reasons given earlier, foresight of the consequences, if it is necessary in the case of implied waiver, is equally required where the waiver is said to be express. It is interesting to note the two overlapping aspects of the requirement knowledge and intelligence on the one hand and reasonable foresight of the consequences on the other. The suspect must know what he is doing; he must be possessed of sufficient intelligence to appreciate the importance of the step that he is taking; and he must have reasonable foresight of the consequences for him of doing it. Miss Cherry suggested that the last requirement was fulfilled merely by the suspect knowing that he would be asked questions by police officers and that his solicitor would not be present. That surely cannot be right, if the knowing and intelligent element is to have any significance. I do not suggest that a suspect needs to be aware of every legal nuance that might arise in the course of his interview but he should be aware in a general sense that legal issues might arise and should have consciously decided that he is prepared to forgo the advice that a lawyer might give on those issues either before or in the course of the interview. In Yolda v Turkey (Application No 27503/04) (unreported) given 23 February 2010, the court held that the applicant had effectively waived his right to legal assistance. A careful review of the facts of this case is instructive. The applicant was 29 years old at the time of his arrest. After the charges were read to him he was required to sign a form which confirmed that he had been advised of his right to assistance by a lawyer of his choice or a court appointed lawyer. This happened more than 36 hours after he had been received into the custody of the Turkish police. Mr Yolda was asked whether he wished to have his family informed but he said that he did not want them to be contacted until he had appeared before the court. A document containing the handwritten note of this request by the applicant as well as his signature was produced to the court and was not disputed by him. On 24 December 2003, some six days after Mr Yolda had been taken into custody, the applicant's deposition was drawn up. According to this document, the applicant's right to remain silent, to have his relative informed, to the assistance of a lawyer and to bring the matter before a judge in order to object to his arrest and his custody were repeated to him. He stated that he was sorry and wished to benefit from law No 4959 of 29 July 2003 concerning reintegration in society. He signed his deposition thus drawn up. On the same date the applicant was referred to the Public Prosecutor, who informed him of his rights as stated in article 135 of the Code of Criminal procedure. Significantly, the applicant stated that he understood his rights and did not wish to be assisted by a lawyer or for his family to be informed of his situation. He confirmed his statement made in custody, acknowledged belonging to the organisation in question and having participated in activities as part of this, including armed attacks. He declared that he wished to benefit from the law on repentance. He signed the deposition. Later on the same date, 24 December 2003, Mr Yolda appeared before a judge. He was reminded by the judge of his right to legal assistance. The applicant again stated that he understood his rights but did not wish to be assisted by a lawyer and made his deposition alone. He repeated his previous depositions and signed the deposition made before the court. Mr Yolda had been informed or reminded therefore on no fewer than four occasions of his right to a lawyer. This information had been imparted to him by police officers, a public prosecutor and a judge. He twice asserted that he knew and understood what his rights were. He was clearly familiar with the law on repentance and re integration into society. It is clear that these particular circumstances bore heavily on the decision of the European Court that there had been an effective waiver of the applicants rights to legal assistance. This is especially clear from the opening words of para 52 of the courts judgment: Under the particular circumstances of this case, the Court notes that the applicant had been informed of his right to be assisted by a lawyer whilst in custody. In this connection the police drew up a report stating his rights during custody, and in particular that of being assisted by a lawyer (paragraph 6 above). After reading the report, a copy signed by the applicant was delivered to him. Furthermore, the police also reminded the interested party that he was entitled to see his family. The applicant stated that he wished to contact his family after appearing before the competent court (paragraph 7 above). Therefore while he was entitled to legal assistance during his custody and although he was reminded of this right, the applicant refused legal assistance. It also clearly emerges from his statements taken whilst in custody that the interested party's decision to waive his right to legal assistance must be considered to have been freely and voluntarily made. Hence, the applicant's waiver of this right was unequivocal and surrounded by a minimum guarantee (a contrario, Padalov v Bulgaria, No 54784/00 para 54, 10 August 2006). (Emphasis supplied) Lord Hope has said (in para 32 of his judgment in McGowan) that this decision indicates that where it is shown that the accused, having been informed of his rights, states that he does not want to exercise them, his express waiver of those rights will normally be held to be effective. I do not so read it. Certainly no statement to that effect is to be found in the text of the judgment and it is replete with references to the importance of the particular facts of the case see paras 48, 50, 52, 53 and 54. In Galstyan v Armenia (2007) 50 EHRR 618 the European Court found that the applicant had been informed of his right to a lawyer both by police officers and the judge before whom he appeared. The applicant had chosen to represent himself this was a specific finding of ECtHR para 91. It was the governments case that he had been advised by police to avail of the services of a lawyer but stated that he did not wish to have one para 16. The applicant was an authorised election assistant for the main opposition candidate in the presidential election and, when he appeared before the judge, was sufficiently robust to demand justice and lawfulness when asked by the judge what he wanted. There is nothing in the report which suggests that the presence of a lawyer would have made a significant difference to the outcome. This is a case from which, I think, it would be difficult to discern any principle of general application. In Sharkunov and Mezentsev v Russia (Application No 75330/01) (unreported) given 10 June 2010, (referred to by Lord Hope in para 33 of his judgment in McGowan) the first applicant made no statement or admissions after his arrest, and the court did not consider it necessary to make findings in his case on his complaint that there had been a violation of article 6 because he had been denied legal assistance. So far as the second applicant was concerned, the court found that he had waived his right to legal assistance, and had expressly said that the waiver was not related to a lack of financial means. Subsequently, when he asked for legal assistance, this was obtained promptly. Significantly, he did not complain that he was not provided with legal assistance between December 1999 and February 2000. And the court found (see para 108) that the case file did not disclose that the second applicant made any statement or admission between those dates. Again, this is a case that is confined to its own facts and upon which no principle of general application can be founded. Paskal v Ukraine (Application No 24652/04) (unreported) given 15 September 2011 was a case in which the facts were somewhat unusual. The applicant had a university degree in law. When under interrogation he was a serving police officer. He had been arrested on suspicion of having taken part in a robbery. He signed a procedural rights notification form and noted that he wished to appoint a lawyer whom he named as his advocate. He was then questioned, without a lawyer being present, about the robbery. It was argued that this was a case of an implied waiver. Most significantly, of course, the applicant, when questioned without a lawyer, did not make any incriminating statements see para 75 of the judgment. The court also observed in that paragraph that because of the applicants educational and professional background as a lawyer and a police officer, his participation in the questioning was rather well informed and deliberate. In para 76 of Paskal ECtHR stated that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction, citing Salduz para 55. It also stated that the very fact of restricting access of a detained suspect to a lawyer may prejudice the rights of the defence even where no incriminating statements were obtained as a result. These are strong statements which, unlike the cases of Yolda, Galstyan and Sharkunov and Mezentsev, do have general import. The principle to be derived from them is clear. As a general rule, incriminating statements given during police interrogation where there has not been access to a lawyer irretrievably prejudice the rights of the defence when they are used to obtain a conviction. But the courts disapproval of the adducing of evidence given by a suspect who has not had the benefit of legal assistance did not stop there. At para 79 the court said that the very fact of questioning a suspect without enabling him to consult a lawyer may shift the power balance between the parties in breach of the fair trial guarantees even absent any appearance of negative consequences for the outcome of the proceedings. This sends a powerful message. It emphasises the exceptionality of the circumstances in which statements made by suspects who have not had access to a lawyer should be admitted in evidence. Now, as it happens, the European Court in Paskal decided that there had been an effective waiver of the right to legal assistance and it is on that aspect of the decision that Lord Hope has concentrated. But I suggest that this conclusion reflects the particular, and somewhat unusual, facts of the case and of far greater significance are the expressions of general principle which it contains and which I have referred to above. It was because the applicant never raised the matter of the lack of legal assistance during his trial and because, although he complained in his cassation appeal in general terms that his right to defence had been breached, he made no express mention of the questioning that took place in the absence of legal assistance that the court considered that a breach of article 6 had not been established. The court was also influenced, to some extent, by the applicants background as a law graduate and police officer see paras 78 and 79 of the judgment. But these are, as I have said, unusual facts. They do not remotely sound on the issues that arise in these appeals and reference. They are peculiar to that particular case. Paskal is a significant case, however, but significant in my view in favour of the arguments advanced on behalf of the respondents in the appeal and on behalf of B in the reference. It is not particularly easy to assemble a list of coherent principles that should guide consideration by courts of the difficult question of waiver of the right to legal assistance. With some misgivings, I suggest that the following are, while by no means exhaustive, perhaps useful guidelines to follow: i) Each case must be examined on its own particular facts. Close scrutiny of the claim that the right has been waived will always be required. Among the circumstances that will be relevant are the gravity of the offence and the sensitive nature of the charges; ii) The background of the suspect may be relevant, especially if it includes an expertise in legal matters but it should not be assumed that previous experience with police procedures will make it more likely that a waiver is effective; iii) Unless it is shown that the suspect had a proper insight into the significance of the decision to waive his right, the purported waiver should not be regarded as effective; the most obvious and easiest way of showing this is when the suspect has been advised by a lawyer as to whether he should waive the right; iv) A decision to waive the right which is prompted by a desire to get the interview over with or because the suspect does not wish to wait for his solicitor to arrive or because he erroneously believes that he may have to pay for the services of a solicitor are all strong indicators that the waiver is not unequivocal; v) Unless there is clear evidence that the suspect understands the significance of waiving his right to a solicitor, he should be asked why he has decided not to exercise his right; his reasons should be recorded; and any misunderstanding should be corrected. He should also be informed that a telephone consultation with a solicitor can be arranged. (These minimum safeguards were not present in any of the cases under appeal or the subject of the reference); vi) Simply because a suspect evinces a willingness to answer questions, it is not to be presumed that he has tacitly waived his right to access to legal advice. Conclusions I would answer the first question in the negative for the reasons given by Lord Hope. I would answer the second question in the negative also. No attempt was made to discover why B had refused to avail of the legal assistance. I consider that it is impossible to say on the available evidence that his was an unequivocal and informed decision to waive his right under article 6. In para 58 of his judgment, Lord Brown suggests that it is surely obvious that the point of a lawyer is to advise on any legal issues that may arise and that it is also obvious that if a suspect chooses to forego this right he will be questioned without the benefit of such advice. I agree. But knowledge of the obvious is not the same as understanding that this may carry grave implications for the suspect. Otherwise there would be no need for any examination of the circumstances in which a suspect has declined to avail of legal assistance. His statement that he did not wish to have a lawyer would determine the issue. He would be presumed to know the obvious and that would be, in Lord Browns view, an end of the matter. With respect to Lord Brown, to seek to be sure that the suspect realises that he is foregoing the chance to have a lawyer advise him on legal issues that might bear directly on his defence does not seem to me to ask for too much. |
Mr Achilles Macriss complaint is that without giving him a chance to make representations in his own defence, the Financial Conduct Authority has published a notice imposing a penalty on his former employer for various irregularities in the conduct of its business, in terms which identify him as the person responsible. The question at issue on this appeal is whether the notices in question did in fact identify him. This may look like a small point but, for reasons which I shall explain, it has significant implications for the conduct of the Authoritys investigatory and disciplinary functions. The Financial Conduct Authority is responsible for the statutory regulation of the United Kingdoms financial markets. This includes protecting and enhancing the integrity of the United Kingdom financial system and ensuring the stability and orderly functioning of financial markets. The Authoritys powers are derived from the Financial Services and Markets Act 2000 (the Act), as amended by the Financial Services Act 2012. JP Morgan Chase Bank NA is authorised under the Act to carry on regulated investment activities. In 2012 Mr Macris was the Banks International Chief Investment Officer. In that capacity, he was the head of a unit of the Bank in London called the Chief Investment Office (or CIO International). The function of CIO International was to manage the firms excess deposits, including a portfolio of traded credit instruments called the Synthetic Credit Portfolio. Mr Macriss own functions were controlled functions for the purpose of section 59 of the Act, which meant that he had to be approved by the Authority as a suitable person to carry on those functions. In July 2012, the Bank announced that the Synthetic Credit Portfolio had lost $5.8 billion in the first half of the year, a figure which rose to $6.2 billion by the end of the year. Following an investigation, the Authority concluded that the loss was caused by a high risk trading strategy, weak management of that trading and an inadequate response to important information which should have alerted the Bank to the problems. It also concluded that the Bank had withheld significant information from the Authority while the losses were being incurred. Together, these failings were found to have undermined trust and confidence in UK financial markets. A regulatory settlement was agreed with the Bank, under which it paid a penalty of 137,610,000. The provisions of the Act governing the imposition of penalties provide for three successive notices to be given to a person or firm under investigation: a warning notice describing the action which the Authority is provisionally minded to take and inviting representations (section 207); a decision notice describing the action that it has decided to take after considering any representations and informing the recipient of his right to refer the matter to the Upper Tribunal (Tax and Chancery) (section 208); and a final notice describing the action that it is taking once the decision notice has become final, ie after it has been reviewed by the Upper Tribunal or the time for applying for such a review has expired (section 390). The normal form of these notices is a brief statement of the action proposed, followed by a fairly extensive narrative entitled Reasons. Where a regulatory settlement is agreed before the service of any of these notices, they must still be given, but the practice is to draft them in identical terms and serve them simultaneously. In this case the three notices were all served on the Bank on 18 September 2013. The Authority is not required to publish a warning notice to the world, but it is required to publish a decision notice and a final notice. It did so in this case on the following day, 19 September 2013. Notices recording disciplinary action proposed to be taken against an authorised firm will almost inevitably contain implicit or explicit criticisms of those responsible for the irregularities in question and possibly of other persons involved. These are referred to in the Act as third parties. Section 393 contains provisions for protecting them against unfair prejudice. Subsection (1) provides: If any of the reasons contained in a warning notice to which this section applies relates to a matter which identifies a person (the third party) other than (a) the person to whom the notice is given, and (b) is prejudicial to the third party, in the opinion of the regulator giving the notice, a copy of the notice must be given to the third party. The object of this procedure is to enable the third party to make representations to the regulator. Subsection (3) requires a copy notice served on a third party to specify a reasonable period of time within which he may do so. Subsection (4) contains a corresponding provision relating to decision notices. The object here is to enable the third party to take the matter before the Upper Tribunal, as subsection (9) entitles him to do. These procedures need not be followed if a corresponding notice in relation to the same matter has been given to the third party in his own right: see subsections (2) and (6). Mr Macris was not supplied with a copy of the notice served on the Bank or given an opportunity to make representations. As an approved person he was personally under investigation along with his employer. But he was not party to the settlement with the Bank, and the investigation of his conduct was still in progress at the time. Ultimately, in February 2016, Mr Macris reached his own regulatory settlement. A final notice in relation to him was published on 9 February 2016, in which he was found to have been party to the withholding of information from the Authority and on one occasion to have misled it. A penalty of 762,900 was imposed on him. The Authority does not deny that if Mr Macris was identified in the warning and decision notices served on the Bank, there were statements in those notices which were prejudicial to him. Their case is that he was not identified. It is common ground that he was not identified by name or job title. But there were many references to conduct by CIO London management or similar expressions. Mr Macris was not the only manager in CIO International in London. On the basis of the notice alone, therefore, CIO London management could have referred to a number of people other than him. His case is that those who were active in the relevant markets would have known that it referred to him. In support of this case, he produced two witness statements in the Upper Tribunal, neither of which was challenged. One was from a senior manager formerly employed in CIO International in London, who said that it was clear to him that CIO London management referred to Mr Macris. This was because of the knowledge that he had acquired as a manager in the same unit. In particular, he knew that Mr Macris was the head of that unit and was not in the habit of sharing his responsibilities with others. The other witness was a senior sales representative dealing in credit instruments for another bank in London. He said that he drew the same conclusion because he knew about Mr Macriss position and working methods from his dealings with CIO International. In addition, Mr Macris relied on the fact that some five months before the service of the notices on the Bank, a US Senate Committee had published a report on the losses in the Banks Synthetic Credit Portfolio, which described his role in the incurring and treatment of those losses, identifying him by name. This report was available on the internet. It was said that if read side by side with the Authoritys notices the Senate Committee report would enable anyone to deduce who was being referred to as CIO London management. The Upper Tribunal directed the hearing as a preliminary issue of the question whether Mr Macris was entitled to be treated as a third party for the purposes of section 393 of the Act. Judge Herrington upheld Mr Macriss complaint and held that he was. He referred at para 13 of his judgment to para 4.3 of the final notice, which described the position of CIO International in the Banks hierarchy in the following terms: 4.3 The Firm is a wholly owned subsidiary of the Group. CIO operates within the Firm in both New York and London. The traders on the SCP were managed by SCP management, which in turn were managed by CIO London management. CIO London management represented the most senior level of management for the SCP in London, reporting directly to CIO Senior Management in New York, which in turn reported to Firm Senior Management. CIO also had its own Risk, Finance and VCG functions, which were control functions relevant to the SCP and other portfolios within CIO. The wider control functions within the Group included Internal Audit, Compliance and the Groups Audit Committee. The judge then referred at para 16 to a number of places where the notices referred to acts as having been performed by an individual (eg CIO London management sent an e mail). The essence of his reasoning appears at paras 45 and 46 of his judgment: 45. In my view the drafting of para 4.3 is inconsistent with how a corporation would describe the hierarchy of its governing bodies. Collective bodies are responsible for the management of particular business units rather than managing them themselves and the bodies concerned would appoint named individuals to carry out the actual management in clearly defined reporting lines. What therefore comes across clearly from para 4.3 of the Final Notice is a description of the reporting lines of particular individuals to their line managers. The paragraph also discloses the fact that SCP management would manage rather than be purely responsible for the management of the individual traders who would therefore each say that their line manager was whoever was identified as SCP management. It is not the practice that an individual trader would report to a collection of individuals; it is the hallmark of good management that there can be no confusion over which individual a person reports to he needs to know who his boss is and so he does not get conflicting messages. The reference to CIO London management being the most senior level of management for the SCP in London is also significant; again a reader with experience of how large corporations operate would take such a reference as being to the most senior individual concerned. 46. This initial impression that the reader would take from para 4.3 is reinforced by the fact that CIO London management is stated in the notice to have performed actions such as having conversations, attending meetings and sending e mails which can only be taken in the context in which these events are described, as being the actions of an individual rather than a body of persons. This is clearly apparent from the references Mr Herberg referred me to as set out in para 16 above. In the Court of Appeal Gloster LJ delivered the leading judgment, Patten LJ agreeing with her generally and Longmore LJ agreeing to the extent that it is a question of law. Gloster LJ declined (paras 52, 60) to adopt Judge Herringtons reasoning but agreed with him in the result, namely that the references to CIO London management were references to an individual, ascertained by reference solely to the terms of the notice itself (para 52). She also considered (para 53) that the evidence adduced by Mr Macris and publicly available material such as the US Senate Committee report entitled the judge to conclude, on an objective basis, that persons acquainted with Mr Macris, or who operated in his area of the financial services industry, would reasonably have been able to identify Mr Macris from the statements made in the notice. Gloster LJs view that the relevant audience was persons acquainted with Mr Macris, or who operated in his area of the financial services industry was based on an analogy, which she regarded as persuasive, between disclosure under section 393 of the Act and publication in the law of defamation. In the latter context, she drew attention after the hearing to the statement in the current edition of Gatley on Libel and Slander, 12th ed (2013), paras 7.1, 7.2: The question in all cases is whether the words might be understood by reasonable people to refer to the claimant, subject to the qualification that where the words are published to persons who have special knowledge the issue will be decided by reference to what reasonable persons possessing that knowledge would understand by them. The test of whether words that do not specifically name the claimant refer to him or not is this: Are they such as reasonably in the circumstances would lead persons acquainted with the claimant to believe that he was the person referred to? This appeal turns on the meaning of identifies and on the meaning of the notice to which that word is being applied. Both are questions of law, although the answers may be informed by background facts. The essential question before us is what background facts may be relevant for this purpose. In my opinion, a person is identified in a notice under section 393 if he is identified by name or by a synonym for him, such as his office or job title. In the case of a synonym, it must be apparent from the notice itself that it could apply to only one person and that person must be identifiable from information which is either in the notice or publicly available elsewhere. However, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice. Thus a reference to the chief executive of the X Company may be elucidated by discovering from the companys website who that is. And a reference to CIO London Management would be a relevant synonym if it could be shown to refer to one person and that person so described was identifiable from publicly available information. What is not permissible is to resort to additional facts about the person so described so that if those facts and the notice are placed side by side it becomes apparent that they refer to the same person. I reach this conclusion for the following reasons. The starting point is that section 393 covers the same ground as the general obligation imposed by public law to give those affected sufficient notice to enable them to make representations to protect their legitimate interests. But it does so in a more limited way. So far as it concerns notice of potential criticisms, the section defines what fairness requires in the context of warning and decision notices issued by the Authority. Secondly, although the word identifies is not elaborated, it is clear from the language that it is the reasons contained in the notice which must identify the third party and not some extrinsic source. Reference to extrinsic sources of information is legitimate only so far as it is necessary in order to understand what the notice means. Third, it is necessary to read section 393 in the light of the practicalities of performing the Authoritys investigatory and disciplinary functions. It is common for notices to be served on different parties to the same investigation at different times. The possibility is expressly envisaged in section 393 itself. The role of the firm or of the various individuals involved may take more or less long to investigate. Or, as happened in this case, one of them may settle before the others. Once the facts relating to one person or firm under investigation are ascertained or admitted and are found to justify criticism or sanctions, there will often be no proper reasons for withholding that information from the market. Yet there will almost always be people in the know, who will realise when they read the notices which individuals are encompassed by apparently anodyne collective expressions such as management or who is likely to have been responsible for particular failings of the firm. The facts, or enough of them, may be well known within the firm. They may be deduced by those who know enough about the firms procedures or organisational structure or the business methods of the third party in question. Even for those who are further from the scene, the internet is a fertile source of information and gossip for those who are willing to go to some trouble to discover his identity. The Authority will not necessarily know what if any further information about the business, the facts or the individuals involved may be available to knowledgeable outsiders or discoverable from publicly available sources. In those circumstances it must be able to ensure, by the way in which it frames its own notices, that a third party is not identified in the notice, even if he or she is identifiable from information elsewhere. The present case is a good illustration of the problem. The Court of Appeal considered that the information relevant for the purpose of identifying Mr Macris included the US Senate Report, which identified him by name. On that footing, once the Senate Committee had published his report, it would have been impossible for the Authority to serve the notice on JP Morgan as part of the settlement process, without serving a copy on Mr Macris at a comparatively early stage of the investigation of his role, when it would not necessarily know the relevant facts or have formulated any criticisms. Fourth, the combination of information in the notice with other information can prejudice a third party only if the notice is published. Publication is not automatic. Where the Authority decides to publish, it does so in order to serve the public interest in the proper performance of its functions and the protection of those who use the financial services industry. This is reflected in the Authoritys Enforcement Guide (2016), section 6.2.16 of which states: Publishing notices is important to ensure the transparency of FCA decision making; it informs the public and helps to maximise the deterrent effect of enforcement action. The relevant audience for this purpose is accordingly the public at large. The fact that some specific sector of the public at large may, like Mr Macriss witnesses, have special additional information enabling them to identify a third party is not relevant. Finally, I do not regard the suggested analogy with the law of defamation as helpful. The law imposes strict liability for the publication of a defamatory statement which reflects on the claimant, even if the defendant did not intend it to refer to the claimant and had no reason to believe that others would connect it with him. The test is whether those to whom the statement was published would reasonably suppose him to be the person referred to. That will commonly depend on who it was published to and what knowledge they had of him. In that context, extrinsic evidence is naturally available to connect the perception of the claimant among those to whom the defamatory statement was published with the person referred to in it. Section 393 of the Act has an entirely different purpose. It applies where the Authority knows of the third party and intends to refer to his actions, but only where it actually identifies him in the notice. I do not accept, any more than the Court of Appeal did, the judges view that because reporting lines lead to individuals, any reference to management must be to an individual. Nor do I accept Mr Macriss argument that because the notices referred to actions such as making statements, attending meetings or sending e mails, which must have been done by individuals, a single individual is meant, as opposed to any of a number of individuals comprised within the term the firm, CIO or CIO management. The real question is whether the terms of the notice itself would have conveyed to a reasonable member of the public without extrinsic information that any of these terms was a synonym for Mr Macris. Plainly it would not. I would therefore allow the appeal and declare that Mr Macris was not a third party for the purposes of section 393 of the Financial Services and Markets Act 2000. LORD NEUBERGER: I agree with the judgment of Lord Sumption, and I add a few observations of my own because there is no doubt that the case for giving a wider meaning to section 393(1)(a) of the Financial Services and Markets Act 2000, as explained by Lord Mance and Lord Wilson, has considerable force. The point raised on this appeal centres around the effect of the word identifies in section 393(1)(a), and it is, at least in my view, difficult to resolve. Section 393(1)(a) is a good example of Parliament enacting a provision whose general purpose is clear, but, because there can be more than one reasonable view as to the provisions scope, the resolution of that issue has effectively been assigned to the courts. I do not say this by way of complaint. In some cases, Parliament may consider that it is better for the legislature to lay down a rule in fairly unspecific terms in a statute, and then leave it to the courts to determine the precise extent and reach of the rule by reference to specific sets of facts. This appears to be such a case. As is clear from reading the judgments of Lord Sumption and Lord Wilson, resolution of the point at issue has significant implications both for the conduct of the Financial Conduct Authoritys functions and for individuals who, while they are not named in a warning notice (under section 387) or a decision notice (under section 388), may have their reputations harmed as a result of the publication of such a notice. Section 393 is plainly intended to enable at least some such individuals to be served with a copy of the notice concerned, to refer it to the Upper Tribunal and to challenge some or all of the contents of the notice, rather than leaving any challenge to the notice in the sole hands of the party against whom it is primarily issued, presumably normally the employer of the individual concerned, as in this case. The purpose of including such a provision in the 2000 Act is clear. The interests of the addressee of a notice who is accused of failings, and those of a third party such as an employee of the addressee, who may be identifiable as responsible for, or implicated in, the alleged failings, are by no means necessarily aligned. Thus, it may well be that an employer would want to try and curtail any publicity about the alleged failings by quickly negotiating and paying a penalty, even if there may be grounds for challenging the allegation in whole or in part. But this may often not suit the employee, who might well feel that, in the absence of the Tribunal exonerating him, his reputation, and therefore his future employment prospects, could be severely harmed or even ruined. In this case, the addressee of the Notice, JP Morgan Chase Bank NA, was Mr Macriss employer, and it did indeed pay a substantial penalty to the Authority, no doubt with a view to putting an end to any proceedings on the Notice. Mr Macris received a separate notice and contested before the Tribunal the allegations in the notice served on him (which were substantially identical to those in the Notice served on the Bank, which is the Notice to which he claims section 393 applies). While some of the allegations against Mr Macris were upheld, the more serious ones, including one which at least implied that he had not been honest in certain respects, were rejected. Had he not been served with his own notice, Mr Macris would not have been able to challenge the Notice served on the Bank, unless he had been identifie[d] in that Notice. That brings me to the question of the scope of the section. The wider the scope of section 393(1)(a), the more constraining it will be on the Authoritys activities, as Lord Sumption explains in para 14 above. But the narrower the scope of the provision, the greater the number of individuals who will be at risk of being harmed by notices without any recourse, as Lord Wilson describes in paras 60 and 61 below. On this appeal, it is not suggested on behalf of Mr Macris that an individual should be within the scope of section 393 simply because he could show that one person could identify him from the terms of the notice. On the other hand, the Authority accepts that section 393 cannot be limited to cases where the individual concerned is mentioned by name in the notice. There is no entirely satisfactory logical basis for justifying any particular conclusion as to the precise point at which one draws the line between these two extremes. Because there are powerful policy arguments pointing in opposite directions, it seems to me that it is justified, indeed requisite, to have particular regard to the wording of the relevant statutory provision. Section 393(1)(a) states that section 393 applies where any of the reasons contained in a notice relates to a matter which identifies a person. In other words, the question to be asked is: does the notice identify the individual in question? The language used appears to stipulate that the person must be identified in the notice, not that he must be identifiable as a result of the notice. A literal reading could therefore be said to suggest that the notice must expressly mention the individual by name, as opposed to rendering that individual capable of being identified as a result of information to which one reader, all readers or a specific group of readers of the notice may be able to get access. In my view, that would be too narrow a meaning to give the section. An equally natural, but more realistic interpretation is that, in order for the section to apply to an individual, either he must be named in the notice, or the description in the notice must be equivalent to naming him. On this basis, a reference to the Chairman of the Board of a United Kingdom registered company would identif[y] the individual concerned, as it would be easy for anyone to find out his name. (And, depending on the facts, the same might be the case with a reference to the Chairman of the Board of a foreign registered company). It is true that even that form of identification would require the reader to have some outside knowledge, but as a matter of ordinary language, I would accept that an individual is identified in a document if (i) his position or office is mentioned, (ii) he is the sole holder of that position or office, and (iii) reference by members of the public to freely and publicly available sources of information would easily reveal the name of that individual by reference to his position or office. Apart from the notice having to mention the position or office, that test has two essential features. The first is that it involves assessing the identifiability of an individual by reference to what members of the public generally know or could discover. A test that was satisfied by reference to a specific and smaller group would give rise to difficulties as to where one should draw the line as a matter of principle, and also as to how in practice the Authority could know whether or not an individual satisfies the statutory test. The second essential feature is that, in order to satisfy the test, any research or investigation should be straightforward and simple, as would be the case in relation to identifying who chairs the board of a UK registered company. In order to qualify, any investigation process should not require any detective work; and so jigsaw identification, ie correctly identifying someone as a result of relating separate snippets of information (Donald v Ntuli [2011] 1 WLR 294, para 55), would not do. Similarly, the fact that Mr Macris could be identified by reference to a publicly available US Senate Committee report would not do because a member of the public would not know of that report, and anyway would not think of referring to it for the purpose of identifying Mr Macris as the individual referred to in the Notice in this case. Lord Wilson makes out a strong case as to the potential for unfairness if this conclusion is right, and his powerfully expressed views have caused me considerable doubts as to whether indeed it is. However, his solution appears to me to give rise to problems which support adhering to the conclusion I have expressed. First, if a wider meaning than that which I have suggested is given to section 393(1)(a), it would be a matter of subjective assessment as to how wide a scope to give it. Secondly, any wider definition, unless it is very much wider than anyone has so far suggested, could self evidently lead to disputes. Thirdly, a wider meaning could lead to some rather odd consequences. Fourthly, a wider definition would put the Authority in a difficulty from the start. Fifthly, a wider definition could still lead to arbitrary outcomes. Lord Wilsons suggested formulation in para 63 is plainly reasonable and indeed it is attractive. However, like the formulation suggested by the Court of Appeal, it seems to me to manifest the first and second problems I have just identified, and it also serves to demonstrate the third, fourth and fifth problems. First, if section 393(1)(a) has a wider application than I have suggested, there is no logical or principled reason for excluding from, or indeed including in, its scope an individual who could be identified by a person who is personally acquainted with [him], to quote from Lord Wilsons test. Secondly, there could also easily be disagreements, which would have to be resolved, as to whether, on disputed or agreed facts, a particular person falls within that expression. Thirdly, as the facts of this case show, it may well be that Mr Macris could only have satisfied Lord Wilsons test because of the happenstance that he had been identified in a published US Senate Committee report on various problems encountered by the Bank. Fourthly, these very facts highlight the difficulties which the Authority could face if one gives section 393(1)(a) a wide meaning. Fifthly, even on Lord Wilsons test, where a group of two people is identifiable from a Notice, it could be damaging to both of them if they could not clear their names, yet unless one of them could be identified, neither of them would be within the section. LORD MANCE: This is a difficult case. But, ultimately, I am in broadly the same position as Lord Wilson on the issue of law. However I find myself, not without hesitation, arriving at the same conclusion about the outcome of this appeal as Lord Sumption and Lord Neuberger when I apply this test to the facts of this case. On the question of law, it is tempting to take the very broad view that it is unfair if a person like Mr Macris is not given the opportunity to address criticisms in a final decision notice directed, as this was, to Mr Macriss current employers, JP Morgan Chase Bank NA, in terms which future employers might be able to ascertain by due diligence or investigation were in reality critical of Mr Macris. But that would make the task of the Authority very difficult indeed, and is not in my opinion the intention or effect of the language of section 393 of the Financial Services and Markets Act 2000. On the other hand, I consider that Lord Sumption and Lord Neuberger take too narrow a view of the third party protection which the Act intended. They take a narrower approach than even the Authority advances as its primary case, a narrower approach than any previous court addressing the issue has ever considered appropriate. They do not go to the absolute extremity of a requirement that the third party should be named. But they require either naming or what is described as a synonym. In Lord Sumptions words (para 11), a person is identified in a notice under section 393 if he is identified by name or by a synonym for him, such as his office or job title. In the case of a synonym, it must be apparent from the notice itself that it could apply to only one person and that person must be identifiable from information which is either in the notice or publicly available elsewhere. However, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice. This is what one may call a dictionary approach. But a notice is not issued into a vacuum, of which the only occupant is a dictionary. The dictionary is one aspect of publicly available information, and, once it is permissible to look at that aspect of publicly available information to supply the identity of a person who is being criticised in a notice, I am unclear why this should not, for example, also be permissible to show that a generic description such as CIO London management in a notice in fact describes only one person. In my view, the correct analysis is, rather, along the lines of the Authoritys primary case, viz that a matter (only) identifies a person if the identity of the person is apparent from the terms in which the matter is described or explained, read in the light of information generally or publicly available in the financial world (as distinct from information available only to persons acquainted with the person or his company). Judge Timothy Herrington in the Upper Tribunal treated section 393 of the 2000 Act as involving a two stage test. First, the decision notice must direct criticism at a particular individual or the members of a particular group of individuals. Second, that satisfied, such individual or individuals could be identified for the purposes of section 393 by external material, regardless of whether the ordinary reader of the notice would be able to establish that the criticisms relate to the individual in question (para 37). It was not a question of whether any particular type of reader could identify the individual concerned but simply whether there is information in the public domain that incontrovertibly links the description in the Final Notice to, in this case, Mr Macris (para 50). Judge Herrington considered (in my view, probably incorrectly) that this analysis was consistent with that adopted by an earlier Financial Services and Markets Tribunal decision in Watts v Financial Services Authority FIN/2004/0024 (unreported) 7 September 2005. Judge Herrington attached no significance to the fact that the British press had not in fact worked out the identity of Mr Macris until by his present claim he prompted them. The Court of Appeal considered that Whether the relevant matters identify a person for the purposes of section 393 is in one sense a unitary question, a proposition with which I agree, but went on to adopt Judge Herringtons two stage approach as logical. It disagreed with the breadth of Judge Herringtons approach at the second stage of his two stage approach. It said that there cannot be ex post facto unlimited reference to external material to identify the third party, and that identification could only be made by reference to information which objectively would be known by persons acquainted with the third party, or persons operating in the relevant area of the financial services market (para 50). It is notable, however, that, in the next paragraph of its judgment, the Court of Appeal referred to what such persons might reasonably have known. Further, in para 51, after noting, correctly in my view, that the failure of the press to identify Mr Macris before his present claim was of some evidential relevance, the Court of Appeal only upheld the judges conclusion on the basis that had he applied the objective test [which the Court of Appeal] formulated, [he] would have been entitled to conclude on the evidence before him, that despite the fact that the press had not previously latched on to the matter, the relevant sector of the financial market would nonetheless have appreciated that it was Mr Macris who was identified in the Notice as CIO London management. Once it had concluded that Judge Herrington had applied the wrong test, it was for the Court of Appeal itself to apply the right test, not to consider whether a judge applying the correct text might reasonably have arrived at the same result or would have been entitled to do so. Section 393 gives rights which go beyond any which would arise at common law under principles discussed in In re Pergamon Press Ltd [1971] Ch 388. It is not therefore surprising that these are carefully delimited. The use of the words which identifies a person contrasts with the use elsewhere in the statute of the word identifiable (Schedule 2, paragraph 14(2) and Schedule 11B, paragraph 8(3)). Some assistance in understanding section 393 may also be obtained from section 230A, albeit only added with effect from 24 January 2013. This, in the context of the Ombudsman Scheme introduced by Part XVI of the Act, provides that: (3) Unless the complainant agrees, a report of a determination published by the scheme operator may not include the name of the complainant, or particulars which, in the opinion of the scheme operator, are likely to identify the complainant. The ambit of this provision may be regarded as confirming the limited scope of the third party protection intended under section 393. On the question whether a notice is directed at a particular person, the Tribunal said in Watts, at para 50, in the context of a decision notice directed simply at Shell, that: There is no reason in our view why a market abuse allegation directed at a company must necessarily be taken to impute criticism to particular individuals. We doubt whether undertaking the threefold steps which are said to be required, and looking at publicly available sources to see whether any and if so which individuals were identified, would be a workable process. In the present case, I consider (contrary to the conclusion reached by Judge Herrington) that the criticism directed in the report to CIO [ie Chief Investment Office] London Management cannot by itself necessarily be taken to relate to any particular individual or individuals. However, it must relate to one or more of a group of individuals making up CIO London management. I also consider (contrary to the view taken in both courts below) that a notice cannot be said to identify an individual merely because persons acquainted with him or his company could do so. Otherwise, it would be necessary in almost every case for a third party notice to be given. The test of identification should have regard to information generally available publicly, without inquiry of those with direct knowledge of the company involved or detailed investigation, to those in the relevant financial world in which the matter occurred. A notice will, in my view, only identify an individual if it does so to persons operating in that world, unacquainted with the particular individual or his company, though familiar with information generally available publicly to operators in that world. In the present case, the matter to which the Notice related consisted of the circumstances in which the Bank incurred losses as the result of what became known as the London Whale trades (para 2.1), and the Notice assigned responsibility for this matter in certain respects to CIO London management. If there was publicly available information making clear that CIO London management equated with Mr Macris or that he was the person who within CIO London management had managed the London Whale trades, I would regard that as sufficient identification of him to trigger section 393(1) and (4). The courts below relied both on evidence from two witnesses closely acquainted with Mr Macris and on the US Senate Report into the London Whale matter. The two witnesses in question had worked with Mr Macris in, or done business with, the CIO and had detailed knowledge of the CIOs organisation and structure. They were speaking on the basis of specialist knowledge which was, in my view, irrelevant to identification. As to the Report, Judge Herrington said that it is accessible on the internet and contains many references to [Mr Macris] (para 53), and noted that it showed that some of the communications referred to in the Notice as involving CIO London management were in fact with Mr Macris. In disagreement with Lord Wilson on this point, I do not consider that it follows that CIO London management equated with Mr Macris, or that he was the only relevant individual in CIO London management or that the criticisms directed generically at CIO London management were being directed at him. Although it was accessible on the internet, I am also left uncertain whether it and its contents have been shown to constitute publicly available information in a United Kingdom context. For these reasons, I agree that this appeal should be allowed. LORD WILSON: (dissenting) I find myself in respectful disagreement both with the majority of the court and, on a more limited yet important aspect referable to the disposal of this particular appeal, also with Lord Mance. In its Notice of Appeal the Authority suggested that, when providing for third party rights in section 393 of the Act, Parliament probably intended an approach which could strike a fair balance between individual reputation and regulatory efficiency. The courts decision today does not strike a fair balance. In para 1 of his judgment Lord Sumption observes that the point raised by the appeal has significant implications for the conduct of the Authoritys investigatory and disciplinary functions. I agree with Lord Sumptions observation. But does it not betray a lack of balance? Does the point not also have significant implications for individuals wrongly criticised in warning and decision notices given by the Authority to others? In its Notice of Appeal the Authority stated as follows: I indorse the Authoritys suggestion. The issue in the appeal is whether the test formulated by the Court of Appeal is correct. The Authority does not seek to argue (as it did in the Court of Appeal) that identification for these purposes is limited to names or designations that function as proper nouns. But the Authority submits, as it did in the Court of Appeal, that a person is identified in a notice only if the terms of the notice would reasonably lead the ordinary reader (that is, the reader with a general understanding of financial affairs and aware of publicly and widely available background material, but without specific or special knowledge of the underlying facts of the matter to which the notice and its reasons relate) to conclude that the notice unambiguously identifies the applicant as a person mentioned in the notice. I will refer to the Authoritys suggested test as the ordinary reader test. In its written case, echoed in the oral submissions of Mr Crow QC on its behalf, the Authority suggested that, while the court might wish to consider whether an individual was identified only if named in the notice, or perhaps also if referred to by his formal job title, the correct test was its ordinary reader test. In order to ensure that the Authoritys functions are workable, Lord Sumption favours a construction of section 393 which appears to narrow the field of those upon whom it confers third party rights even more than the Authority itself suggests to be correct. But I say that his construction appears to narrow the field because I confess that I find it indeed it follows that I find the whole basis of the courts decision today slightly hard to understand. My perplexity, which I trust that readers of our judgments will not share, arises in the following way: (a) Both in para 11 and in the final paragraph of his judgment (para 17) Lord Sumption stresses the need for a synonym before an unnamed person will be identified within the meaning of the section. (b) In explaining his agreement with Lord Sumption, Lord Neuberger therefore undertakes, at para 26, a conventional analysis of what, in this context, a synonym means. He suggests that the persons position or office must be mentioned, that he must be the sole holder of it and that, by reference to freely available sources of information, the public must be able easily to discover his name as being the holder of it. In para 11, however, Lord Sumption proceeds to explain his use of the (c) As Lord Mance suggests at para 33, the above may be called a dictionary approach. (d) word synonym. (e) So he says that a reference to CIO London management would be a synonym if it referred to one person who was identifiable from publicly available information. But can CIO London management be described as a position or office? (f) Lord Sumption also says that resort to publicly available information is permissible in order only to interpret, and not to supplement, the language of the notice. How obvious is this distinction? (g) He also says that it is impermissible to resort to additional facts about the person so that, if they are placed alongside the notice, it becomes apparent that they refer to the same person. How clear is the meaning of this prohibition? The question raised by section 393(1) and (4) of the Act is whether any of the reasons contained in a notice relates to a matter which (a) identifies a person The cumbersome terminology was borrowed from the predecessor of the section, namely section 70(4) of the Financial Services Act 1986 (the 1986 Act). But the surplus words are swiftly and conveniently banished in section 393(2)(b) and (6)(b) of the Act, where it is made clear that it is simply the notice which has to identify the person. In the Upper Tribunal Judge Herrington, who prior to his appointment had been Chair of the Authoritys Regulatory Decisions Committee and so brought to the issue an arresting level of expertise, suggested that the question whether a notice identified an applicant for third party status should be answered in two stages: (i) By reference only to the terms of the notice, do the matters of which the applicant complains refer to an individual? If so, (ii) demonstrates that the individual is the applicant? Is there information in the public domain which incontrovertibly The Court of Appeal agreed that the question should be answered in two stages and that the judges formulation of the question at the first stage was correct. The Authority says that it now agrees that a two stage approach may be helpful and it broadly agrees with the formulation of the first question. The Court of Appeal held that the judges formulation of the question at the second stage was too broad; and no one now contends otherwise. The Court of Appeal proceeded to reformulate that question as follows, at para 45: Are the words used in the matters such as would reasonably in the circumstances lead persons acquainted with the [applicant], or who operate in his area of the financial services industry, and therefore would have the requisite specialist knowledge of the relevant circumstances, to believe as at the date of the promulgation of the Notice that he is a person prejudicially affected by matters stated in the reasons contained in the notice? Unfortunately the Court of Appeals mistaken reliance on the law of defamation led it to make two errors in its reformulation of the question at the second stage and to include in it one infelicity. The first error was to include persons acquainted with the [applicant] in the notional constituency of those who would decide whether he was the individual to whom the notice referred. Persons acquainted with him would include persons well acquainted with him, such as members of his family and close colleagues at work; and they would be likely to know that he was indeed that individual in circumstances in which it would be absurd to describe him as having been identified in the notice. Thus, in the recent case in the tribunal of Bittar v Financial Conduct Authority [2015] UKUT 602 (TCC), Judge Herrington felt the need, at paras 33 and 34, to apply a heavy gloss to the Court of Appeals reference to acquaintances so as to exclude those with close knowledge of the circumstances. The second error was to define the decision for that constituency as being whether the applicant was a person prejudicially affected by matters in the notice. The decision for the constituency is, instead, whether the individual to whom the notice refers is the applicant. Whether, if so, matters in the notice are prejudicial to him is, instead, a matter for the Authority pursuant to section 393(1)(b) and (4)(b) of the Act. The infelicity was to suggest that it was enough for that constituency to believe. The verb is too weak. Although the composition of the constituency may not have been correctly identified in its ordinary reader test, the Authority is correct to suggest that, at the second stage, the constituency needs to conclude that the individual to whom the notice refers is the applicant. But the kernel of the Court of Appeals reformulation of the question at the second stage remains. It is that the relevant conclusion should be reached by persons who operate in his area of the financial services industry, and therefore would have the requisite specialist knowledge of the relevant circumstances. It is at this point that the court should have addressed what is in my view the central issue of construction raised by the appeal. Does a notice identify a person for the purpose of section 393(1)(a) and (4)(a) of the Act if ordinary readers, as defined by the Authority in its suggested test, would conclude that the individual to whom the notice refers is the applicant? Or does it identify a person for that purpose if ordinary operators in the same sector of the market would reach that conclusion? Which, in other words, is the appropriate constituency ordinary readers or ordinary market operators? I answer the question by reference to the particular sort of damage which a wrong criticism of an individual in a notice given by the Authority is likely to cause to him. It is the reaction to the criticism of those who operate in the same sector of the market which is likely to cause him most damage; for it may prejudice his ability to remain in his employment, or to find other employment in that sector, or otherwise to continue to earn his livelihood in the industry. The predecessor to section 393 of the Act, namely section 70(4) of the 1986 Act, identified, at (b), the prejudice which the Secretary of State needed to perceive: it was prejudice to that person in any office or employment. Although under section 393(1)(b) and (4)(b) of the 2000 Act the type of prejudice which the Authority needs to perceive is left open, there is nothing to indicate that in 2000 Parliament was any less concerned about prejudice in relation to employment than it had been in 1986. Take the case of Mr Macris himself. In the warning and decision notices given to the bank on 18 September 2013, the Authority referred in detail to a telephone call on 10 April 2012 which it had conducted with CIO London management. In fact it had conducted the call with (or primarily with) Mr Macris; and in these proceedings it has always accepted that, when referring in the notices to CIO London management, it was referring to Mr Macris but in a way which (so it hoped) would avoid identifying him. In the notices the Authority concluded in relation to the telephone call that (by virtue of the conduct of CIO London management) the Authority was deliberately misled by the Firm. The allegation that during the telephone call Mr Macris deliberately misled the Authority is, if untrue, gravely damaging to him. But, in its later notices given to Mr Macris himself following its direct inquiry into his conduct, there is no such allegation. There is extensive reference to the same telephone call; and his conduct in the course of it is said to contribute to the conclusion that, as an approved person, he had failed to deal with the Authority in an open and cooperative way in breach of Statement of Principle 4 of the Authoritys Statements of Principle for Approved Persons. But the more gravely damaging allegation against Mr Macris is not repeated. Yet, by contrast, there, in the published decision notice given to the bank, the allegation remains. Apparently Mr Macris, whose employment by the bank has long since been terminated, cannot challenge it in any way. He cannot sue the Authority for damages, whether in tort or otherwise, because it has not acted in bad faith: paragraph 25 of Schedule 1ZA to the Act. And, by the decision of the court today, he is not entitled to third party status under section 393 of the Act. Nor would Mr Macris have been entitled to third party status by application of the Authoritys ordinary reader test. I see no merit in the Authoritys submission that, even if ordinary market operators were to conclude that he was the individual to whom the decision notice referred, Mr Macris should fail to secure third party status because ordinary readers would not reach a similar conclusion. In my view the proper construction of the word identifies in section 393(1)(a) and (4)(a) of the Act requires that the question at the second stage of the inquiry should be answered by reference to the ordinary market operator test. But the test requires expansion in order to identify, and in particular to limit, the information to which the operator should refer. In essential agreement with Lord Mance at para 37, I would expand it as follows: Are the words in the notice such as would reasonably lead an operator in the same sector of the market who is not personally acquainted with the applicant, by reference only to information in the public domain to which he would have ready access, to conclude that the individual referred to in the notice is the applicant? It is easy to pick holes in my formulation of the above question. In their application to particular facts, its references to the same sector, to personal acquaintanceship and to ready access to information might all give rise to debate. But, for my part, I am unpersuaded that it would be impossible for the Authority satisfactorily to address that question; for it will not have reached the stage of giving a notice before having conducted a profound examination of the relevant circumstances. Above all, however, my formulation would, if I may say so, have better struck, as between individual reputation and regulatory efficiency, the fair balance which the Authority has correctly identified to have been Parliaments intention. Were I correctly to have formulated the question at the second stage of the inquiry, the answer to it would be yes, the individual referred to in the notices is Mr Macris. There is no doubt that the two deponents in support of Mr Macris, each of whom knew him and had worked with him, could not have contributed to an affirmative answer. But there was also the report of the US Senate Permanent Subcommittee on Investigations dated 15 March 2013 and entitled JP Morgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses. As Judge Herrington said, the report was the subject of an in depth investigation; was readily accessible on the subcommittees website; and contained many (in fact more than 80) references to Mr Macris. It had generated significant press attention. By cross reference to the report, the ordinary market operator would readily conclude that the references in the notices to CIO London management were references to Mr Macris. When, for example, the notices referred to the despatch by CIO London management of an e mail on 30 March 2012, the subcommittee report referred to its despatch by Achilles Macris. I do not share the concern of Lord Mance, expressed at para 39, that the report might not have been readily available to market operators in the UK; and I agree with the qualified acknowledgement by Lord Neuberger, at para 30, that it would provide an affirmative answer to my formulation of the question. Nor do I join my colleagues in concluding that Mr Macris fails even to pass the first stage of the inquiry, which requires him to establish that, by reference only to the terms of the notices, the Authoritys criticisms of CIO London management refer to an individual. The Authority secured permission from the Court of Appeal to challenge the tribunals conclusion that Mr Macris had passed the first stage; but its challenge failed. In its Grounds of Appeal to this court there was no suggestion of any aspiration to mount a further challenge in this respect. Indeed in my view, had permission to do so been sought, it would have been refused; it does not raise a point of general public importance. I consider that, although good arguments relevant to the inquiry at the first stage have run both ways, it is no longer open to the Authority to dispute the passage of Mr Macris through it. So I would have dismissed the appeal. |
The transactions with which this appeal is concerned arose during a period when sale and rent back transactions were common. They were what was described by the Office of Fair Trading in 2008 (Sale and rent back: An OFT market study) as a relatively new type of property transaction whereby firms bought homes from individuals, usually at a discount, and allowed the former home owners to stay on in the property as tenants. The deals were often sold to home owners in financial difficulties and the firms selling them often told the home owners that they would be able to stay in their homes for years, when in fact the tenancies were rarely granted for more than six or twelve months. Many firms financed the purchase of the properties through secured borrowing, and former owners were being evicted following proceedings for possession by mortgage lenders after the purchasers defaulted on their loans. The home owners did not fully understand the risks involved, and the OFTs research found that solicitors provided by the sale and rent back companies to provide advice to the seller were sometimes suspected to be acting for the companies as well. By the time of the study the OFT estimated that there were 1,000 firms involved in selling the schemes and about 50,000 transactions. In 2009 the Financial Services Authority recommended that consumer detriment occurring in this market warranted a fast regulatory response, and in the same year sale and rent back transactions became a regulated activity under section 19 of the Financial Services and Markets Act 2000. As a result, in February 2012 the FSA reported that most sale and rent back transactions were unaffordable or unsuitable and should never have been sold, but that in practice the entire market had shut down. They are now very rare. This is an appeal in one of what were originally ten test cases in which the defendant home owners were persuaded to sell their properties to purchasers who promised the vendors the right to remain in their homes after the sale. The purchasers bought the homes with the assistance of mortgages from lenders, who were not given notice of the promises to the home owners. Criminal charges are pending and the original owners and the lenders may have been the victims of a fraud. Some of the solicitors involved in the transactions were subsequently the subject of disciplinary proceedings. Ultimately this appeal will determine which of the innocent parties will bear the consequences. The purchasers/mortgagors were nominees for an entity called North East Property Buyers (NEPB). In each case the purchaser/mortgagor has taken no part in the proceedings. There are another 90 or so cases in the Newcastle area involving NEPB and some 20 different lenders, but also many other cases in other parts of England involving similar schemes. In each case the purchaser applied for a loan from one of the lenders. The application form disclosed that the property was being purchased on a "buy to let" basis and that the tenancies granted would be assured shorthold tenancies of six months' duration. The mortgage terms generally permitted only assured shorthold tenancies for a fixed term of not more than 12 months. As a result the purchasers were able to obtain loans on the basis that they were purchasing properties at full value with vacant possession. Exchange of contracts between the relevant vendor and the purchaser, and the completion of the contract by the execution of the transfer, and the execution of the mortgage, all took place on the same day. Neither the rights of occupation promised by the purchasers to the vendors nor the tenancies granted by the purchasers were permitted by the lenders mortgages. The purchasers defaulted on the loans, and the lenders sought possession of the homes in proceedings, which the original owners resisted, without success, before Judge Behrens sitting as a High Court judge in the Chancery Division at Leeds District Registry (sub nom Various Mortgagors v Various Mortgagees [2010] EWHC 2991 (Ch)) and on appeal before Lord Neuberger MR, and Rix and Etherton LJJ, with Etherton LJ giving the only reasoned judgment: sub nom Cook v Mortgage Business [2012] EWCA Civ 17, [2012] 1 WLR 1521. The essence of the issue before this court is whether the home owners had interests whose priority was protected by virtue of section 29(2)(a)(ii) of, and Schedule 3, paragraph 2, to the Land Registration Act 2002 (the 2002 Act). There are two main questions on this appeal which divide the parties, and each of them concerns the effect of the contract of sale and purchase. One question is whether the purchasers were in a position at the date of exchange of contracts to confer equitable proprietary rights on the vendors, as opposed to personal rights only. The second question is whether, even if the equitable rights of the vendors were more than merely personal rights, the rationale of the decision of the House of Lords on the Land Registration Act 1925 (the 1925 Act) in Abbey National Building Society v Cann [1991] 1 AC 56 applies in this case. At the risk of oversimplification, that case decided that where a purchaser relies on a bank or building society loan for the completion of a purchase, the transactions of acquiring the legal estate and granting the charge are one indivisible transaction, and an occupier cannot assert against the mortgagee an equitable interest arising only on completion. Mrs Scott's case The only appeal before this court is that by Mrs Scott, but because this is a test case I shall for convenience refer to the arguments on her behalf as those of the vendors. In order to put some flesh on the scheme, I propose to illustrate it by reference to some of the facts of Mrs Scotts case, although it should be emphasised that there have been no findings of fact and that the lenders have not agreed the statement of facts from which this account is taken. Mrs Scott and her former husband Mr Scott were originally secure tenants of a house in Longbenton, Newcastle upon Tyne. They bought the house from North Tyneside Borough Council in 1999 on a mortgage from Cheltenham and Gloucester, and became the registered proprietors with absolute title. Five years later Mr Scott left Mrs Scott and she fell into financial difficulties. In 2005 she decided to put the house on the market at 156,000 but only received an offer significantly below the asking price. Mrs Scott was subsequently approached by a man who told Mrs Scott that he had heard she was trying to sell her house, and said that a friend of his worked for a Mr Michael Foster who was looking to buy properties in the area and that Mr Foster would pay the asking price and rent it back to Mrs Scott. Mr Foster, who was in some way connected with NEPB, then met Mrs Scott and told her that he would purchase the property for 135,000 and that she could stay as a tenant at a discounted rent of 250 a calendar month. If she stayed for ten years she would receive a lump sum of 15,000, which would make up some of the deficit in the sale price, and she would receive 24,000 from the net proceeds of sale. The outstanding mortgage to Cheltenham and Gloucester was in the region of 70,000, and so the equity would have been about 65,000. A deduction of 40,000 would be paid to NEPB. Mrs Scott told Mr Foster that she wished to live in the property indefinitely and he assured her that she could stay as long as she liked, and that if she were to die the tenancy would be automatically transferred into her sons name and he would receive the lump sum at the end of the ten year period. Mr Foster said that he would arrange solicitors for her and be responsible for the legal fees so long as those solicitors were used. Those solicitors were Hall & Co, who also acted for the vendors in most of the other cases. The solicitors for the purchaser were Adamsons, who, in the usual way, also acted for the lenders (and also acted in other transactions of this type). Ms Amee Wilkinson was the nominee purchaser for NEPB. Ms Wilkinson was made a buy to let interest only mortgage offer by Southern Pacific Mortgages Ltd on June 15, 2005. The loan amount was 114,750 and 1,751.50 fees. The mortgage offer stated that the purchaser was not bound by the terms of the offer until the purchaser had executed the legal charge, the funds had been released, and the legal transaction had been completed. In the course of the conveyancing process, the answers to the requisitions on title in respect of vacant possession were that arrangements might be made direct with the seller as to both the handover of keys and the time that vacant possession would be given. The agreement for sale, dated August 12, 2005, was expressed to be with Full Title Guarantee and subject to the Standard Conditions of Sale (4th Edition). The Special Conditions attached at Clause 4 were left by both firms of solicitors without either of the alternatives being deleted so that it read, The property is sold with vacant possession (or) The property is sold subject to the following Leases or Tenancies. No leases or tenancies were listed. Completion of the transfer (TR1) from Mrs Scott and Mr Scott to Ms Wilkinson and the legal charge by Ms Wilkinson to SPML also took place on August 12, 2005. The transfer and the charge were registered on September 16, 2005. Four days later, on August 16, 2005 UK Property Buyers acting as agents for Ms Wilkinson, contrary to the terms of Ms Wilkinsons mortgage, granted Mrs Scott a two year assured shorthold tenancy at the reduced rent. On expiry of the fixed term, the tenancy was stated to become a monthly periodic tenancy terminable on not less than two months notice in writing. Mrs Scott also received, dated August 16, 2005, a document promising that she could remain in the property as the tenant and that a loyalty payment of 15,000 would be paid after ten years. Three years later, in August 2008, Mrs Scott became aware that there might be a mortgage on the property. A letter was sent to Mrs Scott by North East Property Lettings suggesting that there had been teething problems following an office move and that some tenants had been receiving letters from mortgage companies stating that the account was in arrears, which, the letter assured Mrs Scott, was incorrect. A few months later, Mrs Scott discovered, through accidentally opening a letter addressed to Ms Wilkinson at the house, that a possession order had been made on March 17, 2009 without her knowledge, pursuant to proceedings commenced in February 2009. Subsequently, she received a warrant of possession due to be executed on May 20, 2009. 24. But there is also an important public interest in the security of registered transactions. There are more than 23 million registered titles in England and Wales, and each month the Land Registry may handle up to 75,000 house sales, of which the vast majority will be financed by secured loans. The judgments of Judge Behrens and the Court of Appeal 26. Ultimately, Mrs Scotts case was selected as one of the ten test cases to be tried before Judge Behrens. At a case management conference, he ordered that three preliminary issues should be tried, of which only the first remains live, namely: With reference to section 29 of the [2002 Act] are any of the interests alleged by the defendants capable of being interests affecting the estates immediately before and/or at the time of the disposition, namely the transfer and/or charge of the property in question, sufficient to be an overriding interest under paragraph 1 and/or 2 of Schedule 3 to the 2002 Act? 27. The vendors argument throughout these proceedings has been, with some variations, that they had rights which took priority to the lenders' charges essentially because: (1) from the moment of exchange of contracts the vendors each had, by virtue of the assurances by the purchasers as to the vendors right of occupation after completion, an equity in their property beyond and in addition to their registered freehold interest; (2) the equity was a proprietary right and not a mere personal equity, because the purchasers had proprietary rights as from exchange of contracts, out of which they could carve the obligation to lease back the properties to the vendors, and it did not matter that the contract of sale did not reflect that obligation; (3) there was a sale subject to a reservation of the leaseback to the vendors (and not a separate sale and leaseback or one indivisible transaction of contract, transfer and mortgage), and the purchasers never had more than a title to the property subject to the vendors rights; (4) the vendors rights had effect from the time they arose: the 2002 Act, section 116; and (5) the equity took priority under Schedule 3, paragraph 2, to the 2002 Act and was therefore binding on the lenders by virtue of section 29(2)(a)(ii). 28. Although there was some suggestion in the appeal to this court that the property was held on resulting trust (on the basis that the sale was in reality a sale of the reversionary interest), Mrs Scotts primary case is that, because of the representations made to her by or on behalf of the purchaser, the purchaser is a constructive trustee or bound by a proprietary estoppel. In Bannister v Bannister [1948] 2 All ER 133, a claim that the owner had agreed to let the occupier live in a cottage rent free for as long as she wished was treated as a claim based on constructive trust, on the basis that the purchaser fraudulently set up the absolute character of the conveyance for the purpose of defeating the beneficial interest (at p 136). The relationship between constructive trust and proprietary estoppel has been the subject of much discussion: see especially Yaxley v Gotts [2000] Ch 162, 176 177. It is likely that the difference would only be crucial in terms of remedies, but nothing turns on the distinction in this appeal. 29. The essence of Judge Behrens judgment was as follows: (1) even if the promises to the vendors gave rise to a proprietary right on completion, there was no moment in time in which such an interest could bind the lender: Abbey National Building Society v Cann [1991] 1 AC 56; (2) the vendors did not obtain an interest on exchange of contracts, because contract, conveyance and mortgage were one indivisible transaction: Nationwide Anglia Building Society v Ahmed (1995) 70 P & CR 381; (3) in any event, prior to completion the vendors equitable rights were at best personal rights and not proprietary rights; (4) the transfers executed by the vendors on completion would have transferred any interest which they had in the properties to the purchaser under the Law of Property Act 1925, section 63. 30. The Court of Appeal decided that: (1) there was a separate sale of the freehold and a leaseback to the vendor on completion, and not a sale subject to a reservation; (2) the clear impression created by the contracts was that the vendors would be selling without reserving any beneficial interest or other rights in the property; (3) a mortgagee lending money to finance the purchase would be entitled to view the matter in the same way; (4) in those circumstances no equitable interest or equivalent equity could have arisen in favour of the vendors prior to completion; (5) even if an equity arose in favour of the vendors on exchange of contracts in consequence of the assurances given by the purchasers, there was no moment of time when the freehold acquired by the purchaser was free from the mortgage but subject to the equity, and it was unrealistic to separate out the contract, on the one hand, and the transfer and mortgage, on the other hand, as separate transactions: Abbey National Building Society v Cann [1991] 1 AC 56, as applied in Nationwide Anglia Building Society v Ahmed (1995) 70 P & CR 381; (5) if the equitable interest arose on completion, then Abbey National Building Society v Cann [1991] 1 AC 56 was not distinguishable and the equitable interest could not take priority. Land Registration legislation 31. Because the earlier authorities are concerned with the predecessor of the provisions in the 2002 Act relating to priority of unregistered interests which are the subject of this appeal, it is necessary to start with the relevant provisions of the 1925 Act. 32. Section 20(1)(b) of the 1925 Act provided: In the case of a freehold estate registered with an absolute title, a disposition of the registered land or of a legal estate therein shall, when registered, confer on the transferee or grantee an estate in fee simple or other legal estate expressed to be created in the land dealt with subject (b) to the overriding interests, if any, affecting the estate transferred or created . 33. Section 70(1) contained a list of miscellaneous overriding interests to which registered land was subject, and section 70(1)(g) provided: All registered land shall, unless under the provisions of this Act the contrary is expressed on the register, be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto, and such interests shall not be treated as incumbrances within the meaning of this Act, (that is to say) . (g) The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where inquiry is made of such person and the rights are not disclosed; . 34. The object of section 70(1)(g) was to protect a person in actual occupation of land from having his rights lost in the welter of registration No one can buy the land over his head and thereby take away or diminish his rights: Lord Denning MR in Strand Securities Ltd v Caswell [1965] Ch 958, 979. 35. The rights which were overriding rights related primarily to rights which in unregistered conveyancing were not normally included in title deeds or revealed in abstracts of title. Overriding interests in general were an impediment to one of the main objectives of land registration, that the land register should be as complete a record of title as it could be: see, eg Gray and Gray, Elements of Land Law (5th ed. 2008), para 8.2.44. Reform of the law of land registration was on the agenda of the Law Commission from its inception. Overriding interests were considered in the Third Report on Land Registration (Law Com No 158, paras 2.54 2.70, 1987) and the Fourth Report (Law Com No 173, 1988), and in a joint consultation by the Law Commission and HM Land Registry in 1998. The Law Commission ultimately produced a draft Bill which led to the 2002 Act: Land Registration for the 21st Century: A Conveyancing Revolution (2001), Law Com No 271, in which it referred to section 70(1)(g) of the 1925 Act as notorious and much litigated (para 8.15). 36. One of the principal objectives of what became the 2002 Act was to create a simplified conveyancing system, electronically based, under which it would be possible to investigate title to land almost entirely on line with the bare minimum of additional inquiries: Law Com No 271, paras 8.1 et seq. A major obstacle to that goal was the existence of overriding interests. Although the 2002 Act was intended to minimise the circumstances in which new overriding interests arose, the Law Commission recommended the retention of the overriding status of occupiers' rights. 37. The reason which had been given in the joint consultation was that: it is unreasonable to expect all encumbrancers to register their rights, particularly where those rights arise informally, under (say) a constructive trust or by estoppel. The law pragmatically recognises that some rights can be created informally, and to require their registration would defeat the sound policy that underlies their recognition. Furthermore, when people occupy land they are often unlikely to appreciate the need to take the formal step of registering any rights that they have in it. They will probably regard their occupation as the only necessary protection. The retention of this category of overriding interest is justifiedbecause this is a very clear case where protection against purchasers is needed but where it is not reasonable to expect or not sensible to require any entry on the register. (Law Com No 254, para 5.61). 38. The expression overriding interests is not found in the 2002 Act, except in relation to transitional matters. The heading to Schedule 3 is Unregistered interests which override registered dispositions. 39. So far as is relevant the scheme of the 2002 Act (leaving aside the special provisions for leases of seven years or less, which do not now arise on this appeal) is as follows: (1) a registered owner has the power to make a disposition of any kind permitted by the general law in relation to an interest of that description: section 23(1)(a); (2) a person is entitled to exercise owner's powers in relation to a registered estate or charge if he is (a) the registered proprietor, or (b) entitled to be registered as the proprietor: section 24; (3) by section 27 certain dispositions, including transfers of land and legal mortgages, are required to be registered and do not operate at law until the relevant registration requirements are met; (4) the basic rule is that the priority of an interest affecting a registered estate or charge is not affected by a disposition of the estate or charge: section 28; (5) section 29 deals with the effect of registered dispositions and provides: (1) If a registrable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration. (2) For the purposes of subsection (1), the priority of an interest is protected (a) in any case, if the interest (i) is a registered charge or the subject of a notice in the register, (ii) falls within any of the paragraphs of Schedule 3 ; (6) Schedule 3 is headed UNREGISTERED INTERESTS WHICH OVERRIDE REGISTERED DISPOSITIONS, and paragraph 2 includes: An interest belonging at the time of the disposition to a person in actual occupation, so far as relating to land of which he is in actual occupation, except for (b) an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so; (c) an interest (i) which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and (ii) of which the person to whom the disposition is made does not have actual knowledge at that time . ; (7) section 72 grants priority protection to those who apply for an entry in the register during the priority period; (8) section 116 is headed Proprietary estoppel and mere equities and provides: It is hereby declared for the avoidance of doubt that, in relation to registered land, each of the following (a) an equity by estoppel, and (b) a mere equity, has effect from the time the equity arises as an interest capable of binding successors in title (subject to the rules about the effect of dispositions on priority); (9) section 132 is an interpretation section and provides (i) in section 132(1) that (a) legal estate has the same meaning as in the Law of Property Act 1925 and (b) registered estate means a legal estate the title to which is entered in the register, other than a registered charge; and (ii) in section 132(3)(b) that references to an interest affecting an estate or charge are to an adverse right affecting the title to the estate or charge ; (10) the effect of section 1 of the Law of Property Act 1925 for present purposes is: (a) that legal estates means [t]he estates and charges which under this section are authorised to subsist or to be conveyed or created at law (when subsisting or conveyed or created at law) (section 1(4)); (b) The only estates in land which are capable of subsisting or of being conveyed or created at law are (a) An estate in fee simple absolute in possession; (b) A term of years absolute (section 1(1)); (c) The only charges in or over land which are capable of subsisting or of being conveyed or created at law are .(c) A charge by way of legal mortgage (section 1(2)); (d) All other estates, interests, and charges in or over land take effect as equitable interests (section 1(3)). 40. The effect of sections 27 and 29 of the 2002 Act is that, although a registrable disposition takes place when it is executed, neither a conveyance nor a charge takes effect at law until registration, and the consequence is that a purchaser and a mortgagee acquire equitable interests on completion: Megarry and Wade, The Law of Real Property, 8th ed, 2012, para 7 053; Mortgage Corpn Ltd v Nationwide Credit Corpn Ltd [1994] Ch 49, 54, per Dillon LJ (a case on the 1925 Act). Abbey National Building Society v Cann [1991] 1 AC 56 41. The principal issue in the courts below was whether the decision in Abbey National Building Society v Cann [1991] 1 AC 56 (Cann) is controlling (as the lenders say) or distinguishable (as the vendors say), and the decision also has some bearing on the other issue on this appeal, namely whether proprietary rights can be granted to a third party by a purchaser prior to completion. Consequently it is necessary to go beyond summarising the principles for which it stands by setting out the essential facts (particularly those facts which the vendors say distinguish the present case) and some of the reasoning. The decision in Cann predates the reform of land registration law in the 2002 Act, and the relevant sections of the 1925 Act have been set out above. The facts 42. Three properties in Mitcham, Surrey, were involved in Cann: 48 Warren Road, Mitcham (48 Warren Road); 30 Island Road, Mitcham (30 Island Road), and 7 Hillview, Mitcham (7 Hillview). Mrs Cann lived with her first husband in a house at 48 Warren Road. Her husband, who was the tenant of the property under a protected tenancy, died in 1962 and Mrs Cann succeeded to the tenancy as his widow and was entitled to the protection afforded by the Rent Acts. In 1977 the landlord's agents approached Mrs Cann as the sitting tenant with an offer to sell the freehold of 48 Warren Road to her for 5,000. Because neither she, nor her late husband's brother, Abraham Cann, who was by then living with her, could afford to purchase the property, her son George Cann (George) offered to raise a mortgage and purchase it; and in 1977 it was conveyed into the joint names of Mrs Cann and George with the aid of an endowment mortgage covering the whole of the price. George assured his mother that she would not need to pay any rent and that she would always have a roof over her head. Later they came across a more attractive house, 30 Island Road. 48 Warren Road was sold for 20,500, and 30 Island Road was purchased in the name of George alone for 26,500 of which 15,000 was, with Mrs Cann's knowledge and acquiescence, raised on mortgage from the Nationwide Building Society. 43. By 1984 George was in financial difficulties and told Mrs Cann that he could no longer afford to pay for two homes. He arranged to sell 30 Island Road for 45,000 and to purchase instead a smaller leasehold property, 7 Hillview, at a price of 34,000. George applied to Abbey National for a loan of 25,000 to be secured on a mortgage of 7 Hillview stating that that property was being purchased for his own sole occupation. Abbey National inspected and approved the property, and made a formal offer of an advance, which was accepted. Contracts for the sale of 30 Island Road, and the purchase of 7 Hillview, were exchanged in July 1984 with the completion date for both transactions fixed for August 13, 1984. Prior to the completion date, in the normal way Georges solicitors received a cheque from Abbey National and George executed a legal charge on the property in favour of Abbey National to secure the sum advanced. The solicitors were in a position to complete the purchase on the completion date subject only to completion of the sale of 30 Island Road, from which the balance of the purchase price was to come. 44. The sale of 30 Island Road and purchase of 7 Hillview by George were completed on August 13, 1984. George subsequently defaulted in his payments to Abbey National, and Abbey National commenced proceedings for possession against George, Mrs Cann and Abraham Cann. George took no part in the proceedings. The decision 45. The defence of Mrs Cann and Abraham Cann was that, because of a contribution made by Mrs Cann to the purchase of 48 Warren Road (represented by her status as a sitting tenant) and by reason of the assurance given by George that she would always have a roof over her head, she had an equitable interest in 7 Hillview, which, by virtue of her actual occupation, had taken priority over Abbey Nationals charge as an overriding interest. 46. The first two main holdings of the House of Lords present no difficulty on the present appeal. First, it was held that the relevant date for determining the existence of overriding interests affecting the estate transferred or created was the date of registration of the estate rather than the date of completion: at pp 87, 106. The 2002 Act lays down the general principle in section 29(1) that completion of a disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration (including overriding interests: section 29(2)(a)(ii)). 47. Second, it was held that to substantiate a claim to an overriding interest against a transferee or chargee by virtue of section 70(1)(g) of the 1925 Act, as a person in actual occupation of the land, the person claiming the overriding interest had to have been in actual occupation at the time of completion: at pp 88, 106. Schedule 3, paragraph 2 of the 2002 Act now expressly confirms that the relevant interest must belong at the time of the disposition to a person in actual occupation. 48. The other holdings are the crucial ones on this appeal, which are these: (1) where a purchaser relies on a bank or building society loan for the completion of a purchase, the transactions of acquiring the legal estate and granting the charge are one indivisible transaction; (2) George never acquired anything but an equity of redemption and there was no scintilla temporis during which the legal estate vested in him free of the charge and an estoppel affecting him could be fed by the acquisition of the legal estate so as to become binding on, and take priority over the interest of, the chargee; and (3) consequently Mrs Cann could have no overriding interest arising from actual occupation on the day of completion. The vendor remained the proprietor until registration, but the charge was created on its execution: at p 80. 49. On the facts it was held in any event that Mrs Cann was not in actual occupation at the time of completion (since all that happened prior to completion was that removers were unloading her carpets and furniture for about 35 minutes) and that she was precluded from relying on any interest as prevailing over Abbey National because she had impliedly authorised George to obtain the mortgage. 50. Lord Oliver gave the leading opinion, with which Lords Bridge, Griffiths and Ackner expressly agreed. Lord Jauncey concurred in a full opinion, but there is no substantial difference between his reasoning and that of Lord Oliver. The following points emerge from Lord Olivers opinion. First, prior to completion Mrs Cann had no interest in 7 Hillview, because she was not a party to the contract for the purchase of that property and if she had been led to believe that she would have an interest in and the right to occupy that property when George acquired it, at the stage prior to its acquisition she had no more than a personal right against him. Second, Abbey National, as an equitable chargee for money actually advanced prior to completion, had an interest ranking in priority to what was merely Mrs Cann's expectation of an interest under a trust for sale to be created if and when the new property was acquired. Third, there was no notional point of time at which the estate vested in George free from the charge and in which the estoppel affecting him could be fed by the acquisition of the legal estate so as to become binding on and take priority over the interest of the mortgagee, approving the analysis of Mustill LJ in Lloyds Bank plc v Rosset [1989] Ch 350, 388 393, and disapproving Church of England Building Society v Piskor [1954] Ch 553. 51. Lord Oliver said (at pp 92 93): The reality is that, in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indissolubly bound together. The acquisition of the legal estate is entirely dependent upon the provision of funds which will have been provided before the conveyance can take effect and which are provided only against an agreement that the estate will be charged to secure them. Indeed, in many, if not most, cases of building society mortgages, there will have been, as there was in this case, a formal offer and acceptance of an advance which will ripen into a specifically enforceable agreement immediately the funds are advanced which will normally be a day or more before completion. In many, if not most, cases, the charge itself will have been executed before the execution, let alone the exchange, of the conveyance or transfer of the property. This is given particular point in the case of registered land where the vesting of the estate is made to depend upon registration, for it may well be that the transfer and the charge will be lodged for registration on different days so that the charge, when registered, may actually take effect from a date prior in time to the date from which the registration of the transfer takes effect The reality is that the purchaser of land who relies upon a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise. The scintilla temporis is no more than a legal artifice 52. Lord Jauncey said that, on completion of the purchase of 7 Hillview, Mrs Cann acquired an equitable interest in that house. Since that interest derived from George it followed that she could acquire no equitable interest in the house prior to his acquisition of an interest therein on completion, nor could she acquire an interest greater than he acquired. He went on (at pp 101 103): It is of course correct as a matter of strict legal analysis that a purchaser of property cannot grant a mortgage over it until the legal estate has vested in him. The question however is whether having borrowed money in order to complete the purchase against an undertaking to grant security for the loan over the property the purchaser is, for a moment of time, in a position to deal with the legal estate as though the mortgagee had no interest therein. In my view a purchaser who can only complete the transaction by borrowing money for the security of which he is contractually bound to grant a mortgage to the lender eo instante with the execution of the conveyance in his favour cannot in reality ever be said to have acquired even for a scintilla temporis the unencumbered fee simple or leasehold interest in land whereby he could grant interests having priority over the mortgage or the estoppel in favour of prior grantees could be fed with similar results. Since no one can grant what he does not have it follows that such a purchaser could never grant an interest which was not subject to the limitations on his own interest. In the present case George Cann borrowed money from the society in order to complete the purchase of 7 Hillview and in return granted to them a mortgage. The mortgage was executed by George Cann prior to 13 August 1984 when the purchase was completed. It follows that as a matter of reality George Cann was never vested in the unencumbered leasehold and was therefore never in a position to grant to Mrs Cann an interest in 7 Hillview which prevailed over that of the society. The interests that Mrs Cann took in 7 Hillview could only be carved out of George Cann's equity of redemption. In reaching this conclusion it is unnecessary to consider whether or not Mrs Cann was aware that George Cann would require to borrow money in order to finance the purchase of 7 Hillview. Contract/conveyance 53. Logically the first question on this appeal is whether the purchasers were in a position at the date of exchange of contracts to confer equitable proprietary rights on the vendors, as opposed to personal rights only. The question whether the analysis in Cann applies where the equitable interest of the occupier arises on exchange of contracts only comes into play if the vendors acquired proprietary rights at that time. It was the second question which exercised the courts below, and they decided that the analysis in Cann did apply where the equitable interest of the occupier arises on exchange of contracts. 54. Effect of contract 55. But I propose to deal with the logically prior question first, namely whether the vendors acquired proprietary rights on exchange of contracts. The lenders argued that, even if the decision in Cann did not have the result that the contract was part of the indivisible transaction, the vendors claims against the purchasers were purely personal, and not proprietary, until the purchasers obtained the legal estate on completion and the estoppel was then fed which, on the basis of Cann, would have been too late to give the vendors priority over the charges. 56. The vendors relied on the 2002 Act, section 116, which is headed Proprietary estoppel and mere equities and declares for the avoidance of doubt that, in relation to registered land, an equity by estoppel has effect from the time the equity arises as an interest capable of binding successors in title (subject to the rules about the effect of dispositions on priority). Their argument was that the 2002 Act expressly provided that their proprietary estoppel claims gave them proprietary rights, and that it is not necessary that the person who is estopped has a legal title. 57. They also supported their claim to proprietary rights by reliance on the long line of authority that following exchange of contracts the seller holds the property on trust for the purchaser. The argument was that (a) a person who has contracted to purchase has a proprietary interest and not a mere contractual right: Lysaght v Edwards (1876) 2 Ch D 499; (b) consequently, on exchange of contracts, the vendors became trustees for the purchasers; and (c) the purchasers were as a result able to confer on the vendors equitable interests in the properties carved out of their rights as purchasers. 59. 58. The purpose of section 116 of the 2002 Act was to make it clear that the rights which arose after detrimental reliance were proprietary even before they were given effect by the court: Explanatory Notes, paras 183 185; Law Com No 271 (2001), paras 5.29 5.31. Cf. Birmingham Midshires Mortgage Services Ltd v Sabherwal (1999) 80 P & CR 256, paras 24 31 per Robert Walker LJ. But section 116 is expressly subject to the priority rules in the 2002 Act, and takes the matter no further. It also begs the question as to when the equity arises as an interest capable of binding successors in title and probably assumes that it first arises (as it usually does) as against the legal owner who is estopped or who is bound by the equity. I accept the argument for the lenders that the unregistered interests which override registered dispositions under the 2002 Act, Schedule 3, paragraph 2, by virtue of section 29(2) of the 2002 Act, must be proprietary in nature, because: (1) the interest which is postponed to a registered disposition of a registered estate under section 29(1) is any interest affecting the estate; (2) by section 132(1) legal estate has the same meaning as in the Law of Property Act 1925, and a registered estate means a legal estate the title to which is entered in the register, other than a registered charge; (3) the effect of the Law of Property Act 1925, section 1 is that the only estates which can exist at law are an estate in fee simple and a term of years absolute and a limited range of other interests including a charge by way of legal mortgage; (4) by section 132(3)(b) references to an interest affecting an estate or charge are to an adverse right affecting the title to the estate or charge; (5) the effect of sections 23 and 24 is that only someone with owners powers, i.e. the registered proprietor or a person entitled to be registered as proprietor, can make a disposition, such as granting a lease. Consequently, the combined effect of sections 116 and 132 is that section 116 rights require a proprietary element to have any effect. 60. The question therefore arises whether a purchaser, prior to acquisition of the legal estate, can grant equitable rights of a proprietary character, as opposed to personal rights against the purchaser. Many of the cases on the nature of the purchasers interest after exchange of contracts, but before completion, were cited on this appeal, and I endeavoured at first instance in Englewood Properties Ltd v Patel [2005] 1 WLR 1961, paras 40 43 to deal with their effect. See also Turner, Understanding the Constructive Trust between Vendor and Purchaser (2012) 128 LQR 582. 62. 61. The position of the vendor as trustee has been variously described as: (1) something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain events, entitled to what the unpaid vendor is, viz, possession of the estate and a constructive trustee: Lysaght v Edwards 2 Ch D 499, 506, 510, Sir George Jessel MR; or (2) constructively a trustee: Shaw v Foster (1872) LR 5 HL 321, 349, per Lord O'Hagan; (3) a trustee with peculiar duties and liabilities: Earl of Egmont v Smith (1877) 6 Ch D 469, 475, per Sir George Jessel MR; (4) a trustee in a qualified sense only: Rayner v Preston (1881) 18 Ch D 1, 6, per Cotton LJ; and (5) a quasi trustee: Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264, 269, per Lord Greene MR. It has frequently been said that a purchaser of land obtains rights which are akin to ownership: by Lord Cairns in Shaw v Foster (1872) LR 5 HL 321, 338, the purchaser was the real beneficial owner in the eye of a court of equity of the property; by Lord OHagan in the same case (at p 349), the ownership is transferred in equity to the purchaser, and the vendor is in progress towards being a trustee. In more modern times it has been recognised that the purchasers interest is a proprietary interest of a sort: Oughtred v IRC [1960] AC 206, 240, per Lord Jenkins. In Jerome v Kelly [2004] UKHL 25, [2004] 1 WLR 1409, para 32, Lord Walker made the point that beneficial ownership of the land is in a sense split between the seller and buyer on the provisional assumptions that specific performance is available and that the contract will in due course be completed In Shaw v Foster (at p 338) Lord Cairns said that a purchaser had not only the right to devise the property (under the equitable doctrine of conversion) but also the right to alienate it or charge it, and Lord OHagan said (at p 350) that the purchasers interest could be the subject of a charge or assignment, and that the sub assignee or encumbrancer could enforce his rights against the original vendor. 63. 64. But in the same case Lord Hatherley LC referred (at p 357) to the fiction of Equity which supposes the money to be paid away with one hand and the estate to be conveyed away with the other, and in the High Court of Australia Deane J said: it is both inaccurate and misleading to speak of the unpaid vendor under an uncompleted contract as a trustee for the purchaser . the ordinary unpaid vendor of land is not a trustee of the land for the purchaser. Nor is it accurate to refer to such a vendor as a trustee sub modo unless the disarming mystique of the added Latin is treated as a warrant for essential misdescription: Kern Corpn Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164, 192. The High Court of Australia has said that the description of the vendor as a trustee tends to conceal the essentially contractual relationship which, rather than the relationship of trustee and beneficiary, governs the rights and duties of the parties: Chang v Registrar of Titles (1976) 137 CLR 177, 190; Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57, (2003) 217 CLR 315, para 53. 66. 65. But these are not cases dealing with the question whether a contract of sale can have a proprietary effect on parties other than the parties to the contract. It is true that the purchaser is given statutory rights to enforce the interests against third parties under a contract of sale by registration: the 2002 Act, sections 15(1)(b), 32, 34(1); Land Charges Act 1972, section 2(1), (4). But it does not follow that the purchaser has proprietary rights for all purposes. Thus in Inland Revenue Commissioners v G Angus & Co (1889) 23 QBD 579, 595, Lindley LJ quoted Lord Cottenham LC in Tasker v Small (1837) 3 My & C 63, 70, who said that the rule by which a purchaser becomes in equity the owner of the property sold applies only as between the parties to the contract, and cannot be extended so as to affect the interests of others. In Berkley v Poulett [1976] EWCA Civ 1, [1977] 1 EGLR 86, 93 Stamp LJ said (at para 36) that the vendor is said to be a trustee because of the duties which he has, and the duties do not arise because he is a trustee but because he has agreed to sell the land to the purchaser and the purchaser on tendering the price is entitled to have the contract specifically performed according to its terms. Nor does the relationship in the meantime have all the incidents of the relationship of trustee and cestui que trust. In that case Lord Poulett sold the Hinton St George Estate to X, and X sub sold the house and grounds to Y. Both transactions were subsequently completed. In an action by Y against the executors of Lord Poulett, the main question which subsequently arose was whether certain objets dart were fixtures or chattels. It was held that none of them was a fixture, but also by a majority (Goff LJ dissenting) that, even though Lord Poulett had notice of the sub contract between X and Y, Lord Poulett was not under a duty to Y to take reasonable care of the house because Lord Poulett did not hold the house as trustee for the sub purchaser Y. In my view it is implicit in this analysis, which I consider to be correct, that X did not obtain proprietary rights against Lord Poulett which he could pass to Y. 67. There are some cases in the Court of Appeal and at first instance (all decided in the early 1950s) which considered the effect on a mortgagee of a grant of tenancies by a purchaser after exchange of contracts but before completion of the sale and a mortgage of the property. Coventry Permanent Economic Building Society v Jones [1951] 1 All ER 901 was a pre cursor of Cann, and was approved in that decision. Harman J decided that the conveyance and mortgage were one transaction, and there was no scintilla temporis between the time of the conveyance and the mortgage during which the purchaser had acquired sufficient estate to be able to perfect the purported grant of the tenancies. Prior to the conveyance, the purchaser only had an equitable interest in the property and the tenants only had personal rights against the purchaser: at p 903. 68. That decision was distinguished by the Court of Appeal in Universal Permanent Building Society v Cooke [1952] Ch 95 on the ground that the building societys charge in that case was executed a day later than the conveyance and there was nothing in the building societys short statement that the conveyance and the mortgage were part of a single transaction (at p 101). That is a surprising (and very formalistic) ground of distinction, since it is apparent from the statement of the facts (at p 96) that the mortgagor had applied for the mortgage two weeks before the contract of sale. But it was recognised that prior to completion the purchaser was only able to make a contract, a promise to the intended tenant: at p 103. In Woolwich Equitable Building Society v Marshall [1952] Ch 1 Danckwerts J distinguished Coventry Permanent Economic Building Society v Jones on the equally surprising ground that the charge to the Woolwich Building Society recited that the mortgagor was the estate owner in respect of the property. In Church of England Building Society v Piskor [1954] Ch 553 purchasers of leasehold premises were given possession before completion and purported to grant tenancies of part of the premises. The purchase was completed on the same day as the purchasers granted a legal charge to the building society. The Court of Appeal disapproved Coventry Permanent Economic Building Society v Jones and held that the assignment of the lease to the purchasers and the legal charge to the building society could not be regarded as one indivisible transaction. Consequently the tenancies by estoppel were fed on the acquisition of the legal estate by the purchasers and prior to the grant of the charge: at p 558, per Sir Raymond Evershed MR, and p 566, per Romer LJ. 69. 70. In Cann the decision in Church of England Building Society v Piskor was disapproved and, as I have said, Coventry Permanent Economic Building Society v Jones was approved: at p 93, per Lord Oliver and p 102, per Lord Jauncey. The decision in the Woolwich Equitable case was doubted by Lord Jauncey in Cann (at p 102), and I do not think that it or Universal Permanent Building Society v Cooke can stand with Cann. 71. But in each of these cases it was decided, or assumed, that, even if the tenant had equitable rights as against the purchaser, those rights would only become proprietary and capable of taking priority over a mortgage when they were fed by the purchasers acquisition of the legal estate. That is because where the proprietary right is claimed to be derived from the rights of a person who does not have the legal estate, then the right needs to be fed by the acquisition of the legal estate before it can be asserted otherwise than personally. In Cuthbertson v Irving (1859) 4 H & N 742 Martin B said, at pp 754 755: There are some points in the law relating to estoppels which seem clear. First, when a lessor without any legal estate or title demises to another, the parties themselves are estopped from disputing the validity of the lease on that ground; in other words a tenant cannot deny his landlords title, nor can the lessor dispute the validity of the lease. Secondly, where a lessor by deed grants a lease without title and subsequently acquires one, the estoppel is said to be fed, and the lease and reversion then take effect in interest and not by estoppel . 72. In Bell v General Accident Fire and Life Assurance Corp Ltd [1998] L & TR 1, Mummery LJ said (at p 12): the juristic basis and the legal effect of the estoppel doctrine were authoritatively expounded in the Court of Exchequer by Martin B in Cuthbertson v Irving in terms applicable to this case. The result is also consistent with the legal effect of the satellite doctrine of feeding the estoppel which applies when an interest in the land is acquired by the person deficient in title at the time of the grant from which the estoppel arose: so that, as Hale put it, by purchase of the land, that is turned into a lease in interest, which before was purely an estoppel: see Holdsworth's History of English Law, vol VII, p 246. 73. Thus in Watson v Goldsbrough [1986] 1 EGLR 265 licensees of land owned by the wifes parents agreed that an angling club could have fishing rights if they improved the ponds: the estoppel was fed when the licensees acquired the legal estate. It is true that in Lloyds Bank plc v Rosset [1989] Ch 350, 386, Nicholls LJ said (in the case of a common intention constructive trust) that prior to completion of the purchase the wife had some equitable interest in the property before completion, carved out of the husband's interest. But the decision of the Court of Appeal was reversed on the facts ([1991] 1 AC 107), although Lord Bridge seems to have contemplated (at p 134) that Mrs Rosset might have had a beneficial interest before completion. But the question whether a purchaser could grant proprietary equitable rights was not argued or decided. 74. The decision in Cann did not directly deal with this point but the conclusion that a purchaser of property cannot grant a proprietary right is strongly supported by the approach of Lord Oliver and Lord Jauncey. Lord Oliver said (at p 89) that prior to completion Mrs Cann had no interest in 7 Hillview, because she was not a party to the contract for the purchase of that property and if she had been led to believe that she would have an interest in and the right to occupy that property when George acquired it, at the stage prior to its acquisition she had no more than a personal right against him. Lord Jauncey said (at p 95) that Mrs Cann could not have acquired an equitable interest in 7 Hillview prior to completion because her rights derived from George and she was not a party to the contract of sale. 76. 75. Nor are the vendors assisted by two further arguments. First, they say that they can justify the existence of an equitable right in the property of which they were legal owners by analogy to the position of an unpaid vendor, who has a proprietary right in property of which he is the legal owner, namely a lien for the unpaid purchase price. In the rare case in which the legal estate is transferred before the purchase price is paid, it was accepted or assumed that the vendors lien could be an overriding interest for the purposes of section 70(1)(g) of the 1925 Act: London and Cheshire Insurance Co Ltd v Laplagrene Property Co Ltd [1971] Ch 499; UCB Bank plc v Beasley [1995] NPC 144; Barclays Bank plc v Estates and Commercial Ltd [1997] 1 WLR 415; Nationwide Anglia Building Society v Ahmed (1995) 70 P & CR 381. It is not necessary to address the point on this appeal, but the position is probably the same under the 2002 Act; cf Law Com No 271, para 5.10. But I accept the lenders answer that there is no analogy in the present case with the vendors lien, which arises by operation of law and is the corollary of the purchasers equitable interest in the property: Capital Finance Co Ltd v Stokes [1969] 1 Ch 261, 279; Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415, 420. 77. Secondly, the vendors say that the substance of the matter is that they did not sell their homes outright to the purchasers, but simply sold them subject to the rights to the leases which they had been promised, and that Cann should be distinguished on the basis that in a sale and leaseback transaction the purchaser in reality has no more than a reversionary interest subject to that leaseback. They rely on a decision of Megarry J at first instance, Sargaison v Roberts [1969] 1 WLR 951, in which the question was whether, for the purposes of the tax legislation then in force, a transfer by the taxpayer into a settlement of a farm and the simultaneous grant by the trustees to him of a lease resulted in the whole of the taxpayer's interest in the land being transferred to another person (which would have disentitled him to a tax allowance) or operated to reduce his interest from ownership of a freehold to ownership of a lease. Megarry J held that the effect of the transaction was that the taxpayers interest had been reduced from ownership of the freehold to ownership of a lease. I agree with Etherton LJ that the true nature of the transaction was that of a sale and lease back. Sargaison v Roberts is of no assistance since Megarry J made it clear (at p 958) that he was considering the interpretation of a United Kingdom taxing statute and not the technicalities of English conveyancing and land law. In the case of Mrs Scott, for example, the contract provided that the property was to be transferred with full title guarantee and vacant possession and a transfer in the normal form was executed. 78. 79. Consequently, in my judgment, the appeal should be dismissed on the principal ground that the vendors acquired no more than personal rights against the purchasers when they agreed to sell their properties on the basis of the purchasers promises that they would be entitled to remain in occupation. Those rights would only become proprietary and capable of taking priority over a mortgage when they were fed by the purchasers acquisition of the legal estate on completion, and then Cann would apply, with the effect that the acquisition of the legal estate and the grant of the charge would be one indivisible transaction, and the vendors would not be able to assert against the lenders their interests arising only on completion. An indivisible transaction? 80. It follows that the question whether the decision in Cann that conveyance and mortgage are one transaction also extends to include a case where the equitable interest is said to arise at the time of the contract of sale does not arise. If I am right on the main point, it is not easy to see how this question could arise in any future case, but I propose to express my view on it because it was the main question canvassed in the courts below and on this appeal. 81. The vendors say that Cann did not decide whether the indivisible transaction analysis applies where the equitable interest of the occupier arises on exchange of contracts, and that the answer is that the analysis does not apply. The lenders say that, even if an equitable interest arose on exchange of contracts, in any event the House of Lords has already decided that not only were the conveyance and the charge part of one indivisible transaction, but also that the contract (which had been exchanged some weeks before), conveyance and charge were indivisible. It is therefore necessary to consider whether (and if so, how) this point was dealt with in Cann. 82. The argument for Mrs Cann was that she had an interest from the time of exchange of contracts for the acquisition of 7 Hillview: her equitable interest must have commenced not later than 20 July 1984, when a specifically enforceable contract for the purchase of 7 Hillview was entered into (at p 66). Lord Oliver assumed (at p 89) that prior to completion George was estopped by his promise to keep a roof over her head from denying her right as against him to terminate her occupation of the property without her consent, but that is a reference to the estoppel which arose on the acquisition of 30 Island Road (as the reference to it not binding the Nationwide Building Society shows). He then goes on to say that Mrs Cann had acquired no rights in 7 Hillview prior to completion because she had not been a party to the contract for its purchase, and at the stage prior to its acquisition she had no more than a personal right against him. Later on he gives a hypothetical example which may suggest that he thought that the relevant reliance by Mrs Cann would have been vacating 30 Island Road rather than merely agreeing that it be sold. It is possible that Lord Jauncey (at p 95) looked at the matter in the same way. 83. There are two inter linked questions involved in this analysis. The first question was whether Mrs Cann had any rights at all against George in relation to 7 Hillview (as distinct from her rights in 30 Island Road) at the time of the contract. The second question was whether the contract, conveyance and legal charge were one indivisible transaction. I have already said that Lord Oliver and Lord Jauncey expressed the view that if Mrs Cann had rights against George in relation to 7 Hillview from the time of the contract, they were only personal rights. On the facts of that case it seems to me that the relevant reliance would have been agreement to the sale of 30 Island Road rather than ceasing occupation of the house on completion of the purchase of 7 Hillview. In Nationwide Anglia Building Society v Ahmed (1995) 70 P & CR 381 A agreed to purchase a business, including some premises in Bradford, from B for 160,000. B was to retain the use of the property until the whole of the principal money and interest due under the agreement had been paid. A raised 84. 80,000 by way of a secured loan from Nationwide and this was paid to B. The balance of 80,000 was left outstanding and secured by a second charge in favour of B against the property. The agreement, the transfer of the property, and the charges were all executed on the same day. A failed to pay B the balance of the purchase price and fell into arrears on the mortgage repayments. In possession proceedings by Nationwide, B sought to defend on the basis that he had an overriding interest in priority to Nationwides charge, namely (1) his vendors lien; and/or (2) the right to occupy given by the purchase agreement until payment of the price in full. The Court of Appeal decided that there was no vendors lien, primarily because it was given up in consideration of the rights to a second charge and occupation of the property until payment. It also decided that the right to occupy was purely contractual and gave rise to no interest in the land. But it was also decided that B did not have an overriding interest in any event, because, applying Cann (per Aldous LJ at p 389): the charges, the agreement and the transfer were all signed on the same day Thus, [Bs] right to occupation under clause 6, did not accrue prior to the creation of [Nationwides] charge. In Abbey National Building Society v Cann the House of Lords concluded that when a purchaser relied on a building society, such as [Nationwide], to enable completion, the transactions involved were one indivisible transaction and, therefore, there was no scintilla temporis during which the right to occupation vested free of [the] charge. The same reasoning is applicable to the facts of this case. On June 1, the contract, the transfer and the legal charges were completed. They formed an indivisible transaction and there was no scintilla temporis during which any right to occupation under clause 6 of the agreement vested in [B] which was free of [Nationwides] charge. Thus, the right given by clause 6 did not provide an overriding interest under section 70(1)(g) of the 1925 Act, even if the right was a proprietary right. [Counsel for B] submitted that that conclusion ignored the reality of the position and that at all times [B] was in occupation. However that submission ignores the reality of the legal position. [B] gave up his right to occupy as an unpaid vendor by signing the agreement and thereby obtained permission to occupy, which permission did not take effect prior to [Nationwides] charge. 85. In my judgment the decision of the Court of Appeal in Nationwide Anglia Building Society v Ahmed (1995) 70 P & CR 381 was correct. As a matter of principle, Aldous LJ was right to take the view that it is implicit in Cann that contract, conveyance and mortgage are indivisible. In the present case, as in Nationwide Anglia Building Society v Ahmed, the contract and conveyance were executed on the same day, but the analysis is not dependant on that. 86. There are some 900,000 domestic conveyancing transactions per year in England and Wales. In almost every case, the Law Societys Conveyancing Protocol is used. The current version is the 2011 edition, but it is not different in substance from that current (5th ed, 2005) when the transactions in this appeal were carried out. The current edition sets out all the steps from instructions (Stage A) (which include the provision of the sellers Property Information Form which will give details of who is occupying the property and indicate whether vacant possession will be given), submission of contract (Stage B), steps prior to exchange, including confirmation of completion date and ensuring the seller is aware of the obligation to give vacant possession (Stage C), exchange of contracts (Stage D), completion (Stage E), and post completion matters, including registration (Stage F). Prior to contract the buyers solicitor should check whether the buyer requires a mortgage, whether an application has been made and whether a mortgage offer has been made, and whether any mortgage conditions remain to be performed. On exchange of contracts the buyers solicitor sends the certificate of title and/or requisition of funds to the lender so that funds are available for completion. Prior to exchange of contracts the sellers solicitor submits to the buyers solicitor a contract bundle, including (inter alia) the draft contract incorporating the latest edition of the Standard Conditions of Sale, official copies of the Register and title plan, replies to inquiries with supporting documentation, searches and inquiries, and (for consideration) a draft transfer. 87. The contract of sale does, of course, have separate legal effects, but it would be wholly unrealistic to treat the contract for present purposes as a divisible element in this process. That is why in R v Waya [2012] UKSC 51, [2013] 1 AC 294 this court adopted the reasoning in Cann to hold that where the same solicitor acts for a borrower and a mortgage lender, and the mortgage advance is paid to the solicitor to be held in the solicitor's client account, until completion, to the order of the mortgage lender; and on completion the solicitor transfers the advance to the vendor's solicitor against an executed transfer: In the eyes of the law all these events occurred simultaneously (per Lord Walker and Hughes LJ, at para 50). The purchaser never acquired more than an equity of redemption (at para 53) and under the tripartite contractual arrangements between vendor, purchaser and mortgage lender, [the purchaser] obtained property in the form of a thing in action which was an indivisible bundle of rights and liabilities (at para 54). 88. On this appeal the court was provided with notes from the parties on the effect on conveyancing practice, and particularly on the inquiries which mortgage 89. lenders would have to undertake and on the increased risk from fraud, should the appeal succeed. I agree with the point made by Lady Hale in the course of argument that the courts duty is to apply the law irrespective of an unexpected impact on conveyancing practice and an adverse effect on the risks of secured lending. It is also important to emphasise that the scheme in the present case could not have worked if the solicitors for the vendors and the solicitors for the purchasers/lenders had complied with their professional obligations and proper and normal conveyancing practice. It is also to be noted that where a person, who might otherwise have rights which could be asserted against a mortgagee, agrees to funds being raised on the property by way of mortgage, the mortgagee will have priority: Cann (at p 94); Bristol & West Building Society v Henning [1985] 1 WLR 778; Paddington Building Society v Mendelsohn (1985) 50 P & CR 244. It would follow that, even if (contrary to my view) the vendors had had equitable rights of a proprietary nature against the purchasers arising on exchange of contracts, the mortgages would have taken priority. 90. Accordingly I would dismiss the appeal on the preliminary issue. Possession order 91. The final question is whether the remainder of Mrs Scotts undated Re Amended Defence and Counterclaim should have been struck out without it being tried on the facts. The point arises because it is said on behalf of Mrs Scott that her pleadings raise specifically the point that, by virtue of the lenders actual, constructive or imputed notice of the leases granted or intended to be granted to the purchasers, the lenders are estopped from denying that Mrs Scott was promised a lease and from relying on the provisions of the mortgage restricting the grant of leases. For the purposes of this appeal, Mrs Scott relies particularly on a letter (which was also written in some of the other cases) written by her solicitors to the solicitors for the purchaser/lenders, requiring them to inform the lenders that a sum of 40,000.00 was to be paid to UK Property Buyers (rather than NEPB) upon completion of the transaction from the proceeds of sale of the property, which is said to show that the sale was not an outright sale. 92. But Judge Behrens decided the third preliminary question against the vendors, namely, whether it was possible for the lenders priority to be adversely affected by notice of such promises as were made and the circumstances of the transaction by virtue of their agents knowledge: (a) if passed on, or (b) if not passed on to the lenders. 93. 94. 97. I agree with the Court of Appeal that the judge was entitled to take the view that any argument about the relevance of the lenders knowledge of the promises made by the purchasers as to the right of the vendors to remain in occupation after completion fell within the third preliminary issue, on which there has been no appeal. I would therefore dismiss the appeal. I would only add that I express the hope that the lenders will, before finally enforcing their security, consider whether they are able to mitigate any hardship which may be caused to the vendors. LADY HALE 95. I am reluctantly driven to agree that this appeal must fail for the reason given by Lord Collins: the purchaser was not in a position either at the date of exchange of contracts or at any time up until completion of the purchase to confer equitable proprietary, as opposed to merely personal, rights on the vendor. But this produces such a harsh result that I would like to add a few additional words of explanation. Given that conclusion, the second question discussed by Lord Collins, which is whether the contract should be seen as an indivisible transaction with the conveyance and the mortgage, does not arise and is unlikely ever to arise. However, I must also explain why, with great respect, I take a different view from Lord Collins on that question. Overriding interests: some preliminary remarks 96. It is important to bear in mind that the system of land registration is merely conveyancing machinery. The underlying law relating to the creation of estates and interests in land remains the same. It is therefore logical to start with what proprietary interests are recognised by the law and then to ask whether the conveyancing machinery has given effect to them and what the consequences are if it has not. Otherwise we are in danger of letting the land registration tail wag the land ownership dog. It is also important to bear in mind that we are here concerned with events which took place before title to the land was registered in the name of the nominee purchaser. There is, of course, as Lord Collins says at para 25, an important public policy interest in the security of registered transactions. But that does not mean that the fact that a transaction is registered should automatically give it priority over all other interests. The land registration scheme accepts, as did the system of unregistered conveyancing, that there are some interests in land which deserve protection from later dispositions even if they are not protected by registration. There is also an important public policy interest in the accuracy of the register, so as to justify the reliance which later purchasers and mortgagees place upon it. 98. Thus the basic rule in section 28(1) of the Land Registration Act 2002 is that Except as provided by sections 29 and 30, the priority of an interest affecting a registered estate or charge is not affected by a disposition of the estate or charge. By section 28(2), it makes no difference whether either the interest or the disposition is registered. Section 29(1) goes on to state: If a registrable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration. Section 29(2)(a)(ii) provides that among the interests protected for the purpose of subsection (1) is an interest which falls within any of the paragraphs of Schedule 3. Falling within paragraph 2 of Schedule 3 is An interest belonging at the time of the disposition to a person in actual occupation, so far as relating to land of which he is in actual occupation. This is subject to a number of exceptions; the only relevant one for our purpose is (b) an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so. It has never been in dispute that Mrs Scott was in actual occupation of the property at the time of the disposition to the nominee purchaser (and the contemporaneous mortgage to the lenders). Nor is it disputed that no inquiries were made of her personally before the disposition. So the only question in this case is, and has always been, whether she had an interest which belonged to her at the time of the disposition. 99. 100. Of course, the whole idea of overriding interests is unpopular with those who would like the register to be a complete record of everything which will affect the estate or charge that they are acquiring. But it has always been recognised that the register cannot be a complete record and that there are some unregistered interests which require and deserve protection. The 2002 Act did reduce the list of overriding interests from that contained in section 70(1) of the Land Registration Act 1925. But the rights of those in actual occupation of the land remained on the list. Pejorative adjectives such as notorious and much litigated do not assist the argument in this case. 101. Perhaps the most notorious example of litigation about the rights of those in actual occupation was Williams and Glyns Bank v Boland [1981] AC 487. In that case it was held that the beneficial interest of a wife who had contributed to the purchase of the matrimonial home in which she lived when her husband mortgaged it to the bank was an overriding interest within the meaning of section 70(1)(g) of the 1925 Act. As Lord Wilberforce (with whom Viscount Dilhorne, Lord Salmon and Lord Roskill agreed) pointed out, in registered conveyancing, the fact of occupation takes the place which actual or constructive notice occupied in unregistered conveyancing: In the case of registered land, it is the fact of occupation that matters. If there is actual occupation, and the occupier has rights, the purchaser takes subject to them (p 504E F). Later on, he repeated that the doctrine of notice has no application to registered conveyancing (p 508E). 102. It follows from that, and is clear from the wording of paragraph 2(b) of Schedule 3 to the 2002 Act (para 98 above), that the question of whether or not it was reasonable to expect the purchaser or lender to make inquiries of the person in actual occupation is irrelevant. The only question is whether they did so and what the answer was. It is worth emphasising this point, because it is to be expected that the vendor of residential property will be in occupation of it at the time of the disposition, and so there is nothing to give the purchaser or lender constructive notice of any other interest that she might have. But that is not the point. If the vendor does have an interest in the land, other than the one of which she is disposing, and a tenancy by estoppel could be an example, then the fact of her occupation at that time makes it an overriding interest. 103. Williams and Glyns Bank v Boland did cause some consternation in some quarters at the time. The Law Commission devoted a whole report to the implications (1982, Law Com No 115), but their recommendations were not enacted. It was discussed in their third report on Land Registration (1987, Law Com No 158), where a constructive way of balancing the competing interests involved was proposed. That solution too did not find favour with the legislators. Nevertheless, the overriding interests of those in actual occupation survived into the 2002 Act. The lending world had meanwhile learned to live with Boland, mainly by insisting that matrimonial homes were conveyed into the joint names of husband and wife. There is no warrant at all for seeking to cut down the scope of overriding interests by giving them a narrower interpretation than they would otherwise have under the underlying law of property. Can a prospective purchaser grant proprietary rights before completion? 104. The question, therefore, is whether a promise of the kind said to have been made here, made to the vendor by or on behalf of a prospective purchaser of land, is capable of giving the vendor a proprietary interest in the land, as opposed to a merely personal right against the purchaser, before the purchase is completed. On the face of it, the promises which were made here and on which Mrs Scott acted in giving up the ownership of her home, bore all the hallmarks of a proprietary estoppel. But is such an estoppel capable of being an interest in land before the person making the promise has become its owner? 105. The best case which can be cited in favour of the vendors argument that it is so capable is the decision of the Court of Appeal in Lloyds Bank v Rosset [1989] Ch 350. Mrs Rosset had done work on the house before it was conveyed to her husband and contemporaneously charged to the Bank. Nicholls LJ was unable to accept that the wife had no beneficial interest in the property before completion (p 385F). The husband had a specifically enforceable contract to purchase the property and hence he had an equitable interest in it. The wife had some equitable interest in the property before completion, carved out of the husbands interest just described (p 386A). Both Mustill and Purchas LJJ agreed with him on this point. 106. When Rosset reached the House of Lords, it was held that the judges factual findings did not justify a finding that she had any beneficial interest in the property. Lord Bridge remarked that, had she become entitled to a beneficial interest prior to completion it might have been necessary to examine a variant of the question regarding priorities which your Lordships have just considered in Abbey National Building Society v Cann: see [1991] 1 AC 107, 134B. Thus it can well be said that their Lordships did not allow the appeal on the basis that the Court of Appeal were wrong on this point; they seem to have proceeded on the basis that the Court of Appeal were right, because otherwise no question of priorities would have arisen. 107. But that would indeed be odd, as the same appellate committee gave judgment in Abbey National Building Society v Cann on the very same day on which they gave judgment in Rosset. And in Cann they were well aware of the series of cases, beginning with Coventry Permanent Economic Building Society v Jones [1951] 1 All ER 951 (Coventry), Woolwich Equitable Building Society v Marshall [1952] Ch 1 (Woolwich), Universal Permanent Building Society v Cooke [1952] Ch 95 (Cooke), and ending with Church of England Building Society v Piskor [1954] Ch 553 (Piskor). These were all cases in which a person who had contracted to buy residential property granted a tenancy of all or part of the premises to another person who moved in before the contract was completed. The purchasers having mortgaged the property at or shortly after completion, the question was whether the mortgagees were bound by the tenancies. 108. All of them depended upon what Harman J in Coventry, at p 903, described as an old doctrine (none the worse for being old) that if A purports to create a lease in Bs favour, A having no estate sufficient to support the lease, then, if A afterwards acquires a sufficient estate, he will be bound not to deny that he always had a good right to create the tenancy and the lease is said to take effect by estoppel. This is the doctrine described as among the clear points about estoppel at first instance in Cuthbertson v Irving (1859) 4 Hurl & N 742, 157 ER 1034 (affirmed on appeal at (1860) 6 Hurl & N 135, 158 ER 56): neither the lessee nor the lessor can dispute one anothers title and if the lessor without a legal estate later acquires one, the estoppel is fed. 109. In each of these four cases, the interest of the purchaser between contract and completion was considered not sufficient to support the lease. Hence the question was whether there was a moment in time between the completion of the purchase and the grant of the mortgage the so called scintilla temporis in which the purchaser acquired the unencumbered legal estate and so the estoppel was fed before the purchaser disposed of it by way of mortgage. In Coventry, Harman J held that there was no such scintilla, the conveyance and the mortgage being (for this purpose at least) indivisible. In Woolwich, Dankwerts J held that there was such a scintilla and hence the tenancy took priority over the mortgage. In Cooke and Piskor, the Court of Appeal, led by Evershed MR, adopted the Woolwich approach. In Cann, of course, the House of Lords held that Piskor was wrongly decided and that Harman J had adopted the correct approach in Coventry. It follows that Woolwich was also wrongly decided as in all these three cases the conveyance and the mortgage were virtually contemporaneous and the mortgage loan was required to complete the transaction. 110. It does not necessarily follow that Cooke was wrongly decided. As Lord Oliver explained in Cann, at p 92: Of course, as a matter of legal theory, a person cannot charge a legal estate that he does not have, so that there is an attractive legal logic in the ratio in Piskors case. Nevertheless, I cannot help feeling that it flies in the face of reality. The reality is that, in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indissolubly bound together. The acquisition of the legal estate is entirely dependent upon the provision of funds which will have been provided before the conveyance can take effect and which are provided only against an agreement that the estate will be charged to secure them. In Cooke, the mortgage was the day after the conveyance and there was no evidence that they were one and the same transaction, or that the advance had been handed over to the vendor rather than the purchase being initially funded in some other way, although the mortgage was applied for before completion. It may be that the conveyance and the mortgage were in fact indivisible. It may be that they were not. Cooke was not cited to their Lordships in Cann, but it must have been known to them, because it features prominently in Piskor, and it was not overruled or even mentioned in their opinions. 111. But that is by the way. None of this scintilla temporis debate would have been necessary if the purchaser of land had been capable of creating a proprietary interest in that land before completion, which would be binding upon a lender whose mortgage could only be granted on or after completion. And if a tenancy cannot be carved out of the equitable interest which the purchaser has before completion, it is hard to see how the sort of beneficial interest which Mrs Rosset was claiming could be so carved out. So it is odd, to say the least, that the House of Lords appears to have assumed that it could. In any event, we are here dealing with a promise which is much closer to a tenancy by estoppel than to the sort of beneficial interest claimed by Mrs Rosset. My provisional conclusion, therefore, is that under the ordinary law of property the nominee purchaser in this case could not give Mrs Scott a tenancy which would bind the lenders in this case before her purchase of the land was completed. 112. How does this provisional conclusion sit with the scheme of the Land Registration Act 2002? Sections 28 and 29, dealing with priority, refer to interests affecting the estate (see para 98 above). The interests which are protected for the purpose of section 29(1) are interests affecting the estate immediately before the disposition in question, in this case the mortgage. Section 132(3)(b) makes it clear that references to an interest affecting an estate are to an adverse right affecting the title to the estate . In other words, there has to be an estate before there can be an interest which affects it. The 2002 Act does not define estate but legal estate has the same meaning as in the Law of Property Act 1925, section 1(1) of which contains the most basic rule of English land law: The only estates in land which are capable of subsisting or of being conveyed or created at law are (a) An estate in fee simple absolute in possession; (b) A term of years absolute. The interest of the purchaser before completion, however it may be characterised, is not a legal estate. Hence the nominee purchaser could not create an interest which was capable of being a protected interest for the purpose of the 2002 Act until she had acquired the legal estate. This is entirely consistent with and confirms the provisional conclusion reached earlier. 113. There is a further complication. There is a gap between any transaction and its registration. The 2002 Act, confirming Cann on this point, makes it clear that the relevant date, when the person must be in actual occupation and have a proprietary interest in the land, is the time of the disposition over which priority is claimed: see Schedule 3, paragraph 2. Any unprotected interest affecting the estate immediately before the disposition is postponed to the interest under the disposition: see section 29(1). The relevant disposition for this purpose is the mortgage. But neither the mortgage nor the transfer to the purchaser can operate at law until they are registered: see section 27(1). Until registration, the purchaser (and indeed the mortgagee) have only equitable interests. This might suggest that rights granted by the purchaser to an occupier could not be fed until registration. However, this is machinery, not substance. Assuming that all relevant registration requirements are met, the purchaser has now acquired an absolute right to the legal estate (and the mortgagee an absolute right to the charge). Her interest is of a different order from that of a purchaser before completion, who has the contractual right to have the property conveyed to her but may never in fact get it. 114. Were there to be a scintilla temporis between the conveyance and the grant of the mortgage, the vendors tenancy by estoppel would indeed become an overriding interest. But it has not been argued in this case that Abbey National Building Society v Cann was wrongly decided. It has been accepted that, at least in the standard case where completion and mortgage take place virtually simultaneously and the mortgage is granted to secure borrowings without which the purchase would not have taken place, completion and mortgage are one indivisible transaction and there is no scintilla temporis between them. We have been invited to distinguish Cann but not to bury it. Are contract, transfer and mortgage indivisible? 115. That simple analysis is sufficient to determine this case, without any resort to the much more controversial proposition that, not only are the conveyance and the mortgage one indivisible transaction for this purpose, but they are now to be joined by the contract as well. Whatever ones view of the decision in Cann (and Lord Oliver acknowledged, at p 92, that the contrary view had an attractive logic to it) it does make sense. The conveyance vests the legal estate in the purchaser who instantly mortgages it to the lender. All the purchaser ever acquires is the equity of redemption. But that may not be true if the mortgage takes place sometime after the conveyance: there may be a period during which the purchaser owns the land without encumbrances. Not all conveyances and mortgages are indivisible: it depends upon the facts, which is why Cooke may not have been wrongly decided. 116. The lender is not a party to the contract to sell the land to the purchaser. This is an entirely separate matter between vendor and purchaser in which the lender is not involved. These days it may well take place on the same day as the conveyance and mortgage but it often takes place days, weeks or even months beforehand. In the olden days, it was common for vendor and purchaser to instruct the same solicitor. But that is no longer permitted, as it is recognised that they may well have a conflict of interest. The vendor may not know, and certainly has no right to know, how the purchaser proposes to fund the purchase and whether or not it is planned to mortgage the property immediately on completion. Indeed, the purchaser, perhaps particularly a corporate purchaser, may not know precisely where the money is coming from at the time when the contract is made. There may be a variety of options available and the choice between them not yet made. 117. Under the Law Societys Conveyancing Protocol (the current edition was published in 2011), the purchasers solicitor should check whether the purchaser requires a mortgage, whether a mortgage application and offer have been made and whether any conditions remain to be performed. It is only sensible to do so before the purchaser client is legally committed to the purchase. The vendor obviously also has an interest in knowing whether the purchaser will be good for the money. The Protocol advises the vendors solicitor to request details of the purchasers funding arrangements before exchange of contracts, but the purchasers solicitor cannot disclose the information without the clients consent. The Protocol simply advises him to consider recommending disclosure. Even if the vendor does know that the purchaser proposes to borrow money to fund the purchase, she will not know the precise terms of any proposed mortgage. Indeed the purchaser may not know them at the time of the contract. Mrs Scott did not know that the nominee purchaser proposed to mortgage her home to the Bank, nor did she know that the mortgage would prohibit the granting of the tenancy which she had been promised. 118. Nor will the mortgagee necessarily know the precise terms of the contract of sale. The seller will of course do so. Nowadays it is common for purchaser and lender to be represented by the same solicitor or conveyancer, but it is not obligatory, and there is obviously a potential conflict in a situation such as this. The Council of Mortgage Lenders Handbook provides that Unless otherwise stated in your instructions, it is a term of the loan that vacant possession is obtained. The contract must provide for this. If you doubt that vacant possession will be given, you must not part with the advance and should report the position to us (para 6.5.1). Existing and proposed lettings should be disclosed to the lender (paras 6.6.1 and 6.6.2). Under the Protocol, on exchange of contracts the purchasers solicitor sends the certificate of title and/or requisition of funds to the lender, or to the lenders solicitor if they are separately represented, in order that the funds will be available to complete the purchase. The certificate of title set out in Appendix F to the 2011 Protocol confirms that the contract of sale provides for vacant possession on completion. It also undertakes not to part with the funds if it comes to the conveyancers notice that the property will be occupied at completion otherwise than in accordance with the lenders instructions. All of this would not be necessary if the lender were a party to the contract of sale or otherwise automatically aware of its terms. 119. Thus in no sense is this a tripartite transaction, to which vendor, purchaser and lender are all party. Lord Walker and Hughes LJ cannot have meant that it was when they referred to the tripartite contractual arrangements between vendor, purchaser and mortgage lender in R v Waya [2012] UKSC 51, [2013] 1 AC 294, para 53. Waya was in any event concerned with the true construction of the arrangements between the purchasing borrower and the lender for the purpose of defining the benefit which the borrower had obtained from the lender having made a false statement in his mortgage application form. The contract between vendor and purchaser did not come into it. 120. I am afraid that I cannot see how it is implicit in the rejection of Piskor by the House of Lords in Cann that the contract of sale was part of the indivisible transaction. I understand, of course, that the ratio of Cann is limited to those cases where the purchaser requires the loan in order to complete his purchase. In that sense, the contract of sale is a necessary pre cursor to the conveyance and mortgage. But that does not explain why they are indivisible, nor does it explain what is meant by indivisibility in this context. If what is meant is that the purchaser only ever acquires an equity of redemption, out of which she is not able at completion to carve proprietary interests which are inconsistent with the terms of the mortgage, then to talk of the indivisibility of the contract adds nothing to the Cann analysis. It is still necessary to decide whether the purchaser can confer proprietary rights before completion. If what is meant is that the purchaser cannot do so, then it adds nothing to the analysis of the first question rehearsed earlier. The risk is that to talk of an indivisible transaction will not only fly in the face of the facts but also create confusion. Will it be taken, for example, to prevent a vendor from creating overriding interests between contract and conveyance? 121. In Nationwide Anglia Building Society v Ahmed and Balakrishnan (1995) 70 P & CR 381, the vendor agreed to sell his business, including its freehold premises, machinery, fixtures, fittings and vehicles, to the purchaser for 160,000. The vendor was prepared to leave up to 80,000 of the purchase price unpaid on completion. Hence the contract of sale provided that the vendor should have a first charge over the machinery, fixtures, fittings and vehicles and a second charge over the premises after the creation of a first charge to secure the intended mortgage loan. The contract also provided that the vendor should have a full set of keys and the use of an office at the property. All this duly happened. The Building Society provided a loan of 80,000 and was granted a first charge over the property. 80,000 remained owing to the vendor, who was granted a second charge over the property and a first charge over the chattels. He was also given the keys and allowed to use the office and therefore remained in actual occupation of the premises. The purchaser defaulted on the loan and the Building Society sought possession. The vendor argued, first, that his unpaid vendors lien was an overriding interest; the Court of Appeal held that the lien had been given up in return for the rights obtained under the agreement. The vendor argued, second, that the licence to occupy the room was an overriding interest; the Court of Appeal held that this was a mere contractual right and not a proprietary interest. The Court of Appeal did go on to say that, because the contract, the transfer and the legal charges were all completed on the same day, they formed an indivisible transaction and there was no scintilla temporis during which any right to occupation vested in the [vendor] which was free of the [lenders] charge (p 389). That observation was clearly not necessary for the decision, because the Court had already rejected the claimed overriding interests. It may have made factual sense in that particular case, as the transactions all took place on the same day and each of the participants knew what the terms of the arrangement were. It cannot, in my view, be extrapolated into a general proposition applicable to all ordinary domestic conveyancing transactions. Conclusion 122. This case has been decided on the simple basis that the purchaser of land cannot create a proprietary interest in the land, which is capable of being an overriding interest, until his contract has been completed. If all the purchaser ever acquires is an equity of redemption, he cannot create an interest which is inconsistent with the terms of his mortgage. I confess to some uneasiness about even that conclusion, for two reasons. First, Cann was not a case in which the vendor had been deceived in any way or been made promises which the purchaser could not keep. Should there not come a point when a vendor who has been tricked out of her property can assert her rights even against a subsequent purchaser or mortgagee? Second, Cann was not a case in which the lenders could be accused of acting irresponsibly in any way. Should there not come a point when the claims of lenders who have failed to heed the obvious warning signs that would have told them that this borrower was not a good risk are postponed to those of vendors who have been made promises that the borrowers cannot keep? Innocence is a comparative concept. There ought to be some middle way between the all or nothing approach of the present law. I am glad, therefore, that the Law Commission have included a wide ranging review of the 2002 Act in their recently announced Twelfth Programme of Law Reform (2014, Law Com No 354), which is to include the impact of fraud. LORD WILSON AND LORD REED 123. We agree that this appeal should be dismissed for the reasons given by Lord Collins and Lady Hale. On the point on which they disagree, the indivisibility of the contract from the conveyance and the mortgage, which is not part of the reasons for the decision, we agree with Lady Hale. The warrant of possession was suspended and Mrs Scott was joined as a defendant in the possession proceedings so that she could argue that she had an overriding interest under the 2002 Act. It is impossible not to feel great sympathy with Mrs Scott and the former home owners in her position, who may have been not only the victims of a fraud which tricked them out of their homes, but also of unprofessional and dishonest behaviour by the solicitors appointed to act for them. They may have claims against the Solicitors Compensation Fund, but the fact remains that they may lose their homes if they do not succeed on this appeal. |
The appellant, VTB Capital plc (VTB), is incorporated and registered, and authorised and regulated as a bank, in England. It is majority owned by JSC VTB Bank (VTB Moscow), a state owned bank based in Moscow. The first, second and fourth respondents are, respectively, Nutritek International Corp (Nutritek), Marshall Capital Holdings Ltd (Marcap BVI), both British Virgin Islands companies, and Mr Konstantin Malofeev, a Russian businessman resident in Moscow said to be the ultimate owner and controller of both, as well as of the third respondent, Marshall Capital LLC (Marcap Moscow), a Russian company which has not been served. The present case arises from a Facility Agreement dated 23 November 2007 (the Facility Agreement) entered into between VTB and a Russian company, Russagroprom LLC (RAP), under which VTB advanced some US$225,050,000 to RAP. The advance was primarily to enable RAP to buy six Russian dairy companies and three associated companies (the dairy companies) from Nutritek. After making three interest payments (and no payments of capital), RAP defaulted on the loan in November 2008. VTB believes the security provided for the loan to be worth only in the region of US$32m to US$40m. VTBs case is that it was induced in London to enter into the Facility Agreement, and an accompanying interest rate swap agreement, by misrepresentations made by Nutritek, for which the other respondents are jointly and severally liable. The misrepresentations alleged are, first, that RAP and Nutritek were not under common control, and second, that the value of the dairy companies was much greater than they were in fact worth. VTBs case is that the misrepresentations were fraudulent. In order to bring proceedings in tort in England against any of the respondents, VTB required permission to effect service on them out of the jurisdiction. Permission was obtained from Master Winegarten on 11 May 2011. The first, second and fourth respondents were served, and applied to set aside the service. In response, VTB applied for leave to amend its particulars of claim to add a contractual claim, seeking to hold the respondents liable for breach of the Facility Agreement and interest rate swap, on the basis that RAPs corporate veil could in the circumstances be pierced and the respondents held liable as persons behind the borrowing. The respondents application to set aside succeeded and VTBs application to amend failed before Arnold J, and the Court of Appeal upheld his decision on both points, albeit by reasoning in some respects different. As to service out, it is common ground, in the light of the decisions below, that VTB has a serious issue to be tried in tort against each of the respondents, and a good arguable case that its tort claims fall within CPR Part 6, PD 6B, para 3.1(9)(a), on the basis that they led to VTB sustaining damage within the jurisdiction. But both courts below held that VTB failed to show that England was clearly or distinctly the appropriate forum for resolution of VTBs tort claims. As to piercing the corporate veil, both courts have held that, although such a principle exists, no basis exists in the present circumstances for applying it to hold the respondents liable on a Facility Agreement or interest rate swap, into which they are alleged to have induced VTB to enter by deceit. VTB now appeals by permission of the Supreme Court on both points, which I will consider in turn. Appropriate forum the basis of the claims Both the alleged misrepresentations on which VTB relies originated in Russia, but they reached VTB in London (very probably via VTB Moscow), and were relied upon by VTB there when it gave formal agreement to the Facility Agreement and interest rate swap there. Further, VTB sustained its loss by disbursing money in and from London, although, as will appear, it was in fact covered by VTB Moscow against any loss which it might otherwise make on the loan. In these circumstances, I address the question of the appropriate forum on the basis that, contrary to the conclusion of the judge and Court of Appeal, the law governing the alleged tort of deceit is English rather than Russian law. In summary, this is because England is the place where the events constituting the tort occurred, within the meaning of section 11(1) of the Private International Law (Miscellaneous Provisions) Act 1995 and the respondents have not shown under section 12 that the significance of the factors connecting the tort with Russia is such that it is substantially more appropriate for Russian rather than English law to apply to determine the issues arising in this case. Whether the same applies to the alleged tort of conspiracy was not the focus of detailed submissions on this appeal and appears to me more doubtful. The conspiracy was to commit the deceit, but since both are based on a common design allegedly formed in Russia, that is a point that cuts both ways. I am however content to proceed on the basis that the conspiracy was, like the deceit, governed by English law, since ultimately in my view it makes no difference to the result. It is relevant in the light of the above to examine the pleaded basis for the allegations of deceit and conspiracy. Each of these alleged torts depends upon an allegation that the first respondent, Nutritek, made false representations as part of a common design and conspiracy with the other respondents to defraud VTB: amended particulars of claim, paras 27(f) and (g). They acted in concert pursuant to a common design: amended particulars of claim, para 67(a). The nominal owner of Nutritek was the second respondent, Marcap BVI. Marcap BVI through another company owned and controlled Marshall Capital LLC (Marcap Moscow), and it is pleaded that Marcap through Marcap BVI had de facto control of and beneficially owned in part Nutritek (amended particulars of claim, para 68(a); see also para 55) and that The whole transaction under which VTB was defrauded was co ordinated by Marcap (para 68(d)). Marcap is defined as the Marshall Capital group of companies (para 3). These pleaded formulations no doubt point to the reality that the affairs of Nutritek were controlled in Moscow, by Marcap Moscow through Marcap BVI, and, consistently with this, Marcap Moscows offices and personnel feature prominently in the history of the transaction: see e.g. amended particulars of claim, paras 30 and 69 and para 19 below. It follows that, even though the tort of deceit was itself committed in England, the alleged tortious responsibility of all the respondents depends upon its being established that they were party to a common design. On the facts of this case, it is also clear that any common design is alleged to have been and must have been formed in Russia. That is where Mr Malofeev and Marcap Moscow are based and it is Marcap who co ordinated the transaction under which the fraud allegedly occurred and through Mr Malofeev as Marcap BVIs agent that the Court of Appeal held that there was a good arguable case against Marcap BVI: see judgment, para 127. As to Nutritek that was, like Marcap BVI, a British Virgin Islands company, but it was principally owned by two Russian companies (see amended particulars of claim, para 2(a)), it was managed in Russia, no doubt through Marcap Moscow, and the approach relating to the proposed sale and facility agreement was made on its behalf to VTB Moscow by Mr Malofeev. The principal witnesses from all three respondents who have been served in relation to the alleged torts will come from Russia. The conclusion that the alleged tort of deceit is governed by English law is very relevant to the question of the appropriate forum, and I am prepared to assume that the alleged tort of conspiracy is also governed by English law. However, assuming English law to govern both alleged torts, no one suggests that this is decisive of the appropriate forum. For reasons I have already indicated, the common design on which VTBs tortious claims depend is thoroughly Russian. The legal principles regarding appropriate forum The appeal was originally presented to the Supreme Court as raising a significant issue regarding the nature and extent of the relevance of the governing law and the way in which this should be expressed. The suggestion was that a conclusion that the tort was committed in England gave rise to a strong presumption in favour of an English forum. It was submitted that the Court of Appeal had unjustifiably diluted this. It appears clear that it was only before the Court of Appeal that the suggestion was evidently first advanced. The judges judgment makes no reference at all to the line of authority represented by Cordoba Shipping Co Ltd v National State Bank, Elizabeth, New Jersey (The Albaforth) [1984] 2 Lloyds Rep 91, to which so much significance is now attached. The appellants skeleton argument before the Court of Appeal raises the point, but does not in any way criticise the judge for not mentioning it again indicating that the different counsel representing the appellant at that stage had not relied upon it. The locus classicus in relation to issues of appropriate forum at common law is Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460, where Lord Goff of Chieveley gave the leading speech. He identified as the underlying aim in all cases of disputed forum, to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice (p 480G). But he also identified the important distinction in the starting point and onus of proof between cases where permission is required to serve proceedings out of the jurisdiction and situations where service is possible without permission: p 480G H. The present case falls into the former category. In cases within that category, permission was not to be granted under the former rules of court unless it shall be made sufficiently to appear to the court that the case is a proper one for service out (RSC Ord 11, r 4(2)), and, as Lord Goff noted, the jurisdiction being exercised may be exorbitant (p 481A D). On this basis, Lord Goff concluded that: The effect is, not merely that the burden of proof rests on the plaintiff to persuade the court that England is the appropriate forum for the trial of the action, but that he has to show that this is clearly so (p 481E). Lord Goff went on to explain that caution was necessary in respect of the word exorbitant caution that explains his statement that the jurisdiction to serve out may be exorbitant. He noted (p 481F 482B) that the circumstances in which permission to serve out may be granted: are of great variety, ranging from cases where, one would have thought, the discretion would normally be exercised in favour of granting leave (e.g., where the relief sought is an injunction ordering the defendant to do or refrain from doing something within the jurisdiction) to cases where the grant of leave is far more problematical. In addition, the importance to be attached to any particular ground invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance .; or it may be of little importance as seen in the context of the whole case. In these circumstances, it is, in my judgment, necessary to include both the residence or place of business of the defendant and the relevant ground invoked by the plaintiff as factors to be considered by the court when deciding whether to exercise its discretion to grant leave; but, in so doing, the court should give to such factors the weight which, in all the circumstances of the case, it considers to be appropriate. The modern rules reflect more precisely Lord Goffs statement of general principle, in providing that permission is not to be given unless the court is satisfied that England and Wales is the proper place in which to bring the claim: CPR, rule 6.37(3). In the present case, the appellants rely upon words of Robert Goff LJ, as he was, in an earlier Court of Appeal case: Cordoba Shipping Co Ltd v National State Bank, Elizabeth, New Jersey (The Albaforth) [1984] 2 Lloyds Rep 91, and the acceptance of that case as consistent with The Spiliada by the House of Lords in the later case of Berezovsky v Michaels [2000] 1 WLR 1004. In The Albaforth Robert Goff LJ deduced from earlier case law that (p 96): where it is held that a Court has jurisdiction on the basis that an alleged tort has been committed within the jurisdiction of the Court, the test which has been satisfied in order to reach that conclusion is one founded on the basis that the Court, so having jurisdiction, is the most appropriate Court to try the claim, where it is manifestly just and reasonable that the defendant should answer for his wrongdoing. This being so, it must usually be difficult in any particular case to resist the conclusion that a Court which has jurisdiction on that basis must also be the natural forum for the trial of the action. If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum. Certainly, in the present case, I can see no factors which could displace that conclusion. In Berezovsky v Michaels a challenge to the consistency of this approach with The Spiliada was rejected by Lord Steyn in a speech with which the other two members of the majority agreed: speaking of a line of authority in which the approach taken in The Albaforth had been followed, he said (p 1014A F): The express or implied supposition in all these decided cases is that the substance of the tort arose within the jurisdiction. In other words the test of substantiality as required by Kroch v Rossell [1937] 1 Al1 ER 725 was in each case satisfied. Counsel for Forbes argued that a prima facie rule that the appropriate jurisdiction is where the tort was committed is inconsistent with the Spiliada case [1987] AC 460. He said that Spiliada admits of no presumptions. The context of the two lines of authority must be borne in mind. In Spiliada the House examined the relevant questions at a high level of generality. The leading judgment of Lord Goff of Chieveley is an essay in synthesis; he explored and explained the coherence of legal principles and provided guidance. Lord Goff of Chieveley did not attempt to examine exhaustively the classes of cases which may arise in practice, notably he did not consider the practical problems associated with libels which cross national borders. On the other hand, the line of authority of which The Albaforth is an example was concerned with practical problems at a much lower level of generality. Those decisions were concerned with the bread and butter issue of the weight of evidence. There is therefore no conflict. Counsel accepted that he could not object to a proposition that the place where in substance the tort arises is a weighty factor pointing to that jurisdiction being the appropriate one. This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part the Albaforth line of authority is well established, tried and tested, and unobjectionable in principle. Kroch v Rossell [1937] 1 All ER 725 was a case in which a foreigner describing himself as a gentlemen of no occupation claimed that he had been libelled in Le Soir, a publication with a daily circulation in Paris of about a million and a half, and in London of well under 50. He failed to establish any English reputation or connection, save temporary presence here to start the proceedings. Not surprisingly, the Court of Appeal thought that any breach here was technical and of no substance. It described the principles governing permission as requiring an examination of the circumstances to identify where the action should be better tried, in terms which foreshadowed Lord Goffs approach in The Spiliada. Berezovsky v Michaels was concerned with an alleged libel of a Russian businessman in a magazine with sales of 785,000 in the USA, 1,900 in England and 13 in Russia. But, in contrast with the position in Kroch v Rossell, the claimant had significant connections with and reputation to protect in England. On the basis that the English tort was a separate one, for the pursuit of which England was prima facie the appropriate forum on the approach taken in The Albaforth, the majority in the House upheld the Court of Appeals conclusion that England was the appropriate forum for its pursuit. The Albaforth line of authority is no doubt a useful rule of thumb or a prima facie starting point, which may in many cases also prove to give a final answer on the question whether jurisdiction should appropriately be exercised. But the variety of circumstances is infinite, and the Albaforth principle cannot obviate the need to have regard to all of them in any particular case. The ultimate over arching principle is that stated in The Spiliada, and, if a court is not satisfied at the end of the day that England is clearly the appropriate forum, then permission to serve out must be refused or set aside. The history of the transaction In the present case, there are two elements of the deceit by which VTB claims that it was deceived into entering into the facility agreement: the first goes to the ownership of the buyers, RAP; the second goes to the financial position of the dairy enterprises being sold to RAP. A large part of the evidence on these aspects by which VTB obtained permission to serve out of the jurisdiction on 11 May 2011 consisted of statements from Mr Konstantin Tulupov and Mr Vadim Muraviev, both of Moscow. There was further evidence in support of the application for permission to serve out, all from other Russian witnesses: see para 191 of Arnold Js judgment, quoted in para 41 below. Mr Tulupov was until October 2008 employed at JSC, VTB Moscow as a director within the Investment Business Acquisition and Leverage Finance Team in Moscow. Mr Muraviev had no personal involvement in events but was when he made his statement in April 2011 the Head of the Division of Distressed Debt Settlement at VTB Moscow and made his statement on the basis of a series of interviews had on 1 February 2011 with various staff members of VTB, namely Colin Magee, VTBs then general counsel, Julia Ferris, director at VTBs legal counsel department, Peter Yates, VTBs head of credit portfolio management and administration and Martin Pasek, managing director of structuring at VTB. Mr Tulupov explains that he was the project manager in respect of the facility agreement between VTB and RAP, a transaction that was both high risk but offered potentially significant benefits for VTB and VTB Moscow (para 8). As such he would (para 70) attend meetings with and obtain information from potential borrowers, draft proposed terms of any loan to submit to VTB Moscows credit committee, liaise with VTB where it was to be the lender of record, deal with any matters raised by VTB Moscows credit committee, have the conduct of matters arising after any loan was made, although where VTB was the lender of record the performance of the loan was also monitored by it and in all these matters report to his managing director, Mr Konstantin Ryzhkov, and at times also to his superior, one of two senior vice presidents, Mr Vassily Kirpichev and Mr Alexander Yastrib, who in turn reported to the deputy president, Mr Levin. During the course of the present transaction, Mr Ryzhkov also became head of the investment business acquisition and leverage finance team of VTB in London (according to Mr Muraviev from 1 September 2007). Mr Tulupov in para 8 deals with the two bases of the present claim. He states that the value of the shareholding and cash flow of the dairy companies was of considerable importance to VTB and VTB Moscow, since it represented the only real security of value, and for this reason they wanted an independent valuation and relied upon that provided by Ernst & Young dated September 2007. As to the alleged representation regarding ownership of RAP, he said: G. Whilst it was entirely a matter for the Credit Committee of VTB Moscow, if VTB Moscow had known that the proposal for the sale by Nutritek was to a company under common control, it is likely VTB Moscow would have approached the proposal differently. In particular, I believe that it is likely to have viewed the proposal as one seeking asset finance rather than acquisition finance. Amongst one of the many additional matters that would have been considered (and to which I will briefly refer later in this statement) would be the provision of additional security; H. Given that it was disclosed to VTB Moscow at the outset that Nutritek was controlled by Marcap, which I understood was a family of funds controlled by Mr Konstantin Malofeev . then Marcap was the obvious target to provide that security. This was particularly the case, when it was known to VTB Moscow that Nutritek urgently needed to raise funds to pay certain credit linked notes (CLN) and that some of the monies raised by the sale of the Dairy Companies were being used to pay them. It would have been noteworthy if Marcap refused to provide security for the risk that VTB and VTB Moscow were taking. Mr Tulupov proceeds at some length to set out the history of the transaction, starting with a meeting in Moscow where the proposed transaction was explained to Mr Ryzhkov and Mr Tulupov by Mr Malofeev and a Mr Provotorov, following which Mr Tulupov on about 18 July 2007 engaged Mr Johnston of Dewey & LeBoeuf, London to draw up finance documentation for a loan to an unknown borrower who Mr Malofeev and Mr Provotorov said they had in mind to approach to buy the dairy companies. VTBs director, Ms Bragina, responsible for investment business acquisition and leverage finance at VTB, was copied into the email and a party to the conference call by which Mr Tulupov instructed Mr Johnston. A subsequent enquiry by Mr Johnston of Mr Tulupov as to the identity of any borrower led to the answer, that the potential purchaser is controlled by a group of individuals with whom, Marcap assures, you cant have any conflict of interest. Mr Johnston described this as evasive and said that VTB would need to do a KYC (know your customer) clearance on the borrower. Arnold Js judgment records (para 14) that Mr Tulupov had a further meeting with Mr Provotorov and Mr Leonov in Moscow in late July, after which he emailed them with two versions of a term sheet, copying in Mr Malofeev, Mr Ryzhkov and Ms Bragina. A third Moscow meeting involving Mr Tulupov, Mr Malofeev, accompanied by Mr Provotorov and probably also by Mr Yuri Leonov, took place at Marcap Moscows offices in early October, when Mr Malofeev identified RAP as the potential buyer and borrower. But, according to Mr Tulupov, nothing was said to suggest that the sale would be to anything other than an independent third party, and that it would have been apparent to Mr Malofeev and his colleagues that what was being discussed was acquisition finance, rather than a balance sheet loan. A third term sheet was emailed by Mr Tulupov to the previous recipients, but not on this occasion copied to Ms Bragina. It identified VTB as the lender and recorded that additional commission was to be earned through a derivative tied to the shares and there was to be an interest rate swap to hedge interest and currency risks. VTB was commonly lender of record on such transactions, because it could offer more sophisticated lending structures and because English law offers greater protection in the event of default, but in such cases VTB Moscow would lend the relevant monies to VTB, as here, under a 100% participation agreement, although, in addition VTB was in this case itself involved in providing the interest rate swap agreement. In these circumstances, from an early stage, Mr Tulupov also worked with his counterpart at VTB, Ms Bragina, copying her into emails. Mr Tulupovs role was thereafter to obtain, check and distribute the information required by the various departments of VTB Moscow, to obtain their reports and opinions, to draw these together in a Deal Description and Draft Credit Committee Decision, to have these documents signed and approved by Mr Ryzhkov and then submitted to the Credit Committee of VTB Moscow, after approval by which the decision would still need to be reviewed by both the Managing Board of VTB Moscow given the size of the loan and VTB as both the Lender of Record and the party entering into the Interest Rate Swap Agreement (para 34). In performing his role, Mr Tulupov liaised principally with Mr Leonov, but also with Mr Provotorov and Ms Tyurina and in relation to Nutritek with Mr Skuratov, all in Moscow. One of the documents obtained in this process was the Ernst & Young report of 2007 on the dairy companies. A draft Deal Description and draft Credit Committee Decision were prepared with the assistance of Dewey & LeBoeuf for VTB/VTB Moscow and of Clifford Chance for RAP and were then signed off by Mr Yastrib, Mr Ryzhkov and Mr Tulupov, before being reviewed and approved on 31 October 2007 at a meeting of VTB Moscows credit committee, attended by Mr Novikov, Mr Yu, Mr Belov, Mr Kuzmenko, Mr Yastrib, Mr Shipilov, Mr Krasnoselsky and Mrs Bozhaeva. The approval recorded that the committee had, after taking into consideration a good financial situation of the Borrower classified the debt as Quality Category 1. The approval was subject to conditions. These included the provision of a report for the assessment of the market value of the Shares and Stakes, a reference to the Ernst & Young report already provided, a further copy of which was provided by RAP and Mr Leonov on 7 November 2007 (and circulated by Mr Tulupov to Ms Bragina and Mr Magee, albeit in Russian, on 12 November). They also included further approval of the proposal by VTB Moscows management board and VTB. Mr Tulupov recites that these approvals were obtained, the former by a formal board resolution, and that he was not involved in the latter, although he says that it was apparent from his discussions with Mr Ryzhkov and Ms Bragina that they relied upon the false representations when approving the loan. This refers to the Ernst & Young report of 2007, but it can hardly refer to any representation relating to the ownership of RAP, since Mr Tulupov goes on to say that, once approval to the credit line had been obtained from VTB and VTB Moscow, steps were taken to implement the conditions precedent which clearly included confirming the beneficial ownership of RAP as is apparent from the emails of 6 and 8 November which are exhibited to his statement. None of the conditions precedent is, however, explicitly directed to obtaining such confirmation (even though one of them required the provision to VTB and VTB Moscow of the decisions of the authorised management bodies of RAP approving the acquisition). As to the emails to which Mr Tulupov refers, these are from Ms Bragina, reporting to various colleagues in VTB (including Mr Yates) and copying to Mr Ryzhkov and Mr Tulupov, information that RAPs beneficiary and 90% shareholder (with the other 10% being owned by his management team) was a Mr Vladmir Alginin, and giving some details of his recent business career. These emails are also relied upon by Mr Tulupov as an example of the involvement of Ms Bragina, who has left VTB and whose whereabouts cannot now apparently be ascertained. However, it seems clear that all they show is that Ms Bragina was passing on internally information which she had herself received from another unidentified source. VTBs very unspecific plea is that this was information provided to VTB and VTB Moscow by the management of Nutritek: amended particulars of claim, para 51. There is no indication that Ms Bragina had any direct contact with the management of Nutritek, and the substantial likelihood must be that any information which reached her came from VTB Moscow. VTB Moscows management board approved the transaction on 13 November, and an application was signed by Ms Bragina and Mr Thunem on behalf of VTB for credit facilities. The application recorded that RAP had approached VTB Moscow for the debt financing of its proposed acquisition of the dairy companies, and that under the proposed structure VTB was to act as lender of record, but VTB Moscow was to fully fund the transaction and fully undertake the credit risk under the transaction in accordance with the participation agreement. It also recorded that the market value of the dairy company shares had been determined by Ernst & Young. On 19 November a similar application was signed off by Ms Wooi, Mr Yates and Mr Manning on behalf of VTB in respect of the interest rate swap. It however recorded the structure risk as potentially high, but acceptable, on the basis that the transaction was considered unsecured, and the security package (RAPs shares in the dairy companies) of little tangible value, the financial risk as high, on the basis that, according to the historical balance sheets the price being paid for the companies appeared to be significantly above the book value of the assets. As to ownership risk, it recorded that no formal information could be found confirming that Mr Alginin was RAPs beneficial owner as IB [investment banking] have advised, that they were requesting formal proof as a condition precedent to drawdown, and to make the ownership risk medium. There is no indication that this point was followed up, even in relation to the interest rate swap, and it is not part of VTBs case in respect of the loan that it relied upon any later representation regarding RAPs ownership or Mr Alginin. Mr Tulupov continued to be the means by which the transaction was progressed, and sent VTBs mandate letter, updated term sheet and fee letter to RAP for signature on 16 November. On 23 November 2007, the facility agreement was completed, being signed for VTB by Mr Ryzhkov as managing director, head of acquisition and leveraged finance and by Ms Bragina as director, acquisition and leveraged finance. The interest rate swap agreement was completed on 28 November, being signed for VTB by Mr Ryzhkov as managing director and by Mr Steve Humphries as senior manager operations. The 100% funded participation agreement between VTB and VTB Moscow was completed on the same date. Mr Thunem, then head of global markets at, but no longer with, VTB and Mr Ianovski signed for VTB. Under it, VTBs liability to repay any sum funded by VTB Moscow was limited to any amount that it received from RAP (or any other obligor under the loan facility). All these agreements were subject to English law, and included provisions recognising England as an appropriate forum in the event of any dispute. Mr Muravievs second hand account of the history in his statement is understandably shorter. But, having spoken to Mr Yates, because both Ms Bragina and Mr Thunem had left, he understood that: A. Once the decision had been taken by VTB Moscow to enter into the Participation Agreement, there was no need for the matter to be decided by the Credit Committee of [VTB]; B. Instead, it was sufficient for the loan to proceed if the proposed transaction had been approved by Mr Ryzhkov, given his senior position within both [VTB] and JSC VTB, and the ACF [Advance Credit Facility] dated 13 November 2007 was signed off by the appropriate authorised signatories; C. Mr Ryzhkov approved the transaction and indeed he signed the Facility Agreement together with Ms Bragina on behalf of [VTB]; . Notwithstanding the position taken by Credit Risk in the ACF dated 15 November 2007 that Credit Risk consider this transaction as unsecured as the security package has little tangible value, in granting the loan and approving the ISA, [VTB] did rely heavily on the representations that had been made as to: i. the past financial performance of the Dairy Companies and the forecast performance; ii. the 2007 E&Y 2007 Valuation of the Dairy Companies based upon those figures, and iii. The SPA representing a commercial transaction between two separate entities, namely RAP and Nutritek. It was entirely unaware that they were under the common control of Marshall Capital Group of Companies and believed them to be under separate control based on the information that had been provided by Nutritek. Mr Muraviev concluded by saying: 11. Having spoken to Mr Yates, Colin Magee, Julia Ferris and Martin Pasek I am informed that and believe that if [VTB] had known that RAP and Nutritek were under the common control of Marshall BVI or that the representations identified above and contained in the 2007 E&Y Valuation were false then it would not have entered into the Facility Agreement or the ISA or permitted the draw down of the Tranche A monies. The issues Numerous judicial statements establish that it is incumbent on a defendant challenging the jurisdiction so far as possible to identify the issues concerned and to state as clearly as possible how they arise or may arise in the proceedings: see e.g. Limit (No 3) Ltd v PDV Insurance Co [2005] EWCA Civ 383, [2005] 2 All ER (Comm) 347, 366, para 72, per Clarke LJ; Dicey, Morris & Collins, The Conflict of Laws (15th ed), para 11 143. In the present case, the basic issues were in my view established by the evidence and submissions adduced below. The respondents deny that false representations were made, deny that they were party to any that were made, deny that any reliance was placed on any that were made and, for good measure, rely upon the participation agreement as showing that VTB, as opposed to VTB Moscow, did not suffer any loss. The last point was strongly argued in the courts below, as showing that VTB had no good arguable case in respect of which it could properly seek permission to serve out of the jurisdiction, but the Supreme Court refused permission to re argue the point before it. The case must therefore be considered on the basis that the claim is properly arguable, but that this defence is among those that the respondents will advance to it. It is however essentially a point of law, in relation to which there is no reason to think that the answer would be any different in Russia to here. All the points mentioned in the previous paragraph were treated as issues in the courts below. In relation to one respondent, Marcap BVI, Arnold J concluded that there was no serious issue to be tried. But in relation to Nutritek and Mr Malofeev he concluded that VTB had a real prospect of establishing deceit, despite issues argued before him as to the incurring of any loss, the making of any false representations and reliance. The Court of Appeal considered that, even in respect of Marcap BVI, a serious issue to be tried existed, while setting aside service on all three respondents on the ground that England was not the appropriate forum. A suggestion that the respondents should have advanced a positive case to support their denial of any involvement in the alleged deceit appears to me to go too far. Even where jurisdiction is established, a defendant is entitled to deny involvement in or liability for an alleged deceit, without advancing a positive explanation as to why he was not party to an alleged lie or conspiracy or as to how assets acquired proved, without any prior knowledge on his part, to be worth so much less than independent accountants had valued them as being. Further, no suggestion or objection appears to have been made below to the case being argued, as it was, on the basis that all the issues were properly raised by the respondents general denials. On the other hand, there may be particular points, in relation to which, in the absence of any positive case from a defendants side, it is not possible to conclude that any evidence will be called by the defence. That may in turn preclude bringing into account the convenience or otherwise of adducing in England or Russia any such evidence from the defence side as might be supposed to exist on such points, had any positive case been raised on them. It is also clear, from such material as the Court has before it in relation to the issue regarding the worldwide freezing order, that VTB has been given a considerable understanding by Mr Malofeev himself of the nature of his case regarding the discrepancy between the position indicated by the Ernst & Young report of 2007 and the position as it materialised not very long after the completion of the transaction. Mr Michaelson, partner at SJ Berwin acting for Mr Malofeev recorded in his tenth statement of 18 October 2011 (paras 38 to 42) that Nutrinvestholding (Nutriteks parent) had at Mr Malofeevs instance instructed Ernst & Young to prepare a further report dated 26 February 2010, to determine precisely what accounting practices and transactions were taking place within the Nutritek business and that the report does not implicate Mr Malofeev. Mr Michaelson went on to refer to the obvious inconsistency between Mr Malofeev commissioning the Report and at the same time being responsible for any wrongdoing identified (para 43). The judgments below Arnold J addressed the question of the appropriate forum in paras 186 to 195: 186. Stage I. The factors that may be taken into account in determining which is the natural forum for the action include: (a) the personal connections which the parties have to the countries in question; (b) the factual connections which the events relevant to the claim have with those countries; (c) factors affecting convenience or expense such as the location of the witnesses or documents; and (d) the applicable law. 187. Counsel for VTB submitted that England was the natural forum because (i)VTB is English, (ii) the misrepresentations were relied upon in England, (iii) the money was lent and the loss sustained in England, (iv) the Facility Agreement, ISA, the Participation Agreement and the SPA contain English law and English jurisdiction or arbitration clauses and (v) the applicable law is English law. I do not consider that any of these factors points strongly to England being the natural forum in the present case. So far as (i) is concerned, VTB is controlled by VTB Moscow. As to (ii), as explained above, it seems to me that VTB's reliance was wholly secondary to that of VTB Moscow. In relation to factor (iii), the loss was sustained because Russian assets provided inadequate security. As to (iv) and (v), the English law clauses are immaterial once it is concluded, as I have, that the law applicable to the tort is Russian law. The English jurisdiction and arbitration clauses are a pointer to England, but not a strong one given that the claim is a tort claim not a contract claim. 188. Counsel for the defendants submitted that the following factors pointed to Russia being the natural forum. First, the connections of the parties to Russia. VTB is controlled by VTB Moscow, which is Russian. Furthermore, the litigation is being managed by VTBDC, which is also Russian. MarCap Moscow and Mr Malofeev are Russian. It is common ground that Nutritek was managed from Russia, and VTB's case is that Mr Malofeev controls both Nutritek and MarCap BVI. Furthermore, it is VTB's case that Mr Malofeev orchestrated the fraud, primarily through MarCap Moscow. 189. Secondly, the connections of the events constituting the torts to Russia. The transaction was introduced to VTB Moscow at meetings between Russian individuals in Russia. The negotiations mainly took place in Russia. The misrepresentations were made and mainly received in Russia. The more important misrepresentation concerned the performance of the Dairy Companies, which are Russian companies. The 2007 E&Y Valuation was a valuation by Ernst & Young's Moscow office and was based on information provided by Nutriteks Russian management. The misrepresentations were primarily relied upon by VTB Moscow acting through its Credit Committee and Management Board in Russia. It was VTB Moscow and VTBDC which primarily dealt with RAPs default and enforcing the security. The secured assets were in Russia. The discovery of the fraud took place in Russia. Although the loss was sustained by VTB in England, as discussed above the ultimate economic impact is in Russia. 190. Thirdly, most of the witnesses are Russian and many of the documents are in Russian and located in Russia. So far as the witnesses are concerned, there are a considerable number of relevant Russian witnesses from VTB Moscow, VTBDC, Ernst & Young, Nutritek (Mr Skuratov and the managers of the Dairy Companies), MarCap Moscow (Mr Leonov, Mr Provotorov, Ms Tyurina and Mr Popov as well as Mr Malofeev) and RAP (Ms Kremneva and Mr Pankov). Other potential Russian witnesses include Mr Sazhinov and Mr Alginin. By contrast, there are relatively few material witnesses from VTB. The two most important ones appear to be Ms Bragina and Mr Ryzhkov. Both have left VTB (as has Mr Thunem). It appears that Mr Ryzhkov is in Russia, while VTB's evidence is that Ms Bragina is believed to be in England. Although Mr Ryzhkov has been contacted about the matter, it does not appear that Ms Bragina had been. 191. As counsel for the defendants pointed out, it is striking that all of VTB's witness statements in support of its application for permission to serve out, other than one from its solicitor, were made by Russian witnesses. In addition to the statements of Mr Tulupov and Mr Chernenko, these consisted of: i) a statement made by Andrey Puchkov, Deputy Chairman of VTB Moscow, which among other matters dealt with VTB Moscow's reliance on the misrepresentations alleged, Mr Puchkov having been present at the Management Board meeting on 13 November 2007 at which the transaction was approved; ii) a statement made by Vadim Muraviev, Head of the Division of Distressed Debt Settlements at VTB Moscow, who gave evidence as to VTB's reliance on the misrepresentations alleged based on interviews with four English employees of VTB including Mr Magee and Mr Pasek; and iii) a statement made by Denis Zemlyakov, General Director of VTBDC, who gave evidence concerning RAP's default and the enforcement of the security. 192. In addition, VTB relied on two draft statements from Alexander Buryan and Irina Leonova, who were employed by RAP as Vice President and Chief Accountant. Furthermore, since then a number of statements have been made by Arthur Klaos of VTBDC, in the most recent of which Mr Klaos relays information provided to him by (among others) Mr Ryzhkov and Alexander Yastrib (at the time Senior Vice President of VTB Moscow and now a board member of the Bank of Moscow). 193. While the four VTB employees interviewed by Mr Muraviev are evidently material witnesses to VTB's claim (although Mr Magee and Mr Yates appear to have had more involvement in the transaction than Mr Pasek or the fourth employee Julia Ferris), it is clear that they are of secondary importance compared to Ms Bragina and Mr Ryzhkov, let alone Mr Tulupov and his colleagues in Moscow. If the claim is tried in England, witnesses located in Russia will not be compellable except by means of letters rogatory. Even if they are prepared to give evidence voluntarily, they may not be prepared to come in person, necessitating evidence being given by videolink. Even if they are prepared to come in person, they are likely to require interpreters. As for the documents, many of these have required or will require translation. It is true that the agreements are mainly in English, and that these are important documents, but these and other documents in English form a relatively small proportion of the relevant documents even at this stage of the proceedings. 194. Fourthly, counsel for the defendants submitted that the applicable law was not a strong factor in favour of England even if it was English law. It is clear from the expert evidence before the court (as to which, see below) that the Russian courts can receive expert evidence as to English law. Furthermore, the key issues in the case are likely to be factual rather than legal. In the event, of course, I have concluded that the applicable law is Russian law, which supports the conclusion that Russia is the natural forum. 195. In my judgment, taking all the factors considered above into account, the natural forum is Russia. The Court of Appeal before which reliance was, for the first time, placed on the suggested presumption arising from The Albaforth (see para 14 above) dealt with the issue of appropriate forum as follows: 164. We have already commented that the judge may have erred in his interpretation of the test adumbrated in the Spiliada case. Instead of asking first whether England was the natural forum and then, even if it is not, asking whether England is nevertheless the appropriate forum for other reasons, there is only one overall question to be answered: has VTB established that England is clearly or distinctly the appropriate forum? 165. In our view the judge was correct to conclude that VTB has failed to do so. The steps leading to our conclusions are as follows: first, we will assume (based on our discussion above) that the fact that VTB has sustained its loss resulting from the torts in England raises a prima facie case that England is the appropriate forum in which to try the disputes. Secondly, however, we have to take account of all the other factors identified by both sides in order to determine whether VTB has satisfied the court that England is clearly or distinctly the appropriate forum. 166. Thirdly, in that regard, we have concluded, on the basis of the material presently before us, that the applicable law of the torts is Russian law. That cannot be a concluded view. Wherever a trial takes place, it can be challenged. But that point works both ways. Even if we had concluded that the applicable law of the torts was English law, this would not have been a factor that would weigh heavily in making England the appropriate forum, precisely because if the defendants wished to allege and plead that the applicable law was Russian law, both sides would have had to prepare for a trial on that basis. If the case were to be heard in England, both sides would have to prepare expert evidence on Russian law; and, doubtless, the obverse would be so if the case were to be heard in Russia. This is not a case, such as we think Lord Goff of Chieveley contemplated in Spiliada at 481G, where the law of the contract is a known certainty. In this case the applicable law of the torts remains very much in issue. Moreover, there was no serious challenge to the judge's view (at para 194) that the key issues in the case are likely to be factual rather than legal. 167. Fourthly, we have to give due weight to all the other factors (apart from those where we have found the judge erred) which the judge took into account and which have not been challenged on appeal. These are set out at paras 188 and 189 of the judgment and, as we have indicated in relation to the applicable law point, we think that these indicate that the centre of gravity of these disputes is in Russia, not England. Fifthly, VTB has not challenged the judges conclusion that VTB had failed to show that there was a real risk that it would not obtain substantial justice in Russia for any of the reasons it advanced before him. 168. Accordingly, the judge was correct to set aside Chief Master Winegarten's order granting VTB permission to serve the proceedings on Nutritek, Marcap BVI and Mr Malofeev out of the jurisdiction. The factors relevant to the appropriate forum I turn therefore to consider the appropriate forum and the relevant factors. The first question is whether there is any basis for regarding the judges or the Court of Appeals conclusion as flawed in any way which would require this Court as a second appellate court to revisit the exercise of the discretion to give permission for service out of the jurisdiction. The second question, if there is any such basis, is what conclusion this Court should reach on the issue as to the appropriate forum. The Court of Appeal re exercised the discretion, because it believed that Arnold J had erred in his interpretation of Lord Goffs speech in The Spiliada. It said that he had adopted a two stage approach instead of recognising that, in a service out case, there was a single burden on a claimant to show that England was clearly or distinctly the appropriate forum (paras 128 131 and 164; and see The Spiliada, p 481D E). But the two part approach was the one which Lord Goff identified as appropriate in cases where service is effected within the jurisdiction, so that the claimant starts with the advantage of having achieved a legitimate basis for jurisdiction without leave, and it is for the defendant to show that some other country is the appropriate forum: see The Spiliada, pp.476F. Any error therefore favoured VTB as claimant. Any error, if error there was, does not in any event impact on the force and weight of the judges analysis in the paragraphs quoted above. Further, the way the judge answered his two part test shows that he could not conceivably have come to any conclusion other than that the claimant had failed to show (clearly or at all) that England was the appropriate forum. He expressed his conclusion, at stage 1 of the two part test which he (wrongly) adopted, as being that Russia was the natural forum (para 195) before going on at stage 2 to reject any suggestion that substantial justice could not be obtained in Russia (para 196 to the conclusion at para 222). Once one concludes that Russia is the natural forum, where there is no risk that substantial justice cannot be obtained, it is really impossible to conclude that England is clearly the appropriate forum. The Court of Appeal itself held that the judge was correct to conclude that VTB had failed to establish that England was clearly or distinctly the appropriate forum (para 165). However, it itself fell into error in my view in its treatment of the governing law. (a) Governing law The Court of Appeal was wrong to regard Russian law as governing the alleged torts, but it acknowledged that possibility and it dealt with the alternative, that English law governed them. However, in relation to this alternative, it was in my opinion also wrong to approach the matter on the basis that it made no difference which law governed, because each side would have in any event to prepare evidence on both legal systems in whichever country the case was tried. The governing law, which is here English, is in general terms a positive factor in favour of trial in England, because it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. However, that factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles or rules applicable to such issues in the two countries in contention as the appropriate forum. Neither of these considerations here applies. VTBs claims are for deceit and for conspiracy. The conspiracy alleged is to obtain finance by the deceit. Accepting that the governing law of both alleged torts is, to English legal eyes, English, there is nothing to show that Russian law would reach any different conclusion. Parties are able to plead and rely on English law in Russian courts. But, even if there were reason to think that a Russian court would regard Russian law as governing the alleged torts, there is nothing to suggest that Russian law does not recognise and impose tortious liability for deceit, and for conspiracy to commit a deceit, on bases for material purposes equivalent to those which would be recognised under English law. It is unlikely that it does not, and no evidence has been adduced that it does not. It would have been for VTB to adduce evidence on all these points, if it could, in support of its case that England was the appropriate forum. Although Arnold J wrongly concluded Russian law governed the alleged torts, he also considered the exercise of his discretion on an opposite basis, namely that English law applied, and, as I understand him, accepted the submission that this would not be a strong factor in favour of England, as well as saying that it was clear that the Russian courts could if necessary hear evidence of English law: see judgment, para 194 quoted above. His judgment therefore addresses the position on a correct hypothesis. Even if, contrary to my view, the judges conclusion as to the appropriate forum was limited by an assumption that Russian law governed the alleged torts, I cannot conceive, in the light of what he said in para 194, that it would have made any difference to his conclusion if he had concluded that English law governed. The key issues in this litigation will on the face of it be factual not legal. (b) Place of commission of tort For reasons already given, I proceed on the basis that this was London in relation to the claim in deceit, and that the conspiracy, being to commit the same deceit, should be regarded as effectively ancillary. But I also note that, Mr Ryzhkov as managing director of VTBs acquisition department was the first signatory of the Facility Agreement for VTB, and he was based in Moscow. It may well be that his signature was sent or collected electronically from Moscow. Even if that were so, he is in Russia, and on any view an important potential witness. The place of commission is a relevant starting point when considering the appropriate forum for a tort claim. References to a presumption are in my view unhelpful. The preferable analysis is that, viewed by itself and in isolation, the place of commission will normally establish a prima facie basis for treating that place as the appropriate jurisdiction. But, especially in the context of an international transaction like the present, it is likely to be over simplistic to view the place of commission in isolation or by itself, when considering where the appropriate forum for the resolution of any dispute is. The significance attaching to the place of commission may be dwarfed by other countervailing factors. Here the common design on which the respondents tortious responsibility is based was formed in Russia. Further, both the alleged representations emanated from Russia, in the form of the Ernst & Young 2007 report and the information that Mr Alginin was the effective beneficial owner of RAP. The history of the transaction which I have set out indicates that the transaction was introduced, pursued and approved predominantly in Moscow. It is difficult to avoid the conclusion that VTB was effectively following suit on decisions taken there. Further, significant aspects of the facts which are said to have rendered the representations untrue existed in Russia: particularly, the dairy companies businesses and financial positions, but also, presumably, the factual control which Mr Malofeev is said to have exercised directly or through Marcap Moscow over RAP. VTB, as a London based bank, must have had to go through some formal decision making processes, or it would not have been party to the facility agreement at all. However, it did not need to put the loan proposal through its own credit committee, once it had been through VTB Moscows credit committee (para 34 above). Further, the main documents emanating from VTB, the two credit applications of 13 and 15 November, date from well after the matter was approved by VTB Moscows credit committee on 31 October and are contemporaneous with the approval of 13 November by VTB Moscows management board. Finally, no formal record of any decision making or approval by VTB itself exists, save in the form of Mr Ryzhkovs and Ms Braginas signatures on the facility agreement. All this is however unsurprising when the transaction was effectively negotiated and decided upon in Moscow, and the funding and credit risk in respect of the loan was being fully assumed by VTB Moscow. Arnold J was not referred to The Albaforth, but in my view his approach in paras 186 to 195, cited above, was consistent with the proper application of the overriding principles of The Spiliada by which he correctly directed himself. It is true that at an earlier point in his judgment, when determining the governing law of the alleged torts to be Russian, he wrongly identified Russia as their place of commission (paras 134 to 135). But, as I have already said, in para 187 he also considered the exercise of the discretion to serve out on the opposite hypothesis, namely that English law governed the torts. Had he had cited to him The Albaforth, I do not see how it could or should, in the light of the other factors that he correctly identified, have led him to any different result than that to which he in fact came. It is clear that in his view the other factors pointed very powerfully towards Russia as the natural forum for resolution of the issues. Further, the Court of Appeal, before which The Albaforth was relied upon, did not regard it decisive in the circumstances of this case (para 166 et seq). It erred in treating Russian law as governing the alleged torts, but went on largely to eliminate the significance of this error by treating it as irrelevant which law governed. It should have treated English law as governing the torts and have recognised this as one factor generally tending to favour English jurisdiction. But, for reasons explained in paras 46 to 49 above, it was in this case a factor of very little if any real potency. Had the Court of Appeal approached the potential relevance of the governing law on a correct basis, it is in my view clear that it would in this case also have made no difference to its ultimate conclusion. The Supreme Court is, in these circumstances, being asked to re exercise the discretion exercised at two stages below in the light of points made about their reasoning of no real significance, which it is clear would not have altered the decision in either court. (c) The factual focus VTBs case is that deceitful representations emanated from the respondents in Russia, but were communicated to VTB, and relied upon by VTB, in London where VTB also suffered its loss. This analysis is important when considering where the tort was committed and what law governs it. But a wider view is necessary when considering the appropriate forum. The respondents denials of any liability raise as issues whether the representations were inaccurate, whether, if so, any or all of the respondents knew of their inaccuracy and whether they joined together by common design to make the alleged representations and what impact any inaccuracy of such representations had. Taking the Ernst & Young 2007 report, the factual focus will be on the dairy companies and on the respondents understanding of their affairs and financial position, matters which are clearly likely to be more appropriately examined in Russia, where the companies, their records and any relevant company witnesses are. Ernst & Young examined the companies through their Moscow office, and the same is probably true of VTBs expert accountants, Deloittes. It is clear (para 40 above) that Mr Malofeevs case is that he was as unaware as Ernst & Young of the financial inaccuracy of their report. Secondly, relevance may attach to the impact which the Ernst & Young report had on those to whom it was first presented in Moscow. As to the ownership of RAP, the plan, which VTB has produced showing Mr Malofeevs alleged connection with and/or control of RAP, shows an international picture. On many aspects of the plan, evidence about the alleged corporate and personal links could be adduced as easily in England as in Russia. But any evidence from Mr Malofeev, who is said to have been in control of a web of interlinking companies as shown on the plan, would more conveniently be heard in Russia. The judge noted, however, the respondents did not adduce before him any positive case challenging VTBs contention that Mr Malofeev ultimately controlled RAP as well as Nutritek. That does not mean that this is not in issue. But it does mean that, in the absence of any positive challenge, the convenience or otherwise of Mr Malofeev giving evidence on it in England or Russia can be put on one side. On the other hand, the issue relating to reliance is one on which VTB will clearly have to adduce the relevant evidence from its side. Again, it is likely that the relevant evidence will come in large measure from Russia and Russian witnesses. The informality of the alleged representation regarding RAPs ownership and regarding Mr Alginin, and the apparent failures to follow it up by obtaining more formal confirmation, is striking. It is likely to lead to questions as to how much, if any, weight was placed upon any such representation by VTB or VTB Moscow. Ms Bragina cannot now be located and is not shown to have remained in England, and the representations said to be evidenced by her two emails in November 2007 seem, as already stated, likely to have come to her via VTB Moscow: see amended particulars of claim, para 51 and para 31 above, by a process which is obscure. The impact or lack of impact which it had on those to whom it was first presented in Moscow is thus likely to be a very relevant subject of examination in the litigation, on the basis that the substantial decision making process took place in Moscow, with VTB following in very large measure suit. (d) Witnesses This is a factor at the core of the question of appropriate forum. It was covered fully and helpfully by Arnold J in the course of considering the natural forum in paras 188 to 195 of his judgment, set out in full above. In summary, it is clear that the issues and evidence will be focused overwhelmingly on matters which happened in and concern Russia, and that the oral and documentary evidence, on both factual and expert matters, is likewise likely to be overwhelmingly Russian and to be found in Russia, where it could be heard in Russian without translators. (e) Aim of the alleged torts The alleged torts were designed to induce VTB to enter into a facility agreement with RAP which was subject to English law and an agreement (for the benefit of VTB only) that the courts of England should have non exclusive jurisdiction and be the most appropriate and convenient forum: clause 35.1. The purpose of the facility agreement was in turn to fund RAPs purchase of the dairy companies from the first respondent, Nutritek International Corpn. I am inclined to agree with Arnold J (para 187) that the fact that the facility agreement was subject to English law is not relevant. He discounted it because of his view, erroneous on the basis on which I approach the case, that the tort claims were subject to Russian law. But, in my view, even though the tort claims are subject to English law, it bears scarcely if at all on the appropriateness of the forum for their resolution that they were designed to induce another English law contract. No issue arises about the interpretation of the facility agreement. On the other hand, the fact that the alleged torts were designed to induce the making of a loan facility agreement, under which England was accepted as the most appropriate and convenient forum is a potentially relevant factor. It links with and reinforces the fact that, if there was any such deceit and/or conspiracy as alleged, the same were directed at VTB in London. But it is a factor which Arnold J did take into account (para 187). He saw it as a pointer to England, but not a strong one given that the claim is a tort claim not a contract claim. I agree with this balanced view. But, even if it understates the significance of the pointer, it does so only slightly and not in a way which can, in my view, possibly justify this Court in interfering with the judges conclusion. There is certainly general attraction in a conclusion that persons committing deceit should answer in the jurisdiction which is not merely that where their deceitfulness manifested itself, but also a jurisdiction agreed to be appropriate under the contract which they are by such deceit inducing. But that formulation, by omitting the word allegedly, begs the question where the issue whether any such deceit occurred and induced the loan should most appropriately be determined. All that has been established at this stage is that there is a serious issue to be tried in other words, that VTB has a reasonable prospect of success in respect of VTBs tort claims. The question where such claims are appropriately to be tried has to be answered in the light of all the circumstances, including the nature of the issues to be tried and the evidence which would be involved. The alleged torts were committed in England under English law, but the fundamental matters in dispute whether there was any such deceit, whether the respondents were party to it, and what, if any impact, any falsely made representations had on VTB are, as I have shown, heavily focused in this case on Russia and Russian witnesses. (f) Fair trial? There is, as the Court of Appeal mentioned in para 167, no suggestion that this matter could not or would not receive a fair and proper trial in Moscow. Conclusions On the issues relating to the appropriate forum which the courts below addressed, the reasoning of Arnold J and the Court of Appeal was, subject to differences which I have identified, largely concurrent. The Court of Appeal erred in its approach to the significance of the law governing the alleged torts, but Arnold J, although he erred in regarding the governing law as Russian, also, as I read para 194 of his judgment, expressed his view as to the appropriate exercise of his discretion on the assumed opposite basis, that English law applied. For reasons which I have set out in paras 54 and 55 above, neither Arnold Js error as to the governing law of the alleged torts, nor the Court of Appeals failure to recognise the potential significance of the governing law of such torts, can have been decisive in relation to the concurrent conclusions which they both reached. In short, Arnold Js analysis and exercise of his discretion cannot in my view be faulted in any substantial respect, and I see no basis on which this Court would be justified in setting aside his exercise of his discretion and re exercising the discretion for ourselves, still less in arriving at a different conclusion from his. The case is one in which an appellate court should refrain from interfering, unless satisfied that the judge made a significant error of principle, or a significant error in the considerations taken or not taken into account. However, if it were incumbent on us to re exercise the discretion regarding service out, I would myself arrive at the same conclusion as the judge and the Court of Appeal. Once again in summary, the major part of the factual subject matter involves Russia, and it is clear that the great bulk of evidence on both sides will have to come from Russian witnesses. The location in law of the alleged torts is of much diminished relevance, on examination of their circumstances and place in which they are said to have originated, the process by which they are said to have reached and impacted on VTB and the evidence which would be involved in undertaking such examination. The fact that any deceit was intended to induce an English law contract which provided for English jurisdiction is relevant, but cannot determine the appropriate forum in which to decide whether there was in fact any such deceit or conspiracy. In my opinion, the Russian connection is of such strength and importance in this case that, despite the existence of some factors favouring England, the appellant is quite unable to discharge the onus on it of showing that England is clearly or distinctly the appropriate forum for determination of the issues in this case. The proposed contractual claim based on piercing the corporate veil I agree with Lord Neubergers judgment on this aspect and would accordingly uphold the Court of Appeals decision to refuse VTB permission to amend to raise a contractual claim based on piercing the corporate veil and treating the defendants liable for breach of the Facility Agreement and/or associated interest rate swap. The Freezing Order Like Lord Wilson (paras 159 to 160), I am concerned that a freezing order should have been in force for some 14 months despite concurrent decisions below concluding that jurisdiction should not be exercised and, at least in the view of the judge, that, irrespective of whether jurisdiction should be exercised, the freezing order originally granted should not be continued. On any view, this position reinforces Lord Neubergers comments in paras 81 to 93 with which I would associate myself. Conclusion I would in the light of my above conclusions dismiss this appeal on both the issues of jurisdiction and amendment and order that the freezing order be discharged. LORD NEUBERGER Introductory This appeal raises two main questions which arise out of a claim brought in the High Court by VTB Capital PLC (VTB) against (i) Nutritek International Corp (Nutritek), (ii) Marshall Capital Holdings Ltd, (iii) Marshall Capital LLC, and (iv) Konstantin Malofeev (together the defendants), based on the torts of deceit and conspiracy. The first main question is whether the permission granted ex parte to VTB to serve the proceedings out of the jurisdiction on the defendants should be set aside. The second main question is whether VTB should be allowed to raise an additional claim, by way of amendment to its statement of case, based on piercing the corporate veil. Arnold J and the Court of Appeal each concluded that the answer to the first question was yes, and to the second question was no see, respectively [2011] EWHC 3107 (Ch), and [2012] EWCA Civ 808. VTB appeals against both conclusions. The first question turns on whether the English court is the appropriate forum for the hearing of VTBs claim. The second question turns on whether VTB has an arguable case on piercing the corporate veil. The background facts have been fully set out in paras 165 to 180 of Lord Clarkes judgment, in paras 19 to 40 of Lord Mances judgment, (as well as in paras 9 to 37 in the judgment of Lloyd LJ in the Court of Appeal, and in paras 4 to 56 of Arnold Js judgment). I shall discuss both questions on the basis that they arise between VTB and Mr Malofeev, because (subject to the point that Marcap Capital LLC has not been served), it appears to be common ground that (i) the position of the other three defendants in relation to the first question is no different from his, (ii) the position of Marshall Capital Holdings Ltd and Marshall Capital LLC (together Marcap) in relation to the second question is no different from his. The first question: the appropriate forum: three general points In very summary terms: (i) VTBs substantive case is that it was induced by deceitful misrepresentations, for which the defendants were responsible, to enter into certain agreements (the agreements) with various parties, in particular Russagropom LLC (RAP), under which VTB agreed to lend, and thereafter did lend, money to RAP; (ii) VTB obtained permission ex parte to effect service of proceedings, claiming damages for deceit and conspiracy, on the defendants out of the jurisdiction, and the defendants then applied to set aside service on the ground that Russia, rather than England, was the appropriate forum for the issues to be determined. In a case such as this, permission to serve out of the jurisdiction should only be granted if the court is satisfied that England and Wales is the proper place in which to bring the claim see CPR 6.37(3). It was common ground that this means that VTB could only succeed on the first question if it was able to establish that, in the words of Lord Goff of Chieveley in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, 481, the courts of England and Wales (hereafter England) are clearly the appropriate forum for the trial of the action. When a court is called upon to decide whether an action should proceed in this, as opposed to another, jurisdiction, it is being asked to decide a procedural issue at a very early stage. Where, as is now the position in this case, it is common ground that the parties would have a fair trial in the competing jurisdiction, the exercise will normally involve the court weighing up a number of different factors, and deciding where the balance lies. Whilst the same considerations will not always apply to applications for permission to serve out and applications for stays of proceedings, the argument on this appeal has highlighted three general points in relation to each type of exercise. The first point is that hearings concerning the issue of appropriate forum should not involve masses of documents, long witness statements, detailed analysis of the issues, and long argument. It is self defeating if, in order to determine whether an action should proceed to trial in this jurisdiction, the parties prepare for and conduct a hearing which approaches the putative trial itself, in terms of effort, time and cost. There is also a real danger that, if the hearing is an expensive and time consuming exercise, it will be used by a richer party to wear down a poorer party, or by a party with a weak case to prevent, or at least to discourage, a party with a strong case from enforcing its rights. Quite apart from this, it is simply disproportionate for parties to incur costs, often running to hundreds of thousands of pounds each, and to spend many days in court, on such a hearing. The essentially relevant factors should, in the main at any rate, be capable of being identified relatively simply and, in many respects, uncontroversially. There is little point in going into much detail: when determining such applications, the court can only form preliminary views on most of the relevant legal issues and cannot be anything like certain about which issues and what evidence will eventuate if the matter proceeds to trial. This concern is not new. In Cherney v Deripaska [2009] EWCA Civ 849, paras 6 and 7, Waller LJ said that whilst he appreciate[d] that litigants do often feel strongly about the place where cases should be tried disputes as to forum should not become state trials. He also lamented the mountain of material the Court faced in that case, and suggested that it would have been better for both parties and better use of court time if they had expended their money and their energy on fighting the merits of the claim. In Friis v Colburn [2009] EWHC 903 (Ch), paras 3 and 5, having set aside an order for service out of the jurisdiction, Peter Smith J referred to the fact that the claimants costs schedule was 215,280.50, following a hearing which, he said, had been strung out by unrealistic stances and unnecessarily prolonged and complicated submissions which seem[ed] to achieve nothing other than create fogs of irrelevancy. In that connection, the present case is striking, as Arnold J explained in para 3 of his judgment. The hearing before him lasted six days, after two days pre reading. He was faced with more than 27 bundles of documents, written evidence, and exhibits, and 14 bundles of authorities. One of the witnesses had made twelve witness statements, and further materials were added on a daily basis. (The hearing was not limited to the application to set aside permission to serve out: it included an application to amend, and applications to continue and to discharge a freezing order; however, no more than half the material and time can have been devoted to those aspects.) Since the hearing of this appeal, the Court of Appeal has given judgment in Alliance Bank JSC v Aquanta Corporation [2012] EWCA Civ 1588, a case involving similar issues to those in this appeal. At para 4 of Tomlinson LJs judgment in that case, he referred to the fact that the first instance hearing of the application to set aside permission to serve out, on the grounds that England was an inappropriate forum (as well as raising some other points), lasted eleven days, and the hearing in the Court of Appeal appears to have lasted four days. In Spiliada [1987] AC 460, 465, Lord Templeman expressed the hope that in a dispute over jurisdiction, the judge will be allowed to study the evidence and refresh his memory of [the principles] in the quiet of his room without expense to the parties; that he will not be referred to other decisions on other facts; and that submissions will be measured in hours and not days. That was a rather optimistic aspiration, not least when one bears in mind the understandable desire of lawyers to do, and to be seen by their clients to be doing, everything they can to advance their clients case, especially where the dispute over jurisdiction may well be determinative of the outcome. However, particularly with the benefit of procedural reforms, which have been introduced, or are in the process of being introduced, following reports from Lord Woolf and Lord Justice Jackson, the judiciary is now encouraged to exercise far greater case management powers than 25 years ago. Accordingly, judges should invoke those powers to ensure that the evidence and argument on service out and stay applications are kept within proportionate bounds and do not get out of hand. The second point is, in a sense, a sub set of the first point, and concerns the extent to which a defendant who is challenging the jurisdiction of the English court should identify the nature of his case. In my view, the position is reasonably clear. As a matter of principle, a defendant is entitled to keep his powder dry: he can simply put the claimant to proof of its case. In general at least, that is true at any point of the proceedings. The mere fact that the defendant is challenging jurisdiction does not somehow impose a duty on him to specify his case. The onus is on the claimant to satisfy the court that there is a serious issue to be tried on the merits of the claim, and not on the defendant to satisfy the court that he has a real prospect of successfully defending it. However, if the defendant chooses to say nothing, then it would be quite appropriate for the court to proceed on the basis that there is no more (and no less) to the proceedings than will be involved in the claimant making, or trying to make, out its case. Of course, in many instances, the defendant will be able to say that, although he has not submitted a draft statement of case, or produced a witness statement, setting out the details of his case, its nature is clear from correspondence, common sense, or even submissions. Consistent with my observations on the first point, I would not want to encourage a defendant to go into great detail as to his case in a long document with many exhibits, but if he is wholly reticent about his case, he can have no complaint if the court does not take into account what points he may make, or evidence he may call, at any trial. I agree with Lord Clarke that a defendant could exhibit draft points of defence, but in many cases, it may be disproportionate to expect him to incur the costs of doing so before it has been decided whether the claim is to proceed at all. The third point was expressed by Lord Bingham in Lubbe v Cape plc [2000] 1 WLR 1545, 1556. He said, in the context of an application for a stay of proceedings on grounds of forum non conveniens, that [t]his is a field in which differing conclusions can be reached by different tribunals without either being susceptible to legal challenge. The jurisdiction to stay is liable to be perverted if parties litigate the issue at different levels of the judicial hierarchy in the hope of persuading a higher court to strike a different balance in the factors pointing for and against a foreign forum. Precisely the same applies in many cases involving permission to serve out. As Mr Mark Hapgood QC, who appeared for Mr Malofeev, said, appellate courts should be vigilant in discouraging appellants from arguing the merits of an evaluative interlocutory decision reached by a judge, who had to balance the various factors relevant to the appropriate forum, when the complaint is, in reality, that the balance should have been struck differently. Lord Templeman in Spiliada, at 465 said that the determination of the appropriate forum is pre eminently a matter for the trial judge, because Commercial Court judges are very experienced in these matters, and [a]n appeal should be rare and the appellate court should be slow to interfere. This case was in the Chancery Division, whose judges entertain such issues less commonly than their Commercial Court colleagues, but their experience and expertise are such that the same conclusion applies. As Tomlinson LJ said at para 117 of his judgment in Alliance Bank, an appellate court should hesitate long before interfering with the judges assessment on such an issue. The first question: the appropriate forum: the instant appeal Lord Mance and Lord Clarke have each fully considered the first question in their respective judgments, and have come to different conclusions. Given that the first question is so fact specific, and is the subject of two full judgments in this court (not to mention two full judgments below), it would not be appropriate for me to go into the facts and issues canvassed between the parties. Lord Mance in paras 41 and 42 of his judgment has set out the passages in the judgments of Arnold J and the Court of Appeal respectively, which contain the centrally relevant reasoning of those tribunals on the first question which we have to decide. At least on the face of it, those passages each involve a classical interlocutory weighing up exercise with which an appellate court should be slow to interfere. Of course, that does not detract from the point that the Court of Appeal will consider any argument that the judge took into account any irrelevant or mistaken material, or omitted some relevant material, which could well have influenced the conclusion reached, or that the case is one of those even more unusual cases where the judges conclusion was one that no reasonable judge could have reached. It is worth emphasising that, as Lord Wilson says, the exercise carried out by the judge and by the Court of Appeal on the first question was not the exercise of a discretion but an evaluative, or a balancing, exercise, with which, as Lord Goff said in Spiliada at 465 an appellate court should be slow to interfere (also reflected in Lord Binghams observation in Lubbe quoted in para 92 above). In my view, there are no good grounds upon which this court should interfere with the decision of the Court of Appeal on the first question, and I also consider that there were no good grounds upon which the Court of Appeal could have interfered with the decision of Arnold J on that question. In that connection, there are one or two points worth mentioning. First, were the Court of Appeal correct to hold that Arnold J went wrong in a way which justified them reconsidering his conclusion? In my view, they were right to say in paras 131 and 129 of their judgment that he should have asked himself the single question identified in para 80 above, whereas he approached the issue through two slightly different questions. However, I am unconvinced that this represented an error of significance. The nub of Arnold Js reasoning, quoted by Lord Mance in para 41 above, shows, to my mind, that the judge ultimately adopted the right approach to the question which he had to resolve. Secondly, there is the governing law. For the reasons given by Lord Clarke and Lord Mance, I agree that the law governing the alleged tort of deceit is English law. As for the alleged tort of conspiracy, this is less clear, because the conspiracy to commit the deceit was based on a common design allegedly formed in Russia. However, like Lord Mance, I am content to proceed on the basis that English law applies. In connection with the relevant governing law, therefore, it is clear that Arnold J and the Court of Appeal went wrong in holding that Russian law was the governing law. It seems to me, however, that that error cannot, at least of itself, justify this court interfering with the Court of Appeals decision, or, indeed, with Arnold Js decision, on the first question. That is because the Court of Appeal said in terms in para 166 of its judgment that it would have reached the same decision even if the law governing the deceit and conspiracy claims was English law, and Arnold J in his judgment appears to me to have taken the same view at his para 194. Thirdly, there is an argument based on the jurisdiction clauses contained in the agreements, which VTB contends it entered into as a result of the alleged deceits and conspiracy. Clause 35 of the Facility Agreement (clause 35) provided, in clause 35.1, that the courts of England have nonexclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement, that no Party would argue that the courts of England [were not] the most appropriate and convenient courts to settle such disputes, but that clause 35.1 was for the benefit of [VTB] only. Clause 35.3 entitled VTB to refer any dispute which may arise out of or in connection with this Agreement to final and binding arbitration in London. The accompanying related agreements also contained jurisdiction clauses in favour of the English courts, and although their terms were not identical to clause 35, the differences are not significant for present purposes, so I shall confine my remarks to clause 35. On behalf of VTB, Mr Mark Howard QC argued that the fact that the defendants had procured, by fraudulent misrepresentations, the entry of VTB into a contract containing a provision such as clause 35, was a powerful pointer to England being the proper place to bring [a] claim that it was induced by deceit to do so, particularly as the individual alleged to be responsible for the deceit was also involved in negotiating the contract. At the end of para 187 of his judgment, Arnold J described clause 35 as a pointer to England, but not a strong one given that the claim is a tort claim not a contract claim. The Court of Appeal did not in terms address this point, as the approval in their para 167 of Arnold Js balancing exercise only refers to his paras 188 and 189. However, by expressly agreeing with his approach, it seems unlikely that they did not take into account the point which he made at the end of his para 187. In my view, Arnold J was right in his view that clause 35 was a factor in favour of VTBs case on the first question, but he was also right to say that it was not a particularly strong factor. As Rix J said in relation to a similar point in Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 All ER (Comm) 237, 252, it would be far fetched to suggest that a provision such as clause 35 could be invoked by VTB to require a claim it brings solely against non parties to be heard in London, even if the claim relates to the agreement containing the clause. However, that is not a reason for concluding that clause 35 cannot be a factor, or, to use Arnold Js word, a pointer, in connection with the first question. There may well be circumstances in which such a factor is a powerful one. An example is to be found in the decision of the New South Wales Court of Appeal in Global Partners Fund Ltd v Babcock & Brown Ltd (in liquidation) [2010] NSWCA 196 see especially at paras 71 to 80. I do not consider that that decision helps VTB: for a number of reasons, it was a very different case. In this case, it is true that, at least on the unchallenged evidence on behalf of VTB, Mr Malofeev was involved, and may have been instrumental in, negotiating the agreements in question, and he can therefore be said to have approved, or at least have had knowledge of, their terms, including clause 35. It is also true, again on VTBs case, that Mr Malofeev can be said to have encouraged VTB to enter into those agreements, which include clause 35. To that extent, it can come as no surprise to him that VTB wish to litigate a claim which, at least on its case, arises out of those agreements, in London. However, clause 35 is not an exclusive jurisdiction provision: it merely gives VTB what is in effect an option to sue the other parties to the agreements in England in respect of any claim arising out of or in connection with those agreements. The present proceedings do not involve VTB suing any party to the agreements, although it may be that they could fairly be said to include any claim arising under the agreements. The fact that RAP was content to be sued under the agreements in England does not mean that Mr Malofeev would have been content to have been sued in tort here. The fact that VTB apparently wanted to have the right to sue RAP here does not mean that it would have wanted to have the same right against Mr Malofeev (e.g. RAP may have been believed to have assets here). I accept that it would be different if VTB had a claim under the agreements against RAP to which its claim against Mr Malofeev was somehow connected. There is obvious force in Mr Hapgood QCs point that, if Mr Malofeev is to be treated as having had notice of clause 35 and its implications, it goes no further than helping VTB in suing him in this jurisdiction in proceedings which include a claim brought under the agreements against one or more of the parties to the agreements. However, I do not consider that the fact there are no such claims destroys VTBs reliance on clause 35 of any validity, but it severely weakens it. I acknowledge the authority of Professor Briggs and the force of his views, as described by Lord Clarke at paras 221 and 222. However, I do not accept that Mr Malofeev engineered VTB entering into clause 35. There is no evidence that he even knew of its existence, and, anyway, it is plain from its terms that the clause was wanted by VTB and is purely for its benefit. In so far as it is said that Mr Malofeev engineered VTB entering into the agreement which happened to include clause 35, it seems to me unsafe to proceed on the assumption that Mr Malofeev was guilty of deceit: that would be the central substantive issue in these proceedings. What I do accept is that the existence of the clause in an agreement, in which Mr Malofeev was in some respects involved (to use a neutral word) in negotiating, renders it hard for him to contend that England is an inappropriate forum for the proceedings which are connected with the agreement, but I do not see it going much further than that on its own. To hold otherwise would, I think, involve effectively treating Mr Malofeev as bound by the clause. Finally, is this a case where the conclusion reached below on the first question was outside the ambit of permissible decisions as canvassed by Lord Bingham in Lubbe and quoted in para 92 above? In my view, it is not. While there is a powerful case for saying that England is the appropriate forum, as Lord Clarkes judgment shows, I think that it is also clear there is a powerful argument to the contrary, as is demonstrated by Lord Mances judgment (supported by the reasoning of Arnold J and the Court of Appeal). It is unnecessary to spend time on what is a hypothetical question, namely what decision I would have reached on this issue if I had been the appropriate decision maker. It is sufficient for me to conclude, as I do, essentially for the reasons given more fully by Lord Mance and Lord Wilson, that Arnold J and the Court of Appeal each reached a conclusion on the first question which (i) they were respectively entitled to reach on the basis of applying the relevant principles to the facts of this case, and (ii) was not vitiated by any error, because, to the extent that there was any error, it did not invalidate the conclusion, both because the error would not have caused them to change their conclusions and because that would have been a reasonable view to take. The second issue: piercing the corporate veil: VTBs case VTB seeks to amend its pleaded case to contend that Mr Malofeev and Marcap should be treated as being jointly and severally liable with RAP for breaches of two of the agreements, namely the Facility Agreement and the associated ISA (the two agreements) and/or otherwise subject to remedies to enforce the two agreements. On the documents, the parties to the two agreements were (i) RAP, (ii) the original guarantors, namely, Migifa, owner of all the shares in RAP, and Brentville, owner of all the shares in Migifa, and (iii) VTB. It is (unsurprisingly) therefore common ground that Mr Malofeev was not party to either of the two agreements. However, VTBs contention is that it is entitled to pierce the veil of incorporation of RAP, as a result of which Mr Malofeev (and Marcap) should be held liable under the two agreements together with RAP and/or otherwise subject to remedies to enforce the two agreements. According to VTBs proposed amended particulars of claim, as expanded in the written and oral argument before us, its case on this issue may be summarised as follows: to (iii) The two agreements appeared (i) Mr Malofeev controlled RAP and Nutritek; (ii) RAP was specifically formed for the purpose of entering into the two agreements, which it duly did and thereby obtained the benefit of the loans of over US$225,050,000 made available to RAP by VTB thereunder; involve, and were misrepresented to VTB to involve, a loan to RAP to enable it to purchase the shares in certain Dairy Companies owned by Nutritek, whereas their true purpose, as Mr Malofeev knew, was to transfer those shares between the two companies at an inflated price; In particular, Mr Malofeev was responsible for inducing VTB to enter into the two agreements by virtue of Nutriteks misrepresentations as to the control, trading performance, and value of the Dairy Companies, and, in particular, representing that they were not controlled by Mr Malofeev or Marcap; (v) Mr Malofeev accordingly improperly used RAP as the corporate vehicle to enter into the two agreements, and (iv) (vi) obtain[ed] thereby the loans, which involved the fraudulent misuse of the company structure; In particular, Mr Malofeev used RAPs separate legal status to disguise the ownership and control ultimately exercised over RAP by [Mr Malofeev and Marcap], which disguise duly misled VTB into believing that there was a genuine arms length transaction at a genuinely negotiated price; (vii) In these circumstances, the corporate veil of RAP should be lifted, exposing Mr Malofeev as the puppeteer behind it to remedies to enforce the terms of the [two agreements], so that Mr Malofeev is jointly and severally liable with RAP under the two agreements in respect of VTBs losses. For Mr Malofeev, it was contended that this line of argument is bound to fail on two alternative grounds. The first is that we should hold that, whatever has been said about it in previous cases, the court cannot in fact pierce the corporate veil, and that the cases which suggest it can are wrong, although the decisions in those cases may often be justified on another basis. The second argument is that, even if the court can in principle pierce the veil, it cannot do so in this case, because VTBs argument represents an illegitimate and unprincipled extension of the circumstances in which the veil can be pierced. The second issue: piercing the corporate veil: the principle of piercing the veil I turn first to consider the argument that there are no circumstances in which the court should pierce, or lift, the corporate veil. The terms piercing and lifting appear throughout the authorities, sometimes interchangeably. As Toulson J observed in Yukong Line Ltd of Korea v Rendsburg Investments Corpn of Liberia (No 2) [1998] 1 WLR 294, 305, it may not matter what language is used as long as the principle is clear; but there lies the rub. Staughton LJ in Atlas Maritime Co SA v Avalon Maritime Ltd (No 1) [1991] 4 All ER 769, 779G, expressly separated the two, on the basis that pierc[ing]is reserve[d] for treating the rights or liabilities or activities of a company as the rights or liabilities or activities of its shareholders, whereas lift[ing] [is] to have regard to the shareholding in a company for some legal purpose. In Ben Hashem v Al Shayif [2008] EWHC 2380 (Fam) [2009] 1 FLR 115, a case which included a claim that a company was no more than one mans alter ego, Munby J said, at para 150, that in this context the expressions are synonymous. For present purposes, I shall use the phrase piercing in preference to lifting. It is the more familiar expression and it is the expression which all counsel have used. It is unnecessary to decide whether, in truth, there is a difference in this context between piercing and lifting the corporate veil. We were referred to a number of cases where courts have either granted relief on the basis of piercing the corporate veil, or where courts have proceeded on the assumption, or concluded, that there is power to do so. The only case in that connection in the House of Lords, or Supreme Court, to which we were referred, was Woolfson v Strathclyde Regional Council 1978 SLT 159, a case where, on the facts, the House of Lords had no difficulty in rejecting an argument that the corporate veil could be pierced. At 1978 SLT 159, 161, Lord Keith suggested that the court could only take such a course where special circumstances exist indicating that [the involvement of the company] is a mere faade concealing the true facts. There is obvious attraction in the proposition that the court can pierce the veil of incorporation on appropriate facts, in order to achieve a just result. However, the spirited and sustained attack mounted against the proposition by Mr Michael Lazarus, who appeared for Marshall Capital Holdings Ltd, is worthy of serious consideration. The brief discussion of the principle in Woolfson does not justify the contention that it was somehow affirmed or approved by the House: Lord Keiths remarks were obiter, and the power of the court to pierce the corporate veil does not appear to have been in issue in that case. The most that can be said about Woolfson from the perspective of VTB is that the House was prepared to assume that the power existed. The starting point for the argument that the principle does not exist is the well known decision in Salomon v A Salomon & Co Ltd [1897] AC 22. There is great force in the argument that that case represented an early attempt to pierce the veil of incorporation, and it failed, pursuant to a unanimous decision of the House of Lords, not on the facts, but as a matter of principle. Thus, at 30 31, Lord Halsbury LC said that a legally incorporated company must be treated like any other independent person with its rights and liabilities appropriate to itself , whatever may have been the ideas or schemes of those who brought it into existence. He added that it was impossible to say at the same time that there is a company and there is not. The notion that there is no principled basis upon which it can be said that one can pierce the veil of incorporation receives some support from the fact that the precise nature, basis and meaning of the principle are all somewhat obscure, as are the precise nature of circumstances in which the principle can apply. Clarke J in The Tjaskemolen [1997] 2 Lloyds Rep 465, 471 rightly said that [t]he cases have not worked out what is meant by piercing the corporate veil. It may not always mean the same thing (and to the same effect, see Palmers Company Law, para 2.1533). Munby J in Ben Hashem seems to have seen the principle as a remedial one, whereas Sir Andrew Morritt V C in Trustor AB v Smallbone (No 2) [2001] 1 WLR 1177 appears to have treated the principle as triggered by the finding of a faade. The faade mentioned by Lord Keith is often regarded as something of a touchstone in the cases e.g. per Munby J in Ben Hashem, para 164, and per Sir Andrew Morritt V C in Trustor, para 23. Words such as faade, and other expressions found in the cases, such as the true facts, sham, mask, cloak, device, or puppet may be useful metaphors. However, such pejorative expressions are often dangerous, as they risk assisting moral indignation to triumph over legal principle, and, while they may enable the court to arrive at a result which seems fair in the case in question, they can also risk causing confusion and uncertainty in the law. The difficulty which Diplock LJ expressed in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, 802, as to the precise meaning of sham in connection with contracts, may be equally applicable to an expression such as faade. Mr Lazarus argued that in all, or at least almost all, the cases where the principle was actually applied, it was either common ground that the principle existed (Gilford Motor Co Ltd v Horne [1933] Ch 935, Re H (restraint order: realisable property) [1996] 2 BCLC 500, and Trustor) and/or the result achieved by piercing the veil of incorporation could have been achieved by a less controversial route for instance, through the law of agency (In re Darby, Ex p Brougham [1911] 1 KB 95, Gilford, and Jones v Lipman [1962] 1 WLR 832), through statutory interpretation (Daimler Company Ltd v Continental Tyre and Rubber Company (Great Britain) Ltd [1916] 2 AC 307, Merchandise Transport Ltd v British Transport Commission [1962] 2 QB 173, Wood Preservation Ltd v Prior [1969] 1 WLR 1077, and Re A Company [1985] BCLC 333), or on the basis that, as stated by Lord Goff in Goss v Chilcott [1996] AC 788, 798, money due to an individual which he directs to his company is treated as received by him (Gencor ACP Ltd v Dalby [2000] 2 BCLC 734, and Trustor). In summary, therefore, the case for Mr Malofeev is that piercing the corporate veil is contrary to high authority, inconsistent with principle, and unnecessary to achieve justice. I see the force of this argument, but there are points the other way. I am not convinced that all the cases where the court has pierced the veil can be explained on the basis advanced by Mr Lazarus. Further, as Mr Howard QC said, the fact is that those cases were decided on the basis of piercing the veil. More generally, it may be right for the law to permit the veil to be pierced in certain circumstances in order to defeat injustice. In addition, there are other cases, notably Adams v Cape Industries plc [1990] Ch 433, where the principle was held to exist (albeit that they include obiter observations and are anyway not binding in this court). It is also difficult to explain the first instance decision in Kensington International Ltd v Republic of the Congo [2005] EWHC 2684 (Comm), [2006] 2 BCLC 296 on any basis other than the principle (but I am not at all sure that the case was rightly decided see Continental Transfert Technique Ltd v Federal Government of Nigeria [2009] EWHC 2898 (Comm), paras 27 29). Further, the existence of the principle is accepted by all the leading textbooks see Palmer op. cit, Gore Browne on Companies at paras 7[3] to 7[6], Gower and Davies on Principles of Modern Company Law (8th ed) at paras 8 5 to 8 14, and Farrars Company Law (4th ed), pp 69 78. In answer to the contention that the approach of the courts to the issue of piercing the veil is unprincipled, there is real force, at least on the face of it, in the fact that it cannot be invoked merely where there has been impropriety. As Munby J put it in Ben Hashem, paras 163 164, it is necessary to show both control of the company by the wrongdoer(s) and impropriety, that is, (mis)use of the company by them as a device or faade to conceal their wrongdoing at the time of the relevant transaction(s). In its recent decision in La Gnrale des Carrires et des Mines v F G Hemisphere Associates LLC [2012] UKPC 27, para 24, the Judicial Committee of the Privy Council, in a judgment given by Lord Mance, was prepared to assume that the appellant was right in contending that it was open to a court in this jurisdiction to pierce the corporate veil, but it is to be noted that this was not challenged by the respondent. In para 27, reference was made to Case concerning Barcelona Traction, Light and Power Company, Ltd [1970] ICJ 3, in which, it was said, [T]he International Court of Justice referred (para 56) to municipal law practice to lift the corporate veil for instance, to prevent the misuse of the privileges of legal personality, as in certain cases of fraud or malfeasance, to protect third persons such as a creditor or purchaser, or to prevent the evasion of legal requirements or of obligations. However, at para 27, Lord Mance pointed out that Barcelona Traction concerned international legal considerations, indicating that there may not always be a precise equation between factors relevant to the lifting of the corporate veil under domestic and international law. In my view, it is unnecessary and inappropriate to resolve the issue of whether we should decide that, unless any statute relied on in the particular case expressly or impliedly provides otherwise, the court cannot pierce the veil of incorporation. It is unnecessary, because the second argument raised on behalf of Mr Malofeev, to which I shall shortly turn, persuades me that VTB cannot succeed on this issue. It is inappropriate because this is an interlocutory appeal, and it would therefore be wrong (absent special circumstances) to decide an issue of such general importance if it is unnecessary to do so. The second issue: piercing the corporate veil: why it cannot succeed in this case I therefore approach this question in the same way as the Court of Appeal, namely by considering whether, assuming in VTBs favour that the court can pierce the veil of incorporation on appropriate facts, the basis on which VTB seeks to pierce the veil can be justified in the present case. I do so on the basis that this issue is to be resolved by reference to English law. It seems to me, however, that there may be a choice of law question to be addressed in cases which concern the piercing of the veil of a foreign incorporated company. That question is whether the proper law governing the piercing of the corporate veil is the lex incorporationis, the lex fori, or some other law (for example, the lex contractus, where the issue concerns who is considered to be party to a contract entered into by the company in question). The ultimate conclusion may be that there is no room for a single choice of law rule to govern the issue: see Tham Piercing the corporate veil: searching for appropriate choice of law rules [2007] LMCLQ 22, 27. However, given that it has been common ground throughout these proceedings that the issue is to be resolved pursuant to English law, it is inappropriate to say more about this issue. In so far as VTB invokes the principle of piercing the veil of incorporation, its case involves what, at best for its point of view, may be characterised as an extension to the circumstances where it has traditionally been held that the corporate veil can be pierced. It is an extension because it would lead to the person controlling the company being held liable as if he had been a co contracting party with the company concerned to a contract where the company was a party and he was not. In other words, unlike virtually all the cases where the court has pierced the corporate veil, VTB is claiming that Mr Malofeev should be treated as if he were, or had been, a co contracting party with RAP under the two agreements, even though neither Mr Malofeev nor any of the contracting parties (including VTB) intended Mr Malofeev to be a party. The notion that the principle can be extended to such a case receives no support from any case save for a very recent decision of Burton J, Antonio Gramsci Shipping Corporation v Stepanovs [2011] EWHC 333 (Comm), [2011] 1 Lloyds Rep 647 (which he followed in his later decision in Alliance Bank JSC v Aquanta Corporation [2011] EWHC 3281 (Comm) [2012] 1 Lloyds Rep 181, which was considered by the Court of Appeal at [2012] EWCA Civ 1588). None of the other decisions relied on by VTB in this connection is, on analysis, of assistance to its case. In Gilford, Mr Horne had undertaken not to compete with his former employer, and a company, in which only he and his wife were shareholders, and which he formed after leaving his employment, was enjoined from competing. He effectively broke his undertaking by trading through the company, in the same way as if it had been carrying on the competing business through his wife as indeed had happened in Smith v Hancock [1894] 2 Ch 377, 385, a case relied on by the Court of Appeal in Gilford. Thus, the decision in Gilford had nothing to do with the fact that a company was involved, and therefore, as a matter of logic, the decision cannot have been based on piercing the corporate veil a point made by Toulson J in Yukong Line at 308, and rightly accepted by Arnold J and the Court of Appeal in this case. The same point (as was said in Yukong Line) applies to Jones v Lipman, which I do not find an entirely easy case. After agreeing to sell a property to a purchaser, the vendor sold the same property to a company owned by him and his wife, and the purchaser obtained an order for specific performance against the company. On the judges reasoning, it would have equally been entitled to do so if, instead of the company, the property had been transferred to the vendors wife. Another view of Jones is that the sale by the vendor to the company was treated as a sham transaction. In both Gencor and Trustor, the court pierced the corporate veil in order to impose liability on a company, effectively owned and controlled by the wrongdoer, for money which he had misappropriated from the claimant and diverted to the company. There was no question of the wrongdoer being treated as contractually liable under a contract to which the company, rather than he, was a party. Even the doubtful decision in Kensington did not involve going so far as to hold that the person sheltering behind the veil was liable as if he was a contracting party under a contract entered into by the company. The fact that there has been no case (until Gramsci) where the power to pierce the corporate veil has been extended in the way for which VTB contends in these proceedings does not necessarily mean that VTBs case, in so far as it is based on piercing the veil, must fail. However, given that the principle is subject to the criticisms discussed above, it seems to me that strong justification would be required before the court would be prepared to extend it. Once one subjects the proposed extension to analysis, I consider that it is plain that it cannot be sustained: far from there being a strong case for the proposed extension, there is an overwhelming case against it. First, it is not suggested by VTB that any of the other contracting parties under the two agreements is not liable. Indeed, as mentioned above, VTBs proposed pleaded case is that Mr Malofeev is jointly and severally liable with RAP. Even accepting that the court can pierce the corporate veil in some circumstances, the notion of such joint and several liability is inconsistent with the reasoning and decision in Salomon. A company should be treated as being a person by the law in the same way as a human being. The fact that a company can only act or think through humans does not call that point into question: it just means that the law of agency will always potentially be in play, but, it will, at least normally, be the company which is the principal, not an agent. On VTBs case, if the agency analogy is relevant, the company, as the contracting party, is the quasi agent, not the quasi principal. Subject to some other rule (such as that of undisclosed principal), where B and C are the contracting parties and A is not, there is simply no justification for holding A responsible for Bs contractual liabilities to C simply because A controls B and has made misrepresentations about B to induce C to enter into the contract. This could not be said to result in unfairness to C: the law provides redress for C against A, in the form of a cause of action in negligent or fraudulent misrepresentation. In any event, it would be wrong to hold that Mr Malofeev should be treated as if he was a party to an agreement, in circumstances where (i) at the time the agreement was entered into, none of the actual parties to the agreement intended to contract with him, and he did not intend to contract with them, and (ii) thereafter, Mr Malofeev never conducted himself as if, or led any other party to believe, he was liable under the agreement. That that is the right approach seems to me to follow from one of the most fundamental principles on which contractual liabilities and rights are based, namely what an objective reasonable observer would believe was the effect of what the parties to the contract, or alleged contract, communicated to each other by words and actions, as assessed in their context see e.g. Smith v Hughes (1871) LR 6 QB 597, 607. In his argument, Mr Howard QC relied by analogy with the law relating to undisclosed principals. In my view, the analogy tells against VTBs argument. The existence of the undisclosed principal rule has long been regarded as an anomaly, as discussed in Bowstead & Reynolds on Agency, 19th ed (2010), para 8 070, and as observed by Dillon LJ in Welsh Development Agency v Export Finance Co Ltd [1992] BCLC 148, 173. As the Court of Appeal said in this case at para 89, it would be inappropriate to extend an anomaly save where it would be unjust and unprincipled not to do so. To adapt what Lord Hoffmann said in OBG Ltd v Allan [2007] UKHL 21, [2008] AC 1, paras 103 and 106, an anomaly created by the judges to solve a particular problem is an insecure base on which to justify an extension to a principle, especially when that principle can itself be said to be anomalous. Quite apart from this, it seems to me that the facts relied on by VTB to justify piercing the veil of incorporation in this case do not involve RAP being used as a faade concealing the true facts. In my view, if the corporate veil is to be pierced, the true facts must mean that, in reality, it is the person behind the company, rather than the company, which is the relevant actor or recipient (as the case may be). Here, on VTBs case, the true facts relate to the control, trading performance, and value of the Dairy Companies (if one considers the specific allegations against Mr Malofeev), or to the genuineness of the nature of the underlying arrangement (which involves a transfer of assets between companies in common ownership). Neither of these features can be said to involve RAP being used as a faade to conceal the true facts. It was suggested, however, by Mr Howard QC that the case against Mr Malofeev involves him abusing the corporate structure, and that that is sufficient to justify piercing the corporate veil. However, in my view, abuse of the corporate structure (whatever that expression means) adds nothing to the debate, at least in this case. It may be another way of describing use of the company as a faade to conceal the true facts (in which case it adds nothing to Lord Keiths characterisation in Woolfson), or it may be an additional requirement before the corporate veil will be pierced: otherwise, it seems to me that it would be an illegitimate extension of the circumstances in which the veil can be pierced. It is true that in many civil law systems, abuse of rights is a well recognised concept, and it may be appropriate for a domestic court to apply such a principle in relation to some areas of EU law. However, it was not suggested to us that it should be applied as a new or separate ground in domestic law for treating Mr Malofeev as contractually liable to VTB, or that it would assist VTB in this case. Accordingly, in agreement with the Court of Appeal and for substantially the same reasons, I consider that VTBs contention represents an extension to the circumstances in which the court will pierce the corporate veil, and on analysis it is an extension which is contrary to authority and contrary to principle. The proposed extension is all the more difficult to justify given that it is not needed to enable VTB to seek redress from Mr Malofeev. It is clear that, if VTB establishes that it was induced to enter into the agreements by the fraudulent statements which he is alleged to have made, then Mr Malofeev will be liable to compensate VTB. The measure of damages may be different, but that is not a particularly attractive reason for extending the principle in a new and unprincipled way. And I am not at all attracted by the notion that the principle should be invoked simply to enable VTB to justify the proceedings being heard in this jurisdiction, if they otherwise could not be. That would be precious close to its application being permitted to pull itself up by its own bootstraps. It follows from this analysis that I doubt that the decision in Gramsci can be justified, at least on the basis of piercing the corporate veil. In agreement with the Court of Appeal and Arnold J, I think that the reasoning in that case involved a misinterpretation of the basis of the decisions in Gilford and Jones. It seems to me that the conclusion in Gramsci was driven by an understandable desire to ensure that an individual who appears to have been the moving spirit behind a dishonourable (or worse) transaction, action, or receipt, should not be able to avoid liability by relying on the fact that the transaction, action, or receipt was effected through the medium (but not the agency) of a company. But that is not, on any view, enough to justify piercing the corporate veil for the purpose of holding the individual liable for the transaction, action, or receipt, especially where the action is entering into a contract. For these reasons, I agree with the Court of Appeal in concluding that, assuming that there is jurisdiction to pierce the corporate veil on appropriate facts, VTBs proposed pleaded case does not give rise to arguable grounds for contending that this jurisdiction could be invoked in the present case. I would therefore refuse VTB permission to amend its pleaded case to raise such a claim. Conclusion I would therefore dismiss VTBs appeal on both main issues. I have referred to the issues I have been discussing as the main issues, because there is another series of issues relating to a freezing order which VTB obtained. Following its discharge by Arnold J, VTB wishes this freezing order to be reinstated. There is also a temporary freezing order, which VTB obtained pending the determination of this appeal. In the light of the fact that this appeal is being dismissed, it seems to me clear that the discharged freezing order must remain discharged and the temporary freezing order must now be discharged as well. I should add that I agree with what Lord Wilson says about the freezing orders. LORD WILSON I agree with Lord Mance and Lord Neuberger that the appeal should be dismissed. As their judgments, and, on the other hand, those of Lord Clarke and Lord Reed, well demonstrate, the rival arguments in relation to forum are evenly balanced. VTB has three main points: (a) The location of the alleged torts in England. It is worthwhile to remember, however, that, in one sense, the bringing of the transactions into England was pure chance. In July 2007 VTB Moscow informed Mr Malofeev and MarCap that the proposed lender would be either itself or VTB; and in October 2007 it informed them that it would be VTB. They had no objection; but the placement of the lending into the hands of its English subsidiary was effected entirely at the election of, and for the convenience of, VTB Moscow. (b) The English jurisdiction clause in the facility agreement and indeed also in the interest rate swap agreement. If Mr Malofeev controlled the borrowing party to the agreements, namely RAP, and so can be considered responsible for its contractual concession that VTB should have the right to demand that disputes arising out of them be resolved in the courts of England, he can hardly complain if allegations of his and his companies fraudulent inducement of VTB to enter into them are also resolved here. But two riders fall to be attached. The first is whether the court can at this stage proceed on the basis that Mr Malofeev controlled RAP. The court must not for this purpose assume what VTB needs to prove; yet the fact is that, while not admitting control of RAP, Mr Malofeev has, to date, not actively challenged it. The second is that the test to be applied pursuant to the decision in the Spiliada case, [1987] AC 460, mandates a much wider inquiry than into whether Mr Malofeev would have no ground for complaint about the continuation of the proceedings in England. (c) The government by English law of VTBs claims in tort, as held unanimously by this court and as explained in judgments above with which I agree. A spectre of considerable practical inconvenience is raised around the receipt by a Russian judge of evidence of English law and around his application of it to such facts as he were to find. On the other hand the legal framework of VTBs case does not appear to be complex or controversial and Arnold J was entitled to conclude that the key issues in the case were likely to be factual rather than legal. Although, therefore, I discern a practical element in the third of VTBs main points, I have no doubt that, over all, considerations of practicality militate strongly in favour of a Russian forum. The apparently relevant witnesses are Russian, speak Russian and seem almost entirely to be resident in Russia and so beyond the reach of an English witness summons; and the relevant documentation, in particular relating to both the actual and the represented profitability of the dairy companies, was written in Russian. On the one hand, therefore, there are VTBs points, which primarily go to theory, to policy and, yes, perhaps to a limited extent to justice. On the other hand there are the defendants points, which primarily go to practicality. The forum issue required Arnold J not (in my view) to exercise a discretion but, rather, to reach an evaluative judgment upon whether, in the light of these and the many other points pressed upon him by each side, England was clearly the more appropriate forum. [T]he appellate court should be slow to interfere (Lord Goff in the Spiliada case, at p 465); and I agree with Lord Mance at para 68 and with Lord Neuberger at para 96 that the errors which the Court of Appeal identified in the judgment of Arnold J (in particular his adoption of the two part test apt to an application for stay) were, on analysis, of materiality insufficient to justify a re evaluation of its own. Furthermore, notwithstanding its own error about the governing law of the torts, alongside which, however, one must weigh its assertion that an English governing law would not have led it to a different conclusion, I agree with Lord Neubergers alternative conclusion at para 98 that there are no grounds for interfering with the Court of Appeals own evaluative conclusion. To be honest, a disposal of the forum part of the appeal on the above basis is, in the light of this courts intended function in the resolution of controversial and important issues of law, a banal disposal; and, in retrospect, a question arises whether it is appropriate for there to have been a massive second appeal to this court on the forum issue. In its notice of appeal VTB identified the requisite issue of general public importance relative to the issue in one sentence: the appellant says that if a defendant has committed a wrong in England, there is a presumption, and a strong one, that he ought to answer for that wrong in England. But, while he was careful not entirely to abandon his preference for the language of presumption, Mr Howard conceded, early in his opening address, that it was irrelevant whether such was a presumptive position, a starting point or a prima facie conclusion; a little later in his address, he added that the issue was not really about a label, such as that of presumption, but about approach; and he scarcely pressed the difficult suggestion that there was anything in the jurisprudence even in The Albaforth, [1984] 2 Lloyds Rep 91 to raise a formal, legal presumption that the forum should follow the location of the tort. I am doubtful whether the committee would have granted permission to appeal on the forum issue if it had realised that VTBs case would develop into little more than an invitation to re evaluate all the relevant factors for and against the English forum. VTBs application for permission to amend its particulars of claim so as to include claims against Mr Malofeev and the two MarCap companies as additional parties to the facility and interest rate swap agreements logically falls for consideration before that of the forum issue. For, had it been granted, the jurisdiction clauses in the agreements would have been directly in play. VTB frankly concedes that its primary purpose in making the proposed claims in contract was, by reference to such clauses, to establish the English jurisdiction pursuant to article 23(1) of Council Regulation EC 44/2001 (the Judgments Regulation); and that its secondary purpose was thereby to be enabled to claim more substantial sums, particularly by way of interest, than would be payable as damages in tort. In the event, however, for the reasons given by Lord Neuberger in paras 126 to 148, the Court of Appeal was right to dismiss VTBs appeal against the refusal of Arnold J to permit the amendment: for there was no good arguable case that the three specified defendants could be unveiled as additional parties to the agreements with VTB. In that this court welcomes blue sky thinking, I do not criticise Mr Lazarus for his over arching attempt to persuade it that English law recognises no principle that the corporate veil may ever be lifted. In my view, however, and notwithstanding the difficulty of being able to define within one sentence the circumstances in which the law will perhaps lift the corporate veil, such was a highly ambitious submission. But this is not the place at which to embark on an attempted subjection of it to critical examination. In that, by a majority, VTBs appeal is to be dismissed, the worldwide freezing order against Mr Malofeev must fall to be discharged. But the continuation of the order to date represents a highly unsatisfactory state of affairs. The order was first made, without notice, in August 2011 and was continued, on notice, in September 2011. On 29 November 2011, in the light of his conclusion in favour of the Russian forum, Arnold J declined further to continue the order, save for one week in order to enable VTB to approach the Court of Appeal. But importantly, as Lord Clarke has explained in para 163, Arnold J also ruled that, even had he allowed the English proceedings to continue by declining to set aside the order for service out of the jurisdiction, it would have been wrong, for each of two reasons, for the freezing order to continue. VTB, to whom Arnold J had granted permission to appeal against his refusal to permit the amendment, secured permission from the Court of Appeal also to appeal against his decision in relation to forum and his independent refusal to continue the freezing order; and, on a holding basis, the court continued that order until determination of the appeal. In the light of its dismissal of VTBs appeal in relation to forum, the Court of Appeal concluded that there was no basis on which the freezing order could continue in any event; and, although it expressed doubts about the first reason given by Arnold J for his independent refusal to continue the freezing order, it did not address his second reason and made no order on that part of VTBs appeal. It continued the freezing order for ten days only in order to enable VTB to approach this court, which further continued it until its determination of this appeal. In the light of this courts dismissal, by a majority, of the appeal in relation to forum, it can now be seen that Mr Malofeev has continued to be subject to a worldwide freezing order for some 14 months beyond the time when it was proper for such an order to have continued. For in November 2011 Arnold J rightly decided that the proceedings should take place in Russia; and the freezing order should then have expired. It was extended only because of the pendency of two successive appeals which can now be seen both to have failed. Such a state of affairs is bad enough. But what makes it worse is that, as I have explained, Arnold J also ruled as long ago as November 2011 that, irrespective of its dependence on the continuation of the English proceedings, the freezing order should not be continued; and his ruling has not been set aside by the Court of Appeal. In retrospect the Court of Appeal should have determined VTBs appeal against that ruling. Had it, for example, dismissed its appeal, this court would be unlikely to have permitted it to appeal against the dismissal and so the freezing order would no doubt at last have come to an end. One cannot quarrel with the logic behind the conventional continuation of a freezing order pending an appeal against a refusal to make an order upon its continued existence depends. But what turns out to have been the protracted wrongful continuation of the freezing order is another indication of the inappropriateness of a further appeal to this court in circumstances such as the present. The degree of economic inhibition caused to a person in the position of Mr Malofeev by a worldwide freezing order made in England remains to be seen. At first sight, however, he is entitled to complain that it was an oppressive restraint on his economic activities. Whether he is correct to say that it has caused considerable prejudice to him will no doubt be the subject of inquiry in his application, already issued but so far stayed, for VTB to be ordered to compensate him for his losses pursuant to its cross undertaking attached to the freezing order. LORD CLARKE (dissenting) Introduction In this action the appellant claimant, VTB Capital plc (VTB), which was formerly called VTB Bank Europe plc, sought and obtained permission to serve proceedings out of the jurisdiction on the defendant respondents on the ground that the defendants had committed the torts of deceit and conspiracy in England. Save for the third defendant, which has not been served with the proceedings, the defendants applied to have that permission set aside on the ground that VTB had failed to show that England was in all the circumstances clearly and distinctly the appropriate forum to determine the dispute. That application succeeded before Arnold J (the judge): [2011] EWHC 3107 (Ch). VTBs appeal to the Court of Appeal failed: [2012] EWCA Civ 808. The Supreme Court subsequently gave permission to appeal on that issue, which has (not entirely correctly) been described in argument as the jurisdiction issue. That is the first issue in this appeal. The second issue arises out of an application made by VTB to amend its particulars of claim to add a claim for breach of contract. Its case involves a consideration of the principles relevant to what is sometimes called piercing the corporate veil. Both the judge and the Court of Appeal refused that application. Although both courts accepted that it is possible in some circumstances to pierce the corporate veil, they both held that VTB had no arguable case that this is such a case. Under this head the defendants seek to uphold the decision of the Court of Appeal, not only on the particular facts, but also on the basis that there are no circumstances in which the court can pierce the corporate veil. The third issue arises out of a world wide freezing order (WFO) granted to VTB against Mr Malofeev on 5 August 2011 by Roth J. Mr Malofeev applied to discharge the order on the grounds (a) that there was no risk of dissipation of assets and (b) that there had been material non disclosure before Roth J. Arnold J subsequently declared that the WFO should be discharged on the ground that the court had refused to exercise jurisdiction over the claim. He also said that he would in any event have discharged and refused to re grant the WFO on the grounds relied upon by Mr Malofeev. The WTO was however renewed pending an appeal to the Court of Appeal and subsequently to this court. Jurisdiction Service out of the jurisdiction the principles The relevant principles are not in dispute. They have been stated and restated many times. They were correctly stated in the Court of Appeal in this case by Lloyd LJ, with whom Rimer and Aikens LJJ agreed, at paras 98 to 101. Lloyd LJ put them thus in paras 99 and 100: 99. The three basic principles were recently restated by Lord Collins of Mapesbury in giving the advice of the Privy Council in AK Investment CJSC v Kyrgyz Mobile Tel Ltd [2011] UKPC 7, 1 CLC 205 at paragraphs 71, 81 and 88. They can be summarised as follows: first, the claimant must satisfy the court that, in relation to the foreign defendant to be served with the proceedings, there is a serious issue to be tried on the merits of the claim, i.e. a substantial question of fact or law or both. This means that there has to be a real, as opposed to a fanciful, prospect of success on the claim. Secondly, the claimant must satisfy the court that there is a good arguable case that the claim against the foreign defendant falls within one or more of the classes of case for which leave to serve out of the jurisdiction may be given. These are now set out in paragraph 3.1 of Practice Direction 6B. Good arguable case in this context means that the claimant has a much better argument than the foreign defendant. Further, where a question of law arises in connection with a dispute about service out of the jurisdiction and that question of law goes to the existence of the jurisdiction (eg whether a claim falls within one of the classes set out in paragraph 3.1 of Practice Direction 6B), then the court will normally decide the question of law, as opposed to seeing whether there is a good arguable case on that issue of law. 100. Thirdly, the claimant must satisfy the court that in all the circumstances England is clearly or distinctly the appropriate forum for the trial of the dispute and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction. This requirement is reflected in rule 6.37(3) of the CPR, which provides that The court will not give permission [to serve a claim form out of the jurisdiction on any of the grounds set out in paragraph 3.1 of Practice Direction 6B] unless satisfied that England and Wales is the proper place in which to bring the claim. The facts The underlying facts and issues under this head are set out in the agreed statement of facts and issues (the SFI), from which I can take the salient events. VTBs case is that the key step in the fraud was VTBs advancing a sum of US$195,000,000 in London to the account of a borrower in London, which was in turn paid to a seller of a business to its account in London, all done subject to a loan agreement and other related agreements governed by English law and containing English jurisdiction clauses. VTB claims that it has suffered a loss in excess of US$185,000,000. The judge and the Court of Appeal both held that VTB has a good arguable case that its claims are claims in tort within paragraph 3.1(9)(a) of CPR Part 6, Practice Direction 6B, on the ground that damage was sustained within the jurisdiction and that VTB has a good arguable case in tort against Mr Malofeev. However they held that permission to serve out of the jurisdiction should be set aside because VTB has failed to show that England was clearly or distinctly the appropriate forum to determine the disputes. The first issue in this appeal is whether they were entitled so to hold. VTBs case on the facts may be summarised in this way. VTB is a bank incorporated and registered in England. It is a member of the London Stock Exchange, and it is authorised and regulated by the Financial Services Authority for the conduct of investment business in the United Kingdom. It is majority owned by JSC VTB Bank (VTB Moscow), which is a state owned bank. It is one of three strategic business arms of the VTB Group, the others being the corporate and retail businesses. It entered into a facility agreement, dated 23 November 2007 (the facility agreement), with a Russian company, Russagroprom LLC (RAP). Pursuant to the facility agreement, sums totalling US$225,050,000 were advanced to RAP, primarily to enable RAP to buy six Russian dairy companies and three associated companies (the dairy companies) from the first respondent (Nutritek), a company registered in the British Virgin Islands (BVI). After making three interest payments (and no payments of capital), RAP defaulted on the loan in November 2008. VTBs case is that the value of the security provided for the loan was no more than a figure in the region of US$32m to US$40m. VTBs case is that it was induced in London to enter into the facility agreement and an accompanying interest rate swap agreement, by misrepresentations made by Nutritek, for which the other respondents are jointly and severally liable. The two alleged misrepresentations were: first, that RAP and Nutritek were not under common control, and second, that the value of the dairy companies was much greater than their true worth. It is VTBs case that the misrepresentations were fraudulent. The ostensible primary purpose of the facility agreement was to fund the acquisition of the dairy companies from Nutritek by RAP. RAP entered into a Share Purchase Agreement (SPA) with Nutritek dated 27 November 2007, whereby RAP purchased shares in a newly incorporated BVI company, Newblade Ltd (Newblade), which in turn owned the dairy companies. VTB put before the judge a structure chart, setting out in a diagram the complex web of offshore companies through which, on VTBs case, Mr Malofeev ultimately controlled each of Nutritek, the second respondent (Marcap BVI), the third defendant (Marcap Moscow), and RAP. Marcap Moscow has not been served with the proceedings, and has not taken part in any of the hearings to date. Mr Malofeev is an international businessman who resides in Moscow. The Court of Appeal found that there was a good arguable case that Mr Malofeev operated a complex web of companies in a number of jurisdictions. It is VTBs case that he was at all material times the controller and a principal beneficial owner of the BVI companies, Nutritek and Marcap BVI, as well as Marcap Moscow and RAP. RAP was incorporated in Russia on 21 May 2007 as a special purpose vehicle. In November 2007 its immediate parent company was Migifa Holdings Ltd (Migifa), a company incorporated in Cyprus. Migifas parent company was Brentville Ltd (Brentville), a company incorporated in the BVI. It is VTBs case that RAP was ultimately owned and controlled by Mr Malofeev, through a web of offshore companies. As the judge found at para 59, this has not been the subject of challenge by Mr Malofeev, who has advanced no positive case on the issue of the ultimate ownership and control of RAP. See also the Court of Appeal, at para 34. It is VTBs case that, in July 2007 in Moscow, Mr Malofeev personally introduced the VTB Group to the scheme, whereby Nutritek sold its interests in the dairy companies to RAP under the SPA. He stated that a decision had been taken to sell Nutriteks interest in the dairy business and that a purchaser had been identified. He said that a purchaser would have to find banking facilities in order to make the purchase. Mr Tulupov of VTB Moscow was the project manager in respect of the proposed transaction, where his role included liaising with VTB in respect of the project. At an early stage, it was contemplated that either VTB Moscow or VTB would become the lender in connection with the intended transaction. On 18 July 2007, he instructed the London office of Dewey LeBoeuf, Greene & Macrae (DLGM) in relation to the proposed transaction. On the next day, a conference call took place between representatives of VTB Moscow, VTB (Marina Bragina, in London) and Marcap Moscow (Mr Alexander Provotorov and Mr Yury Leonov). It is apparent from a draft term sheet of 8 October 2007 that by early October that year, the proposed structure of the transaction was that the lender was to be VTB (funded by a participation agreement with VTB Moscow) and the borrower was to be RAP. It is VTBs case that, from about this time it was VTB which was to be the particular target for the fraud. The loan amount was to be in excess of US$220m towards an acquisition cost of US$250m. Work started to prepare the documentation for the transaction. The facility agreement was to be governed by English law and VTB was to be the lender in the transaction. Mr Tulupov explains in his statement that the attraction of the lender being VTB was that (i) VTB in the London market was able to provide more sophisticated lending structures than VTB Moscow (owing to internal Russian banking requirements) and (ii) English law offered more protection in the case of default. On 31 October 2007, VTB Moscows Credit Committee approved the proposed transaction. It is VTBs case that, separately from this, and in connection specifically with the ability of VTB to decide to enter into the facility agreement, VTB, as an FSA regulated entity, had its own processes and procedures before lending moneys. The key figures at VTB in this process included (1) Konstantin Ryzhkov, who was VTBs Head of Acquisition and Leverage Finance from 1 September 2007 to 27 October 2008 and who was also a managing director at VTB Moscow, (2) Marina Bragina, who held the equivalent post in VTB to that held by Mr Tulupov in VTB Moscow, (3) Steve Thunem, Head of Debt Capital Markets, (4) Juliet Wooi, a credit risk analyst, (5) Peter Yates, Head of Credit Risk, (6) Peter Manning, Chief Risk Officer, as per Board Approved Delegated Credit Approval Authorities and (7) K Ianovski, Head of Structured Finance and Syndication. As regards the ownership of RAP, VTB relies upon two emails dated 6 and 8 November 2007 by Ms Bragina of VTB to others within VTB and VTB Moscow which recorded information from Nutritek or from Marcap Moscow. The first email states that RAP was incorporated on 21 May 2007 (in error written as 2002) as an SPV for a Nutritek dairy division acquisition and further states that RAP has no other operations and that RAPs beneficiary is a Mr Vladimir Alginin. The second email was in response to a list of questions put to Ms Bragina previously. The key passage states as follows, in the form of the question followed by the answer: Confirm that [RAP] is 100% owned by Alginin. As per the info just received from Nutritek management, Mr Alginin has a 90% share [RAP], the remaining 10% share belongs to the management team. As to the dairy companies, there was a valuation report produced by the Moscow office of Ernst & Young Valuation LLC (E&Y), valuing the dairy companies at US$366m. This report, which is dated 5 September 2007 and is in Russian, was received by Mr Tulupov on 8 November 2007 and was discussed in several conversations with Ms Bragina and Mr Ryzhkov. Based on Mr Tulupovs evidence, VTBs case is that it attached considerable importance to the report, as did VTB Moscow. By a document headed Application for Credit Facilities, dated 13 November 2007, VTB approved the proposed transaction. It was signed on 16 November 2007 by Ms Bragina and Mr Thunem, both of VTB. VTB took the decision to enter into a separate interest swap agreement (the ISA), by a further application for credit facilities, dated 15 November 2007, and signed by Juliet Wooi, Mr Yates and Mr Manning on 19 November 2007. Further particulars relating to VTBs case as to reliance on the information provided by Nutritek concerning the ostensibly arms length relationship between Nutritek and RAP, and concerning the value of the dairy companies, are found in the witness statement of Mr Muraviev. The transaction was completed over the period 23 to 28 November 2007, during which period a number of agreements were entered into by the various parties. The principal agreements entered into as part of the overall transaction were thus as follows: the facility agreement, between VTB and RAP, the SPA between RAP, Nutritek and Newblade dated 27 November 2007, the ISA between VTB and RAP dated 28 November 2007 and the participation agreement between VTB and VTB Moscow dated 28 November 2007 (the participation agreement). The key provisions of the facility agreement are set out by the Court of Appeal at Appendix 1 of its judgment. They included that its governing law is English law (clause 34) and that the courts of England and Wales have non exclusive jurisdiction to settle any dispute arising out of, or in connection with the facility agreement, or, at VTBs option, arbitration in London (clauses 35.1.1 and 35.3). It was further expressly agreed in clause 35.1.2 that the courts of England and Wales were the most appropriate convenient courts to settle such disputes and that no party would argue otherwise (clause 35.1.2). The other agreements referred to above also contain both a choice of law clause in favour of English law, and a jurisdiction agreement in favour of the courts of England and Wales. As stated above, both the judge and the Court of Appeal held that VTB had a good arguable case that it entered into the facility agreement in reliance on the two misrepresentations, the first relating to the representation that RAP and Nutritek were not under common control, and the second as to the value of the dairy companies. On 28 November 2007, RAPs account with VTB in London was credited with US$208,700,000.00. This sum represented the Tranche A payment under the facility agreement. On the same day, US$195,000,000 of those monies were transferred to Nutriteks account with VTB in London, at RAPs direction. The monies were thereafter removed from Nutriteks account, so that by 7 December 2007 no funds remained in Nutriteks account with VTB in London. Some of the monies were transferred to various creditors of Nutritek, while at least US$62 million went to a Nutritek bank account in Switzerland. VTB says that it does not know where the funds went after that, and none of the respondents has put forward evidence as to where the funds went thereafter. As noted by the judge at para 54, some further moneys lent by VTB as part of Tranche B under the facility agreement were utilised to pay interest due under it. This involved the use of another BVI company Madinter Associates Ltd (Madinter), which enabled interest to be paid in respect of the principal loan until but not including the payment due in November 2008, since when no payment of interest or principal due under the facility agreement has been made. VTB sent a first notice of default from its London office to RAP on 15 December 2008 and a second notice of default on 14 January 2009. From August 2009, VTB began to enforce its security. In due course, VTB took control over Newblade, Migifa and eventually RAP. VTB currently estimates the value of the assets of the dairy companies as less than US$40m, and probably no more than US$32m. VTBs claims VTBs claims are concisely described by the judge at paras 57 to 63. It says that it was induced to enter into the facility agreement and the ISA, and to advance sums totalling US$225,050,000 to RAP, by two fraudulent misrepresentations. First, it claims that (together with VTB Moscow) it relied on representations made primarily by Nutritek to the effect that the SPA was a sale between companies that were under separate control. It contends that these representations were false and must have been known by Nutritek to be false when made. VTB knew at the time that Mr Malofeev through MarCap Moscow had de facto control of Nutritek. As the judge put it, what it says it did not know at the time, but has since discovered, is that Mr Malofeev through MarCap BVI also controlled RAP. Thus RAP and Nutritek were under common control at the date of the facility agreement and of the SPA and it was not therefore a commercial transaction carried on at arm's length. The judge held at para 59 that it was not necessary to go into detail concerning the basis of VTBs contention that Mr Malofeev ultimately controlled RAP as well as Nutritek, since it had not been the subject of challenge before him. Secondly, VTB claims that both it and VTB Moscow relied upon the 2007 E&Y valuation of the dairy companies and that that valuation was based on false financial figures and unsupportable forecasts provided to E&Y by Nutritek. In this regard, VTB relies upon an opinion obtained from Deloitte LLP dated 11 April 2011, which analysed the figures provided by Nutritek to E&Y and compared them with the financial information provided by the dairy companies from their own accounting records, which represents the true trading position, as well as information from other sources. It is said that it is apparent from Deloitte's opinion that Nutritek very substantially overstated the true performance figures for the dairy companies. It is VTBs case that the extent of the overstatement is such that it could only have been deliberate. The judge summarised the position in paras 61 and 62. The false representations are alleged to have been made principally by Nutritek. It is VTBs case that they were made pursuant to a conspiracy between a number of persons including MarCap BVI, MarCap Moscow and Mr Malofeev. Given the significant role they played in introducing the business opportunity to VTB and the conduct of the negotiations, VTB says that Mr Malofeev and MarCap Moscow were the prime movers in the conspiracy to deceive VTB. In this part of the case VTB pleaded causes of action against the defendants in deceit and unlawful means conspiracy, the unlawful means being the fraudulent misrepresentations. In deceit, VTBs case against MarCap BVI, MarCap Moscow and Mr Malofeev is that they are jointly liable with Nutritek on the basis that the misrepresentations were made pursuant to a common design between them. As stated in his judgment at para 144, before the judge the respondents accepted that, if English law is the applicable law, VTB has established that VTB has a real prospect of success in its claims for deceit and conspiracy and thus that there is a serious issue to be tried save in three specific respects as follows. The first, the no loss point, was that VTB had no real prospect of establishing that it had suffered loss as a result. The judge discussed the no loss point in considerable detail between paras 145 and 169. He rejected the respondents case. The respondents reargued the no loss point in the Court of Appeal, again on the basis of English law. They again failed, for the reasons given in the judgment of the Court of Appeal at paras 107 to 121. The second point was that VTB has no real prospect of establishing either that Marcap BVI was jointly liable in deceit or that it participated in the alleged conspiracy. The judge considered that submission between paras 170 and 176 and accepted it. However, the Court of Appeal held that he was wrong to do so for the reasons they gave at paras 122 to 127. The third point was that VTB has no real prospect of establishing either that Mr Malofeev is jointly liable in respect of the deceit alleged or that he participated in the alleged conspiracy. The judge rejected that submission between paras 177 and 183. He therefore concluded that there was a serious issue to be tried between VTB and Mr Malofeev. The respondents did not reargue this point in the Court of Appeal. In this court the respondents did not seek to reopen these issues. It follows that, if English law is the relevant law, VTB has a real prospect of succeeding against the respondents on the merits. As summarised thus far, the position is that, at any rate on the basis that English law is the applicable law, VTB has established the first and second of the principles set out in para 164 above. There is a serious issue to be tried on the merits in the case of each of VTBs claims in tort and VTB has a good arguable case that it sustained damage within the jurisdiction within the meaning of paragraph 3.1(9)(a) of Practice Direction 6B, which is the relevant provision by reason of CPR 6.36. It follows that the remaining question is whether the third principle is satisfied. I will consider that question under the heading forum conveniens. Forum conveniens As stated above, the question is whether VTB has satisfied the court that England is clearly or distinctly the appropriate forum for the trial of the dispute and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction on the basis that England is the proper place in which to bring the claim. As the Court of Appeal noted at para 101, on the basis of Lord Goffs classic speech in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460, 475 484, the underlying principle is that, the task of the court is to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice: Sim v Robinow (1892) 19 R 665, 668. Only two fora have been canvassed in this case; they are England and Russia. Both the judge and the Court of Appeal held that VTB had failed to discharge the onus of proof and that the centre of gravity of the case was Russia and not England. I recognise of course that this is an interlocutory appeal, that a comparison between England and Russia involves a number of different considerations and that, in these circumstances, an appellate court should not interfere with a decision of a lower court unless satisfied that it has erred in principle. However, as appears below, it is my view that the Court of Appeal did make a number of errors of principle, which entitles, indeed requires, this court to reach its own independent conclusions. There are a number of points that seem to me to be relevant on this part of the case. First, it appears to me that it is important for the court to know what issues are likely to arise at the trial of the action on the merits. Only when the issues are identified will it be possible to compare the two jurisdictions. This principle is now stated in Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 11 143, in which, having stated the general principles much as above, the editors say that, in practice, the defendant should identify the issues which are appropriate to be tried in the foreign court. In the footnote to that sentence the editors referred to Limit (No 3) Ltd v PDV Insurance Co [2005] EWCA Civ 383, at para 73 and Sawyer v Atari Interactive Inc [2005] EWHC 2351 (Ch), [2006] ILPr 129, at para 54. See also Islamic Republic of Pakistan v Zadari [2006] EWHC 2411 (Comm), at para 138 and Novus Aviation Ltd v Onur Air Tasimacilik AS [2009] EWCA Civ 122. Lawrence Collins J or Lawrence Collins LJ is the author of the relevant passage in each of those cases except the Limit (No 3) case, in which I admit to being the author. I adhere to the view I expressed in that case, now supported by Dicey. As Eder J put it in Mujur Bakat Sdn Bhd v Uni Asia General Insurance Berhad [2011] EWHC 643 (Comm), at para 9 , in considering whether or not England is the most appropriate forum, it is necessary to have in mind the overall shape of any trial and, in particular what are, or what are at least likely to be, the issues between the parties and which will ultimately be required to be determined at any trial. These were originally set out in two letters I stress that I do not mean that a defendant must set out his evidence in great detail, whether of foreign law or of fact. The purpose of the exercise is simply to state what the issues of fact are likely to be, so that the court can gauge whether England is clearly or distinctly the appropriate forum for the trial of the issues. This is of some importance in this case because no evidence was put before the court on the merits of the claims by or on behalf of Mr Malofeev. Moreover, Mr Hapgood QC submitted to the court in the course of the argument that Mr Malofeev was perfectly entitled to say and he does say to VTB, You are accusing me of being a swindler, you get on and prove it. Mr Hapgood added that the matter proceeded in both courts below on the clear understanding that VTB will have to prove its case. As he put it, they will have to prove all five ingredients of a claim for fraudulent misrepresentation and a sixth ingredient in the case of conspiracy. It appears from what Mr Hapgood said that, at any rate at present, he has no positive case. It is of course true that a defendant in the position of Mr Malofeev is not bound to advance a positive case but, in the absence of a positive case, the focus of the court can only be on the ingredients of the claim. It should not speculate about the nature of any positive case that might be advanced in the future. It was suggested in the course of the argument that the defendants could not plead a case or put forward a positive case because of the risk that they would submit to the jurisdiction. There is, in my opinion, no such risk. There is no reason why defendants should not put in a draft defence or evidence on the express basis that they are doing so without prejudice to their case on jurisdiction. I note in passing that it is the duty of the parties under CPR 1.3 to help the court to further the overriding objective, which is to deal with cases justly. The second point is the question whether English law is the applicable law. It is common ground that the applicable law falls to be determined by the provisions of the Private International Law (Miscellaneous Provisions) Act 1995 (the 1995 Act) and not by the European Parliament and Council Regulation 864/2007/EC on the law applicable to non contractual regulations, known as the Rome II Regulation. This is because the claims relate to damage which occurred after 20 August 2007 and before 11 January 2009. Sections 11 and 12 of the 1995 Act provide, so far as relevant, as follows: Choice of applicable law: the general rule. 11(1) The general rule is that the applicable law is the law of the country in which the events constituting the tort or delict in question occur. (2) Where elements of those events occur in different countries, the applicable law under the general rule is to be taken as being (c) , the law of the country in which the most significant element or elements of those events occurred. (b) (a) Choice of applicable law: displacement of general rule. 12(1) If it appears, in all the circumstances, from a comparison of the significance of the factors which connect a tort or delict with the country whose law would be the applicable law under the general rule; and the significance of any factors connecting the tort or delict with another country, that it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of the other country, the general rule is displaced and the applicable law for determining those issues or that issue (as the case may be) is the law of that other country. (2) The factors that may be taken into account as connecting a tort or delict with a country for the purposes of this section include, in particular, factors relating to the parties, to any of the events which constitute the tort or delict in question or to any of the circumstances or consequences of those events. The judge discussed the question of applicable law between paras 119 and 143 and concluded that the applicable law was Russian law. He did so by reference to both section 11(2)(c) and section 12. In para 158 the Court of Appeal expressed the tentative conclusion that, under section 11(2)(c), the applicable law was English law but also said that they were not convinced that VTB had by far the better of the argument. They held however that, under section 12, it was substantially more appropriate for the applicable law for determining the issues concerned to be that of Russia. VTB says that both the judge and the Court of Appeal were wrong and that the applicable law is English law. The question under section 11(2)(c) is in which country did the events constituting the tort occur. In para 148 the Court of Appeal set out six principles as reflecting the correct approach to section 11(2)(c) as follows: (l) Section 11 of the I995 Act sets out the general rule for ascertaining the applicable law of a tort. It adopts a geographical approach to that question. (2) Where the elements of the events constituting the tort or delict occur in different countries and the cause of action relates to something other than personal injury or damage to property, then section 11(2)(c) requires an analysis of all the elements of the events constituting the tort in question. (3) In carrying out that exercise, it is the English law constituents of the tort that matter. (4) The analysis requires examination of the intrinsic nature of the elements of the events constituting the tort. It does not, at this stage, involve an examination of the nature or closeness of any tie between the element and the country where that element was involved or took place. This latter exercise is only relevant if section 12 is invoked. (5) Once the different elements of the events and the country in which they occurred have been identified, the court has to make a value judgment regarding the significance of each of those elements. Significance means the significance of the element in relation to the tort in question, rather than trying to judge which involves the most elaborate factual investigation. (6) Under section 11(2)(c), (ie in relation to causes of action other than in respect of personal injury or damage to property where the elements of the events constituting the tort occur in different countries) the applicable law of the tort in question will be that of the country where the significance of one element or several elements of events outweighs or outweigh the significance of any element or elements found in any other country. Those principles were derived from four cases: Morin v Bonhams & Brooks Ltd [2004] 1 Lloyds Rep 702 (CA); Dornoch Ltd v Mauritius Union Assurance Co Ltd [2006] Lloyds Rep IR 127 (Aikens J) and [2006] 2 Lloyds Rep 475 (CA); Trafigura Beheer BV v Kookmin Bank Co [2006] 2 Lloyds Rep 455 (Aikens J); and Fiona Trust & Holding Corpn v Privalov [2010] EWHC 3199 (Comm) (Andrew Smith J). In this court those propositions were rightly accepted as correct. The Court of Appeal added at para 150, in relation both to section 11(2)(c) and to section 12, that two further and important points emerged from Dornoch. The first was that, if, as here, the exercise is being carried out at an interlocutory stage as part of an overall exercise to determine whether the English court should have jurisdiction to determine the claim in tort in question, the court cannot finally determine the applicable law of the tort. The second was that it is quintessentially for the judge to make an assessment of the significance of the elements of the events constituting the tort for the purposes of section 11(2)(c) and that the Court of Appeal would not interfere with that assessment unless it was satisfied that the judge made such an error in his assessment as to require the Court of Appeal to make its own assessment. It referred to the judgment of Tuckey LJ at paras 46 and 47, with which Sir Mark Potter P and May LJ agreed. The Court of Appeal held at paras 154 to 157 that the judge had made such an error in the case of section 11(2)(c) and reached a different conclusion. In my opinion, if the principles set out above are applied, the Court of Appeal was entitled to interfere with the conclusion reached by the judge. As Mance LJ put it in Morin at para 21, section 11 directs attention to the intrinsic nature of the element(s) of the tort. The Court of Appeal said at para 157 that they judged that the most important elements of the facts constituting the tort of deceit are, by their intrinsic nature, the reliance on the misrepresentations by VTB and the loss suffered by VTB. I agree. The events constituting the tort of deceit are indeed the making of the misrepresentations which were known to be untrue, reliance on the misrepresentations and the loss sustained as a result. All those occurred in England. The misrepresentations were made to VTB in England, VTB relied upon them in England and incurred its loss in England. In my opinion that is plain. It is true in the case of both misrepresentations: even though the dairy representations were initially made in Russia, the critical representations which induced VTB to enter into the facility agreement were made in London and relied upon in London. As to the alleged conspiracy, the essence of the case is that the representations were made as part of a common design. To my mind, it does not matter for the purposes of section 11(2)(c) because the essence of VTBs case remains based upon the representations made to it in London and relied upon in London by VTB entering into the facility agreement, together with the loss sustained in London. In Dornoch Aikens J was concerned with alleged misrepresentations in a proposal form. The proposal form was completed in Mauritius and given to brokers in Mauritius and then sent to London, where it was presented to reinsurers. Aikens J held that the representation contained in the proposal form was made in Mauritius and London. The presentation to the reinsurers was made and relied upon in London. Aikens J held at para 106 that the intention that the reinsurers should rely upon the proposal form continued to operate in London and the reliance, which he regarded as the most significant element, took place in London. The position is the same here. The reliance by entering into the facility agreement took place in London. Para 107 is also of some assistance. Aikens J said: The antecedent facts concerning the true situation in MCB are important, but it is what is done with those facts that really matters so far as the tort of fraudulent misrepresentation or deceit is concerned. In short, it is (on the assumptions I have made) MCBs decision not to tell the facts as they are and to continue to mislead that matters most, not the true facts themselves. In these circumstances there was in my opinion no room for a tentative conclusion that English law is the applicable law under the general rule set out in section 11. It is plainly the applicable law under the general rule. I turn to section 12. At para 149 the Court of Appeal identified these further four principles: (7) The exercise to be conducted under section 12 is carried out after the court has determined the significance of the factors which connect a tort or delict to the country whose law would therefore be the applicable law under the general rule. (8) At this stage there has to be a comparison between the significance of those factors with the significance of any factors connecting the tort or delict with any other country. The question is whether, on that comparison, it is substantially more appropriate for the applicable law to be the law of the other country so as to displace the applicable law as determined under the general rule. (9) The factors which may be taken into account as connecting a tort or delict with a country other than that determined as being the country of the applicable law under the general rule are potentially much wider than the elements of the events constituting the tort in section 11. They can include factors relating to the parties connections with another country, the connections with another country of any of the events which constitute the tort or delict in question or the connection with another country of any of the circumstances or consequences of those events which constitute the tort or delict. (10) In particular the factors can include (a) a pre existing relationship of the parties, whether contractual or otherwise; (b) any applicable law expressly or impliedly chosen by the parties to apply to that relationship, and (c) whether the pre existing relationship is connected with the events which constitute the relevant tort or delict. In every case to which the 1995 Act applies in which the court has considered the general rule under section 11, the court must consider whether the general rule is displaced under section 12. There is an illuminating discussion of the general approach in para 35 148 of the 15th edition of Dicey. The editors say that the application of the displacement rule in section 12 first requires, taking account of all the circumstances, a comparison of the significance of the factors which connect the tort with the country the law of which would be applicable under the general rule (in this case English law) and the significance of any factors connecting the tort with another country (here Russia). The word tort is italicised in the text in Dicey. The editors say that secondly, it then has to be asked, in the light of the comparison, whether it is substantially more appropriate for the applicable law for determining the issues arising in the case, or any of those issues, to be the law of that other country. The editors note that the general rule has been displaced on very few occasions. They further observe that, although section 12 applies in all cases to which section 11 applies, it would seem that the case for displacement is likely to be most difficult to establish in the case of section 11(2)(c) because the application of that provision itself requires the court to identify the country in which the most significant element or elements of the tort are located. Importantly they stress the use of the word substantially, which they describe as the key word, and conclude that the general rule should not be dislodged easily, lest it be emasculated. The party seeking to displace the law which applies under section 11 must show a clear preponderance of factors declared relevant by section 12(2) which point to the law of the other country. That approach is borne out by the cases. The idea that substantially was the key word was derived from the judgment of Waller LJ in Roerig v Valiant Trawlers Ltd [2002] EWCA Civ 21, [2002] 1 WLR 2304, at para 12(v). The principles were considered in more detail by Brooke LJ in R (Al Jedda) v Secretary of State for Defence [2006] EWCA Civ 327, [2007] QB 621 at paras 103 and 104, where he noted that the 1995 Act derived from a report of the Law Commission, from which he quoted. He added that Lord Wilberforce, who was a member of the House of Lords Committee which considered the Bill, had expressed the view that it would be a very rare case in which the general rule under section 11 would be displaced: Prima facie there has to be a strong case. In para 163 the Court of Appeal concluded that, if the applicable law was English law under the general rule in section 11(2)(c), the factors relied upon by the judge in his paras 188 and 189 led them to the conclusion that English law was displaced by Russian law by section 12. In paras 188 and 189, the judge had said this: 188. Counsel for the defendants submitted that the following factors pointed to Russia being the natural forum. First, the connections of the parties to Russia. VTB is controlled by VTB Moscow, which is Russian. Furthermore, the litigation is being managed by VTBDC, which is also Russian. MarCap Moscow and Mr Malofeev are Russian. It is common ground that Nutritek was managed from Russia, and VTBs case is that Mr Malofeev controls both Nutritek and MarCap BVI. Furthermore, it is VTB's case that Mr Malofeev orchestrated the fraud, primarily through MarCap Moscow. 189. Secondly, the connections of the events constituting the torts to Russia. The transaction was introduced to VTB Moscow at meetings between Russian individuals in Russia. The in Russia. The negotiations mainly misrepresentations were made and mainly received in Russia. The more important misrepresentation concerned the performance of the Dairy Companies, which are Russian companies. The 2007 E&Y Valuation was a valuation by Ernst & Youngs Moscow office and was based on information provided by Nutritek's Russian management. The misrepresentations were primarily relied upon by VTB its Credit Committee and Moscow acting Management Board in Russia. It was VTB Moscow and VTBDC which primarily dealt with RAP's default and enforcing the security. The secured assets were in Russia. The discovery of the fraud took place in Russia. Although the loss was sustained by VTB in England, as discussed above the ultimate economic impact is in Russia. took place through The Court of Appeal recognised in para 163 that they had concluded at para 154 that the judge did not appear to have taken account of the fact that the representations were passed on to or confirmed to VTB in London, that VTB had its own procedures that had to be completed satisfactorily before it could enter into the facility agreement and that, although there was an economic impact on VTB Moscow, VTB suffered loss as soon as the transfer of funds by it to RAP was made in London. Notwithstanding those conclusions, the Court of Appeal reached these conclusions at para 163: in our view the factors identified in the judgment at paras 188 and 189, even after discounting the point about primary reliance on the representations in Russia and the securities being in Russia, are of considerable significance. On the material that is before us, taking all those factors into account we have concluded that the centre of gravity of these torts lies in Russia. Therefore, for present purposes, we have decided that a comparison of the significance of the section 11(2)(c) factors, assuming that they would lead to the applicable law being English, with the significance of the other factors connecting the torts with Russia, leads to the conclusion that it is substantially more appropriate for the applicable law for determining the issues concerning the torts to be that of Russia. It seems to me that in that paragraph the Court of Appeal did not pay sufficient regard to the fact that in his paras 188 and 189 the judge was not considering section 12 of the 1995 Act but the broader question of forum conveniens. Further, the Court of Appeal focused, not upon the particular tort or torts but upon much wider considerations. As Dicey observes, section 12(1) expressly focuses upon the particular torts. Here the tort or torts as a result of which VTB suffered loss in London were committed as a result of VTB entering into a contract or contracts in London in reliance upon representations made to it in London. I entirely accept that some of the other considerations were capable of being relevant under section 12(2), but I can see no basis upon which it can properly be held that the general rule, under which English law was plainly the applicable law, should be displaced by Russian law on the basis that it is substantially more appropriate for the applicable law for determining the issues to be the law of Russia. In short, the claimant here is an English entity which was induced to enter into the facility agreement in England and suffered loss in England when it discharged its obligations under it. The position would no doubt have been entirely different if the claimant had been VTB Moscow. For these reasons, I would hold that the Court of Appeal erred in principle in concluding that the applicable law was Russian law, that under the general rule in section 11(2)(c) of the 1995 Act the applicable law was English law and that the general rule was not displaced in favour of Russian law by section 12. I turn to consider what significance the conclusions that (a) the torts were committed in England and (b) the applicable law is English law have on the question whether England is the proper place in which to bring the claim. As stated above, this involves asking whether England is clearly or distinctly the appropriate forum for the trial of the dispute or (which amounts to the same thing) the forum in which the case can be most suitably tried for the interests of all the parties and for the ends of justice. In my opinion neither consideration is conclusive but, together with the terms of the facility agreement, they afford strong grounds for concluding that the answer to those questions is in the affirmative. It was submitted by Mr Howard QC on behalf of VTB that there is a presumption that that is the case where, in a tort case, the tort is committed within the jurisdiction. In my opinion, that is to put it too high. It is undoubtedly a relevant factor but how strong a factor will depend upon the circumstances. It is true that courts have sometimes used the expression presumption. On the other hand they sometimes talk in terms of a prima facie case. Yet other expressions have been used. For example, in Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 the alleged tort was a negligent failure to warn a pregnant woman of the dangers of taking a drug which contained thalidomide. The tort was committed in New South Wales, where the plaintiff had bought the drug. In the Privy Council, Lord Pearson said at p 468 that it was manifestly just and reasonable that a defendant should have to answer for his wrongdoing in the country where he did the wrong. As in all the cases, the particular phrase chosen depended upon all the circumstances of the case. In The Albaforth [1984] 2 Lloyds Rep 91, which was much discussed in the course of the argument, the claim was for damages for negligent misrepresentation contained in a telex received and acted upon in England. Ackner LJ said that the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute. The other member of the Court of Appeal was Robert Goff LJ. It is of some significance in the present case that he quoted with approval a statement by Lord Denning MR in Diamond v Bank of London and Montreal [1979] QB 333 at 346 to the effect that the tort of negligent misrepresentation was committed at the place where the representation was received and acted upon. Robert Goff LJ did not then use the expression prima facie forum but said at p 96 that the cases showed that, where the jurisdiction of the court is based on the fact that the tort was committed within the jurisdiction, that court, having jurisdiction, is the most appropriate court to try the claim, where it is manifestly just and reasonable that the defendant should answer for his wrongdoing. He added that, that being so, it was not easy to see what other facts could displace the conclusion that the courts of that jurisdiction are the natural forum. That is to my mind so even if significant parts of the evidence derive from elsewhere. Berezovsky v Michaels [2000] 1 WLR 1004 was a libel case in which an internationally disseminated libel had been published in England. Lord Steyn, giving the principal judgment for the majority in the House of Lords, who were himself, Lord Nolan and Lord Hobhouse, quoted (at p 1013) the two passages from The Albaforth set out above and referred to Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458, 468E per Lord Pearson, Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 in the Court of Appeal (subsequently overruled in Lonrho plc v Fayed [1992] 1 AC 448 on other aspects of the case) and Schapira v Ahronson [1999] EMLR 735. Lord Steyn added that the implied supposition in these cases was that the substance of the tort arose within the jurisdiction. He added at p 1014D E: Counsel accepted that he could not object to a proposition that the place where in substance the tort arises is a weighty factor pointing to that jurisdiction being the appropriate one. This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part the Albaforth line of authority is well established, tried and tested, and unobjectionable in principle. I would hold that Hirst LJ correctly relied on these decisions. The Court of Appeal considered this issue at paras 140 to 144. They expressly referred to the statements of principle in The Albaforth, noting that neither Ackner nor Robert Goff LJJ referred to a presumption. They then referred to the statements of Lord Steyn in Berezovsky v Michaels noted above, adding that, although Lord Hope dissented (as did Lord Hoffmann), he agreed with the reasons given by Lord Steyn for accepting that Hirst LJ was right to rely on The Albaforth line of authority. They further noted that Lord Hope said at p 103 that he would reject the argument that the application of the Spiliada test did not admit of the application in that case of the principle that the jurisdiction in which the tort is committed is prima facie the natural forum for the dispute. The Court of Appeal concluded at para 144 that the most that could be extracted from the House of Lords decision in Berezovsky was that, where a tort is committed within the jurisdiction, that jurisdiction is prima facie the natural forum for the resolution of claims arising from it. However they added two points to which they attached importance. The first was that it had not been stated that this principle applies where the loss is sustained in the jurisdiction but other elements of the tort occur elsewhere. The second was that the statements made in the Berezovsky case can only describe, at best, a prima facie position, and that they cannot detract from the overall test which has to be applied, namely that permission to serve out of the jurisdiction will only be granted if the claimant demonstrates that England is clearly or distinctly the appropriate forum for the resolution of the dispute. They concluded that there is no presumption in favour of England being either the natural or the appropriate forum in this case. I agree with the Court of Appeal that the cases do not go so far as to say that there is such a presumption but they do recognise that it is likely to be a strong or weighty factor: see further paras 231 to 232 below. While it is true that the principle in The Albaforth has not been expressly stated to apply where the loss is sustained in the jurisdiction but other elements of the tort occur elsewhere, the application of the principle in that very case was in respect of the tort of negligent misrepresentation which was held to be committed in England as the place where the representation was received and acted upon. The same is true of the alleged fraudulent representations here. The second factor which seems to me to be of real significance is that, for the reasons set out above, the applicable law under the 1995 Act is English law. It is not in dispute that it is a potentially relevant factor. The correct approach was, as ever, encapsulated by Lord Goff in Spiliada at p 481H: the importance to be attached to any particular ground [of RSC Ord 11, r 1(1)] invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance (as in BP Exploration Co (Libya) Ltd v Hunt [1976] 1 WLR 788, where, in my opinion, Kerr J rightly granted leave to serve proceedings on the defendant out of the jurisdiction); or it may be of little importance as seen in the context of the whole case. See also Dicey, 15th ed, para 12 034. The significance of the conclusion that English law is the applicable law is that it is generally appropriate for a claim in tort governed by English law to be adjudicated upon by an English court. The same would of course be true mutatis mutandis if the claim in tort were governed by Russian law. In that case the natural court to determine liability would be a Russian court. It was no doubt for that reason that the defendants have throughout persisted in arguing that the applicable law is Russian law. In the instant case, it is not clear what, if any, role Russian law might play at a trial. It seems most unlikely to play a role if the action proceeds in England. Although I recognise that it would be open to the defendants to reopen the issue of applicable law for determination at trial, it is difficult to imagine circumstances in which they would have a real prospect of persuading a judge to reach a different conclusion from that arrived at in this court. If the action proceeds in Russia it is possible that Russian law will play a role because the respondents have reserved their right to rely upon Russian law but, since they have given no indication as to the nature of the case they might wish to run, it is not possible to express a view as to its possible effect on a trial in Russia. In these circumstances it seems to me that, given that VTB has shown that the applicable law of the tort is English law and that the respondents have asserted no positive case to the contrary even if the action were to proceed in Russia, this is a strong factor in favour of England as the natural forum. A further important factor is, as I see it, the fact that the facility agreement which, on VTBs case, it was induced to enter into, contained, not only clause 34, which provided that the agreement was governed by English law, but also clause 35.1, which provided that the courts of England had non exclusive jurisdiction to settle any dispute arising out of the agreement, that the English courts were the most appropriate and convenient to settle the disputes, that no party would argue to the contrary and that the clause was for the benefit of VTB alone. Clause 35.3 also gave VTB the right to refer a dispute to arbitration in London. The fact that those clauses were included in the agreement which, on VTBs case, it was fraudulently induced to enter into, seems to me to be a strong pointer to the conclusion that the natural forum for the resolution of the dispute is England. If VTB had not enforced its security by acquiring RAP, it would have been able to sue RAP in England and to add the present respondents as necessary or proper parties to the action against RAP. I appreciate that the respondents are not parties to the facility agreement and that it is therefore said that these clauses are irrelevant. However, VTBs submission derives support from Professor Briggs recent article entitled The subtle variety of jurisdiction agreements, [2012] LMCLQ 364, in which he discusses the Court of Appeal decision in the present case (at pp 370 371): In VTB Capital plc v Nutritek International Corpn it appears to have been accepted without substantial argument that if the hidden person were not a party to the substantive contract containing the jurisdiction clause he could not be affected by a jurisdiction agreement contained in that contract. This conclusion, with respect, should not be accepted without further reflection. For even if the lifting of the veil does not allow a contractual claim, otherwise lying against the company, to be made against the veiled person, there may be other bases for seeking to establish his personal liability. Fraud will be the most likely one That being so, the question becomes whether the jurisdiction clause in the companys contract may be utilised to establish or sustain jurisdiction against the alleged fraudster. This is a question which requires more of an answer than a simple assertion that a jurisdiction agreement is only ever effective in relation to a contracting party. For one thing, the jurisdiction clause is separable from the substantive contract, and the absence of a contractual claim against the fraudulent defendant need not entail the irrelevance of a jurisdiction agreement which he engineered. For another even if he is not contractually bound to the jurisdiction, it should not be challenging to contend that the court which he signed his company up to, in circumstances of fraud, is also the proper place in which to assert any available claim of substantive liability against him. I agree with Professor Briggs. In particular I agree with him that it is significant that where a person fraudulently engineers a contract, not only subject to English law but also subject to an English jurisdiction clause, the proper (or natural) place in which to assert a claim for substantive liability against him, whether in contract or tort, is England. The same would of course be true mutatis mutandis if the agreed law and jurisdiction were that of another state. Mr Howards submission on behalf of VTB is that the principal grounds for concluding that England is the natural forum for this action are therefore these. Although a significant number of preliminary events occurred in Russia, the critical ingredients of all the torts took place in England. In particular, the representations were made to VTB in England, where they were intended to be relied upon because it was VTB that was intended to enter into the facility agreement, which was governed by English law and contained an English jurisdiction clause. VTB did enter into the agreement and, pursuant to its terms large sums of money were drawn down and, as the judge and the Court of Appeal held, VTB suffered its loss in England. As explained above, it is substantially for these reasons that English law is the law applicable to the torts. In these circumstances, England is clearly or distinctly the appropriate forum for the trial of the dispute. I would accept those submissions. The judge and the Court of Appeal rejected that approach on the basis that the centre of gravity of the torts lies in Russia. They did so on the basis of the evidence that there was considerable activity in Moscow before VTB was chosen as the lender. It is said that all the evidence referable to that period would be in Russia. There is some force in that but the difficulty facing the respondents is that they have not identified what classes of evidence they might wish to adduce about what. It is therefore appropriate, as counsel for the respondents himself indicated, to approach the case on the basis that VTB will be put to proof of its claims. The nature of VTBs claims is summarised in paras 181 to 184 above. VTB hopes to be able to call Ms Bragina and others from VTB, although it is right to say that Ms Bragina has left VTB and it is no longer in contact with her. There is some documentary evidence available in London and Moscow. I see no difficulty in any of the VTB witnesses who are now in Moscow or elsewhere coming to London to give evidence. The evidence will no doubt focus on the alleged representations. As to the allegation that it was represented that Nutritek and RAP were not under common control, there is evidence in the emails referred to in para 174 above. It is not known whether it is said on behalf of the respondents that no such representations were made or, if they were made, by whom they were made (and with whose knowledge and on whose behalf) and whether they were true. Since the respondents have not indicated the nature of their case, it is not known what evidence they might wish to adduce on this part of the case. For example, it is not known whether Mr Malofeev accepts that he controlled both Nutritek and RAP as alleged, although (as stated at para 170 above), the judge found that the allegation that RAP was ultimately owned and controlled by Mr Malofeev through a web of offshore companies had not been the subject of challenge by him. Mr Malofeev is an international business man who is said to control a series of offshore companies. There is no evidence that either he or any other witness could not readily come to London. It may equally be said that there is no reason why any witness could not go to Moscow. So, on the first alleged misrepresentation, there seems to me to be no reason to depart from the view expressed earlier, namely that the natural forum for the resolution of the issues is England. The same is true of the second alleged representation. The issues may essentially be whether the facts relating to the dairy companies were fairly given to E&Y in Moscow. Much of the information is no doubt in Russian and, if detailed evidence is required, it may be in Russia. However, Deloittes LLP in London have made a report in English on which VTB relies dated 11 April 2011, which analysed the figures provided by Nutritek to E&Y and compared them with the financial information provided by the dairy companies from their own accounting records, which represent the true trading position, as well as information from other sources. It is said that it is apparent from Deloitte's opinion that Nutritek very substantially overstated the true performance figures for the dairy companies. It is VTB's case that the extent of the overstatement is such that it could only have been deliberate. It seems likely to me that any issues under this head could be determined in England or Russia. In all the circumstances, given that VTB is the claimant and not VTB Moscow, I do not agree with the Court of Appeal that the centre of gravity of the torts is in Russia. I would hold that VTB has shown that England is clearly or distinctly the appropriate forum for the reasons summarised in para 223 above. I would therefore allow the appeal on the forum non conveniens point. I would only add this in the light of the judgments of Lord Mance and Lord Neuberger which I have seen since I prepared my own draft. Subject to the general point that one of the underlying principles of the CPR is that the parties should co operate with each other and the court in order that cases are resolved justly, which must surely include the necessity for each party to put his cards on the table, I do not disagree with the general points made by Lord Neuberger in the early parts of his judgment. None of the points I have made above is inconsistent with them. Thus, as I see it, even if the burden of proof is on the claimant, the defendant must indicate, at least in general terms what positive case he wishes to advance at a future trial, whether in England or elsewhere. This should be done shortly and concisely. In the instant case no attempt was made to do it at all. I entirely agree with Lord Neuberger that, where a judge has made no error of principle and the only challenge that can be advanced against his or her decision depends upon persuading an appellate court to balance the various factors differently, an appellate court should not interfere unless the balance struck by the judge can be shown to be plainly wrong. The question is whether this is such a case or whether this is a case in which, as VTB says, both the judge and the Court of Appeal made errors of principle and that, permission to appeal to this Court having been granted, it becomes its responsibility to strike the balance. In my opinion, this case is in the second category. As to the position before the judge, the Court of Appeal held that he had wrongly approached the question as a two stage question. However I agree with Lord Mance and Lord Neuberger that, even if he did, he ultimately posed the correct question. The position as to choice of law is different. The judge erred in law in concluding that Russian law was the applicable law by reference to both section 11(2)(c) and section 12 of the 1995 Act. The Court of Appeal correctly held that he was wrong under section 11(2)(c) but it too was wrong in so far as it held that the applicable law was Russian law under section 12. In my opinion, as discussed in paras 195 to 210 above, those were errors of principle. Moreover, as explained in para 219, they were significant errors, as evidenced by the importance attached to the applicable law point by both sides. Both sides naturally took the view that whichever was the applicable law provided a strong pointer to the forum conveniens. As Lord Mance puts it at para 46, it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. There are to my mind two other important respects in which the courts below failed to apply the correct principles. They are the correct approach to the significance of, first, the place where the tort was committed and, secondly, the fact that the facility agreement contained an English jurisdiction clause. As to the first, it is only fair to the judge to note that VTB did not refer to The Albaforth or the other cases following it which I have discussed in paras 212 to 217 above. Although there is reference in the cases to the proposition that the place of the tort is prima facie the natural forum and although of course (as ever) all depends upon the circumstances, in the passage quoted from The Albaforth at para 213 above, Robert Goff LJ expressed the view that, where the jurisdiction of the court was based on the fact that the tort was committed within the jurisdiction, that court was the most appropriate court to try the claim on the basis that it was manifestly just and reasonable that the defendant should answer there for his wrongdoing. Robert Goff LJ there echoed (at p 96) the expression used by Lord Pearson in the Distillers case at p 468: see para 212 above. Finally, as I read the speech of Lord Steyn in Berezovsky (quoted at para 214 above), the majority of the House of Lords approved the proposition that there is no real distinction between treating the place of the tort as a prima facie pointer and treating it as a weighty factor. It is in my opinion a weighty factor here, where the alleged representations (if made) were deliberate acts which were committed within the jurisdiction, which were intended to be relied upon within the jurisdiction, which were in fact relied upon within the jurisdiction and which caused VTB to sustain loss within the jurisdiction. I stress again that this is a claim by VTB and not by VTB Moscow and VTB is not suing upon a tort committed in Moscow. Albeit for understandable reasons, this point was not considered by the judge. It follows, as I see it, that he did not take it into account, even in the alternative, in carrying out the balancing exercise. In the Court of Appeal the effect of the authorities was in my judgment down played. It is not to my mind a fair conclusion based on the authorities that the statements made in Berezovsky can only describe, at best, a prima facie position, at any rate unless one keeps well in mind the reasoning of Lord Goff and Lord Pearson referred to above. Although it is fair to say that the Court of Appeal did refer to the passage from the speech of Lord Steyn in Berezovsky quoted above, there is no hint that they treated this consideration as a weighty factor. For the reasons I have given they should have done so. The second respect in which in my opinion the courts below erred in principle relates to the relevance of the English jurisdiction agreement in the facility agreement. The judge merely said in para 187 that the English jurisdiction and arbitration clauses are a pointer to England but not a strong one, given that the claim is a tort claim not a contract claim. He does not explain why the fact that the claim is a tort claim leads to the conclusion that the pointer to England is not a strong one. He does not address the force of the submissions made on behalf of VTB. For the reasons given in paras 220 to 212 above, this is in my opinion a strong factor, on the basis that, as Professor Briggs observed, where a person fraudulently engineers a contract, not only subject to English law but also subject to an English jurisdiction clause, the proper (or natural) place in which to assert a claim for substantive liability against him, whether in contract or tort, is England. The Court of Appeal did not expressly address this point. Lord Neuberger says that they must have agreed with the judge. That may be so but, given that the judge gave no reasons for his view, it seems to me to be of little assistance to the respondents. With respect to him, Lord Neuberger does not as I see it address this way of putting the case, which is much narrower than that addressed by Lord Neuberger in paras 105 and 106. In so far as he does address the point, I strongly prefer the opinion of Professor Briggs. In all the circumstances I remain of the view that both the judge and the Court of Appeal erred in principle in more than one respect, that it is now for this Court to reach its own conclusion on the question whether England is clearly or distinctly the appropriate forum for the trial of the dispute or (which amounts to the same thing) the forum in which the case can be most suitably tried for the interests of all the parties and for the ends of justice. For the reasons I have given, my conclusion is that it is. In so far as it is suggested by Lord Neuberger and Lord Wilson that this approach is to assume what VTB has to prove, namely that Mr Malofeev was guilty of deceit, I respectfully disagree. The approach I favour does not assume that VTB will succeed but is based upon the fact that it has been held that VTB has at least a good arguable case on each of these factors: (1) the tort alleged was committed in England; (2) English law is the applicable law under the 1995 Act; (3) the respondents made fraudulent representations which induced VTB to enter into the facility agreement which is not only subject to English law but also subject to an English jurisdiction clause; and (4) the loss sustained as a result of lending money in England pursuant to the facility agreement was incurred in England. In all these circumstances England is clearly and distinctly the proper (or natural) place in which to assert a claim for damages for fraudulent representation against the respondents. I recognise that, as pointed out by Lord Mance there are many factors which connect the underlying dispute with Russia but many of them are evidential and, indeed, many of them treat the claim as if it were a claim by VTB Moscow or the VTB Group, which it is not. As Lord Wilson observes, the defendants points primarily go to practicality, but it seems to me that a trial could perfectly well take place in England or Russia but that England is the natural forum for the reasons I have given. In all the circumstances I would allow the appeal on the forum non conveniens point. Piercing the corporate veil I agree with Lord Neuberger that this is not a case in which it would be appropriate to pierce the corporate veil on the facts. I would however wish to reserve for future decision the question what is the true scope of the circumstances in which it is permissible to pierce the corporate veil. That includes the question whether Antonio Gramsci Shipping Corpn v Stepanovs [2011] EWHC 333 (Comm), [2011] 1 Lloyds Rep 647 was correctly decided. The WFO Since the appeal is to be dismissed, I agree with Lord Neuberger that the discharged freezing order should remain discharged and that the temporary WFO should be discharged as well. LORD REED (dissenting) In relation to the first question in this appeal, namely whether the permission granted ex parte to VTB to serve the proceedings out of the jurisdiction should be set aside, I have reached the same conclusion as Lord Clarke. I do not question the general points made by Lord Neuberger at paragraphs 79 to 93 of his judgment. Nevertheless, it appears to me that the courts below erred in law in their approach to this question. In particular, as explained by Lord Clarke, they erred (i) in concluding that the applicable law was Russian law rather than English law and (ii) in failing to attach appropriate weight to the fact that the alleged tort was committed in England, in accordance with the line of authority including The Albaforth [1984] 2 Lloyds Rep 91 and Berezovsky v Michaels [2000] 1 WLR 1004. These errors, particularly when considered cumulatively, appear to me to have been material. I recognise that the Court of Appeal stated (para 166) that, even if it had concluded that the applicable law was English law, this would not have been a factor that would weigh heavily, precisely because if the defendants wished to allege and plead that the applicable law was Russian law, both sides would have had to prepare for a trial on that basis. The fact of the matter is however that the defendants have not pleaded, or indicated any intention to plead, that the applicable law is Russian law. Since the approach of the courts below was flawed in principle, it appears to me that this court has no alternative but to reconsider the question on a proper basis. Having done so, I have reached the same conclusion as Lord Clarke, essentially for the reasons stated at paragraphs 223 to 227 of his judgment. In relation to the second question, namely whether VTB should be allowed to amend its statement of case so as to add a claim of damages for breach of contract, based upon piercing the corporate veil, I agree that permission should be refused, for the reasons given by Lord Neuberger. Since the appeal is being dismissed, I also agree that the discharged freezing order should remain discharged, and that the temporary freezing order should also be discharged. |
Sexual offences can inflict harm whose consequences persist throughout the lives of their victims and some sexual offenders never lose their predisposition to commit sexual offences. Section 82 of the Sexual Offences Act 2003 (the 2003 Act) imposes on all who are sentenced to 30 months imprisonment or more for a sexual offence the duty to keep the police notified of where they are living and of travel abroad (the notification requirements). This duty persists until the day they die. There is no right to a review of the notification requirements. These appeals raise the question of whether the absence of any right to a review renders the notification requirements incompatible with article 8 of the European Convention on Human Rights (the Convention). That article provides: 1. Everyone has the right to respect for his private and family life, his home and his correspondence. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. 2. These appeals arise out of two independent claims for judicial review. The first was brought by F. When he was eleven years old he committed a number of serious sexual offences, including two offences of rape, on a six year old boy. On 17 October 2005, having been convicted of these offences after a contested trial, he was sentenced to 30 months imprisonment on each count concurrent. This sentence automatically brought into effect the notification requirements. The second claim was brought by Mr Thompson. He was born on 1 March 1951. On 12 December 1996 he was sentenced to 5 years imprisonment, concurrent, on two counts of indecent assault on his daughter, together with other concurrent sentences for assault occasioning actual bodily harm. This sentence also brought into effect the notification requirements. Neither claimant was in a position to bring proceedings pursuant to section 7(1) of the Human Rights Act 1998 on the ground that the imposition of the notification requirements unlawfully infringed his Convention rights, for section 6(2) of that Act precluded such a claim. Each commenced proceedings for judicial review claiming a declaration that the notification requirements were incompatible with article 8 of the Convention. The claims succeeded before the Divisional Court (Latham LJ, Underhill and Flaux JJ) on 19 December 2008, whose decision was upheld by the Court of Appeal (Dyson, Maurice Kay and Hooper LJJ) on 23 July 2009, [2010] 1 WLR 76. The ground on which the claims succeeded was a narrow one. The courts below held that the notification requirements interfered with article 8 rights, that the interference was in accordance with the law and that it pursued legitimate aims, namely the prevention of crime and the protection of the rights and freedoms of others, but that the lack of any provision for review of the notification requirements rendered these a disproportionate manner of pursuing that legitimate aim. It is not to be inferred from the judgments below that, had either claimant been entitled to challenge, by way of a review, the notification requirements made in his case, the challenge would have succeeded. The only issue raised by these appeals is a general one. Does the absence of any right to a review render lifetime notification requirements disproportionate to the legitimate aims that they seek to pursue? The statutory provisions relevant statutory provisions set out by the Court of Appeal. Statutory notification requirements for sex offenders were first introduced by section 1(3) of the Sex Offenders Act 1997 (the 1997 Act). They were automatic on conviction. Under the 1997 Act regime, the notification requirements were to give the police details of the offenders name, address and date of birth within 14 days of conviction, and to notify any address at which he would be staying for 14 days or longer. The Criminal Justice and Courts Services Act 2000 (the 2000 Act) reduced the initial notification time to 3 days and introduced a new requirement that an offender notify the police if he intended to travel overseas in accordance with regulations made by the Secretary of State. Regulations were made pursuant to the 2000 Act which required that notification of travel should be made at least 48 hours prior to departure and that it should include the identity of the carrier, all I propose to adopt, with some additions, the helpful summary of the points of arrival in destination countries, accommodation arrangements, return date and point of arrival if known. Under the 1997 and 2000 Acts the required notifications could be given either by attending in person at a local police station or by sending a written notification to any such station. All these provisions were repealed by the 2003 Act. Section 82(1) of the 2003 Act contains a table which prescribes the notification periods for different categories of offenders. As I have said, for persons who have been sentenced to imprisonment or detention for 30 months or more, an indefinite period beginning with the relevant date is prescribed. For present purposes the relevant date is defined as the date of conviction (section 82(6)). Section 82(2) provides that, where a person is under the age of 18 on the relevant date, the determinate periods prescribed in the table are halved in respect of sentences shorter than 30 months. Section 83 makes provision for initial notification. Thus, within 3 days of the relevant date, the offender must notify to the police the information specified in subsection (5), namely his date of birth; his national insurance number; his name on the relevant date and, where he used one or more other names on that date, each of those names; his home address on the relevant date; his name on the date on which notification is given and, where he uses one or more other names on that date, each of those names; his home address on the date on which notification is given; and the address of any other premises in the United Kingdom at which, at the time the notification is given, he regularly resides or stays. Section 84 makes provision for the notification of changes in the information given pursuant to section 83 within 3 days of the changes occurring. This includes notification of the person's "having resided or stayed, for a qualifying period, at any premises in the United Kingdom the address of which has not been notified to the police" (subsection (1)(c)). Subsection (6) provides that "qualifying period" means (a) a period of 7 days, or (b) two or more periods, in any period of 12 months, which taken together amount to 7 days. Section 85 provides for periodic notification of the information specified in section 83(5). Section 86(1) provides that the Secretary of State may by regulations make provision requiring offenders who leave the United Kingdom to give a notification under subsection (2) before they leave and a notification under subsection (3) about their subsequent return. A notification under subsection (2) must disclose the date on which the offender will leave; the country (or the first country) to which he will travel and his point of arrival in that country; and any other information prescribed by the regulations which the offender holds about his departure from or return to the United Kingdom or his movements while outside the United Kingdom. A notification under subsection (3) must disclose any information prescribed by the regulations about the offender's return to the United Kingdom. Section 87(1) provides that a person gives a notification by "(a) attending at such police station in his local police area as the Secretary of State may by regulations prescribe, and (b) giving an oral notification to any police officer, or to any person authorised for the purpose by the officer in charge of the station". Section 87(4) provides that where a notification is given, the relevant offender must, if requested to do so by the police officer or authorised person, allow the officer or person to take his fingerprints and/or photograph any part of him. Section 91(1) provides that a person commits an offence "if he (a) fails, without reasonable excuse, to comply with section 83(1), 84(1), 84(4)(b), 85(1), 87(4)or any requirement imposed by regulations made under section 86(1)". Section 91(2) provides that a person guilty of an offence under this section is liable on conviction on indictment to imprisonment to a term not exceeding 5 years and on summary conviction to a term not exceeding 6 months or a fine or both. Pursuant to section 86 the Secretary of State made the Sexual Offences Act 2003 (Travel Notification Requirements) Regulations 2004 (SI 2004/1220). These require extremely detailed information to be given in relation to travel plans. Just as in the case of information required by sections 83, 84 and 85, this information had to be provided in person at a police station. The approach to proportionality In order to decide whether interference with a fundamental right is proportionate to the legitimate end sought to be achieved the court has to ask the questions identified by the Privy Council in de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at p 80: whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective. However, as Lord Bingham of Cornhill observed in Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167 at para 19, there is an overriding requirement to balance the interests of the individual against those of society. In this case the importance of the legislative objective has never been in doubt. The prevention of sexual offending is of great social value and the respondents have not suggested that, insofar as notification requirements play a useful role in assisting to achieve this objective, they are not a proportionate means of doing so. The debate has been as to the necessity and utility of imposing notification requirements for life without any review. In respect of this debate the observations of Lord Nicholls of Birkenhead in Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816 at paras 62 64 are in point. He remarked that when a court makes a value judgment in respect of proportionality the facts will often speak for themselves, but that sometimes the court may need additional background information tending to show, for instance, the likely practical impact of the statutory measure. Such information may be provided in the course of Parliamentary debate, and it is legitimate to have recourse to Hansard in the search for it. Domestic jurisprudence The Court of Appeal considered three cases, to which this court has also been referred, in which the relevant provisions of the 2003 Act, or its predecessor the 1997 Act, were considered. The first was In re an application by Kevin Gallagher for Judicial Review [2003] NIQB 26, a decision of Kerr J sitting in the High Court of Northern Ireland. The applicant had been sentenced to 33 months imprisonment on three counts of indecent assault and, in consequence, become subject to the automatic reporting restrictions. He complained that these were disproportionate in that they were automatic. The trial judge had no jurisdiction to disapply or vary them where it was clear to him that they were unnecessary or inappropriate. The applicant was particularly concerned with the obligation to give notification of proposed travel arrangements added by the 2000 Act as he moved regularly across the border to the Republic of Ireland, usually for very short periods. The decision and reasoning of Kerr J appear from the following paragraphs of his judgment. 22 . the absence of a dispensing provision whereby the applicant might apply to be relieved of the reporting requirements after a stipulated period will not render the provisions automatically disproportionate. That feature is undoubtedly relevant to the issue but it alone cannot dictate the outcome of the examination of a schemes proportionality. 23. It is inevitable that a scheme which applies to sex offenders generally will bear more heavily on some individuals than others. But to be viable the scheme must contain general provisions that will be universally applied to all who come within its purview. The proportionality of the reporting requirements must be examined principally in relation to its general effect. The particular impact that it has on individuals must be of secondary importance. 24. The gravity of sex offences and the serious harm that is caused to those who suffer sexual abuse must weigh heavily in favour of a scheme designed to protect potential victims of such crimes. It is important, of course, that one should not allow revulsion to colour ones attitude to the measures necessary to curtail such criminal behaviour. A scheme that interferes with an individuals right to respect for his private and family life must be capable of justification in the sense that it can be shown that such interference will achieve the aim that it aspires to and will not simply act as a penalty on the offender. 25. The automatic nature of the notification requirements is in my judgment a necessary and reasonable element of the scheme. Its purpose is to ensure that the police are aware of the whereabouts of all serious sex offenders. This knowledge is of obvious assistance in the detection of offenders and the prevention of crime. If individual offenders were able to obtain exemption from the notification requirements this could at least potentially compromise the efficacy of the scheme. 26. By the same token the fact that the notification requirements persist indefinitely does not render the scheme disproportionate. While this is unquestionably an inconvenience for those who must make the report, that inconvenience must be set against the substantial benefit that it will achieve of keeping the police informed of where offenders are living and of their travel plans so that further offending may be forestalled both by rendering detection more easily and deterring those who might be tempted to repeat their offences. 27. I am therefore satisfied that the notification requirements are proportionate and the application for judicial review must be dismissed. This passage is of obvious relevance, albeit that Kerr J was considering submissions directed at the role of the trial judge. I observe that he treated as axiomatic both the substantial benefit to which he referred in paragraph 26 and the statement in paragraph 25 that it could, at least potentially, compromise the efficacy of the scheme if individual offenders were able to obtain exemption from the notification requirements. In Forbes v Secretary of State for the Home Department [2006] EWCA Civ 962; [2006] 1 WLR 3075 Sir Igor Judge P endorsed Kerr Js analysis of the principles underpinning and justifying the notification requirements. As the Court of Appeal observed, however, Forbes was not concerned with indefinite notification requirements, nor with the possibility of a review of these. A v Scottish Ministers [2007] CSOH 189; 2008 SLT 412 concerns the 2003 Act, as it applies in Scotland, and regulations made pursuant to it. The provisions are not in all respects identical in the two jurisdictions. A brought a petition for judicial review, challenging the compatibility of these provisions with article 8 of the Convention. The petition was refused by the Lord Ordinary and a reclaiming motion was considered by the Inner House on 19 to 21 January. The First Division has reserved judgment until after the court has delivered judgment in this appeal. In these circumstances the court granted permission to intervene in these appeals to both the Lord Advocate and to A. The Lord Ordinary reviewed the relevant jurisprudence in a lengthy judgment and concluded that the notification requirements were proportionate to the legitimate aim at which they were directed and were compatible with article 8 of the Convention (paragraph 58). As the Court of Appeal observed, however, this conclusion was not easy to reconcile with the following passage in paragraph 52 of his judgment: In light of the importance of the aims being pursued I am satisfied that the rigid and indeterminate nature of the scheme under discussion does not result in this petitioner having to bear an individual and excessive burden. That is not to say that if the facts of the case were different the same view would necessarily be arrived at. For example, the proportionality of an indefinite interference with the art 8 rights of an elderly man who had been in no trouble for very many years might cause the issue to be focused in quite a different way. The Lord Ordinary had earlier accepted the proposition that his task was to look at the facts as they applied to the applicant rather than in the abstract, albeit in the context of the general aims of the legislation (para 49), and this is what he appears to have done. His judgment did not focus on the question of whether the lack of any review of the notification requirements could be justified. The Strasbourg jurisprudence An appropriate starting point when considering the Strasbourg jurisprudence is the following statement of the Strasbourg Court in Stubbings & Others v United Kingdom (1996) 23 EHRR 213 at para 62 in relation to the positive obligation owed by States to protect individuals against sexual abuse: Sexual abuse is unquestionably an abhorrent type of wrongdoing, with debilitating effects on its victims. Children and other vulnerable individuals are entitled to state protection, in the form of effective deterrence, from such grave types of interference with essential aspects of their private lives. The reference to deterrence was particularly relevant on the facts of that case, and the duty extends to taking such other steps as are reasonable to prevent the commission of sexual offences. In Ibbotson v United Kingdom (1998) 27 EHRR CD 332, an admissibility decision, the issue was whether the notification requirements under the 1997 Act constituted a penalty for the purposes of article 7 of the Convention. The Commission held that it did not, remarking that the measures did not go beyond a requirement to furnish to the authorities information which could, in any event, be in the public domain. The same conclusion was reached in another admissibility decision, Adamson v United Kingdom (1999) 28 EHRR CD 209. The Court reached the following conclusion as to the purpose of the notification requirements: . the purpose of the measures in question is to contribute towards a lower rate of reoffending in sex offenders, since a persons knowledge that he is registered with the police may dissuade him from committing further offences and since, with the help of the register, the police may be enabled to trace suspected reoffenders faster. The applicant in that case also sought to make an article 8 challenge to the notification requirements. In finding such a challenge inadmissible the Court held that the notification requirements amounted to an interference with private life within article 8(1). The requirements were, however, in accordance with the law and they pursued the legitimate aims of the prevention of crime and the protection of the rights and freedoms of others. It was thus necessary to consider whether the measures were proportionate. This required weighing the fact that they required no more than registration of information with the police against the importance of the aims pursued by the Act, namely to protect individuals from grave forms of interference. The Court found the notification requirements proportionate and the complaint manifestly ill founded. As the Court of Appeal observed at paragraph 21 the Court did not expressly consider the impact of the lack of a mechanism for review since that was not the subject of the complaint. Massey v United Kingdom (Application No 14399/02) (unreported) 8 April 2003 was another case where the Court ruled an application in relation to the notification requirements inadmissible. In that case the applicant made a discrete complaint that there was no assessment or review of the necessity for registration in his particular case. The Court of Appeal at paragraph 23 treated this as a complaint that focussed on the moment when the sentence was imposed. I am not sure that this reading is justified. While assessment naturally applies to the time of sentence review suggests a subsequent process. But this complaint was a subsidiary point to more fundamental challenges to the applicants conviction and sentence and the absence of any review of the notification requirements received no separate consideration by the Court. I now turn to the Strasbourg decisions that have the greatest relevance, and which were particularly relied upon by the respondents. The second of these post dates the decision of the Court of Appeal. In S and Marper v United Kingdom (2008) 48 EHRR 1169 the first applicant had been charged with attempted robbery and acquitted. The second applicant had been charged with harassment of his partner, but the case against him was formally discontinued. Each had had fingerprints, cellular samples and DNA samples taken. They complained that the fact that the police were lawfully entitled to retain these indefinitely infringed their article 8 rights. In holding that there had been a violation of article 8 the Court had regard to a number of matters: the blanket and indiscriminate nature of the power of retention; the fact that the nature and gravity of the suspected offence was immaterial, as was the age of the suspected offender; the fact that the power to retain was unlimited in time and in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. In Bouchacourt v France (Application No 5335/06) (unreported) 17 December 2009 an unsuccessful application was made by a man who had been sentenced to ten years imprisonment for rape and sexual assault on minors. This resulted in his name being placed automatically on a Register of Sexual and Violent Offenders. It also resulted in an obligation to confirm his address every year and to give notice of any change of address. This could be done by registered letter including a receipt or invoice, not more than three months old, containing the applicants name and address. How long an offenders name remained on the register depended on the gravity of the offence, but it could be for twenty or thirty years. The Court held that there had been no violation of article 8, for reasons that appear in the following paragraphs of its judgment: 67. Comme lindique le Gouvernement, il sagit dune dure maximale. Quoi quimportante en lespce puisquelle est de trente ans, la Cour observe que leffacement des donnes est de droit, une fois ce dlai coul, lequel se compute ds que la dcision ayant entran linscription cesse de produire tous ses effets. La Cour relve galement que la personne concerne peut prsenter une demande deffacement au procureur de la Rpublique si la conservation des donnes la concernant napparat plus pertinente compte tenu de la finalit du fichier, au regard de la nature de linfraction, de lge de la personne lors de sa commission, du temps coul depuis lors et de sa personnalit actuelle (paragraphe 16, article 706 53 10 du CPP). La dcision du procureur est susceptible de recours devant le juge des liberts et de la dtention puis devant le prsident de la chambre de linstruction. 68. La Cour considre que cette procdure judiciaire deffacement des donnes assure un contrle indpendant de la justification de la conservation des informations sur la base de critres prcis (section et Marper, prcit, 119) et prsente des garanties suffisantes et adquates du respect de la vie prive au regard de la gravit des infractions justifiant linscription sur le fichier. Certes, la mmorisation des donnes pour une priode aussi longue pourrait poser un problme sous langle de larticle 8 de la Convention, mais la Cour constate que le requrant a, en tout tat de cause, la possibilit concrte de prsenter une requte en effacement des donnes mmorises alors que la dcision ayant entran son inscription a cess de produire tous ses effets. Dans ces conditions, la Cour est davis que la dure de conservation des donnes nest pas disproportionne au regard du but poursuivi par la mmorisation des informations. Unofficial translation: 67. As the Government points out, it is a maximum duration. Although significant in this case, since it is of thirty years, the Court observes that what is important in this case, where the period is thirty years, is that the deletion of information is of right once the time has lapsed, as calculated from the date on which the sentence giving rise to registration ceases to have effect. The Court also notes that the person concerned can apply to the prosecutor for the deletion of the information if its preservation no longer appears to be relevant, taking into account the purpose of the register and having regard to the nature of the offence, the age of the person at the time that it was committed, the length of time that has lapsed since then, and the offenders current character (paragraph 16, Article 706 53 10 of the Code of Criminal Procedure). The prosecutors decision is subject to appeal to the juge des liberts et de la detention, then to the president of the investigating chamber. 68. The Court considers that this judicial procedure for removing the information ensures independent review of the justification for the retention of the information according to defined criteria (S and Marper, already cited, para 119) and provides adequate and sufficient safeguards in relation to respect for private life, with regard to the seriousness of the offences justifying registration on the sex offenders register. Certainly, the retention of data for so long a period could be problematic in terms of Article 8 of the Convention, but the Court notes that the Applicant has in any case the concrete opportunity to apply for the deletion of the data retained when the sentence giving rise to his registration has ceased to have effect. In these circumstances, the Court is of the opinion that the length of time that the data is kept is not disproportionate to the aim pursued by the storage of the information. The effect of the jurisprudence The Court of Appeal found in paragraph 35 that there was no authority binding on the court which decided the question of whether the imposition of indefinite notification requirements without the possibility of review was itself a disproportionate interference with an offenders article 8 rights. It might have held that there was no such authority, binding or otherwise. That analysis holds good, despite the decisions in S and Marper and Bouchacourt. Those decisions show, however, that the Strasbourg Court considers that the possibility of reviewing the retention of sensitive personal information and notification requirements in respect of such information is highly material to the question of whether such retention and notification requirements are proportionate and thus compliant with article 8. Paragraph 68 of Bouchacourt suggests that, but for the right to apply for deletion of the data retained, the lengthy registration period would have been held disproportionate. The decision of the Divisional Court Giving a judgment with which the other two members of the court agreed, Latham LJ found that there was general justification for continuing notification requirements for the lifetime of serious sexual offenders. He held, however, that the real question was whether an offender who can clearly demonstrate that he presents no risk, or no measurable risk, of re offending should be precluded from obtaining a review of the notification requirements. Latham LJ gave a negative answer to that question. He held that it was not justifiable in article 8 terms to deny to a person who believed himself to be in a position to establish that he presented no risk the opportunity to do this. The decision of the Court of Appeal The Court of Appeal considered the impact of the notification requirements imposed by the 2003 Act. The court concluded that counsel for the Secretary of State was wrong to describe these as no more than very slight interference with article 8 rights. The court annexed in an appendix to its judgment examples of the difficulty that the requirements posed to those who needed to travel frequently and at short notice, either within the jurisdiction or abroad. The court also made the point that the notification requirements are capable of leading to the disclosure to third parties of the fact that the person subject to them has a past conviction for a sexual offence. For these reasons, while the impact of the notification requirements might be modest for some, for others they would be more substantial. The court considered the submission that a right of review would compromise the utility of the notification requirements as a tool for the prevention and detection of sexual offences. It did not accept that submission for the reasons set out in paragraph 44: . The aim of the notification requirements regime is to assist in the prevention and detection of sexual offences. The assumptions that underpin the provision for indefinite notification requirements are that (i) there is a risk that those who have committed serious sexual offences (ie offences which attract a custodial sentence of at least 30 months in length) may commit further sexual offences for the rest of their lives; and (ii) the notification requirements will assist the police in preventing and detecting such offences and may deter offenders from further offending. These two assumptions are falsified in a case where it is clear that there is no real risk that the sexual offender will re offend. No purpose is served by keeping on the Sexual Offences Register a person of whom it can confidently be said that there is no risk that he will commit a sexual offence. To keep such a person on the police data base does nothing to promote the aims of the notification requirements. To say that the data base is no longer complete begs the question of what a complete data base should comprise. In our judgment, it should not include offenders who no longer present a risk of sexual offending. The court rejected the submission that resource implications were a bar to granting a right of review and that it would be difficult to operate a review process. It observed that a flood of applications could be avoided by setting a high threshold for review as to the time that an application could first be made, the frequency of applications and what had to be proved in order to succeed on the review. To the submission that it would be difficult for applicants to demonstrate that they no longer presented a risk of sexual offending the court observed that this was not a reason for depriving them of the opportunity of attempting to do this, regardless of the circumstances of the particular case. For these reasons the court concluded that an offender was, as a matter of principle, entitled to have the question of whether the notification requirements continued to serve a legitimate purpose determined on a review. This entitlement was even stronger in the case of child offenders because of the fact that children change as they mature. Discussion The issue in this case is one of proportionality. It is common ground that the notification requirements interfere with offenders article 8 rights, that this interference is in accordance with the law and that it is directed at the legitimate aims of the prevention of crime and the protection of the rights and freedoms of others. The issue is whether the notification requirements, as embodied in the 2003 Act, and without any right to a review, are proportionate to that aim. That issue requires consideration of three questions. (i) What is the extent of the interference with article 8 rights? (ii) How valuable are the notification requirements in achieving the legitimate aims? and (iii) To what extent would that value be eroded if the notification requirements were made subject to review? The issue is a narrow one. The respondents case is that the notification requirements cannot be proportionate in the absence of any right to a review. The challenge has been to the absence of any right to a review, not to some of the features of the notification requirements that have the potential to be particularly onerous. I turn to consider the extent of interference with article 8 rights that can result from the notification requirements. When the Strasbourg Court held in Adamson that the notification requirements interfered with private life within the meaning of article 8.1 the interference identified was the obtaining and retention of information by law enforcement authorities. The information, name, date of birth and address was, on the face of it innocuous. The reality is, however, that it is implicit in the requirement to notify the police of his name and address that the ex offender will have to explain the purpose of the notification. The significance of notification is that it links the ex offender with the recorded particulars of his conviction. Thus the notification requirements have been treated as being equivalent to being placed on a Sexual Offences Register and it is convenient to use this terminology, as did the Court of Appeal, see paragraph 44. The notification requirements become a much more serious interference with private life when the information that the individual is on the Sexual Offences Register is conveyed to third parties. As Mr Eadie QC pointed out, one of the objects of the notification requirements is that this information should be conveyed to third parties in circumstances where this is necessary for the prevention of further offending, as in some circumstances it will be. He rightly submitted that the possibility of such use should not be held to add to the case that the requirements are disproportionate. He further submitted that the court should proceed on the premise that the information will only be conveyed to third parties where this is necessary. I do not accept this submission. Giving information to the local police in relation to ones address and ones movements coupled with the explanation that this is necessary because one is on the Sexual Offences Register will necessarily carry the risk that the information may be conveyed to third parties in circumstances where this is not appropriate. This said, the fact that under the 1997 Act the relevant notification could be made in writing and that the information to be provided was limited meant that the task of giving the notification could be described as a mere inconvenience. This ceased to be the case with the increased requirements imposed first by the 2000 Act and then by the 2003 Act. These requirements, which included the requirement to give notification in person at a police station, imposed a considerable burden on anyone who was a frequent traveller, whether within or outside the jurisdiction, as illustrated by the examples given by the Court of Appeal. There is an obvious risk inherent in making repeated visits to a police station to give notification of travel plans that third parties will become aware of the reason for so doing. In short, the changes made by the 2000 and 2003 Acts to the notification requirements will have given some of those subject to those requirements very good reason for wishing to have the requirements lifted, for they are capable of causing significant interference with article 8 rights. I turn to consider how important notification requirements are in furthering the aims of preventing crime and protecting potential victims of crime. It is obvious that it is necessary for the authorities that are responsible for the management and supervision of those convicted of sexual offences to be aware of the whereabouts of those who are subject to active management or supervision. The nature and extent of the management and supervision of such offenders will vary and will depend, in part, upon an assessment of the degree of risk of re offending that they pose. I do not propose to attempt to set out all the complex statutory provisions in relation to sentencing that are relevant, but will summarise the effect of some of them. An offender who has received a fixed term sentence will be released on licence after serving the requisite custodial period. The licence will remain in effect for the length of the sentence. An offender who has been given a life sentence, or a sentence of imprisonment for public protection (IPP) will be released on licence after serving his minimum term if the Parole Board is satisfied that it is no longer necessary for the protection of the public that he be confined. An offender who has been given a life sentence will remain on licence for the rest of his life. An IPP prisoner can apply to the Parole Board which will order the licence to cease to have effect if satisfied that it is no longer necessary for the protection of the public that the licence remain in force. While the licence remains in force, the conditions of the licence will make provision for the supervision of the offender by the appropriate authority. Thus where the Parole Board orders a licence to cease to have effect it is presumably satisfied that such supervision is no longer necessary for the protection of the public. Section 104 of the 2003 Act grants power to a magistrates court to make a sexual offences prevention order (SOPO) in relation to a qualifying offender who has acted in such a way as to give reasonable cause to believe that it is necessary for such an order to be made. Those subject to notification requirements are qualifying offenders. Section 114 of the 2003 Act grants power to a magistrates court to impose a foreign travel order in respect of a qualifying offender where his behaviour makes it necessary to make such an order for the purpose of protecting children generally or any child from serious sexual harm. Such an order prevents the offender from travelling to the countries specified, which may be all countries, outside the United Kingdom. Section 325 of the Criminal Justice Act 2003 requires the responsible authority for each area to establish arrangements for the purpose of assessing and managing the risks posed in that area by relevant sexual and violent offenders. The responsible authority means the chief officer of police, the probation board or provider of probation services and the Minister of the Crown exercising functions in relation to prisons, acting jointly. Relevant sexual offenders include those who are subject to notification requirements. Section 327A of the same Act requires the responsible authority for each area, in the course of discharging its functions under section 325, to consider whether to disclose information in its possession about the relevant previous convictions of any child sex offender managed by it and goes on to make detailed provision for circumstances in which there is a presumption that this should be done. The responsible authority has made Multi Agency Public Protection Arrangements (MAPPA) pursuant to the duty imposed on it by section 325 and makes an annual report in relation to the operation of these. Counsel provided the court with a little information about the manner in which risk is managed under MAPPA and the court has since obtained a press notice issued on the occasion of the publication of MAPPAs 8th Report for 2009. This states that there are three levels of management of offenders. At Level 1 offenders are subject to the usual management arrangements applied by whichever agency is supervising them. At Level 2 risk management involves the active involvement of several agencies via regular multi agency public protection meetings. At Level 3 cases require the involvement of senior officers to authorise the use of special resources, such as police surveillance or specialised accommodation and, sometimes, senior management oversight. The interrelationship between these measures and the notification requirements is obvious. In the first place, the same criteria often apply to determine those who are subject to the notification requirements as apply to determine those who are potentially subject to the various methods of management and supervision. In the second place, notification requirements are important in that they assist the responsible authorities to keep tabs on those whom they are supervising and managing. This case turns, however, on one critical issue. If some of those who are subject to lifetime notification requirements no longer pose any significant risk of committing further sexual offences and it is possible for them to demonstrate that this is the case, there is no point in subjecting them to supervision or management or to the interference with their article 8 rights involved in visits to their local police stations in order to provide information about their places of residence and their travel plans. Indeed subjecting them to these requirements can only impose an unnecessary and unproductive burden on the responsible authorities. We were informed that there are now some 24,000 ex offenders subject to notification requirements and this number will inevitably grow. Both the Divisional Court and the Court of Appeal proceeded on the premise that there were some who were subject to notification requirements who could clearly demonstrate that they presented no risk of re offending or of whom it can confidently be said that there was no risk that they would commit a sexual offence. Mr Eadie came close to admitting that, if this premise were correct, it would be hard to gainsay the proposition that there ought to be a right to a review to enable notification requirements to be lifted in respect of those who no longer posed a risk. He submitted, however, that the nature of sexual offences was such that it was never possible to be sure that someone who had been guilty of a serious sexual offence posed no significant risk of re offending, and that this was borne out by statistical evidence. Either all sexual offenders had a (possibly) latent predisposition to commit further sexual offences or, if some did not, it was impossible to identify who these were. Whether these submissions are well founded is the question that lies at the heart of this appeal. I turn to consider the evidence before the court. Parliamentary material Mr Eadie told the court that there had been a consultation exercise before the introduction of the 1997 Bill that led to the 1997 Act, but that this provided no assistance on the issue raised by this appeal. No material was placed before the court to explain the changes that were made to the notification requirements by the 2000 Act or the 2003 Act. The court was referred to an extract from Hansard for 4 February 1997 (HC Debates), Cols 19, 23, 25 which reported the moving of two amendments in Standing Committee D to the 1997 Bill. I have considered this in the search for background information to explain why the Act contained no right to a review of the notification requirements. The second proposed amendment would have introduced a right to apply to the court to vary the duration of the notification requirements if a chief officer of police certified that the applicant was no longer likely to be a danger to others. Mr Timothy Kirkhope, resisting this amendment, raised the question of how the court would decide whether the need for a notification requirement remained and suggested that such a provision would have resource implications, would create bureaucracy and could weaken the Bills protection. He said that the course adopted reflected the results of consultation. This throws little light on the question of whether reliable risk assessment can be carried out in the case of sex offenders. Mr Eadie relied primarily on statistical evidence to support his submission that a reliable review of the risk posed by those convicted of serious sexual offences was not practicable. The most detailed statistics were provided in a paper published in 2004 in Legal and Criminological Psychology by Ms Jenny Cann and others, then of the Research, Development and Statistics Department of the Home Office. This examined reconviction rates of sexual offenders released from prison in England and Wales in 1979, over a 21 year period. Of 419 offenders 103, or about 25%, committed a total of 405 sexual offences during this period. Of these 37 first re offended over 5 years after release from prison and 19 at least 10 years after release. The authors comment that these figures suggest that sexual offending by sexual offenders released from custody has a longer life span than general re offending and one which often begins a number of years after discharge. The paper recommends further research to look at the type of sexual offender most at risk of receiving a first reconviction for a sexual offence 10 years following discharge. This recommendation illustrates why this paper is inconclusive. Caution must, of course, be taken in relying on reconviction statistics because these will necessarily be lower than the actual incidence of re offending. Nonetheless, these statistics show that 75% of the sexual offenders who were monitored were not reconvicted. No light is thrown on the question of whether it was possible to identify by considering these whether there were some reliable indications of offenders who did not pose a significant risk of re offending. No evidence has been placed before this court or the courts below that demonstrate that it is not possible to identify from among those convicted of serious offences, at any stage in their lives, some at least who pose no significant risk of re offending. It is equally true that no evidence has been adduced that demonstrates that this is possible. This may well be because the necessary research has not been carried out to enable firm conclusions to be drawn on this topic. If uncertainty exists can this render proportionate the imposition of notification requirements for life without review under the precautionary principle? I do not believe that it can. I have referred earlier to a number of situations in which the degree of risk of re offending has to be assessed in relation to sexual offenders. I think that it is obvious that there must be some circumstances in which an appropriate tribunal could reliably conclude that the risk of an individual carrying out a further sexual offence can be discounted to the extent that continuance of notification requirements is unjustified. As the courts below have observed, it is open to the legislature to impose an appropriately high threshold for review. Registration systems for sexual offenders are not uncommon in other jurisdictions. Those acting for the first respondent have drawn attention to registration requirements for sexual offenders in France, Ireland, the seven Australian States, Canada, South Africa and the United States. Almost all of these have provisions for review. This does not suggest that the review exercise is not practicable. For these reasons I have concluded that the Divisional Court and the Court of Appeal were correct to find that the notification requirements constitute a disproportionate interference with article 8 rights because they make no provision for individual review of the requirements. I would dismiss this appeal and repeat the declaration of incompatibility made by the Divisional Court. LORD HOPE I agree with the judgment of Lord Phillips. For the reasons he gives, with which I agree, I too would hold that the indefinite notification requirements in section 82(1) of the Sexual Offences Act 2003 are incompatible with article 8 of the European Convention on Human Rights because they do not contain any mechanism for the review of the justification for continuing the requirements in individual cases. I wish also to associate myself with Lord Rodgers comments, with which I am in full agreement. I would dismiss the appeals. I agree that the appeal should be dismissed for the reasons given by Lord LORD RODGER Phillips, but subject to the following comments. First, at para 33 of his judgment, Lord Phillips quotes the unofficial translation of para 67 of the judgment of the European Court of Human Rights in Bouchacourt v France (Application No 5335/06) 17 December 2009, unreported. The beginning of that translation is inaccurate and misleading. What the court actually says is As the Government points out, [the prescribed period of preservation of the data] is a maximum duration. Although significant in this case, since it is of thirty years, the Court observes that the deletion of the data is by right once this period has elapsed. Secondly, in the case of the most serious offenders, of which the respondents in these cases are examples, the notification period under section 82 of the Sexual Offences Act 2003 (the 2003 Act) is an indefinite period. Although the language was, no doubt, carefully chosen, it is perhaps a little surprising: life would have been a shorter and clearer way of expressing what is actually involved, since, whatever happens, there is no means of ever bringing the notification requirements in question to an end. Indeed such a requirement can only be ended in one situation: under section 93 and Schedule 4, where it relates to an abolished homosexual offence. Schedule 4 provides a mechanism of an application to the Secretary of State, with the possibility of an appeal to the High Court, with the permission of the court. Thirdly, I see no basis for saying that, in themselves, the notification requirements, including those relating to travel, are a disproportionate interference with the offenders article 8 rights to respect for their family life, having regard to the important and legitimate aim of preventing sexual offending. That is particularly the case where, as Lord Phillips explains, these requirements are not to be seen in isolation, but as underpinning the scheme of Multi Agency Public Protection Arrangements which are designed to manage the risk of re offending. Of course, it is possible that the information which offenders provide to the police will be wrongly conveyed to third parties in circumstances where disclosure is not appropriate. The same can be said of the information which we have to supply, say, to Her Majestys Revenue and Customs, or to the social security authorities. The proportionality of the requirement to provide that information has to be judged by reference to its proper use, not by reference to any possible misuse. Organisations which gather sensitive information will, in practice, have adopted administrative practices that are designed to minimise the risk of misuse. The Data Protection Act 1998 provides a legal framework for handling personal data and makes knowing or reckless disclosure of the data a criminal offence. That framework applies to the gathering and retention of information supplied under the 2003 Act. In that situation the proportionality of the requirements made by the Act should be judged on the basis that the information supplied will be handled appropriately. If, as may well happen on occasions, the information is wrongly disclosed or otherwise misused, then the assumption must be that appropriate steps will be taken both to identify and punish those who misuse it and to prevent similar misuse in the future. Fourthly, the need for an offender to give the notification in person at a police station does, of course, impose a burden on him and entails some additional risk of his status becoming known. But it also helps to eliminate the familiar excuses (such as letters allegedly going astray, or real or imaginary delays in the post) which can bedevil the operation of a system which depends, for its effectiveness, on notification being given within short, fixed, time limits limits which those affected may be understandably reluctant to comply with and astute to avoid. Again, I see nothing disproportionate in the requirement. Finally, the case of F shows that, where his offence has been of the most serious kind, a child will be subject to an indefinite notification requirement. That requirement will affect the whole of his adult life. Judges, as individuals, may have views on whether children who offend in this way are likely to have a tendency to repeat that behaviour when they are adults, or will tend to grow out of it. No doubt, in years to come, advances in genetic research may clarify the position. In the meantime it must be open to Parliament to take the view that, as a precaution against the risk of them committing serious sexual offences in future, even such young offenders should be required to comply with the notification rgime indefinitely. But that makes it all the more important for the legislation to include some provision for reviewing the position and ending the requirement if the time comes when that is appropriate. |
This appeal raises important and difficult issues as to the meaning and effect of Part 2 of the Proceeds of Crime Act 2002 (POCA), dealing with post conviction confiscation. It does not concern civil recovery under Part 5 of POCA, which was considered recently by the court in Serious Organised Crime Agency v Perry [2012] UKSC 35, [2012] 3 WLR 379 nor, although the argument ranged widely, did it address by any means all of the questions which are raised in a post conviction case. But because of the importance and difficulty of the issues which are raised, the appeal (originally heard by a court of seven Justices in 2011) has been re argued before a court of nine. These issues relate chiefly to the calculation of benefit and the impact of the Human Rights Act 1998 (HRA). At the rehearing the Court has had the benefit of argument not only on behalf of the original parties, but also from counsel instructed as advocates to the Court and counsel on behalf of the Secretary of State for the Home Department as an intervener. POCA is concerned with the confiscation of the proceeds of crime. Its legislative purpose, like that of earlier enactments in this field, is to ensure that criminals (and especially professional criminals engaged in serious organised crime) do not profit from their crimes, and it sends a strong deterrent message to that effect. In R v Rezvi [2002] UKHL 1, [2003] 1 AC 1099, para 14, Lord Steyn stated: It is a notorious fact that professional and habitual criminals frequently take steps to conceal their profits from crime. Effective but fair powers of confiscating the proceeds of crime are therefore essential. The provisions of the 1988 Act are aimed at depriving such offenders of the proceeds of their criminal conduct. Its purposes are to punish convicted offenders, to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises. These objectives reflect not only national but also international policy. These observations have been cited and followed many times, although Lord Steyns reference to punishment needs some qualification. Despite the use of the term confiscation, which is a misnomer, orders under Part 2 of POCA are made in sums of money (value based) rather than being directed, as are civil recovery orders under Part 5 of POCA, at the divestment of specific assets. Nevertheless, a confiscation order is not an additional fine. The legislation under which value based criminal confiscation orders are made has changed significantly during the past thirty years. The main landmarks can be briefly summarised (there is a more detailed account, which also refers to the international conventions underlying some of the legislation, in the considered opinion of the Appellate Committee of the House of Lords, delivered by Lord Bingham, in R v May [2008] UKHL 28, [2008] AC 1028, para 8). The first statute, the Drug Trafficking Offences Act 1986 (the 1986 Act) provided for confiscation of sums related to the proceeds of unlawful drug trafficking. The 1986 Act was repealed and replaced by the Drug Trafficking Act 1994 (the 1994 Act). In the meantime Part VI of the Criminal Justice Act 1988 (the 1988 Act) had extended the range of offences in respect of which confiscation orders could be made. The 1988 Act and the 1994 Act were framed in similar but not identical terms and in some of the authorities the Court of Appeal had to consider whether relatively small variations in the scheme and language of the statutes reflected significant differences in legislative policy (see for instance R v Rose [2008] EWCA Crim 239, [2008] 1 WLR 2113, para 78). POCA has put an end to those difficulties, but they must be borne in mind when reading some of the older cases. The Proceeds of Crime Act 1995 (the 1995 Act) was an amending statute, but its effects were far reaching and, with hindsight after the enactment of HRA a few years later, problematic. The 1995 Act removed from the Crown Court almost all discretion as to the making or quantum of a confiscation order, if it was applied for by the prosecution and the statutory requirements were satisfied. That remains the position under POCA. The Crown Court no longer has any power to use its discretion so as to mould the confiscation order to fit the facts and the justice of the case, even though a confiscation order may arise in every kind of crime from which the defendant has benefited, however briefly. The Crown Court has encountered many difficulties in applying POCAs strict regime. Many of the complexities and difficulties of confiscation cases, arising from the extremely involved statutory language, would undoubtedly be avoided if a measure of discretion were restored, but whether to restore it, and if so in which form, is a matter for Parliament and not for the courts. On the introduction of the Bill that was later enacted as POCA it was certified in the usual way, under section 19 of HRA, as compatible with rights under the European Convention on Human Rights (Convention rights). The question now raised for this court is whether the application of POCAs rules for the calculation of benefit may, in some circumstances, give rise to a contravention of Convention rights. This is not a question which has arisen in cases before the Strasbourg court although other challenges to evidential aspects of confiscation legislation have been rejected, for example in Phillips v UK [2001] ECHR 437, (2001) 11 BHRC 280 (statutory assumptions) and Grayson and Barnham v UK [2008] ECHR 871; (2009) 48 EHRR 30 (onus on defendant to demonstrate realisable assets smaller than the benefit figure). This very important issue is addressed at section III below. The statutory provisions Part 2 of POCA has two general features of central importance to its structure. The first is the distinction between cases in which the defendant is, or is not, to be treated as having a criminal lifestyle (as prescribed by section 75 of POCA). Mr Wayas is not a criminal lifestyle case, but many of the authorities are concerned with criminal lifestyle cases, and it must be noted that the statutory assumptions made in those cases (under section 10 of POCA) are often determinative of the outcome. The other structural feature is that the making and quantum of a confiscation order involve three stages. The first stage is the identification of the benefit obtained by the defendant (sections 6(4), 8 and 76 of POCA). The second stage is the valuation of that benefit. It may fall to be valued (sections 79 and 80) either at the time when it is obtained, or at the date of the confiscation order (the confiscation day). Intermediate events may be relevant, especially for the tracing exercise that may be required under section 80(3), but the valuation date must be either at the beginning or at the end of the process. The third stage is the valuation as at the confiscation day of all the defendants realisable assets (designated in section 9 as the available assets). This value sets a cap on the amount (the recoverable amount) of the confiscation order (section 7). In R v May [2008] AC 1028, para 8, the House of Lords emphasised that the Crown Court must proceed through these three stages in a systematic manner, and not elide them. Because POCA covers a wide range of offences, Parliament has framed the statute in broad terms with a certain amount of what Lord Wilberforce (in a tax case) called overkill. Examples of this are the apparently loose causal test in section 76(4) (as a result of or in connection with the conduct) and the rather puzzling definition (property is obtained by a person if he obtains an interest in it) in section 84(2)(b). Although the statute has often been described as draconian that cannot be a warrant for abandoning the traditional rule that a penal statute should be construed with some strictness. But subject to this and to HRA, the task of the Crown Court judge is to give effect to Parliaments intention as expressed in the language of the statute. The statutory language must be given a fair and purposive construction in order to give effect to its legislative policy. Much of the argument in the appeal has focussed on sections 76, 79, 80 and 84 of POCA, and they must be set out in full. 76 Conduct and benefit (1) Criminal conduct is conduct which (a) constitutes an offence in England and Wales, or (b) would constitute such an offence if it occurred in England and Wales. (2) General criminal conduct of the defendant is all his criminal conduct, and it is immaterial (a) whether conduct occurred before or after the passing of this Act; (b) whether property constituting a benefit from conduct was obtained before or after the passing of this Act. (3) Particular criminal conduct of the defendant is all his criminal conduct which falls within the following paragraphs (a) conduct which constitutes the offence or offences concerned; (b) conduct which constitutes offences of which he was convicted in the same proceedings as those in which he was convicted of the offence or offences concerned; (c) conduct which constitutes offences which the court will be taking into consideration in deciding his sentence for the offence or offences concerned. (4) A person benefits from conduct if he obtains property as a result of or in connection with the conduct. (5) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage. (6) References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other. (7) If a person benefits from conduct his benefit is the value of the property obtained. 79 Value: the basic rule (1) This section applies for the purpose of deciding the value at any time of property then held by a person. (2) Its value is the market value of the property at that time. (3) But if at that time another person holds an interest in the property its value, in relation to the person mentioned in subsection (1), is the market value of his interest at that time, ignoring any charging order under a provision listed in subsection (4). (4) The provisions are (a) section 9 of the Drug Trafficking Offences Act 1986 (c. 32); (b) section 78 of the Criminal Justice Act 1988 (c. 33); (c) Article 14 of the Criminal Justice (Confiscation) (Northern Ireland) Order 1990 (S.I. 1990/2588 (N.I. 17)); (d) section 27 of the Drug Trafficking Act 1994 (c. 37); (e) Article 32 of the Proceeds of Crime (Northern Ireland) Order 1996 (S.I. 1996/1299 (N.I. 9)). (5) This section has effect subject to sections 80 and 81. 80 Value of property obtained from conduct (1) This section applies for the purpose of deciding the value of property obtained by a person as a result of or in connection with his criminal conduct; and the material time is the time the court makes its decision. (2) The value of the property at the material time is the greater of the following (a) the value of the property (at the time the person obtained it) adjusted to take account of later changes in the value of money; (b) the value (at the material time) of the property found under subsection (3). (3) The property found under this subsection is as follows (a) if the person holds the property obtained, the property found under this subsection is that property; (b) if he holds no part of the property obtained, the property found under this subsection is any property which directly or indirectly represents it in his hands; (c) if he holds part of the property obtained, the property found under this subsection is that part and any property which directly or indirectly represents the other part in his hands. (4) The references in subsection (2)(a) and (b) to the value are to the value found in accordance with section 79. 84 Property: general provisions (1) Property is all property wherever situated and includes (a) money; (b) all forms of real or personal property; (c) things in action and other intangible or incorporeal property. (2) The following rules apply in relation to property (a) property is held by a person if he holds an interest in it; (b) property is obtained by a person if he obtains an interest in it; (c) property is transferred by one person to another if the first one transfers or grants an interest in it to the second; (d) references to property held by a person include references to property vested in his trustee in bankruptcy, permanent or interim trustee (within the meaning of the Bankruptcy (Scotland) Act 1985 (c. 66)) or liquidator; (e) references to an interest held by a person beneficially in property include references to an interest which would be held by him beneficially if the property were not so vested; (f) references to an interest, in relation to land in England and Wales or Northern Ireland, are to any legal estate or equitable interest or power; (g) references to an interest, in relation to land in Scotland, are to any estate, interest, servitude or other heritable right in or over land, including a heritable security; (h) references to an interest, in relation to property other than land, include references to a right (including a right to possession). III The effect of HRA At the first hearing of this case in 2011 Mr Krolicks arguments on behalf of the defendant included the submission that the operation of the confiscation regime might in some circumstances give rise to an order which infringed Article 1 of the First Protocol to the European Convention on Human Rights. When adjourning the case to a fresh hearing, this court invited further submissions on this topic, and more generally upon the questions: a. whether POCA is capable of operating in a manner which is oppressive and/or an abuse of process; b. if so, whether the court ought to give any (and if so what) guidance on when that might occur; c. what ought to be the approach to property gained by the defendant but fully restored to the true owner; d. what ought to be the approach to a dishonestly obtained loan which had been fully repaid. Further submissions on these and related topics were, in consequence, made by all parties at the re hearing of the appeal. Article 1 of the First Protocol to the European Convention (A1P1) provides: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties It is clear law, and was common ground between the parties, that this imports, via the rule of fair balance, the requirement that there must be a reasonable relationship of proportionality between the means employed by the State in, inter alia the deprivation of property as a form of penalty, and the legitimate aim which is sought to be realised by the deprivation. That rule has consistently been stated by the European Court of Human Rights: see for example its iteration in Jahn v Germany (2006) 42 EHRR 1084, para 93: 93. The Court reiterates that an interference with the peaceful enjoyment of possessions must strike a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights [see, among other authorities, Sporrong and Lnnroth, cited above, p. 26, 69]. The concern to achieve this balance is reflected in the structure of Article 1 of Protocol no. 1 as a whole, including therefore the second sentence, which is to be read in the light of the general principle enunciated in the first sentence. In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by any measure depriving a person of his possessions [see Pressos Compania Naviera SA and Others v Belgium, judgment of 20 November 1995, Series A no. 332, p. 23, 38]. In determining whether this requirement is met, the Court recognises that the State enjoys a wide margin of appreciation with regard both to choosing the means of enforcement and to ascertaining whether the consequences of enforcement are justified in the general interest for the purpose of achieving the object of the law in question [see Chassagnou v France [GC], nos. 25088/94, 28331/95 and 28443/95, 75, ECHR 1999 III]. Although that case applied this principle to very particular facts, relating to the operation of post reunification German land re organisation, the principle itself is gathered from established Strasbourg jurisprudence in terms often repeated and generally applied. A1P1 is one of the Convention rights to which the HRA applies: section 1(1)(b). That means that section 3(1) requires that so far as it is possible to do so, legislation must be: read and given effect in a way which is compatible. [with it]. Mr Perry QC, for the Crown, and Lord Pannick QC for the Home Secretary, both submitted that this means: (a) (b) (c) (d) that POCA must be read and given effect in a manner which avoids a violation of A1P1; that a confiscation order which did not conform to the test of proportionality would constitute such a violation; that it is incumbent upon the domestic court to provide a remedy for any such violation; and that the appropriate remedy lies in the duty of the Crown Court judge not to make an order which involves such a violation. These submissions are plainly correct. Any such violation can be avoided by applying to POCA, and in particular to section 6, the rule of construction required by section 3 of HRA. The extent of the courts obligation under section 3 was summarised by Lord Bingham in Sheldrake v DPP [2004] UKHL 43, [2005] 1 AC 264, para 28: The interpretative obligation of the courts under section 3 of the 1998 Act was the subject of illuminating discussion in Ghaidan v Godin Mendoza [2004] 2 AC 557. The majority opinions of Lord Nicholls, Lord Steyn and Lord Rodger in that case (with which Lady Hale agreed) do not lend themselves easily to a brief summary. But they leave no room for doubt on four important points. First, the interpretative obligation under section 3 is a very strong and far reaching one, and may require the court to depart from the legislative intention of Parliament. Secondly, a Convention compliant interpretation under section 3 is the primary remedial measure and a declaration of incompatibility under section 4 an exceptional course. Thirdly, it is to be noted that during the passage of the Bill through Parliament the promoters of the Bill told both Houses that it was envisaged that the need for a declaration of incompatibility would rarely arise. Fourthly, there is a limit beyond which a Convention compliant interpretation is not possible, such limit being illustrated by R (Anderson) v Secretary of State for the Home Department [2003] 1 AC 837 and Bellinger v Bellinger [2003] 2 AC 467. In explaining why a Convention compliant interpretation may not be possible, members of the committee used differing expressions: such an interpretation would be incompatible with the underlying thrust of the legislation, or would not go with the grain of it, or would call for legislative deliberation, or would change the substance of a provision completely, or would remove its pith and substance, or would violate a cardinal principle of the legislation (paras 33, 49, 110 113, 116). All of these expressions, as I respectfully think, yield valuable insights, but none of them should be allowed to supplant the simple test enacted in the Act: So far as it is possible to do so . While the House declined to try to formulate precise rules (para 50), it was thought that cases in which section 3 could not be used would in practice be fairly easy to identify. Section 6(5) of POCA sets out the final stage of the process of assessment of a confiscation order: If the court decides under subsection 4(b) or (c) that the defendant has benefited from the conduct referred to it must (a) decide the recoverable amount, and (b) make an order (a confiscation order) requiring him to pay that amount. It is plainly possible to read paragraph (b) as subject to the qualification: except insofar as such an order would be disproportionate and thus a breach of Article 1, Protocol 1. It is necessary to do so in order to ensure that the statute remains Convention compliant, as Parliament must, by section 3 of HRA, be taken to have intended that it should. Thus read, POCA can be given effect in a manner which is compliant with the Convention right. The judge should, if confronted by an application for an order which would be disproportionate, refuse to make it but accede only to an application for such sum as would be proportionate. Both Mr Perry and Lord Pannick accepted the correctness of two cases decided in the Court of Appeal, Criminal Division, in which it was held that a disproportionate confiscation order might in limited circumstances be prevented by the application of the courts jurisdiction to prevent an abuse of process. Those cases were R v Morgan and R v Bygrave [2008] EWCA Crim 1323; [2009] 1 Cr App R (S) 60 and R v Shabir [2008] EWCA Crim 1809, [2009] 1 Cr App R (S) 84. The first (where the point was substantially conceded by the Crown) involved consideration of the case of a class of defendant (such as Morgan) whose benefit was limited to loss occasioned to a single victim, who did not have a criminal lifestyle, and who either had repaid, or stood ready to repay, the victim in full. Such a defendant would not be able to invoke section 6(6) of POCA to ask the court to treat the statutory duty to make a confiscation order as a discretionary power, because the victim would have no occasion to bring or threaten legal proceedings to recover his loss. The second case involved a defendant whose defalcations were accepted to amount to 464 but from whom the Crown sought a confiscation order of over 400,000 as a result of the manner in which he had obtained the money together with much larger sums to which he was agreed to be entitled and of the form of the charges of which he had been convicted. The situations described in both cases have (with others) subsequently been recognised in guidance issued by the DPP to prosecutors as ones in which a disproportionate confiscation order ought not to be sought by the Crown. Whilst the outcomes of those cases were, as is conceded, correct, the better analysis of such situations is that orders such as those there considered ought to be refused by the judge on the grounds that they would be wholly disproportionate and a breach of A1P1. There is no need to invoke the concept of abuse of process. That guidance should be issued to prosecutors is perfectly proper. The Crowns power, under section 6(3)(a) of POCA, to ask the court to make a confiscation order is one with far reaching consequences and care should be taken to exercise it on sound principles. Section 6 of HRA imposes on prosecutors the duty not to act in a manner incompatible with Convention rights, so that the Crown has an important preliminary function in ensuring that a disproportionate order is not sought. But the safeguard of the defendants Convention right under A1P1 not to be the object of a disproportionate order does not, and must not, depend on prosecutorial discretion, nor on the very limited jurisdiction of the High Court to review the exercise of such discretion by way of judicial review. The latter would moreover lead to undesirable satellite litigation. Mr Perry and Lord Pannick were correct to identify the repository of the control in the person of the Crown Court judge, subject to the reviewing jurisdiction of the Court of Appeal, Criminal Division, on appeal by either party. There is no occasion for any challenge to a confiscation order to involve an application for judicial review, which would founder on the objection that there is an adequate remedy in the hands of those two courts. The difficult question is when a confiscation order sought may be disproportionate. The clear rule as set out in the Strasbourg jurisprudence requires examination of the relationship between the aim of the legislation and the means employed to achieve it. The first governs the second, but the second must be proportionate to the first. Likewise, the clear limitation on the domestic courts power to read and give effect to the statute in a manner which keeps it Convention compliant is that the interpretation must recognise and respect the essential purpose, or grain of the statute. Both Mr Perry and Lord Pannick submitted that it would be very unusual for orders sought under the statute to be disproportionate. Both drew attention to the severity of the regime and commended its deterrent effect. The purpose of the legislation is plainly, and has repeatedly been held to be, to impose upon convicted defendants a severe regime for removing from them their proceeds of crime. It is not to be doubted that this severe regime goes further than the schoolboy concept of confiscation, as Lord Bingham explained in R v May [2008] 1 AC 1028. Nor is it to be doubted that the severity of the regime will have a deterrent effect on at least some would be criminals. It does not, however, follow that its deterrent qualities represent the essence (or the grain) of the legislation. They are, no doubt, an incident of it, but they are not its essence. Its essence, and its frequently declared purpose, is to remove from criminals the pecuniary proceeds of their crime. Just one example of such declarations is afforded by the explanatory notes to the statute (para 4): The purpose of confiscation proceedings is to recover the financial benefit that the offender has obtained from his criminal conduct. A confiscation order must therefore bear a proportionate relationship to this purpose. Lord Bingham recognised this in his seminal speech in R v May, in adding to his Endnote or overview of the regime, at para 48, two balancing propositions: The legislation does not provide for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine. Some general propositions may be offered in the light of the submissions of Mr Perry and Lord Pannick. For the reasons given above, it must clearly be understood that the judges responsibility to refuse to make a confiscation order which, because disproportionate, would result in an infringement of the Convention right under A1P1 is not the same as the re creation by another route of the general discretion once available to judges but deliberately removed. An order which the judge would not have made as a matter of discretion does not thereby ipso facto become disproportionate. So to treat the jurisdiction would be to ignore the rule that the Parliamentary objective must, so long as proportionately applied, be respected. A great many of the more serious cases in which confiscation orders are appropriate are criminal lifestyle cases. The statutory test for a lifestyle case is contained in section 75, read with Schedule 2, of POCA. In essence, a defendant who has in the past six years committed a number of offences from which he has benefited, or who has committed certain specified offences, will meet the statutory test. If he does, the calculation of his benefit will normally not depend on the known benefit obtained from identified offences, but will be made after applying the statutory assumptions set out in section 10 as to the criminal source of any assets passing through his hands in the six year period. Although the starting point is that the assumptions must be made (section 10(1)), this duty is subject to two qualifications contained in section 10(6). The assumptions should not be made if they are shown to be incorrect: section 10(6)(a). Nor should they be made if making them would give rise to a risk of serious injustice: section 10(6)(b). The combination of these provisions, and especially the latter, ought to mean that to the extent that a confiscation order in a lifestyle case is based on assumptions it ought not, except in very unusual circumstances, to court the danger of being disproportionate because those assumptions will only be applied if they can be made without risk of serious injustice. confiscation order may have one or more of three effects: It is apparent from the decision in May that a legitimate, and proportionate, (a) it may require the defendant to pay the whole of a sum which he has obtained jointly with others; (b) similarly it may require several defendants each to pay a sum which has been obtained, successively, by each of them, as where one defendant pays another for criminal property; (c) it may require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime. These propositions are not difficult to understand. To embark upon an accounting exercise in which the defendant is entitled to set off the cost of committing his crime would be to treat his criminal enterprise as if it were a legitimate business and confiscation a form of business taxation. To treat (for example) a bribe paid to an official to look the other way, whether at home or abroad, as reducing the proceeds of crime would be offensive, as well as frequently impossible of accurate determination. To attempt to enquire into the financial dealings of criminals as between themselves would usually be equally impracticable and would lay the process of confiscation wide open to simple avoidance. Although these propositions involve the possibility of removing from the defendant by way of confiscation order a sum larger than may in fact represent his net proceeds of crime, they are consistent with the statutes objective and represent proportionate means of achieving it. Nor, with great respect to the minority judgment, does the application of A1P1 amount to creating a new governing concept of real benefit. Similarly, it can be accepted that the scheme of the Act, and of previous confiscation legislation, is to focus on the value of the defendants obtained proceeds of crime, whether retained or not. It is an important part of the scheme that even if the proceeds have been spent, a confiscation order up to the value of the proceeds will follow against legitimately acquired assets to the extent that they are available for realisation. The case of a defendant such as was considered in Morgan and Bygrave is, however, a different one. To make a confiscation order in his case, when he has restored to the loser any proceeds of crime which he had ever had, is disproportionate. It would not achieve the statutory objective of removing his proceeds of crime but would simply be an additional financial penalty. That it is consistent with the statutory purpose so to hold is moreover demonstrated by the presence of section 6(6). This subsection removes the duty to make a confiscation order, and converts it into a discretionary power, wherever the loser whose property represents the defendants proceeds of crime either has brought, or proposes to bring, civil proceedings to recover his loss. It may be that the presence of section 6(6) is capable of explanation simply as a means of avoiding any obstacle to a civil action brought by the loser, which risk would not arise if repayment has already been made. But it would be unfair and capricious, and thus disproportionate, to distinguish between a defendant whose victim was about to sue him and a defendant who had already repaid. If anything, an order that the same sum be paid again by way of confiscation is more disproportionate in the second case than in the first. Unlike the first defendant, the second has not forced his victim to resort to litigation. The principle considered above ought to apply equally to other cases where the benefit obtained by the defendant has been wholly restored to the loser. In such a case a confiscation order which requires him to pay the same sum again does not achieve the object of the legislation of removing from the defendant his proceeds of crime, but amounts simply to a further pecuniary penalty in any ordinary language a fine. It is for that reason disproportionate. If he obtained other benefit, then an order confiscating that is a different matter. The earlier case of Nield [2007] EWCA Crim 993 voiced concern about the effect of a confiscation order in a full restoration case. That case, however, pre dated Morgan and Bygrave and did not consider A1P1. To the extent that it, and Forte [2004] EWCA Crim 3188 (a non counsel application with minimal argument), rationalised a confiscation order in such a case on the basis that part of the purpose of the statute was to impose an additional punitive sanction, those observations need now to be read in the light of the observations of Lord Bingham at para 48 in May, cited above. The principal thrust of Rose [2008] 1 WLR 2113 relates to the question whether the losers interest in stolen property prevents the thief from obtaining it, and to the proper basis for valuation of benefit obtained (see below). To the extent that Rose held at para 88 that the recovery and restoration intact of the stolen property was always irrelevant to the making of a confiscation order, that part of the decision should not be followed; it too preceded both Morgan and Bygrave and May, and neither A1P1 nor any issue of disproportion was addressed in argument. Several of these conclusions can conveniently be tested by considering the facts of R v Wilkes [2003] EWCA Crim 848, [2003] 2 Cr App R (S) 105. The defendant was convicted of burglary. He had a previous conviction, within the statutory assumption period of six years, for handling. Both the property stolen in the burglary and the property handled had been recovered intact and restored, undamaged, to the true owners. The defendant had obtained no other benefit from those two offences. Under the legislation then prevailing, the 1988 Act (as amended), these two convictions triggered the statutory assumptions, providing that Wilkes had benefited (to any extent) from each of the offences. The Crown did not assert that the calculation of Wilkes benefit ought to include the value of the goods either stolen in the burglary or handled on the previous occasion. It confined itself to relying on the statutory assumptions which cast upon him the onus of disproving the proposition that his expenditure on living over the previous six years and some money found buried in the garden were, in each case, attributable to crime. The Court of Appeal was invited to hold that the statutory assumptions did not apply because Wilkes had not benefited, even briefly, from the two offences under consideration. That argument was rightly rejected; plainly he had benefited, although the benefit had been for the briefest of time. The court had no occasion to consider whether the order sought was disproportionate. If the Crown had sought to recover from him the value of the goods which had been restored intact to their owners, that would have been disproportionate to the aim of the statute to deprive him of his proceeds of crime. But it did not. It sensibly abstained from attempting to do so and instead relied upon the contention that except so far as he could prove otherwise his assets and expenditure over the past six years should be treated as the proceeds of crime. That was no doubt severe, but he had the opportunity to disprove these things, and could do so, to the extent, for example, that he could show that he had received state benefits. If he had been able to demonstrate that the source of his assets or expenditure was honest earnings from employment, or genuine untainted gifts from others, or a loan honestly obtained from a third party (R v Johnson (Julie) [1991] 2 QB 249 and R v Walls [2002] EWCA Crim 2456, [2003] 1 WLR 731), the same would have applied. If any assumption had carried the risk of serious injustice to him, it would not have been made. Instead, the conclusion on the evidence was that he was a career criminal and all unaccounted for expenditure had been derived from the proceeds of crime. For the confiscation order to be made, there had to be available assets up to the sum ordered. The order as made in his case was not disproportionate to the statutory objectives. Under the POCA rules for lifestyle offences, the trigger for the assumptions would now be four, not two, offences of this kind from which the defendant had benefited, but otherwise the position is unchanged. If, however, an order were sought independently of the lifestyle provisions and the concomitant assumptions, and to the extent that it were based solely on the momentary benefit of obtaining goods which had been restored intact to the true owners, that order would be disproportionate and ought not to be made: it would not serve the aim, or go with the grain, of the legislation. Such a defendants proceeds of crime would already have been restored to the loser in their entirety. An order in the same sum again would simply impose an additional financial penalty upon him. If such a defendant deserves an additional financial penalty, as in some cases he may, it ought to be imposed openly by way of fine, and whether or not he is also sent to prison, providing he has the means to pay. A confiscation order in such a case is not compelled by the House of Lords decision in R v Smith (David) [2001] UKHL 68, [2002] 1 WLR 54, although the contrary appears often to be asserted. In Smith the defendant had evaded the payment of duty on imported cigarettes by smuggling them past the customs post. The decision in the case was that the pecuniary advantage thus (admittedly) obtained had not retrospectively been undone by the subsequent seizure of the cigarettes. That was plainly correct. Lord Rodger held, at para 23, that the subsequent seizure of the cigarettes was in like case to subsequent loss of or damage to goods obtained in the course of crime; such loss or damage would not affect the propriety of a confiscation order consider for example the case of a burglar who hides the householders goods in the open air so that they are ruined by the weather or stolen by someone else. The House was not, however, considering the case in which the criminal property obtained has been restored to its owner undamaged. On the contrary, Smith was agreed to have obtained the pecuniary advantage of avoiding payment of the duty, at any rate temporarily. The true analysis of tax or excise avoidance cases did not arise in this appeal and ought to await full argument when it does. It is, however, to be observed that in such a case HM Revenue and Customs does not as a matter of practice seek double recovery by way of both the payment of the unpaid duty and a confiscation order in the same sum: see R v Edwards [2004] EWCA Crim 2923, [2005] 2 Cr App R (S) 29, paras 24 to 25, where the existence of this practice was the reason why no breach of A1P1 was argued. This practice is followed, it appears, because such double recovery is recognised to be disproportionate and wrong. On the principle explained in para 19 above, the argument may need in the future to be considered that a disproportionate result should not be left to be achieved by way of Executive concession but rather should be the responsibility of the court to which an application for a confiscation order is made. There may be other cases of disproportion analogous to that of goods or money entirely restored to the loser. That will have to be resolved case by case as the need arises. Such a case might include, for example, the defendant who, by deception, induces someone else to trade with him in a manner otherwise lawful, and who gives full value for goods or services obtained. He ought no doubt to be punished and, depending on the harm done and the culpability demonstrated, maybe severely, but whether a confiscation order is proportionate for any sum beyond profit made may need careful consideration. Counsels submissions also touched very lightly on cases of employment obtained by deception, where it may well be that difficult questions of causation may arise, quite apart from any argument based upon disproportion. Those issues were not the subject of argument in this case and must await an appeal in which they directly arise; moreover related issues are understood to be currently before the Strasbourg court. The present case is one of money lent because of fraud, but subsequently repaid in full and always fully secured. If, in such a case, the fraud were discovered immediately any confiscation order which included the same sum as had been repaid in full would be disproportionate on the principles set out above. However, the present case, like many mortgage frauds, is one of substantial benefit gained from the fraud in the form of the large increase in value of the flat which the fraud enabled the offender to buy. This therefore is not a case in which no confiscation order ought to have been made because any order would be disproportionate. In general, where the mortgage loan has been repaid or is bound to be repaid because it is amply secured, and absent other property obtained, a proportionate confiscation order is likely to be the benefit that the defendant has derived from his use of the loan, namely the increase in value of the property attributable to the loan. IV The facts Mr Waya is a Nigerian businessman resident in London. In 2003 he wished to buy a flat, 18A Northgate Mansions, Albert Road, London NW8. He contracted to purchase the flat for 775,000, of which 310,000 came from his own resources. The balance of 465,000 was provided by a mortgage lender, G E Money Home Lending. In order to obtain this loan Mr Waya made false statements about his employment record and his earnings. The sentencing judges remarks (quoted by His Honour Judge Rivlin QC, who made the confiscation order) suggest that Mr Wayas advisers may have encouraged him to make false statements. The purchase and mortgage were completed in the usual way, with the mortgage lender putting Mr Wayas solicitor in funds shortly before completion. The solicitor would have held the funds in his client account, in trust for and to the order of the mortgage lender, until they were paid direct to the vendors solicitor on completion. (There is a fuller description of the normal process of completion of a purchase and mortgage in the opinion of Lord Goff of Chieveley in Preddy [1996] AC 815, 828 829.) In April 2005 the mortgage in favour of G E Money Home Lending was redeemed, on payment of the full sum secured together with a fee of 58,000 for early redemption, and the flat was remortgaged to Birmingham Midshires Building Society to secure the sum of 838,943. There is no clear evidence as to what happened to the balance (which must have been of the order of 360,000) in excess of the redemption money but it seems probable that Mr Waya spent some of it on improvements to the flat. The judge accepted that he spent up to 150,000 on the flat during his period of ownership. Mr Waya was arrested in November 2005 and was charged on two counts of obtaining a money transfer by deception, contrary to section 15A of the Theft Act 1968, one relating to each of the mortgages. On 10 July 2007 at Southwark Crown Court he was convicted on the first count and acquitted on the second. He was sentenced to 80 hours community punishment. The application under POCA was heard on 25 January 2008. The sum of 1.54m ordered by Judge Rivlin was arrived at by deducting from the then market value of the flat (1.85m) the sum of untainted money (0.31m) paid by Mr Waya out of his own resources on the original purchase. The judge disregarded the remortgage for reasons that he stated rather briefly. The Court of Appeal, in a careful reserved judgment delivered by Blake J on 25 March 2010, reduced the amount of the order to 1,110,000: [2010] EWCA Crim 412. This figure was arrived at as 60% of the market value of the flat. This represented a rateable split of the value since 465,000 (the loan obtained) is 60%, and 310,000 is 40%, of the original purchase price of 775,000. The remortgage was again disregarded. The Court of Appeal certified a point of law of general public importance in these terms: Where a person obtains a money transfer by deception contrary to section 15A Theft Act 1968 as amended, and thereby causes a lending institution to transfer funds to the persons solicitor for the purpose of a mortgage advance to enable purchase by that person of a residential property, does: i) That person obtain a benefit from his conduct in the form of property within the meaning of Part 2 of the Proceeds of Crime Act 2002? ii) If so is the property so obtained the value of the loan advanced to purchase the property or his interest in the property or some other property? iii) meaning of Part 2 of the Proceeds of Crime Act 2002? If not does the person obtain a pecuniary advantage within the The issues in the appeal have since become wider, partly as the result of directions given by this Court when directing a rehearing (see para 10 above). Mr Wayas sentence of 80 hours community service reflected the judges view of the relatively low level of his culpability. He was not guilty of a serious mortgage fraud involving dishonest overvaluation of property. There was no loss to the mortgage lender. Nevertheless he did, by dishonestly misrepresenting his own financial position, obtain credit on terms which might not otherwise have been available. It is well known that those with poor credit ratings must expect to pay higher rates of interest if they have to borrow on the secondary or sub prime mortgage markets. In economic terms, the benefit that Mr Waya obtained from the offence for which he was convicted was obtaining credit, on better terms than those that he could expect to get if he told the truth. With that credit came the prospect of obtaining a handsome capital gain if the market for high grade residential property in London continued to rise (as it did). If on the other hand the market had fallen substantially, the mortgage lenders security might have proved inadequate, and the mortgagors personal covenant to repay principal and interest might have been shown to be worthless. Depriving him of that prospective capital gain, or a proportionate part of it, would therefore be the appropriate way of making the confiscation order fit the crime. Moreover that is the way in which the provisions of POCA apply in this case, on a fair and purposive construction that takes account of section 3 of HRA and the need for proportionality under A1 P1. The property obtained V The first issue, and the only one squarely raised in the certified question, is the identification of the property that Mr Waya obtained (in the language of section 76(4) of POCA) as a result of or in connection with the criminal conduct for which he was convicted of an offence under section 15A of the Theft Act 1968. This issue of identification is of critical importance since the value of the property obtained, at the time when it was obtained, fixes (subject to adjustment for inflation) one of the two alternative bases of valuation under section 80(2)(a). If what Mr Waya obtained was 465,000, then that sum (adjusted for inflation) is the minimum sum to be treated as the value of his benefit under section 76(7). The issue of identification is also important if the alternative (tracing) basis of valuation under section 80(2)(b) and (3)(b) or (c) falls to be considered, because the property originally obtained is no longer in the defendants hands. If this arises, the first necessary step is to identify the property originally obtained and then to progress by inquiring whether the defendant now holds other property which directly or indirectly represents it. This aspect is discussed in Part VI below. All counsel rightly acknowledged that the issue of identification is a difficult one, and some offered alternative analyses. Mr Krolick (for the appellant) put forward a radical solution, contending that Mr Wayas benefit was nil and criticising as a fallacy what he called the snapshot approach exemplified by the decision of the House of Lords in R v Smith (David) [2001] [2002] 1 WLR 54. Mr Perry QC (instructed by the Crown Prosecution Service) put forward as his primary submission (paras 86 and 108 of his printed case) that Mr Waya obtained 465,000. Lord Pannick QC supported this submission (para 39 of his printed case on behalf of the Secretary of State as Intervener). So did Mr Swift QC (para 17 of the printed case of the Advocates to the Court). These submissions were broadly in line with the reasoning of the Court of Appeal, although Blake J put it rather more tentatively in para 25 of his judgment ([2010] EWCA Crim 412): In our judgment, at the latest at the time the conditions upon which the money was advanced were satisfied, the appellant had at the least an equitable interest in the money transfer order in his solicitors account, namely a right to ensure that the money was forwarded to the vendor to complete the purchase. Whether the appellants interest was in property belonging to the lender institution at a time when his interest arose is irrelevant to our inquiry although it was central to the decision in Preddy [R v Preddy [1996] AC 815]. In the words of section 15A Theft Act as amended he obtained the money transfer for himself, if only for the purpose of it being applied to discharge the obligation to pay the purchase price for the property through the solicitors account. No one contended that the property obtained was the entire flat, although that analysis had been adopted in two early unreported cases on the 1988 Act, Re K (6 July 1990, McCullough J) and R v Layode (12 March 1993, Court of Appeal). In the latter case the Court relied on the wide language of section 71(4) of the 1988 Act, which (like section 76(4) of POCA) refers to obtaining property as a result of or in connection with the commission of an offence. Both were, however, cases where the judicial discretion was available to ensure that any eventual order did not exceed what was fair, and more recent cases have declined to stretch the causal link. In R v May [2008] AC 1028, para 26, a case on the 1988 Act as amended by the 1995 Act, Lord Bingham referred to Re K and R v Layode and observed: It must, however, be appreciated that section 71(4) called for an essentially factual inquiry: what is the value of the property the defendant obtained? If (say) a defendant applies 10,000 of tainted money as a down payment on a 250,000 house, legitimately borrowing the remainder, it cannot plausibly be said that he has obtained the house as a result of or in connection with the commission of his offence. Similar reasoning can be found in the decision of the Court of Appeal, Civil Division, in Olupitan v Director of the Assets Recovery Agency [2008] EWCA Civ 104, 22 February 2008 and in R v Ahmad [2012] EWCA Crim 391; [2012] 1 WLR 2335, 2 March 2012. But it is unnecessary and probably inappropriate to refer to those cases in detail, since an appeal to this court is pending in Ahmad, whilst Olupitan was a civil recovery case on different wording in Part 5 of POCA, where as Toulson LJ observed at para 55, the rival arguments about the mechanics of the transaction by which one house had been acquired did not in the end make any difference, once it had been found that the source of all relevant purchase money was some relevant crime. It is sufficient to say that the contention that Mr Waya obtained the whole leasehold interest in the flat by his dishonest conduct would completely ignore his down payment, out of untainted funds, of 310,000. That would not be a fair or purposive application of section 76(4), and it is unnecessary to add that it would also be disproportionate for the purposes of HRA. The submission that what Mr Waya obtained was 465,000 calls for close examination. In the case of an ordinary loan induced by fraud, there is no doubt that the defendant does obtain the loan sum advanced. The facts that he is under an obligation to repay it, and even intends to repay it, do not mean that he does not obtain it. Indeed the obligation (and intention) to repay both assume an initial obtaining; if there had not been an initial obtaining, there would be nothing to repay. Nor does the fact that repayment is secured mean that he does not obtain it. A loan may often be secured on property belonging to the borrower. The security means that the lender has a much better prospect of being repaid, but once again there can be no doubt that the borrower obtains the sum advanced. It is paid to him and he can use it either as he wishes, or maybe for the particular purposes for which it is advanced. In either case, it has come into his possession and control; he has obtained it. For the reasons set out in Part III above, if a borrower does in fact repay a fraudulently induced loan, secured or unsecured, a confiscation order which requires him to pay the same sum again is (lifestyle considerations apart) likely to be disproportionate and wrong. But that, likewise, does not mean that he did not obtain the loan sum advanced in the first place. The difference in the present case lies in the legal machinery by which the loan advance is made, as explained in para 36 above. The appeal has proceeded on the agreed or assumed factual basis that the same solicitor was acting for Mr Waya and the mortgage lender; that the mortgage advance was paid to the solicitor to be held in the solicitors client account, until completion, in trust for and to the order of the mortgage lender; and that on completion the jointly instructed solicitor transferred the advance to the vendors solicitor, receiving instead an executed transfer of the lease. Mr Waya would already have executed a charge of the lease in favour of the mortgage lender. In the eyes of the law all these events occurred simultaneously. That is established by the decision of the House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56. There is a full explanation in the speech of Lord Oliver at pp 92 93. After referring to the proposition that, at least where there is a prior agreement to grant the charge on the legal estate when obtained, the transactions of acquiring the legal estate and granting the charge are, in law as in reality, one indivisible transaction, Lord Oliver analysed the position in detail and concluded: The reality is that the purchaser of land who relies upon a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise. The scintilla temporis is no more than a legal artifice. On this analysis even Blake Js cautious reference to at least an equitable interest seems open to debate. Mr Waya no doubt had a contractual right as against the mortgage lender, conditional on the vendor performing his contractual obligations to the purchaser, to have the mortgage advance applied towards payment of the purchase price on completion. Lord Oliver (in a part of his speech between the passages quoted above) referred to the purchaser having a specifically enforceable agreement once the advance was in his solicitors client account, and that might be described as an equitable interest of a sort. But that cannot detract from the well established principle that in this sort of case the mortgage advance remains in the beneficial ownership of the lender until completion, when it passes direct to the vendor. That principle was stated in Target Holdings Ltd v Redferns (a firm) [1996] AC 421, 436, reaffirmed in R v Preddy [1996] AC 815, 838, and recently discussed by the Court of Appeal in Lloyds TSB Bank Plc v Markandan & Uddin [2012] EWCA Civ 65, 9 February 2012, a case about a mortgage fraud the facts of which are, even by todays standards, fairly remarkable. In R v Glatt [2006] EWCA Crim 605, 17 March 2006, a case under the 1988 Act in its original form, in which a solicitor had been convicted of assisting in laundering the proceeds of large scale evasion of excise duty, the Court of Appeal stated in relation to section 71(4) of the 1988 Act (para 141): But obtain does include the cases where a defendant retains control over property received by a third person as a result of steps taken by him, as well as cases where he obtains an interest in property received by a third person. In R v May [2008] AC 1028, para 16 Lord Bingham stated that the observations on section 71(4) made by Buxton J in R v Gokal (7 May 1997) should not . be understood as excluding . cases where payment is made to a third party at the behest of the defendant. True it is that in this case the mortgage advance was paid to the vendors solicitor at Mr Wayas behest. But he had no control over its disposal in the recipients hands; the sole and predetermined purpose of the payment was to form part of the purchase price of the flat, with the mortgage lender having security for its repayment from the moment of completion. Mr Waya never in fact acquired anything but an equity of redemption (as Lord Oliver put it in Cann), the equity of redemption corresponding in value (at that point) to his untainted down payment of 310,000. To conclude (as was submitted by Mr Perry, Lord Pannick and Mr Swift) that Mr Waya obtained 465,000 is a legally inaccurate account of the transaction, because the loan sum never became his or came into his possession. Under the tripartite contractual arrangements between vendor, purchaser and mortgage lender Mr Waya obtained property in the form of a thing in action which was an indivisible bundle of rights and liabilities, and it cannot be correct to fasten onto the rights and ignore the liabilities (the analysis would of course be different if the loan had ever been at the defendants free disposal: see paras 48 and 49 above). In short, what Mr Waya obtained was the right to have the mortgage advance applied in the acquisition of his flat, subject from the moment of completion to the mortgage lenders security, which ensured the repayment of the advance. This thing in action had no market value at or immediately after completion, as the equity of redemption (or in everyday speech, the equity) represented Mr Wayas down payment. There will no doubt be other mortgage fraud cases in which this thing in action does have a value. One example would be the common case where false representations as to income and status of the borrower are accompanied by a dishonestly inflated valuation of the property which is being purchased. In such a case the fraud may not only have induced a larger loan than would otherwise have been made, but may well have induced a loan which is not fully secured as the lender believes. Another example might be the case where the property which the defendant is purporting to purchase does not exist, or is not really being purchased at all. In both these cases the thing in action has a real value to the defendant. It is unnecessary to consider the alternative view (canvassed by Mr Perry in para 43 of his printed case) that if the money transfer was not property it was a pecuniary advantage, except to express some doubt as to whether, as Mr Perry suggests, the analysis would be just the same. It is not clear that the tracing provisions in section 80(3) of POCA could apply to a pecuniary advantage which is not property, but is merely deemed (by section 76(5)) to be a sum of money. But it is not necessary to decide that point. VI The operation of section 80(3) There are four general features of s 80(3) which should be recognised. a) Once property has been obtained as a result of or in connection with crime, it remains the defendants benefit whether or not he retains it. This is inherent in the value based scheme for post conviction confiscation. b) If however the defendant does not retain all or any of the property originally obtained, but does have other property representing it in his hands, then section 80(3) operates. This is an important part of the statutory scheme in cases where, for example, the profits of crime such as drug trafficking, are laundered into other assets which are likely to rise in value. c) Even in such a case, s 80(3) only bites if the value of the representing property is larger than the value of the property originally obtained; if it is not, the benefit remains the value of what was originally obtained, subject to index linking under section 80(2)(a). d) Where s 80(3) applies, the value of the representing property is an alternative but not an additional or cumulative benefit; see the helpful explanation offered by Toulson LJ in Pattison, considered below at paras 59 to 61. Section 80(3) of POCA does not give any guidance (beyond the general interpretative provisions in section 84) as to how the test of direct or indirect representation is to be applied. This is in contrast to the detailed provisions in Part 5 of POCA, which are to be applied by civil courts in cases where what is being considered is, unlike a post conviction Part 2 case, an order for the surrender of identified property, rather than simply an order for payment of a sum of money. This suggests that Parliament may have intended section 80(3)(b) and (c) to apply only when the established facts are relatively straightforward. That is what is likely to happen in practice. Where bank statements and other documentary evidence are not available the Crown Court may well conclude that any elaborate tracing exercise is impossible. But the general notion that the court can trace one asset into another is very familiar in English law, not only under formally constituted trusts but also for the purposes of obtaining proprietary or other remedies against a variety of persons in fiduciary positions, such as company directors, and others who have, by dishonestly giving assistance, made themselves accountable as if they were fiduciaries (see generally Lewin on Trusts, 18th ed (2008) pp 1655 1732; Lionel Smith, The Law of Tracing (1997). This is not to suggest that section 80(3) of POCA is intended to bring in the whole panoply of rules as to tracing in equity. But the language of the subsection plainly proceeds on the basis that there may be sufficient evidence that one item of property represents another, in the sense that one asset has been exchanged for another asset, or (as is in practice more likely) that money derived from the one asset (whether by sale, mortgage or otherwise) has been used to acquire another asset. That was recognised (in relation to a similar provision in section 74(8) of the 1988 Act) in the speech of Lord Rodger (with which the rest of the House concurred) in R v Smith (David) [2002] 1 WLR 54, para 23. It was explored in detail by Toulson LJ giving the judgment of the Court of Appeal in R v Pattison [2007] EWCA Crim 1536, [2008] 1 Cr App R (S) 51. It is worth setting out one passage of Toulson LJs judgment in full, since it explains the position very clearly. In Pattison the defendant was an estate agent who had been convicted of money laundering when he bought, at a gross undervalue, a house belonging to an associate who anticipated (correctly) that he would in the near future be the subject of a confiscation order for drug dealing. The estate agent bought the house for 43,000 in 2004 and it was worth 152,500 at the time of the confiscation order against him. But he had charged it to secure a loan of 112,500 which he intended to use to meet the drug dealers confiscation order. However the estate agent was arrested before he could do so, and only 60,000 of the loan was actually drawn down, and remained in his bank account. In these circumstances Toulson LJ said (para 21): It is the prosecutions argument that where a defendant acquires property through criminal conduct, and subsequently deals with that property, then any proceeds of that dealing must be benefits which result from the offending and are therefore to be added to the original value of the property. This overlooks the provisions of section 80 (to which the judge was not referred) but before coming to that section it is worth pausing to consider the implications of the argument. Suppose that after the appellant received the property worth 150,000 he had sold it for that sum and put the money in the bank. On the prosecutions argument, the benefit that he would then have received and for which he would be amenable to a confiscation order would be 300,000, representing the value of the property (150,000) plus the sum for which he realised it (150,000). If he then used the 150,000 to buy a yacht worth 150,000, the benefit would rise to 450,000. If he then tired of sailing and sold the yacht for the same price, the benefit which he would have received and for which he would be liable to a confiscation order would become 600,000. All the while, his true financial position would have remained identical. That offends commonsense. Every school child knows that you cannot have the penny and the sweet. If your mother gives you a penny and you buy a sweet with it, your benefit is a pennys worth and not two pennys worth. It is correct that the provisions of the legislation are draconian, but the effect of the prosecutions argument would not [make] any underlying sense. Fortunately, s.80 addresses the situation where a person subsequently deals with property which has been acquired by him through criminal conduct. He then set out the terms of section 80, and concluded that quantifying the benefit at 150,000 accorded with the language of the statute as well as with justice and commonsense. It was represented, on the estate agents confiscation day, by an equity of redemption (presumably worth about 90,000, since the loan had not been drawn down in full) and 60,000 in his bank account. It is at this point convenient to advert to the discussion before us as to the Although Toulson LJs example takes complete substitutions, no doubt for the sake of simplicity, the actual decision in the case was on what restitution scholars, following Roman law, call a mixed substitution (see for instance Foskett v McKeown [2001] 1 AC 102, 115F (Lord Hoffmann), 126G (Lord Millett)). There is no reason to restrict the language of section 80(3) to complete substitutions, since section 80(3)(c) in terms covers the case of partial representation. To do so would greatly restrict its operation. Provided that adequate evidence is available, the section is to be given its natural meaning, which is (especially with the interpretative provision in section 84(2)(a)) quite wide. In this case the established facts are reasonably straightforward. It is absolutely clear that Mr Waya no longer had the chose in action originally obtained, and equally clear that some interest in the flat now represented that chose in action in his hands. But there are competing arguments as to (1) what that interest was and (2) how it was to be valued. import of two sections of POCA, section 84(2)(b) and section 79(3). Section 84(2)(b) is a general statement concerning property. It has a bearing on the question of what representing property was held by Mr Waya when confiscation came to be calculated. One question briefly raised was whether the combination of section 84(2)(b) with section 79(3) carries the meaning that if a person obtains by his crime a limited interest in an item of property, he thereby is to be treated as obtaining the whole item. It is quite apparent that this is not what section 84(2)(b) means. Such a construction would ignore well understood concepts of concurrent interests in property, which are recognised by, inter alia, section 79(3). The potential confusion arises from the sometimes indiscriminate use of the word property to mean both (1) an interest and (2) the item itself, such as a racehorse or 13 Acacia Avenue. Both the racehorse and the house in Acacia Avenue are very commonly held by several people with concurrent partial interests. What section 84(2)(b) plainly means is that if a person obtains a limited interest in an item of property, that limited interest is itself property which may fall accordingly to be counted as benefit. In the same way, section 84(2)(a) means that a person who holds an interest in property holds property for the purposes of POCA. It follows that the representing property held by Mr Waya can perfectly well be a limited interest in the flat and does not have to be the whole flat. Section 79(3) contains a general provision for valuation. If the defendant and another person both hold interests in the same property, then it is the value of the defendants limited interest which is to be taken for the purposes of calculating his benefit. Contrary to some submissions made to us, it clearly applies both at the benefit calculation and at the assessment of realisable property stages. That was the conclusion correctly reached in R v Rose [2008] 1 WLR 2113. Rose was a relatively straightforward case in which the defendant had been found guilty on three counts of possession of criminal property under section 329 of POCA. Some of the stolen property (principally a lorry trailer and its load of alcoholic drink) had been restored to the owner, a brewery. But the alcoholic drink was no longer marketable, and some of the stolen property had not been restored at all. The confiscation order made was for little more than 8,000, although the market value of the stolen goods was over 27,000. The Crown appealed, challenging the proposition that the property obtained was valueless, since legal title remained in the brewery. The logic of that proposition, as Richards LJ pointed out at para 38, was that instead of a confiscation order for about 8,000, there should have been no order at all. The judgment delivered by Richards LJ sets out a careful analysis of the provisions of the earlier legislation in this area, and the authorities on it. The Court of Appeal rejected the Crowns subsidiary submission that section 79(3) applied only to the valuation of realisable assets (the last stage in the three stage statutory process). But the Court acceded to one limb of the Crowns primary argument, that is (para 87): . that the market value, within section 79(2), of property obtained by a thief or a handler is the amount it would have cost the defendant to obtain the property legitimately, or the economic value to the loser, rather than what the defendant could get for the property if he sold it (or, therefore, what he could get for his interest in the property if he sold that interest). That was the approach of the Courts when applying section 74(5) of the [Criminal Justice Act 1988]: see, most obviously, R v Ascroft [2004] 1 Cr App R (S) 326: paras 56 and 60 above. On that basis there is no need to consider the nature of the defendants interest in the property obtained or the market value of that interest: the focus is on the incoming value of the property, not the value of the property in his hands. The Court considered that Parliament did not intend to alter the outcome of Ascroft, and that the restoration of stolen property to the owner was irrelevant. It added that R v Johnson [1991] 2 QB 249 and R v Walls [2003] 1 WLR 731 did not tell against this conclusion. The argument thus confronted in Rose and also ventilated in this court is that section 79(3) means that in every valuation of property which had been stolen or obtained by deception, the interest of the true owner must be taken into account as reducing the value to the defendant. The same argument can be presented on the basis that a thief obtains no title to the stolen property, but at most a possessory interest good against third parties, and thus of no significant value. If the argument is good, the effect will be in most cases to reduce the value to the defendant of property obtained by acquisitive crime to nil, or to next to nothing, since almost every loser has the right to the restoration of such property. It is quite clear that section 79(3) cannot carry this meaning without wholly emasculating POCA; such a construction is contrary to the whole purpose of the Act and would mean that some of the most obvious examples of the proceeds of crime would be almost entirely removed from the calculation of benefit. This possible construction of section 79(3) is not necessary. What that section means is that lawfully co existing interests in property are to be valued individually. It does not mean that the losers right to recover the property from the thief, which is a claim totally to defeat anything the thief has obtained, is to be treated as a co existing partial interest for the very purpose of valuing what he has obtained. Rose and Ascroft are correct in holding that the measure of the value of the interest in property stolen to the thief, for the purposes of confiscation, is what it would cost him to acquire it in the open market. In the present case Mr Perry and Lord Pannick advanced an extension of this Rose proposition. They contended that because the lender was the loser in the crime, its partial interest in the flat would be irrelevant to any valuation of the flat which had to be performed. Thus, they contended, any valuation of Mr Waya's interest in the flat ought to ignore the mortgage held by the lender. That does not follow. Section 79(3) plainly does apply to co existing legitimate partial interests. A mortgagee has such an interest. The fact that he is also the victim of the crime, and so could no doubt claim rescission of the loan, does not affect the fact that if the value of the flat has to be determined, what Mr Waya has is not an unencumbered flat, but a flat subject to the interest of the lender mortgagee. The victims right to rescission is not within s 79(3), but his quite separately existing mortgage interest is. What, then, was the property held by Mr Waya, after the completion of the purchase, which represented in his hands the chose in action which he had originally obtained? Mr Perry and Lord Pannick submitted that it was a 60% interest in the flat. That submission can be accepted so far as it goes, but it does not address the incidence of the mortgage. The property representing the original chose in action was a fractional part of Mr Wayas total interest in the flat, the fraction corresponding to the part of the original purchase price financed by the dishonestly obtained mortgage (that is, 60%). But fairness requires that the mortgage liability (deductable under section 79(3)) should be matched to this 60% interest, so that the benefit obtained by Mr Waya was initially nil. Otherwise 60% of his untainted contribution of 310,000 would, irrationally, be treated as proceeds of crime. The interest which fairly represented his original chose in action was 60% of the open market value of the flat from time to time, less the whole of the mortgage liability (465,000). In other words it was 60% of any increase in the flat's market value over its acquisition price. That represents the reality of what he obtained from his crime and is, moreover, a proportionate order to make by way of confiscation, subject only to the re mortgage, considered below. So for example, if the confiscation day had occurred before the remortgage and if the flat had then been worth 1.2m, the value of the property obtained by Mr Waya as a result of his dishonesty would have been computed under section 80(2) and (3) as follows: 1,200,000 market value 465,000 mortgage ________ equity 735,000 original equity 310,000 ________ appreciation 425,000 60% thereof 255,000 This analysis may seem, at first sight, to be inconsistent with R v Moulden [2004] EWCA Crim 2715, [2005] 1 Cr App R (S) 121, but it is not. That was a case under the 1994 Act in which the proceeds of drug trafficking had provided down payments on several properties, otherwise funded by mortgage lenders. The properties had greatly increased in value. In the judgment of the Court of Appeal given by Stanley Burnton J the Court rejected the argument that the increase in value should be apportioned between the equity of redemption and the mortgage (para 25): In our judgment it is neither unjust nor surprising that where a property is bought with a relatively low down payment and a high mortgage and it increases in value, the benefit to the defendant is a sum which may be a multiple of the original deposit. That is because, subject to any interest payments, any mortgage remains unchanged by increases in market values, whereas the defendant has acquired the equity in the property, that is to say he has the property subject only to the mortgage. That appears to us to be plain on the wording of section 4 and having regard to the draconian purposes of the Act. So where the down payment was tainted money, and gearing was obtained by the use of a mortgage, the Court of Appeal had no reason to depart from the entirely uncontroversial view that subject to the fixed sum of principal secured by the mortgage, the equity in the property, including the whole of any capital appreciation, belongs to the owner. The difference between the two cases is a factual one. A mortgage is a fixed liability which does not rise as the market rises. What the defendant in Moulden had converted his criminal money into was the whole equity in the house, ie its full value less the fixed sum of the mortgage. What Mr Waya converted his criminal chose in action into was the proportion of the equity attributable to the mortgage loan, less that loan. VII The remortgage By the remortgage Mr Waya realised additional liquid funds of about 360,000 (after payment off of the original mortgage and the fee for early repayment). Up to 150,000 of the 360,000 is assumed to have been spent on the flat and was no doubt reflected, to some extent, in its market value at the confiscation day. There is no evidence of what happened to the balance of 210,000. It cannot therefore be caught by section 80(3), since there are only two possible valuation dates that can be relevant: the date when property is first obtained, and the confiscation day. That is spelled out in section 80(2), together with the definition of material time in section 80(1). If this 210,000 were known still to be in the bank, or to have been converted into some other identifiable asset, then section 80(3)(b) would catch it, but there are no findings that either has occurred, rather than the money simply being consumed in living expenses. The statute does not provide for any assumption adverse to the defendant to be made on that point. We must assume (in Toulson LJs homely phrase) that Mr Waya decided to consume the sweet. Mr Perry (para 126) disputes this analysis (again Mr Swift, paras 51 to 59, takes a rather different line). Mr Perry would apply an extended principle derived from Rose to the remortgage as well as to the original mortgage. They supplement this submission by pointing out that otherwise ill gotten gains could easily be laundered, and the effectiveness of the confiscation regime undermined. That cannot however be a good reason for disregarding the reasonably plain terms of the statute. It is inherent in the scheme of section 80(3)(b) that it can operate only where the defendant still possesses the representing property. If he previously created it, and then liquidated it and spent the money, section 80(3)(b) cannot apply. In most cases (though not here) section 80(2)(a) will provide a satisfactory alternative basis for an order, and in some cases (though not here) money raised by a remortgage will be traceable into more valuable assets held at the confiscation day. VIII Repayment of principal The last complication to be raised is of little practical importance on the facts of this case, but it calls for mention because it may make more of a difference in other cases. It arises from the fact that at some time between the remortgage in April 2005 and the confiscation day (25 January 2008) Mr Waya paid off a relatively small part (23,400) of the principal sum secured by the remortgage. This payment is agreed to have been made out of untainted funds. Once the repayment of capital was made, the representing property in the hands of Mr Waya was no longer 60% of the market value less mortgage and untainted contribution but was the lesser percentage which 465,000 less 23,400 yields. Thus the effect of repayment of principal out of untainted funds is not to have the paradoxical effect of diminishing the section 79(3) deduction and so increasing the severity of the confiscation order. In this case, where the repayment was relatively small and seems to have been made at a time when most of the capital appreciation had already taken place, justice can be done by the simple adjustment of adding the amount of the repayment to the amount of the original down payment. But in the case of a long term instalment mortgage under which principal was repaid throughout the term, it might be more accurate (and fairer) to adjust the percentages of the original down payment and the original mortgage advance so that a smaller proportion of the capital appreciation is treated as benefit. Elaborate and precise calculations would not be called for; in many cases experienced counsel would be able to agree on the appropriate adjustment and invite the judge to adopt it. IX The order to be made Pulling together and summarising the reasoning set out above, we consider that the benefit obtained by Mr Waya from his criminal behaviour was a thing in action with no immediate market value. It was an item of property but it had a very short life, since on completion it immediately came to be represented by a fractional 60 per cent share of the leasehold interest in the flat, subject to (the whole of) the mortgage, with the remaining 40% representing the untainted contribution. In economic terms, his benefit was so much of any appreciation in value as was attributable to the mortgage obtained by his dishonesty. Immediately after completion this value was nil, but as the market value of the flat increased the benefit came to have a significant value, that is 60 per cent of the appreciation in the net value of the flat, subject to the mortgage. On the facts of this case the amount raised and secured by the remortgage had three elements. The first, 465,000 plus the early repayment fee of 58,000, had no significant economic effect since it merely substituted one mortgage lender for another (possibly at a different rate of interest). No new, untainted money of Mr Waya was used to redeem the original mortgage. The next element, not exceeding 150,000 at most, was recycled into the flat and probably produced some increase, but not a pound for pound increase, in its market value. The third element, the balance, must be supposed to have been consumed in expenditure of one sort or another so as to fall outside the ambit of section 80(3). A small adjustment needs to be made for the repayment of the principal sum of 23,400. A computation in similar format to that at para 71 above produces these figures: 1,850,000 market value mortgage 862,000 ________ equity 987,400 original equity and 333,400 repayment ________ appreciation 654,000 392,400 60% thereof We would therefore allow the appeal and substitute a confiscation order in the sum of 392,400. That is a substantial sum, but the order is not disproportionate. LORD PHILLIPS AND LORD REED Introduction By far the most important part of the majority judgment is contained in paragraphs 1 to 34. These paragraphs recognise that the provisions of POCA are capable of operating in a manner that violates article 1 of the first protocol to the European Convention on Human Rights (A1P1). They provide a remedy in that they hold that the judge can and must substitute a confiscation order that is proportionate for the confiscation order that would be produced by applying strictly the relevant provisions of POCA, where this is disproportionate. We shall call this remedy by way of shorthand A1P1. The identification of A1P1 is novel and imaginative. It has the important effect of rendering POCA compatible with the European Convention on Human Rights. We both admire and endorse the careful reasoning and the conclusion of the majority in paragraphs 1 to 34 of their judgment. There is thus unanimity as to the most important part of the judgment. The part of the majority judgment from which we dissent is of limited significance, albeit of some complexity. It relates to the manner in which POCA applies to a mortgage transaction. A1P1 requires the judge hearing an application for a confiscation order to adopt the following approach. First he must decide on the amount of the benefit that the defendant is deemed to have obtained from his crime by the application of the express provisions of POCA (the POCA benefit). Secondly he must decide on the real benefit that the defendant has obtained from his crime (the real benefit). Thirdly, where the POCA benefit exceeds the real benefit, he must decide whether it is proportionate to base the confiscation order on the POCA benefit. If it is not, he must make an order that is proportionate in place of the order based on the POCA benefit. The majority have decided that, on the facts of this case, the POCA benefit obtained by Mr Waya was the same as the real benefit that he obtained by his criminal conduct. There is, in consequence, no scope for the application of A1P1. The confiscation order must be made in the amount of the benefit obtained by Mr Waya from his criminal conduct, calculated in accordance with the express provisions of POCA. We regret that we are fundamentally at odds with the majority in respect of this analysis. We do not agree with the conclusion of the majority as to the POCA benefit. Nor do we agree with the conclusion of the majority as to the real benefit that Mr Waya obtained from his crime. To explain why we differ from the majority requires a more detailed explanation than would normally be appropriate for a dissent from such a powerful majority. As, however, the Court will have to return to POCA when considering the appeal that is pending in R v Ahmad [2012] EWCA Crim 391, we have decided that we should give a full explanation for our dissent. The Analysis of the Majority The analysis of the majority follows the following steps: i) The property initially obtained by Mr Waya was the bundle of contractual rights and liabilities to which Mr Waya was subject prior to completion (see paragraph 53). ii) These constituted a single chose in action (see paragraph 53). iii) The chose in action had no value (see paragraph 53). iv) After completion (and before the remortgage) the property that represented the original chose in action was (a) 60% of the open market value of the flat from time to time, less the mortgagees security interest of 465,000, or (b) 60% of the increase in the flats market value over its acquisition price (see paragraph 70) or (c) 60% of the increase in Mr Wayas equity in the flat (see paragraph 71), these being different ways of describing the same property. v) After the remortgage (and ignoring the repayment of principal) the property that represented the original chose in action was 60% of the increase in Mr Wayas equity in the flat (see paragraphs 74, 75 and 80). vi) On the facts of this case the repayment of principal can be reflected by adding the amount of the repayment to the original down payment (see paragraph 77). vii) The effect of regular repayments of principal under a long term mortgage should be dealt with by a notional adjustment to the original down payment and the original mortgage advance (see paragraph 77). viii) The POCA benefit arrived at in accordance with the preceding steps was the same as the real benefit that Mr Waya obtained by his criminal behaviour, so that it was proportionate to base the confiscation order on the POCA benefit. We have problems with each of these steps. We propose to explain these problems before setting out our own approach to this case. Step (i): The property that Mr Waya initially obtained was the bundle of rights and liabilities to which he was subject prior to completion This starting point is the foundation of all that follows in the reasoning of the majority. It is a novel starting point. With one exception, all other decisions applying POCA in the context of a mortgage transaction have treated the property initially obtained as the physical property purchased with, or with the aid of, the mortgage loan, not the contractual rights and obligations prior to the completion of the mortgage transaction. The exception is the approach of Toulson LJ in Olupitan v Director of the Assets Recovery Agency [2008] EWCA Civ 104, a Part 5 case, referred to by the majority at paragraph 47. The majority do not explain why they have chosen this novel starting point. Their choice raises an important issue as the approach that should be adopted when applying POCA to a contract procured by fraud. Where a defendant by a fraudulent misrepresentation induces a third party (the victim) to enter into a contract that is subsequently performed, there are two possible ways of identifying the property initially obtained by the defendant as a result of or in connection with his criminal conduct for the purposes of section 76(4) of POCA: (i) the defendants rights under the contract prior to its performance; (ii) the property obtained by the defendant upon performance of the contract. (i) and (ii) are not normally the same, nor can it normally be said that (ii) represents (i). When valuing the defendants rights under the contract it is necessary to take into account the consideration that he has agreed to provide under the contract whereas the value of the property that he obtains after the contract has been performed will not normally reflect the consideration provided. Thus if a defendant fraudulently induces a lender to agree to make him a loan, the value of his rights and obligations under that agreement will reflect the consideration that the defendant has agreed to provide for the loan normally the obligation to pay interest and to provide security for that obligation. On completion the property obtained by the defendant will simply be the sum advanced by the lender. At paragraph 48 of their judgment the majority consider the position of a loan that is secured on property already owned by the defendant. In that situation they conclude that the property initially obtained is the sum advanced under the loan, not the bundle of rights and obligations under the antecedent contract. We understand that they adopt a different approach in this case because, under the bundle of rights and liabilities, the loan made to Mr Waya had to be used to purchase the property that secured it. We readily appreciate why this affects the analysis of the property obtained by Mr Waya on completion of the transaction. We do not understand why it makes it appropriate to treat the property initially obtained as the antecedent bundle of rights and liabilities, rather than the property obtained on completion. The approach adopted by the majority to the property initially obtained by Mr Waya has its attractions. It produces a result that approximates to the real benefit initially obtained by Mr Waya. As we shall explain, however, it is not possible after completion to identify property that fairly represented the antecedent bundle of rights and liabilities. The approach of the majority injects a complication into the application of POCA that is at odds with the simple scheme of the Act. We shall suggest in due course that, on the natural reading of the provisions of POCA, the property initially obtained by Mr Waya as a result of or in connection with his [criminal] conduct was the flat, subject as it was to the mortgage. Step (ii): the bundle of rights and liabilities constituted a single chose in action. Step (iii): the chose in action had no value It is an over simplification to say that the bundle of rights and liabilities constituted a single chose in action. The bundle of rights and liabilities arose under two interlinked contracts, the purchase contract and the loan agreement. Mr Waya had a chose in action in relation to each: (i) the right to purchase the flat for 775,000; (ii) the right to require the lender to pay 60% of the purchase price of the flat. Assuming that 775,000 was the market value of the flat, the first chose in action had no value. The same is not true of the second chose in action. The majority assume that Mr Waya obtained the loan on better terms than he would have obtained had he told the truth about his sources of income (paragraphs 41 and 42 above). They accept that this was a benefit in economic terms. A mortgage broker could, no doubt, put a value on this benefit. As explained below we consider that this was the real benefit that Mr Waya obtained from his criminal conduct. The majority at paragraph 53 say that the chose in action had no market value. In doing so they focus on the first chose in action and ignore the second. They disregard their earlier finding that the loan agreement had an economic benefit for Mr Waya. Yet in the latter part of paragraph 53 they set out examples of other situations in which a loan agreement, ie the second chose in action, would have a value. These demonstrate that the real benefit that a defendant obtains from a mortgage transaction will vary, depending upon the particular facts of the case and the nature of the deception that he has perpetrated. What they do not support is the thesis that it is possible to identify, after completion of the transaction, property that represents the bundle of rights and liabilities that existed before completion, or that represents the real benefit derived by the defendant from the transaction. We do not believe that it is possible to do so in the present case. Step (iv): After completion and until the remortgage, the chose in action was represented by (i) 60% of the market value of the flat less the mortgagees security interest of 465.000, or (ii) 60% of the increase in market value of the flat over its acquisition price or (iii) 60% of the increase in Mr Wayas equity in the flat, all three being the same thing Paragraph 70 of the majority judgment represents perhaps the most critical step in their reasoning. We can summarise that reasoning as follows. Because the loan was fully secured, the benefit that Mr Waya derived from it was not the amount of the advance, but the benefit derived from the use of the advance. The advance had to be used to purchase 60% of the flat and Mr Wayas benefit from the transaction was 60% of any increase in value of the flat, or of his equity in the flat, the two being the same. That was what Mr Waya was entitled to under the bundle of rights and liabilities that constituted the property that he initially obtained. 60% of the increase in value of the flat, or of his equity in the flat, was the property that represented the property that he originally obtained. We have already explained the first problem that we have with this analysis it ignores the economic benefit that Mr Waya obtained by securing the mortgage facility on better terms. Our second problem, as explained below, is that we do not accept that it is correct to treat 60% of the increase in value of the flat, or of Mr Wayas equity in the flat, as the benefit that Mr Waya obtained from his criminal conduct. Our fundamental problem with the approach of the majority is, however, that we do not consider that 60% of the open market value of the flat less the mortgage liability of 465,000 or 60% of any increase in the flats market value over its acquisition price, or 60% of the increase of Mr Wayas equity in the flat is, or can properly be said to be property, as defined by section 84 of POCA or at all. These formulae do not even describe the value of an interest in property. They describe the increase in the value of an interest in property. The approach of the majority cannot be reconciled with the provisions of sections 79, 80 and 84 of POCA, which govern the identification and valuation of property obtained by or in connection with criminal conduct. Step (v): After the remortgage (and ignoring the repayment of principal) the chose in action was represented by 60% of the increase in Mr Wayas equity in the flat The majority deal with the effect of the remortgage at paragraphs 74, 75, 79 and 80 of their judgment. In paragraph 74 they treat the additional funds raised on the remortgage as falling in principle within the scope of section 80(3)(b), as property representing the original chose in action, notwithstanding the fact that they consider that the flat, on the security of which the funds were raised, cannot itself be treated in its entirety as having been obtained from criminal conduct. Paragraph 75 considers and dismisses an argument advanced by the Crown that the additional funds constituted further property obtained by Mr Waya by or in connection with his criminal conduct so as to increase the amount of the confiscation order, even though the additional funds had been dissipated by confiscation day. On this point we agree with the majority. Paragraphs 79 and 80 disregard the use of funds raised by the remortgage to repay the original loan and to meet the early repayment fee, on the basis that no new, untainted money of Mr Waya was used to redeem the original mortgage. The implicit assumption is again that any funds obtained on the security of the flat are tainted, although only a proportion of the value of the flat represents, in the view of the majority, the property obtained by Mr Waya as a result of or in connection with criminal conduct. The majority judgment does not expressly provide a formula for arriving at the property representing the original chose in action that takes account of the remortgage. The formula that we have set out as representing step (v) is derived from the computation at paragraph 80 of the judgment, which the majority describe as a computation in similar format to that at step (iv). The formula is, however, no longer the same as 60% of the increase in the market value of the flat. That formula has to be abandoned in face of the requirement imposed by section 79(3) to have regard to the increase in the amount secured by the mortgage when valuing Mr Wayas interest in the flat. Our principal objection to the formula adopted at step (v) is the same as our objection to the formula adopted at step (iv). It does not describe property or a proprietary interest. It describes the increase in value of a proprietary interest. Step (vi): On the facts of this case the repayment of principal can be reflected by adding the amount of the repayment to the original down payment This conclusion of the majority is set out in paragraph 77 of their judgment. It is tantamount to saying that because the repayment was made late in the day and was of a relatively small amount, 23,400, its effect can be reflected by making a pound for pound reduction from the confiscation order of 60% of the sum repaid. This robust approach sidesteps the problem of how to apply the formula that immediately precedes it: Once repayment of capital was made, the representing property in the hands of Mr Waya was no longer 60% of the market value less the mortgage and untainted contribution but was the lesser percentage which 465,000 less 23,400 yields. On the face of it this formula would seem to have the result that Mr Waya could have reduced the value of the representing property held by him to nil by repaying the entire loan on the day before confiscation day. Step (vii): The effect of regular repayments of principal under a long term mortgage should be dealt with by a notional adjustment to the original down payment and the original mortgage advance This proposition is set out in the latter part of paragraph 77 of the majority judgment. As we understand this, the notional adjustment would have to be made each time a repayment was made. An ever decreasing proportion of the increase in the value of the flat would be treated as benefit derived from Mr Wayas criminal conduct, to be added to the previous increases in value which qualified as benefit derived from the criminal conduct. The task of computing on confiscation day the value of the benefit derived by Mr Waya from his criminal conduct would be near impossible, which is no doubt why the majority state, somewhat optimistically, that elaborate and precise calculations would not be called for because experienced counsel would in many cases be able to agree upon an appropriate adjustment. Whatever the final figure agreed upon in the way suggested, we do not see how it could be described as property held by Mr Waya on confiscation day that represented the chose in action that he initially obtained. Step (viii): the POCA benefit, calculated in accordance with the preceding steps, was the same as the real benefit obtained by Mr Wayas criminal conduct so that the confiscation order based upon it was proportionate We shall explain why we disagree with this proposition when we come to consider the real benefit obtained by Mr Waya as a result of his criminal conduct. First, however, we propose to set out our conclusions as to how the provisions of POCA apply in the case of Mr Waya. Our Analysis Once it is recognised that the judge has A1P1 at his disposal to deal with any disproportionate effect of POCA, it is no longer necessary, or desirable, to depart from the natural meaning and effect of the provisions of POCA in an attempt to avoid an unfair result. The earlier cases on mortgage transactions cease to provide a foundation upon which to build. This is as well, for those cases do not provide a consistent approach. The approach of the majority certainly does not purport to found on the previous cases that deal with mortgage transactions. The property initially obtained by Mr Waya We understand it to be the view of the majority that where a contract is induced by the fraud of a defendant the property obtained by the defendant under that contract will normally constitute the property obtained as a result of or in connection with the defendants criminal conduct, within the meaning of section 76(4) of POCA. We agree with this analysis. It gives the words of section 76(4) their natural meaning. We can see no justification in the present case for treating as the property initially obtained the rights and liabilities under the two linked contracts, rather than the property held by Mr Waya after the simultaneous performance of those contracts. We agree with the majority, for the reasons set out at length in paragraphs 48 to 52 of their judgment, that the property initially obtained by Mr Waya was not the advance of 465,000. Mr Waya never obtained that sum. It was paid by the lender to the vendor as part of the simultaneous performance of the two contracts. There is no doubt as to the property held by Mr Waya after the performance of the two linked contracts. It was the flat, which was subject to the mortgage. We consider that on the natural meaning of section 76(4) the entire flat was obtained as a result of or in connection with Mr Wayas criminal conduct, or at least constituted property obtained in that connection and some other section 76(6). The flat was, of course, also obtained as a result of or in connection with Mr Wayas contribution of 40% of the purchase price, but that does not take the flat outside the wording of section 76(4) and 76(6). If POCA treats the whole flat as property obtained as a result of or in connection with Mr Wayas criminal conduct, notwithstanding that he contributed 40% to the purchase price, the result is unfair and disproportionate. The temptation is to disregard the broad reach of the wording of section 76(4) and (6) and hold that only 60% of the flat was property obtained by Mr Waya as a result of or in connection with his criminal conduct. We were initially tempted to adopt this course. Unfortunately it only mitigates but does not resolve the unfairness that results from the application of the provisions of POCA, as the majority have identified in paragraph 70 of their judgment. Attempting to avoid this unfairness has led the majority to adopt the complex series of steps that we believe, for the reasons that we have given, are not compatible with the provisions of POCA. We have concluded that the better course is to recognise that POCA will often produce a disproportionate result when applied to property obtained under a contract induced by fraud. The provisions of POCA are simple to apply when accorded their natural meaning, and they should be applied in accordance with that meaning. Where this produces a disproportionate result, the judge should tailor the confiscation order so as to produce a result which is proportionate. This is an easier task, and one that has greater flexibility, than the task of following the steps that the majority have held must be taken in order to comply with the requirements of POCA. Thus we would hold that the property initially obtained by Mr Waya as a result of his criminal conduct was the flat. As the majority have observed at paragraph 46, this accords with the analysis in the early cases of Re K and R v Layode, where the courts simply applied the natural meaning of property obtained as a result of or in connection with the commission of an offence language preserved in section 76(4) of POCA. The value of the property initially obtained The flat was, when obtained by Mr Waya, subject to the mortgage. This situation is covered by section 79(3). The value of the flat in relation to Mr Waya was the market value of his interest, which some would describe by way of shorthand as his equity in the flat. This can be calculated by deducting the amount of the mortgage, 465,000, from the market value of the flat, 775,000, producing a value of 310,000. That value was wholly attributable to Mr Wayas contribution of 310,000 to the purchase price of the flat. The provisions of POCA give him no credit for this. To base a confiscation order upon it would be disproportionate. A1P1 provides the judge with the necessary power to defeat any attempt by the prosecution to produce such a result. The effect of the remortage By the time of the remortgage the flat had increased in market value. The remortgage increased the amount secured on the flat. This diminished the value of Mr Wayas interest in the flat, and thus its value in relation to him, by reason of the application of section 79(3). The fact that this diminution was attributable to Mr Waya, in effect, drawing down part of his interest in the flat did not affect the process of valuing the flat held by him. It is arguable, however, that the additional funds drawn down represented in Mr Wayas hands part of the original property obtained by Mr Waya so that they fell within the provisions of section 80(3)(c) of POCA. The additional funds were, however, no longer in the hands of Mr Waya on confiscation day, so they vanish from the picture. The majority correctly so hold at paragraph 75 of their judgment. The effect of the repayment of principal Section 79(3) is of general application. It provides a simple and rational method of calculating the value to a defendant of property held by him that is subject to a charge. It pays no regard to the reason for the charge. The effect of paying off part of the principal secured by a mortgage is to reduce the amount secured by the mortgage and to increase the value of the property held in relation to the defendant. The more that the defendant repays the greater the confiscation order. This result is paradoxical, but underlines the fact that the provisions of POCA are capable of producing an unfair result when applied to a mortgage transaction. A1P1 provides the answer to this. The confiscation order according to POCA Calculation of Mr Wayas benefit on confiscation day, and thus the amount of the confiscation order, poses no problem. The market value of the flat had more than doubled to 1,850,000. The amount of the mortgage was 862,600. Applying section 79(3), Mr Wayas benefit was the difference between the two, namely 987,400. That is the amount of the confiscation order that follows from the application of the express provisions of POCA. On any view this needs to be adjusted under A1P1 to reflect the fact that part of this benefit was attributable to the 40% contribution to the cost of the flat that was made by Mr Waya out of untainted funds. We turn to consider the real benefit obtained by Mr Waya from his criminal conduct. The real benefit obtained by Mr Waya While on our analysis the determination of the POCA benefit is easily achieved, the more difficult problem for the confiscating judge is to determine the real benefit derived by a defendant from a mortgage fraud. It may be appropriate to apply a broad brush to this task. The majority consider that any increase in value of that portion of the property purchased with the mortgage loan will normally constitute benefit obtained by the defendant as a result of his criminal conduct and that it will be proportionate to base the confiscation order on this (see paragraph 35). We do not agree. The real benefit obtained by a mortgage fraud will depend on the nature of the fraud and may involve the application of principles of causation for a discussion of these in the context of the assessment of damages for misrepresentation in relation to a mortgage transaction see Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191. In the second part of paragraph 53 the majority consider different types of mortgage fraud. The facts of the present case are so extreme that there is no need to embark on the task of attempting to define the value of the benefit obtained by the defendant in each of these examples. We will restrict ourselves to some general observations. A normal mortgage agreement is one under which the lender provides the borrower with the use of a sum of money to purchase realty. The primary consideration that the borrower provides for the use of the lenders money is the interest that he agrees to pay. The lender has decided to use his money to produce income rather than, for example, to speculate on the property market. A defendant who, by a misrepresentation, induces the lender to make a loan that he would not otherwise have made, or to make a larger loan than he would otherwise have made, is not in the same position, and does not obtain the same benefit, as a defendant who, by a misrepresentation, induces the lender to make a loan on more favourable terms than he would otherwise have demanded. And a defendant who uses tainted funds to pay the interest due under the mortgage agreement obtains a greater benefit from his criminal conduct than a defendant who pays for the use of the lenders money with clean funds. It cannot be right to proceed on the basis that in each of these cases the benefit obtained by the defendant is the same, namely the increase in value of the property that he purchases with the money he has borrowed. We turn to the facts relating to Mr Waya. The majority have referred to the remarks of the sentencing judge, His Honour Judge Elwin. These recorded that, in filling out the application form for the mortgage Mr Waya misrepresented the source of his income. The judge continued: The lender suffered no loss, indeed as the loan was redeemed early it made a profit of 58,000. By their verdict the jury plainly and surely concluded that you knew that the employment details entered on the form were false; you nevertheless signed it. Whether you were responsible for the collection and collation of the supporting documentation is far from clear. There was no false valuation, and the probability is that if you had been open and honest with the lender the loan would have been granted anyway. It may well also have been the case that you left almost everything to others (our emphasis). In the light of these remarks it cannot be right to proceed on the basis that if Mr Waya had not made a misrepresentation about his income he would not have obtained the finance that he needed. The majority are right at paragraph 41 to summarise the benefit he obtained from his dishonesty as obtaining credit on terms which might not otherwise have been available. Mr Waya provided 40% of the cost of the flat and thus took upon himself the risk that its value might fall to that extent. Realistically the lenders money was never at risk. Mr Waya paid the interest due under the mortgage agreement out of clean funds. He then discharged the first mortgage out of funds raised by remortgaging the flat. He was guilty of no dishonesty in obtaining the second mortgage he was charged but acquitted of obtaining this by deception. In circumstances where the remortgage was honestly obtained, and in which the property over which it was secured was not the real benefit obtained by the initial mortgage fraud, we do not think it right to treat the funds raised on the remortgage as tainted monies. It seems to us that the only benefit that Mr Waya obtained by his dishonesty was that the terms of the loan advanced to him may have been somewhat more generous than they would have been had he told the truth about his income. A confiscation order in the value of that benefit would plainly be proportionate. That, in effect, would make him pay the price that he should have paid for the finance that he obtained. But having achieved this, it would, we suggest, plainly be unjust and disproportionate to deprive him of the benefit that he obtained by the use of the money for which he had paid. It would be even more unjust to disregard the fact that Mr Waya redeemed the mortgage with funds acquired without dishonesty. In these circumstances we cannot accept that the real benefit that Mr Waya obtained by his dishonesty was any part of the increase in value of the flat. The real benefit was no more than the money value of obtaining his financing on better terms than might otherwise have been available. To base the confiscation order on the increase in value of the flat would be disproportionate. For this reason we consider that the judge should have applied A1P1 and reduced the confiscation order to reflect the modest benefit that Mr Waya may have enjoyed of obtaining the mortgage on better terms. In theory the case could be remitted for determination of that benefit. But after the time that has elapsed and the stress that these proceedings must have involved for Mr Waya, we would not think it just to adopt that course. We would simply allow this appeal and quash the confiscation order. |
The central issue in this case is whether Ms Tamara Gubeladze (the respondent), a Latvian national living in the United Kingdom, is entitled to receive state pension credit, a means tested benefit. She relies on regulation 5(2) of the Immigration (European Economic Area) Regulations 2006 (SI 2006/1003) (the 2006 Regulations), which implements article 17(1)(a) of Directive 2004/38/EC (the Citizens Directive), as a worker or self employed person who has ceased activity. By a Treaty signed at Athens on 16 April 2003 (the Athens Treaty), ten Accession States became member states of the EU with effect from 1 May 2004. The Act of Accession, annexed to the Athens Treaty, set out the conditions of admission and the adjustments to the [EU] Treaties on which the Union is founded, entailed by such admission (article 1(2)). The Act of Accession permitted the existing member states to apply national measures regulating access to their labour markets by nationals of the eight most populous Accession States (the A8 States) which included Latvia. Annex VIII of the Act of Accession required the existing member states to apply for an initial period of two years from the date of accession national measures or those resulting from bilateral agreements, regulating access to their labour markets by Latvian nationals. The existing member states were permitted to continue to apply such measures until the end of the five year period following the date of the accession (para 2). An existing member state maintaining national measures or measures resulting from bilateral agreements at the end of the five year period was permitted, in case of serious disturbances of its labour market or threat thereof and after notifying the Commission to continue to apply these measures until the end of the seven year period following the date of accession (para 5). Other annexes contained identical provisions in respect of nationals of the other A8 States. The Act of Accession was given effect in the domestic law of the United Kingdom by the European Union (Accessions) Act 2003 and the Accession (Immigration and Worker Registration) Regulations 2004 (SI 2004/1219) (the 2004 Regulations). The 2004 Regulations established the Worker Registration Scheme (WRS) which obliged any national of an A8 State to register before starting employment and before taking up any new employment. Each registration incurred a fee of 90 and the obligation to register continued until the worker had worked for 12 months. Failure to register work in accordance with the WRS would mean that the individual would not derive from that work a right to reside in the United Kingdom. The WRS ran initially for five years, from 1 May 2004 to 30 April 2009. In Zalewska v Department for Social Development (Child Poverty Action Group intervening) [2008] UKHL 67; [2008] 1 WLR 2602, the House of Lords considered the legality of the WRS. The House of Lords held unanimously that any requirements of the WRS were imposed pursuant to provisions permitting derogation from EU rights and so had to be proportionate to a legitimate aim. It held further, by a majority, that the requirements of the WRS met that test and were, therefore, lawful. In 2009 HM Government asked the Migration Advisory Committee (MAC) to advise it in relation to the continuation of the WRS. In the light of the MACs advice, the Government decided to exercise the power conferred by the Act of Accession to extend the derogations applicable to nationals of the A8 States for a further two years. Having notified the Commission, it made the Accession (Immigration and Worker Registration) (Amendment) Regulations 2009 (SI 2009/892) (the Extension Regulations) which extended the operation of the WRS for a period of two years from 1 May 2009 to 30 April 2011. The respondent is a national of Latvia who came to the United Kingdom in 2008 and worked for various employers here between September 2009 and November 2012. In the periods when she was not working she was a jobseeker. She was issued with a registration certificate under the WRS on 20 August 2010. Her employment before that date was not covered by the certificate. On 24 October 2012, the respondent made a claim for state pension credit. Entitlement was conditional on her having a right to reside in the United Kingdom. The basis of her claim was that she had a right of residence in the United Kingdom under regulation 5(2) of the 2006 Regulations as a person who had retired, having pursued activities as a worker for at least a year in the United Kingdom, and having resided continuously in the United Kingdom for three years. The Secretary of State for Work and Pensions (the Secretary of State) rejected her claim on the ground that the requirement of three years continuous residence required three years continuous legal residence which meant a right of residence under the Citizens Directive. Since the respondents asserted right of residence during that time was as a worker, but she had not been registered under the WRS for part of that period, the Secretary of State considered that she had not resided in the United Kingdom pursuant to a right of residence conferred by the Citizens Directive and therefore did not meet the three year residence requirement in regulation 5(2) of the 2006 Regulations. Her claim for state pension credit was accordingly refused. The respondents appeal to the First tier Tribunal was dismissed on jurisdictional grounds. On appeal to the Upper Tribunal, it held that the First tier Tribunal had had jurisdiction to hear the appeal but, with the consent of the parties, the Upper Tribunal retained the appeal and itself re made the substantive decision. It allowed the respondents appeal on two grounds. First, it held that article 17 of the Citizens Directive, and therefore regulation 5(2)(c) of the 2006 Regulations, did not require that the three years continuous residence be in exercise of rights under the Citizens Directive. Actual residence was sufficient. Secondly, the decision to extend the WRS in 2009 was disproportionate and therefore unlawful. Accordingly, the respondent was not disqualified by her failure to meet the requirements of the WRS from demonstrating three years continuous residence with a right of residence under the Citizens Directive. The Secretary of State appealed to the Court of Appeal (Rupert Jackson, Lindblom and Peter Jackson LJJ) which on 7 November 2017 dismissed the appeal [2017] EWCA Civ 1751; [2018] 1 WLR 3324: (1) The Secretary of State succeeded on the construction of the Citizens Directive. The word reside in article 17(1)(a) meant legally reside which in this context meant residence in the exercise of rights under the Citizens Directive. As a result, the Court of Appeal did not need to rule on a new argument advanced by the respondent for the first time in the Court of Appeal, namely that even if resided in article 17(1)(a) of the Citizens Directive means legally resided, that word has a wider meaning in regulation 5(2)(c) of the 2006 Regulation where it means actual residence, with or without any right to remain. The Court of Appeal was, however, inclined to the view that resided in regulation 5(2)(c) of the 2006 Regulations has the same meaning as in the Citizens Directive. (2) There was no error of law in the Upper Tribunals conclusion that the extension of the WRS was disproportionate and therefore incompatible with EU law. On 19 June 2018 the Supreme Court granted permission to appeal on condition that the Secretary of State pay the respondents costs in any event. Permission to the Secretary of State to appeal included permission to argue a new ground which had not been advanced in the Court of Appeal, namely that a national measure adopted pursuant to a transitional provision in the Act of Accession is not subject to proportionality review at all. So to hold would involve departing from the reasoning of the House of Lords in Zalewska. Accordingly, a seven Justice panel has been convened for this appeal. The following issues therefore arise for decision on this appeal: Is the decision to extend the WRS open to challenge on grounds of (1) proportionality? (2) If the decision to extend the WRS is open to challenge on grounds of proportionality, did the Upper Tribunal and the Court of Appeal err in their approach and conclusion on this issue? (3) If the Secretary of State succeeds on Issue (1) or Issue (2), does article 17(1)(a) of the Citizens Directive require a person to show that, throughout the period of continuous residence, she enjoyed a right of residence under the Citizens Directive? (4) actual residence sufficient for the purposes of the 2006 Regulations? If article 17 of the Citizens Directive requires lawful residence, is Relevant EU instruments Treaty establishing the European Community At the material time, the Treaty establishing the European Community (TEC) provided in relevant part: Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. 1. Citizenship of the Union is hereby established. Every person holding the nationality of a member state shall be a citizen of the Union. Citizenship of the Union shall complement and not replace national citizenship. Article 12 Article 17 2. Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby. 1. Every citizen of the Union shall have the right to move and reside freely within the territory of the member states, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect. Article 18 Article 39 Freedom of movement for workers shall be secured 1. within the Community. Such freedom of movement shall entail the abolition of 2. any discrimination based on nationality between workers of the member states as regards employment, remuneration and other conditions of work and employment. 3. It shall entail the right, subject to limitations justified on grounds of public policy, public security or public health: to accept offers of employment actually made; to move freely within the territory of member (a) (b) states for this purpose; (c) to stay in a member state for the purpose of employment in accordance with the provisions governing the employment of nationals of that state laid down by law, regulation or administrative action; (d) to remain in the territory of a member state after having been employed in that state, subject to conditions which shall be embodied in implementing regulations to be drawn up by the Commission. Article 49 Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of member states who are established in a state of the Community other than that of the person for whom the services are intended. Regulation (EEC) No 1612/68 Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (Regulation 1612/68) sets out in articles 1 to 6 within Title I EU rules on eligibility for employment. Within Title II (Employment and Equality of Treatment) article 7 provides in relevant part: Article 7 1. A worker who is a national of a member state may not, in the territory of another member state, be treated differently from national workers by reason of his nationality in respect of any conditions of employment and work, in particular as regards remuneration, dismissal, and should he become unemployed, reinstatement or re employment; The Accession Treaty The Athens Treaty states in the sixth recital that the Contracting States: HAVE DECIDED to establish by common agreement the conditions of admission and the adjustments to be made to the Treaties on which the European Union is founded, Article 1(1) provides that the Accession States: hereby become members of the European Union and Parties to the Treaties on which the Union is founded as amended or supplemented. Article 1 continues: 2. The conditions of admission and the adjustments to the Treaties on which the Union is founded, entailed by such admission, are set out in the Act annexed to this Treaty. The provisions of that Act shall form an integral part of this Treaty. 3. The provisions concerning the rights and obligations of the member states and the powers and jurisdiction of the institutions of the Union as set out in the Treaties referred to in paragraph 1 shall apply in respect of this Treaty. Article 2(2) provides that the Treaty shall enter into force on 1 May 2004. The Act of Accession annexed to the Athens Treaty provides in relevant part: From the date of accession, the provisions of the original Treaties and the acts adopted by the institutions and the European Central Bank before accession shall be binding on the new member states and shall apply in those states under the conditions laid down in those Treaties and in this Act. The application of the original Treaties and acts adopted by the institutions shall, as a transitional measure, be subject to the derogations provided for in this Act. Article 2 Article 10 Article 24 The measures listed in Annexes V, VI, VII, VIII, IX, X, XI, XII, XIII and XIV to this Act shall apply in respect of the new member states under the conditions laid down in those Annexes. Annex VIII to the Act of Accession sets out the transitional measures in respect of Latvia. Section 1 of Annex VIII, which deals with free movement of persons, provides in relevant part: 1. Article 39 and the first paragraph of article 49 of the EC Treaty shall fully apply only, in relation to the freedom of movement of workers and the freedom to provide services involving temporary movement of workers as defined in article 1 of Directive 96/71/EC between Latvia on the one hand, and [the existing member states] on the other hand, subject to the transitional provisions laid down in paragraphs 2 to 14. 2. By way of derogation from articles 1 to 6 of Regulation (EEC) No 1612/68 and until the end of the two year period following the date of accession, the present member states will apply national measures, or those resulting from bilateral agreements, regulating access to their labour markets by Latvian nationals. The present member states may continue to apply such measures until the end of the five year period following the date of the accession. Latvian nationals legally working in a present member state at the date of accession and admitted to the labour market of that member state for an uninterrupted period of 12 months or longer will enjoy access to the labour market of that member state but not to the labour market of other member states applying national measures. Latvian nationals admitted to the labour market of a present member state following accession for an uninterrupted period of 12 months or longer shall also enjoy the same rights. The Latvian nationals mentioned in the second and third subparagraphs above shall cease to enjoy the rights contained in those subparagraphs if they voluntarily leave the labour market of the present member state in question. Latvian nationals legally working in a present member state at the date of accession, or during a period when national measures are applied, and who were admitted to the labour market of that member state for a period of less than 12 months shall not enjoy these rights. 3. Before the end of the two year period following the date of accession the Council shall review the functioning of the transitional provisions laid down in paragraph 2, on the basis of a report from the Commission. On completion of this review, and no later than at the end of the two year period following the date of accession, the present member states shall notify the Commission whether they will continue applying national measures or measures resulting from bilateral agreements, or whether they will apply articles 1 to 6 of Regulation (EEC) No 1612/68 henceforth. In the absence of such notification, articles 1 to 6 of Regulation (EEC) No 1612/68 shall apply. 4. Upon Latvias request one further review may be held. The procedure referred to in paragraph 3 shall apply and shall be completed within six months of receipt of Latvias request. 5. A member state maintaining national measures or measures resulting from bilateral agreements at the end of the five year period indicated in paragraph 2 may, in case of serious disturbances of its labour market or threat thereof and after notifying the Commission, continue to apply these measures until the end of the seven year period following the date of accession. In the absence of such notification, articles 1 to 6 of Regulation (EEC) No 1612/68 shall apply. The Citizens Directive The preamble to the Citizens Directive provides in material part: Citizenship of the Union confers on every citizen of the Union a primary and individual right to move and reside freely within the territory of the member states, subject to the limitations and conditions laid down in the Treaty and to the measures adopted to give it effect. (recital (1)) The free movement of persons constitutes one of the fundamental freedoms of the internal market, which comprises an area without internal frontiers, in which freedom is ensured in accordance with the provisions of the Treaty. (recital (2)) Union citizenship should be the fundamental status of nationals of the member states when they exercise their right of free movement and residence. It is therefore necessary to codify and review the existing Community instruments dealing separately with workers, self employed persons, as well as students and other inactive persons in order to simplify and strengthen the right of free movement and residence of all Union citizens. (recital (3)) Enjoyment of permanent residence by Union citizens who have chosen to settle long term in the host member state would strengthen the feeling of Union citizenship and is a key element in promoting social cohesion, which is one of the fundamental objectives of the Union. A right of permanent residence should therefore be laid down for all Union citizens and their family members who have resided in the host member state in compliance with the conditions laid down in this Directive during a continuous period of five years without becoming subject to an expulsion measure. (recital (17)) In order to be a genuine vehicle for integration into the society of the host member state in which the Union citizen resides, the right of permanent residence, once obtained, should not be subject to any conditions. (recital (18)) Certain advantages specific to Union citizens who are workers or self employed persons and to their family members, which may allow these persons to acquire a right of permanent residence before they have resided five years in the host member state, should be maintained, as these constitute acquired rights, conferred by Commission Regulation (EEC) No 1251/70 of 29 June 1970 on the right of workers to remain in the territory of a member state after having been employed in that state and Council Directive 75/34/EEC of 17 December 1974 concerning the right of nationals of a member state to remain in the territory of another member state after having pursued therein an activity in a self employed capacity. (recital (19)) The Directive lays down the conditions governing the exercise of the right of free movement and residence within the territory of the member states by Union citizens and their family members, their right of permanent residence in the territory of the member states and the limits placed on these rights on grounds of public policy, public security or public health (article 1). Within Chapter III, article 6 confers a right of residence on the territory of another member state for up to three months without any conditions or any formalities other than the requirement to hold a valid identity card or passport. Article 7 confers on all Union citizens the right of residence on the territory of another member state for a period of longer than three months if, inter alia, they are workers or self employed persons in the host member state. Article 14 provides that Union citizens and their family members shall have the right of residence provided for in article 6, as long as they do not become an unreasonable burden on the social assistance system of the host member state (article 14(1)), and the right of residence provided for in article 7 as long as they meet the conditions set out therein (article 14(2)). Article 16 provides: General rule for Union citizens and their family members 1. Union citizens who have resided legally for a continuous period of five years in the host member state shall have the right of permanent residence there. This right shall not be subject to the conditions provided for in Chapter III. Article 16 Article 17 provides in material part: Article 17 2. Paragraph 1 shall apply also to family members who are not nationals of a member state and have legally resided with the Union citizen in the host member state for a continuous period of five years. 3. Continuity of residence shall not be affected by temporary absences not exceeding a total of six months a year, or by absences of a longer duration for compulsory military service, or by one absence of a maximum of 12 consecutive months for important reasons such as pregnancy and childbirth, serious illness, study or vocational training, or a posting in another member state or a third country. 4. Once acquired, the right of permanent residence shall be lost only through absence from the host member state for a period exceeding two consecutive years. Exemptions for persons no longer working in the host member state and their family members 1. By way of derogation from article 16, the right of permanent residence in the host member state shall be enjoyed before completion of a continuous period of five years of residence by: (a) workers or self employed persons who, at the time they stop working, have reached the age laid down by the law of that member state for entitlement to an old age pension or workers who cease paid employment to take early retirement, provided that they have been working in that member state for at least the preceding 12 months and have resided there continuously for more than three years. Article 18 provides: Article 18 Acquisition of the right of permanent residence by certain family members who are not nationals of a member state Without prejudice to article 17, the family members of a Union citizen to whom articles 12(2) and 13(2) apply, who satisfy the conditions laid down therein, shall acquire the right of permanent residence after residing legally for a period of five consecutive years in the host member state. In order to understand the Citizens Directive it is also relevant to set out certain parts of Commission Regulation (EEC) No 1251/70 on the right of workers to remain in the territory of a member state after having been employed in that state (Regulation 1251/70), which is one of the instruments referred to in recital (19) to the Citizens Directive. Regulation 1251/70 provides as follows: Whereas it is important, in the first place, to guarantee to the worker residing in the territory of a member state the right to remain in that territory when he ceases to be employed in that state because he has reached retirement age or by reason of permanent incapacity to work; whereas, however, it is equally important to ensure that right for the worker who, after a period of employment and residence in the territory of a member state, works as an employed person in the territory of another member state, while still retaining his residence in the territory of the first state (recital (4)) Article 1 The provisions of this Regulation shall apply to nationals of a member state who have worked as employed persons in the territory of another member state and to members of their families, as defined in article 10 of Council Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community. Article 2 1. The following shall have the right to remain permanently in the territory of a member state: (a) a worker who, at the time of termination of his activity, has reached the age laid down by the law of that member state for entitlement to an old age pension and who has been employed in that state for at least the last 12 months and has resided there continuously for more than three years; Article 4 1. Continuity of residence as provided for in article 2(1) may be attested by any means of proof in use in the country of residence. It shall not be affected by temporary absences not exceeding a total of three months per year, nor by longer absences due to compliance with the obligations of military service. Regulation 1251/70 was repealed by Commission Regulation (EC) No 635/2006 of 25 April 2006 (Regulation 635/2006) with effect from 30 April 2006, in anticipation of the implementation of the Citizens Directive into national laws with effect from the following day. We set out recital (1) to Regulation 635/2006 in our discussion of Issue (3) below. Relevant domestic legislation The Accession (Immigration and Worker Registration) Regulations 2004 The 2004 Regulations, as in force on 30 April 2007, provided in relevant part: 2. accession state worker Accession state worker requiring registration (1) Subject to the following paragraphs of this regulation, requiring registration means a national of a relevant accession state working in the United Kingdom during the accession period. (2) A national of a relevant accession state is not an accession state worker requiring registration if on 30 April 2004 he had leave to enter or remain in the United Kingdom under the 1971 Act and that leave was not subject to any condition restricting his employment. 4. Right of residence of work seekers and workers from relevant acceding states during the accession period (1) This regulation derogates during the accession period from article 39 of the Treaty establishing the European Community, articles 1 to 6 of Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community and Council Directive 2004/38/EC of the European Parliament and of the Council on the right of citizens of the Union and their family members to move and reside freely within the territory of the member states, insofar as it takes over provisions of Council Directive (EEC) No 68/360 on the abolition of restrictions on movement and residence within the Community for workers of member states and their families. (2) A national of a relevant accession state shall not be entitled to reside in the United Kingdom for the purpose of seeking work by virtue of his status as a work seeker if he would be an accession state worker requiring registration if he began working in the United Kingdom. (3) Paragraph (2) is without prejudice to the right of a national of a relevant accession state to reside in the United Kingdom under the 2006 Regulations as a self sufficient person whilst seeking work in the United Kingdom. (4) A national of a relevant accession state who is seeking employment and an accession state worker requiring registration shall only be entitled to reside in the United Kingdom in accordance with the 2006 Regulations as modified by regulation 5. 5. Application of 2006 Regulations in relation to accession state worker requiring registration (1) The 2006 Regulations shall apply in relation to a national of a relevant accession state subject to the modifications set out in this regulation. (2) A national of a relevant accession state who is seeking employment in the United Kingdom shall not be treated as a jobseeker for the purpose of the definition of qualified person in regulation 6(1) of the 2006 Regulations and an accession state worker requiring registration shall be treated as a worker for the purpose of that definition only during a period in which he is working in the United Kingdom for an authorised employer. 7. Requirement for an accession state worker requiring registration to be authorised to work (1) By way of derogation from article 39 of the Treaty establishing the European Community and articles 1 to 6 of Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community, an accession state worker requiring registration shall only be authorised to work in the United Kingdom for an authorised employer. (2) An employer is an authorised employer in relation to a worker if (c) the worker has received a valid registration certificate authorising him to work for that employer and that certificate has not expired under paragraph (5); Regulation 7(5)(b) provided that a registration certificate expired on the date on which the worker ceased working for that employer. The Immigration (European Economic Area) Regulations 2006 The 2006 Regulations transposed some of the provisions of the Citizens Directive into domestic law. At the relevant time they provided in material part: Worker or self employed person who has ceased 5. activity (1) In these Regulations, worker or self employed person who has ceased activity means an EEA national who satisfies the conditions in paragraph (2), (3), (4) or (5). (2) A person satisfies the conditions in this paragraph if he terminates his activity as a worker or self (a) employed person and has reached the age at which he is (i) entitled to a state pension on the date on which he terminates his activity; or (ii) in the case of a worker, ceases working to take early retirement; (b) pursued his activity as a worker or self employed person in the United Kingdom for at least 12 months prior to the termination; and (c) the United Kingdom in resided continuously for more than three years prior to the termination. 15. Permanent right of residence (1) The following persons shall acquire the right to reside in the United Kingdom permanently (c) a worker or self employed person who has ceased activity; The State Pension Credit Act 2002 provides for conditions of entitlement to state pension credit, including a condition that the claimant is in Great Britain (section 1(2)(a)). The State Pension Credit Regulations 2002 (SI 2002/1792) made under that Act set out detailed provisions regarding who qualifies as a person in Great Britain for these purposes. According to those Regulations, so far as relevant, a person so qualifies if she is habitually resident in the United Kingdom pursuant to a right to reside which is not expressly excluded as a relevant right (regulation 2). A right of residence arising pursuant to article 17 of the Citizens Directive is not excluded. Accordingly it is common ground that if the respondent enjoyed a right of permanent residence pursuant to article 17 she would be entitled to claim state pension credit. Issue (1): Is the decision to extend the WRS open to challenge on grounds of proportionality? It is common ground between the parties that decisions to apply transitional measures under the Act of Accession, such as the decision to extend the WRS, cannot be challenged by A8 nationals as a disproportionate restriction on their free movement rights under the EU Treaties or legislation made under them. That is not the basis of the respondents case. On the contrary, she seeks to challenge the proportionality of the measures adopted by the United Kingdom within the context of the transitional provisions established in EU law. In particular, she challenges as disproportionate the decision of the United Kingdom in April 2009 to make the residence rights of A8 nationals contingent on compliance with the WRS beyond the expiry of the initial five year accession period. Before the Court of Appeal, it was accepted on behalf of the Secretary of State in the light of Zalewska that the decision to extend the requirement of compliance with the WRS was subject to proportionality review. However, before the Supreme Court and with its permission Mr Martin Chamberlain QC, who has argued the case for the Secretary of State with great skill and determination, now maintains that the decision cannot be challenged on grounds of proportionality and identifies this as the central question in this appeal. He accepts that the transitional provisions in Annex VIII were designed to protect the labour markets in the existing member states from the impact of large numbers of nationals arriving from the eight most populous new member states and that this was to be achieved by a derogation from the ordinary application of the relevant Treaty provisions on free movement of workers (Vicoplus SC PUH v Minister van Sociale Zaken en Werkgelegenheid (Joined Cases C 307/09 to C 309/09) [2011] ECR I 453 at para 34; Prefeta v Secretary of State for Work and Pensions (Case C 618/16) [2019] 1 WLR 2040 at para 41). As a result, the Accession Treaty established a carefully calibrated and comprehensive suite of derogations from the ordinary operation of the provisions in the EU Treaties governing free movement of workers. However, he submits, nationals of the A8 States had never enjoyed rights under the Treaties or under EU legislation and the effect of the derogations was to place substantive limits, which in some cases depended on decisions by member states, on the rights they would acquire by virtue of accession. In circumstances where the primary provisions of EU law did not apply to nationals of the new member states, they had, for the purposes of EU law, no protected interest in that respect during the transitional period. Accordingly, he submits, the extension of the WRS did not interfere with or derogate from any pre existing protected interest and it was, therefore, not subject to any requirement of proportionality. It was sufficient that it fell within the scope of the permitted derogation in paragraph 5 of Annex VIII to the Act of Accession and was notified to the Commission. The respondent submits that the Secretary of States submission is wrong as a matter of EU law and of national law. The decision to extend the WRS is a national decision to limit fundamental EU law rights of free movement pursuant to a transitional provision in the Act of Accession and is, therefore, subject to proportionality review as a matter of EU law. In addition, the decision to limit enjoyment of state pension credit for those who would otherwise enjoy it, by reason of extension of the WRS, is a discriminatory infringement of the rights to property of an A8 national, and falls to be justified under article 14 of the European Convention of Human Rights (ECHR) read with article 1 Protocol 1 to that Convention (A1P1) by virtue of section 6 of the Human Rights Act 1998. The Secretary of States submission is in direct conflict with the decision of the House of Lords in Zalewska v Department for Social Development which upheld the legality of the WRS in the initial phase of its operation from 2004. That appeal related to the provisions in Annex XII to the Act of Accession concerning national measures regulating access to labour markets within existing member states by Polish nationals. The House of Lords approached the matter on the basis that derogation by the United Kingdom from article 39 pursuant to paragraph 2 of Part II of Annex XII to the Act of Accession precluded direct reliance on article 39 by nationals of Poland and instead required compliance during the transitional period with the national measures governing such access. However, the House unanimously concluded that the powers in the United Kingdom to impose conditions on Polish nationals were required to be exercised in accordance with the Community principle of proportionality. It proceeded on the basis that the UK measures were a derogation from the rights which would otherwise be enjoyed. Lord Hope of Craighead stated the matter in the following terms (at para 30): The proposition that I cannot accept however is that the national measures that the United Kingdom selects have nothing to do with Community law, so the issue as to whether they are proportionate is irrelevant. The only authority that the United Kingdom has to introduce national measures to give access to nationals of an A8 state to its labour market in place of article 39 EC and Title I of Council Regulation (EEC) No 1612/68 is that which is given to it by paragraph 2 of Part 2 of Annex XII. As article 10 of the Act of Accession makes clear, this derogation from the application of the original Treaties and Acts adopted by the institutions of the Community was agreed to by the member states under the umbrella of Community law. Furthermore, the fact that the derogation does not extend to article 7 of the Regulation shows that where the national measures of an existing member state give the status of worker to an A8 state national he is entitled to all the rights in that state that Community law gives to workers. It is not possible to detach the opportunity that is given to the member states to apply national measures from its Community law background. The conclusion that any national measures that the member states introduce under the authority of paragraph 2 must be compatible with the authority given to them by the Treaty of Accession and with the Community law principle of proportionality seems to me to be inescapable. Similarly, Baroness Hale of Richmond explained (at para 46) that the appeal was concerned with the restrictive effect of national measures implementing EU law on the fundamental right of free movement of workers. The national implementing regulations had been made under section 2(2) of the European Communities Act 1972 for the purpose of implementing Community law and in the exercise of powers conferred by section 2 of the European Union (Accessions) Act 2003, which is headed Freedom of movement for workers. As a result, any national measures had to be compatible with the principle of proportionality in EU law. The House held by a bare majority that the national measures there under consideration (namely, requirements under the WRS that nationals of A8 accession states apply for a registration certificate for their first employment in the United Kingdom and re register if they changed employment within a stipulated period) were not disproportionate. Mr Chamberlain does not shrink from submitting that Zalewska was wrongly decided. He does not suggest, as was submitted in Zalewska, that the national measures have nothing to do with EU law. He accepts that the national measures fall within the scope of EU law and that they are required to comply with the terms of the derogations permitted by EU law. He suggests, rather, that Lord Hopes underlying premise in para 30 of his speech, set out above, is flawed in that the EU principle of proportionality can have no application where there is no antecedent interest requiring protection. On his case, nationals of the A8 States enjoyed no rights at all under the EU Treaties at the point of accession and the only rights they enjoyed in this regard during the transitional period were those permitted by the UK measures. On this basis he submits that it is circular to argue that the national measures affect the interests of Latvian nationals in free movement and entitlement to social security payments as workers because these are not conferred until the requirements of the national measures have been met. Mr Chamberlain is correct in his submission that the principle of proportionality necessarily involves, as an essential component, an assessment of the degree to which the impugned measure interferes with a protected interest. Thus, in R (British Sugar plc) v Intervention Board for Agricultural Produce (Case C 329/01) [2004] ECR I 01899 the Court of Justice of the European Union observed (at para 59): It cannot be maintained that rules which do not themselves interfere with protected interests are capable of infringing the principle of proportionality. As a result, a measure the sole purpose of which was to allow the correction of errors did not give rise to any interference with the manufacturers interests in issue in that case and could not, therefore, constitute a breach of the principle of proportionality. The British Sugar case was referred to by Lord Reed and Lord Toulson in R (Lumsdon) v Legal Services Board [2015] UKSC 41; [2016] AC 697 (at para 25) where they reiterated that the principle of proportionality only applies to measures interfering with protected interests. The point is also well made by Professor Tridimas in The General Principles of EU Law (2nd ed, OUP: 2006) where he states (at p 139): The court assesses the adverse consequences that the measure has on an interest worthy of legal protection and determines whether those consequences are justified in view of the importance of the objective pursued. Similarly, Professors Craig and De Brca in EU Law: Text, Cases, and Materials (6th ed, OUP: 2015) state (at p 551): In any proportionality inquiry the relevant interests must be identified, and there will be some ascription of weight or value to those interests, since this is a necessary condition precedent to any balancing operation. The question arises whether the Act of Accession created relevant protectable interests by conferring rights of EU citizenship on the new EU citizens from the A8 States subject to initial, tapering exceptions imposed by the existing member states, or whether it should be regarded as providing for only such rights as may be conferred by the existing member states during the transitional period. This question lies at the heart of Issue (1). The House of Lords in Zalewska took the former view. This reading is supported by the scheme of the relevant instruments. The Treaty of Accession provides (article 1(1)) that the Accession States hereby become members of the European Union and Parties to the Treaties on which the Union is founded as amended or supplemented. The Act of Accession provides (article 2) that [f]rom the date of accession, the provisions of the original Treaties shall be binding on the new member states and shall apply in those states under the conditions laid down in those Treaties and in this Act. Article 10 of the Act of Accession then provides that [t]he application of the original Treaties and acts adopted by the institutions shall, as a transitional measure, be subject to the derogations provided for in this Act. Article 24 provides that the measures listed in Annex VIII shall apply in respect of Latvia under the conditions there laid down. Paragraph 1 of Annex VIII provides that articles 39 and 49(1) TEC shall fully apply only, in relation to the freedom of movement of workers and the freedom to provide services involving temporary movement of workers as defined in article 1 of Directive 96/71/EC between Latvia and the existing member states, subject to the transitional provisions laid down in paragraphs 2 to 14. Paragraph 2 then provides that, during the initial two year period, the existing member states will apply national measures, or those resulting from bilateral agreements regulating access to their labour markets by Latvian nationals [b]y way of derogation from articles 1 to 6 of Regulation (EEC) No 1612/68. The use of the word derogation in this context is itself an indication that A8 nationals are regarded as having significant relevant interests under EU law from the moment of accession, subject to limitation only by action taken by member states which will be subject to the general principle of proportionality in the usual way. The transitional provisions are a derogation from the principle that the provisions of EU law apply immediately and fully to new member states and their nationals (see Vicoplus per Advocate General Bot at para 46). The provisions of the Citizens Directive are also relevant in this regard. The preamble emphasises in recitals (1) to (3) that citizenship of the Union confers on every citizen of the Union a primary and individual right to move and reside freely within the territory of the member states, subject to the limitations and conditions laid down in or pursuant to the Treaty; that such a right of free movement is one of the fundamental freedoms of the internal market; and that Union citizenship should be the fundamental status of nationals of the member states as regards the exercise of their right of free movement and residence. Every A8 national became a citizen of the EU on 1 May 2004 and these recitals indicate that it is by virtue of their status as such that EU law contemplates that they have a protectable interest which came into existence on that date so far as concerns rights of free movement. The Directive lays down the conditions governing the exercise of the right of free movement and residence within the territory of the member states by Union citizens and their family members (article 1). It seems clear, therefore, that the effect of Annex VIII to the Act of Accession is, during the transitional period, to derogate from the rights which Latvian nationals would otherwise enjoy in their newly established status as EU citizens. The application of these derogating provisions is clearly subject to the principle of proportionality in EU law. The same conclusion is arrived at when one has regard to the substance of the matter. Nationals of the A8 States were to enjoy rights as EU citizens from accession, subject to the derogating transitional provisions. The purpose of the transitional provisions was to protect labour markets in existing member states from the impact of large numbers of workers arriving from the eight most populous new member states. This aim was to be achieved by requiring or permitting existing member states to derogate temporarily from the normal application of EU rules on free movement of workers. There was no intention to confer an unfettered right to derogate from general principles of freedom of movement. On the contrary, derogation must be subject to the principle of proportionality in EU law. In the course of his submissions, Mr Chamberlain placed considerable reliance on the decision of the CJEU in Vicoplus, which post dated the decision of the House of Lords in Zalewska and which, he maintained, demonstrated that the EU principle of proportionality had no application in circumstances such as the present. That case concerned Annex XII to the Act of Accession, relating to Poland, which was materially identical to Annex VIII. The appellants had been fined for posting Polish workers to the Netherlands without having first obtained work permits. On a reference for a preliminary ruling the Raad van State (Netherlands) asked whether, with a view to protecting the domestic labour market, the requirement of a work permit under national law for the provision of a service consisting in making workers available was a proportionate measure in the light of articles 56 and 57 TFEU, in view also of the reservation in Chapter 2, paragraph 2 of Annex XII to the Act of Accession with regard to the free movement of workers. At paras 21 25 of its judgment the Second Chamber of the CJEU reformulated the question. It explained (at para 24) that if national legislation is justified pursuant to that transitional measure in Annex XII, the question of compatibility with articles 56 and 57 TFEU can no longer arise. It observed (at para 25) that it was therefore necessary to examine whether legislation such as that at issue in the main proceedings is covered by that transitional measure. The Chamber considered that an undertaking which was engaged in making labour available, although a supplier of services, carried on activities which were specifically intended to enable workers to gain access to the labour market of the host member state. In its view, it followed that the national legislation in issue must be considered to be a measure regulating access of Polish nationals to the labour market of the Netherlands within the meaning of Chapter 2, paragraph 2 of Annex XII. Moreover, a purposive interpretation of that provision led to the same conclusion. Mr Chamberlain submits that notwithstanding a reference clearly framed in terms of proportionality, the CJEU reformulated the question and failed entirely to address the issue of proportionality. This, he submits, demonstrates that proportionality has no part to play when deciding whether the subject matter was covered by that transitional measure. In his submission it is simply necessary to determine that the measure falls within the scope of the derogating provision. The difficulty with this submission is that, although the question referred to proportionality, the case seems to have had nothing to do with proportionality. The essential question was whether the express exception in Chapter 2, paragraph 2 of Annex XII to the Act of Accession permitted an existing member state to make the hiring out of manpower on its territory conditional on having a licence during the transitional period. The CJEU focused on this issue and concluded that the derogation extended so as to permit both measures with regard to employment and measures with regard to the provision of services which made labour available. It was assumed in the circumstances of that case that if the Dutch measure fell within the scope of the derogation, as properly interpreted, then it was of a character which would satisfy the principle of proportionality. This explains the shift in the language used in the judgment from explaining that the referring court was unsure whether the permit regime for Polish workers can be justified in the light of [the derogation in Chapter 2, paragraph 2 of Annex XII] (para 23) and the statement (in para 24) that if national legislation is justified pursuant to that transitional derogation then the question of the compatibility of that legislation with articles 56 and 57 TFEU can no longer arise, to asking (in para 25) whether the legislation in question is covered by that transitional derogation. The word justified indicates that the Chamber in fact considered that a usual process of justification according to the principle of proportionality is applicable, whereas the language used in para 25 indicates that it assumed that in the circumstances of the particular case the justification issue would be resolved if the Dutch regime fell within the scope of the transitional derogation, as properly interpreted. In this respect the judgment follows the approach of Advocate General Bot in his opinion. The case was concerned with the compatibility of a work permit regime with the transitional provision in Chapter 2, paragraph 2 of Annex XII. A work permit regime is inherently capable of having a major effect as a national measure restricting or preventing access to the labour market of the host member state which adopts it, by contrast with the monitoring regime adopted by the UK. The Advocate General treated the case as concerned simply with the interpretation of Chapter 2, paragraph 2 of Annex XII (see points 3 5, 25 and 57 of his opinion) and in addressing that question emphasised that both in the case of direct access to the employment market of member states of A8 nationals as workers and in the case of the access of such nationals to that market through their employment by an undertaking which hires out manpower there are potentially large movements of workers which, following new accessions, risk disturbing the employment market of the member states and that the transitional provision should be interpreted as covering both kinds of access in order to preserve its effectiveness (points 51 52). The judgment and the Advocate Generals opinion give no support to the submission that there is no scope for the application of the principle of proportionality in the context of adoption of national measures by a member state in reliance on the transitional derogating provisions in the Annexes to the Act of Accession. In particular, neither the judgment nor the opinion refers to the absence of any relevant protectable interest. If it had been the intention of the CJEU or the Advocate General to rule that the principle of proportionality had no part to play in the context of derogation under the transitional provisions in the Annexes to the Act of Accession, they would surely have said so in terms and would have explained that that was why the question referred proceeded on a false basis. The Secretary of State also relies on a passage in the judgment of the Second Chamber of the CJEU in Valeko v Klagenfurt (Case C 140/05) [2006] ECR I 10025. That case concerned another provision in the Act of Accession which provided a transitional derogation from EU Treaty provisions and legislation governing excise duties. Austrian legislation purportedly made under that derogation limited the exemption for the import of cigarettes in personal luggage to 25 cigarettes. On a preliminary reference, the Independent Finance Tribunal, Klagenfurt Division, asked whether the Austrian legislation was compatible with Treaty provisions governing the free movement of goods and customs duties (now contained in articles 28, 30 and 31 TFEU). Mr Chamberlain places particular reliance on the following passage in the judgment of the court (at para 74): Since that national legislation is justified in the light of one of the measures referred to in article 24 of the Act of Accession, in this case the transitional measure provided for in section 6(2) of Annex XIII to that Act, the question of the compatibility of that legislation with other provisions of primary law, such as articles 23 EC, 25 EC and 26 EC, can no longer arise. Here, the court was saying no more than that once national legislation is justified for the purposes of the derogating transitional measures, it is not necessary to justify it in addition in the wider context of the principles governing free movement of goods. Again, we consider that the courts use of the word justified is significant. It indicates that the court contemplated that a usual process of justification under EU law, including by reference to the principle of proportionality, would be required in relation to reliance on the transitional provision referred to. We were also referred by Mr Chamberlain to the decision of the Supreme Court in Mirga v Secretary of State for Work and Pensions [2016] UKSC 1; [2016] 1 WLR 481. There the claimants failed to establish that domestic regulations violated their rights under article 18 and article 21(1) TFEU, respectively. Lord Neuberger of Abbotsbury, with whom the other members of the Supreme Court agreed, held that those rights were qualified and, in particular, that those of Ms Mirga under article 21(1) were subject to the limitations and conditions laid down in the Treaties and the measures adopted to give them effect. Those measures included the 2003 Accession Treaty and the Citizens Directive. Clearly, the more general Treaty provisions must be read subject to those qualifications or derogations arising under transitional provisions such as those in the Act of Accession. Lord Neuberger then rejected a further submission founded on a lack of proportionality. Mr Chamberlain drew our attention in particular to the following passage (at para 69): Where a national of another member state is not a worker, self employed or a student, and has no, or very limited, means of support and no medical insurance , it would severely undermine the whole thrust and purpose of the [Citizens] Directive if proportionality could be invoked to entitle that person to have the right of residence and social assistance in another member state, save perhaps in extreme circumstances. It would also place a substantial burden on a host member state if it had to carry out a proportionality exercise in every case where the right of residence (or indeed the right against discrimination) was invoked. As appears from its final words, however, this passage appears in the context of a submission by the claimants that the determination of the authorities, courts and tribunals below had failed to give consideration to the proportionality of refusing each of them social assistance on a case by case basis, taking into account all the particular circumstances of their respective cases. It has no bearing on the issue of whether national legislation derogating from rights or prospective rights under EU law is required to be proportionate and it provides no support for the Secretary of States case on this issue. Mr Chamberlain is correct in his submission that, if a national measure is adopted pursuant to a transitional provision in the Act of Accession, no question of its compatibility with any provision of EU primary law can arise. In the present case, the compatibility of national measures with EU law will have to be assessed, not in the wider context of the principles of free movement of workers, but in the particular context of the transitional provisions. However, it does not follow that the national measure does not have to satisfy the EU principle of proportionality. On the contrary, measures adopted pursuant to a temporary derogation from the law and the rights of EU citizens which would otherwise apply do require to be justified in accordance with the principle of proportionality. Furthermore, there is no basis for the submission on behalf of the Secretary of State that this would confer in substance the same rights of free movement which the Act of Accession provides do not apply during the transitional period; rather, it will simply require that the measure is suitable and necessary to achieve the particular objective identified by the provision authorising the transitional derogation and that the burden imposed is, having regard to that specific objective, not excessive. We consider, therefore, that there is no good reason to depart from the decision of the House of Lords in Zalewska as regards the applicability of the principle of proportionality in the present context. As Lord Reed and Lord Toulson pointed out in their judgment in the Lumsdon case, at para 24, proportionality is a general principle of EU law. There is no basis for saying that it has no application in the context of reliance by a member state on a derogating provision such as that in paragraph 5 of Annex VIII. We consider that it is clear to the acte clair standard that the measures taken by the United Kingdom in issue in this case are required to satisfy the EU principle of proportionality. In these circumstances there is no need to address the respondents alternative submission based on article 14 of the ECHR, A1P1 and the Human Rights Act 1998. Issue (2): If the decision to extend the WRS is open to challenge on grounds of proportionality, did the Upper Tribunal and the Court of Appeal err in their approach and conclusion on this issue? In April 2009 the Secretary of State had a limited, binary choice to make pursuant to paragraph 5 of Annex VIII. The UK had instituted the WRS at the time the Accession Agreements came into effect as its sole relevant national measure regulating access to its labour market under paragraph 2 of Annex VIII, by way of derogation from articles 1 to 6 of Regulation 1612/68. The UK had exercised its discretion under paragraph 2 of Annex VIII to continue to apply that measure until the end of the five year period following the date of the accession and had notified the EU Commission of this under paragraph 3 of that Annex. It is common ground that in 2009 there were serious disturbances of the UKs labour market or threat thereof, owing to the financial crisis. Accordingly, pursuant to paragraph 5 of Annex VIII the Secretary of State had to consider whether to continue to apply the WRS for an additional two years, as the sole relevant national measure in place at the time, or not. The question of the proportionality of the WRS as extended in 2009 has to be assessed in this context, as Judge Ward in the Upper Tribunal and the Court of Appeal correctly understood. The WRS had originally been introduced in 2004 as a measure to allow the monitoring of the impact of migration into the UK of workers who were A8 nationals and to safeguard the UKs social security system from exploitation by people who wished to come to the UK not to work but to live off benefits: see Zalewska at paras 34 35 per Lord Hope. It was as a measure having those objectives that it was held to be proportionate and lawful by a bare majority in the House of Lords in the Zalewska case. However, in 2009 the Secretary of State had to consider under paragraph 5 of Annex VIII whether the WRS could properly be maintained in place for an additional two years as a measure to address and ameliorate serious disturbances of the UKs labour market or the threat thereof. Put shortly, in 2009 did the WRS have a deterrent effect to moderate the in flow of A8 nationals as workers which might exacerbate the serious disturbance of the labour market then being experienced and, if so, would it be proportionate to continue to maintain it in place for that purpose? In the context of the decision to be made pursuant to paragraph 5 of Annex VIII, Mr Chamberlain accepts that the protection of the benefits system was not itself any longer a valid objective. Although the MAC in its report stated that it thought there might be a small impact of savings in spending on benefits if the WRS was retained, it also made it clear that its recommendation that the WRS be retained was not based on this. It is significant that for her case on proportionality of the extension of the WRS in 2009 for two years, the Secretary of State has simply relied upon what is said in the MAC report of April 2009. In effect she has adopted the MACs reasoning. She has not filed evidence to explain any distinct reasoning of her own as to why the extension of the WRS was justified, nor to point to any additional relevant factors other than those taken into account by the MAC in its report. This poses problems for the Secretary of State. The MAC was not asked to consider whether an extension of the WRS would be proportionate in terms of EU law and it expressed no view about that. Instead, the MAC was asked to consider, first, whether there was at the time a serious disturbance to the UK labour market. It concluded that there was a serious disturbance, as the UK economy was in recession and there had been a rise in unemployment and redundancies. That conclusion is not put in issue in these proceedings. The MAC was also asked to consider what the likely labour market impact of relaxing transitional measures [for A8 nationals] would be and whether it would be sensible to do so. In addressing these questions the MAC summarised its views at the start of its report as follows (pp 6 7): Would retaining the WRS help to address the disturbance? A8 immigration has increased rapidly since the date of accession and studies show that its impact on UK employment and unemployment rates to date has been negligible. These studies relate to a period of sustained economic growth prior to the current recession. Examination of the potential labour market impacts and review of the evidence available suggests that removing the WRS would not result in substantial increases in flows of A8 immigrants. It is, however, plausible to argue that it would probably result in a small positive impact on immigration flows relative to what would happen otherwise. In the current economic climate, we are concerned that these additional flows would have a small negative impact on the labour market, thus exacerbating the serious labour market disturbance already occurring. We emphasise that any effects of ending the WRS would be small in relation to the overall negative labour market consequences of the economic downturn. Nonetheless, we believe that it would be sensible to retain the WRS for two more years due to the possibility of small but adverse labour market impacts from abolishing it. In the body of the report the MAC emphasised problems with the available evidence base and the difficulties this posed for analysis of what was likely to happen if the WRS was not extended (para 5.3). However, it considered that there was sufficient information available for it to draw broad conclusions regarding the advisability, or otherwise, of retaining the WRS (para 5.4). At para 5.16 the MAC said this: In conclusion, it is very unlikely that removing the WRS would result in any substantial change in A8 immigrant inflows. However, it is possible that some factors, including the 90 registration fee, could have a small effect at the margin. The effect of maintaining the WRS will be to slightly reduce flows relative to what would otherwise be observed. We argue in this report that this slight dampening effect on flows is a positive phenomenon in the current economic circumstances, which is why we have not given detailed consideration to the option of relaxing the WRS by keeping the scheme but abolishing the 90 fee. It is right to observe that the conclusion of the MAC regarding the impact of removal of the WRS on the flow of workers into the UK from the A8 States was tentative and hedged about with qualifications. But on a fair reading of the report the MAC was clear that such removal would have a small effect in increasing the likely flow of such workers into the UK and that this would exacerbate the prevailing serious disturbance of the labour market. The MAC was a body with the relevant experience and expertise to make an assessment of this kind. This was a legitimate conclusion for it to reach. Although the WRS had originally been introduced for the purpose of monitoring rather than deterring the flow of workers from the A8 States, that does not mean that in the circumstances obtaining in 2009 the scheme was incapable of having the small deterrent effect which the MAC found that it did. In Chapter 6 of the report, entitled Conclusions, the MAC stated that it recognised that the Government would want to weigh the slight reduction in the inward flow to the UK of A8 nationals as workers if the WRS were retained against the longer term aim of free movement of labour within the EU and the spirit of the Treaty of Accession (para 6.7). It also said (para 6.8): it is clear that the WRS creates burdens for employers and immigrants. While we do not wish to trivialise these, they need to be assessed against the benefits of the scheme. This was not an exercise the MAC attempted to undertake itself. The Secretary of State has not adduced any evidence as to how she sought to balance the small impact on the labour market in the UK from retention of the WRS against the significant detriments resulting from the continued implementation of the WRS for employers and A8 nationals in the UK as workers. Whilst we do not consider that this disables the Secretary of State from contending that the retention of the WRS is to be regarded as a proportionate measure, it does mean that it is difficult to say that any significant weight or respect should be given to the Secretary of States (unexplained) assessment that it was right to extend the WRS when conducting a proportionality review. The leading decision of this court on the principle of proportionality in EU law is now Lumsdon. The judgment of Lord Reed and Lord Toulson, with which the other members of the court agreed, authoritatively sets out the approach to be adopted. At para 33 Lord Reed and Lord Toulson summarised the test of proportionality in EU law as follows: Proportionality as a general principle of EU law involves a consideration of two questions: first, whether the measure in question is suitable or appropriate to achieve the objective pursued; and secondly, whether the measure is necessary to achieve that objective, or whether it could be attained by a less onerous method. There is some debate as to whether there is a third question, sometimes referred to as proportionality stricto sensu: namely, whether the burden imposed by the measure is disproportionate to the benefits secured. In practice, the court usually omits this question from its formulation of the proportionality principle. Where the question has been argued, however, the court has often included it in its formulation and addressed it separately, as in R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023. For reasons which appear below, it should be emphasised that Lord Reed and Lord Toulson in this passage have made it clear that the third question, regarding proportionality stricto sensu, does indeed constitute an aspect of the EU law principle of proportionality. It is identified as such by the Court of Justice whenever it is necessary for it to do so. Lord Reed and Lord Toulson then went on at paras 34 and following to give guidance regarding the appropriate intensity of review in applying the proportionality standard. This depends on context. It ranges from intervening on the basis that a measure is manifestly inappropriate (the usual standard applied in proportionality review of measures taken by EU institutions or of national measures implementing EU measures, at least where these reflect political, economic or social choices and a complex assessment of such factors: paras 40 and 73 respectively) to more demanding standards of review which may be relevant in relation to national measures falling within the scope of EU law which derogate from fundamental freedoms, including free movement of workers (paras 50 72). Also, as Lord Reed and Lord Toulson point out at para 74, where a member state relies on a reservation or derogation in a Directive in order to introduce a measure which is restrictive of one of the fundamental freedoms guaranteed by the Treaties, the measure is likely to be scrutinised in the same way as other national measures which are restrictive of those freedoms. As a result of this analysis, at paras 75 82 Lord Reed and Lord Toulson were critical of the reasoning of the English Court of Appeal in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437; [2012] QB 394, in which the less intrusive manifestly inappropriate standard of review was applied in relation to a national measure restricting the free movement of goods. As we have held above, Judge Ward correctly concluded that it was necessary to conduct a proportionality review of the 2004 Regulations at the time when they were given extended effect in 2009 for a further two years. His judgment was delivered before the decision in the Lumsdon case was handed down. In the section of his judgment in which he carried out this review, Judge Ward first considered at paras 82 to 103 the appropriate intensity of review to be applied, particularly in the light of the decision of the Court of Appeal in the Sinclair Collis case. Following the guidance given by Lord Neuberger MR in that case regarding factors which affect the intensity of proportionality review, Judge Ward characterised the decision as one involving economic or social choice, as a factor tending to expand the area of discretion available to the Secretary of State under the proportionality test, albeit the choice was limited in its range by the binary nature of the decision to be made and was not one involving a political dimension to any significant degree (since the Secretary of State had in effect sub contracted consideration of the issue of extension of the WRS to a technical body, the MAC, and there was only limited Parliamentary scrutiny of the extension decision under the negative resolution procedure) (para 98); and the judge had regard to the difficulties of assessment of the evidence regarding the effects of maintaining the WRS in place, as a factor again tending to expand the area of discretion for the Secretary of State (para 99). But Judge Ward also took into account a series of factors which in his view tended to reduce that area of discretion: that the measure was adopted by delegated legislation and subject only to the negative resolution procedure, and in reliance on a report which the MAC itself considered to be rushed (para 100); that the Secretary of State adduced no evidence of having conducted his own proportionality analysis, despite the limitations in the question put to the MAC and the need, identified by the MAC, for its answer to the Secretary of State to be weighed against other factors (para 101); and the fact that the measure in question was a national measure in derogation from the principle of the free movement of workers, in relation to which a court should be astute to ensure that the national government has not unduly sought to favour its national interest at the expense of EU principles (para 102). His conclusion was that the relevant degree of intensity of review was not confined to the manifestly appropriate test which appears in some cases, but was significantly more intrusive than that, albeit with allowance for some margin of appreciation for the Secretary of State (para 103). In the next section of his judgment, at paras 104 to 121, Judge Ward considered whether the Extension Regulations promulgated in 2009 in relation to the WRS passed the proportionality test. He came to the conclusion that the fee and registration requirements in those Regulations were disproportionate and contrary to EU law. He reached this conclusion on two distinct grounds: i) the fee was set to defray the costs of an administrative scheme aimed at monitoring migrant inflows which does not itself materially help to address the disturbance [of the labour market], so the WRS could not be regarded as an appropriate tool for proportionality purposes for addressing the serious disturbance to the UK labour market in that it relies effectively on payment of a sum of money by A8 nationals, while not otherwise affecting their access to it (para 112). Therefore, the Secretary of States case on proportionality failed to satisfy the first stage of the proportionality test; and in any event, even if that was wrong, ii) the WRS failed to comply with proportionality stricto sensu, at the third stage of the test. Regulation 9 of the 2004 Regulations created a criminal offence if an employer employed an A8 national who was not registered as required under the WRS, subject to certain defences. Accordingly, the judge found that the WRS created a burden on employers, even if little research had been done to examine its scale (para 114). In addition, the judge referred at para 115 to the impact of the WRS in relation to A8 nationals who came to work in the UK, paid taxes here and participated actively in UK society. He noted that the MAC report indicated that for language and other reasons there was a significant rate of non registration by A8 nationals working in the UK which could be up to 33%, and further noted that failure by an A8 national to register under the WRS had significant adverse consequences for such a person in terms of exclusion from welfare benefits, no matter how unforeseeable the circumstances which have caused them to be in need of them, and it prevented them from relying on time spent working in the UK whilst unregistered as a contribution to the five years needed to establish a right of permanent residence here under article 16 of the Citizens Directive. The judge found that these detriments constituted a very real downside for A8 nationals who did not register, noting that this had been characterised as severe by Baroness Hale at para 57 of her speech in Zalewska. Moreover, for those A8 nationals who did comply with the registration requirement under the WRS, the fee they had to pay was a sum equivalent to around 1% of annual gross pay for someone working at the national minimum wage for a 35 hour week for 48 weeks (as noted in para 5.9 of the MAC report). The judge found that the small and speculative advantage in respect of reducing the inward flow of A8 nationals as workers from extending the WRS was wholly outweighed by the disadvantage to A8 nationals and employers in the UK and the limitation on Treaty principles of free movement (para 117). That was the judges view in light of the conclusion he had reached at para 103 regarding the appropriate intensity of review, as referred to above. But he went on to hold that even if the appropriate standard of review was the manifestly inappropriate test, which allows a wider margin of discretion to the relevant decision maker, he would have come to the same conclusion (para 118). The Secretary of State challenged this assessment in the Court of Appeal. The Lumsdon judgment had now been handed down and the Court of Appeal analysed the position with reference to the guidance it contains. Rupert Jackson LJ gave the leading judgment, with which the other members of the court agreed. At paras 57 to 63 he accepted a submission for the Secretary of State that Judge Ward at para 98 of his judgment had gone too far in discounting the political aspect of the decision to promulgate the Extension Regulations when he assessed the intensity of review to be applied; but Rupert Jackson LJ still held that whilst the degree of scrutiny should not be intense, it was not a case in which the more generous manifestly disproportionate test applied (para 63). In the event, the modest difference between Rupert Jackson LJ and Judge Ward regarding the precise intensity of review to be applied was immaterial, because Judge Ward had come to the view that the Extension Regulations were disproportionate even if the manifestly disproportionate test was applied. Rupert Jackson LJ pointed out that the Upper Tribunal is a specialist tribunal whose decision deserves respect, and that it can only be interfered with if the tribunal has erred in law: see section 13 of the Tribunals, Courts and Enforcement Act 2007. He set out paras 111 to 115 in the judgment of Judge Ward and said that he could find no fault with his reasoning in those paragraphs. Therefore, Rupert Jackson LJ dismissed the Secretary of States challenge to the Upper Tribunals assessment that the Extension Regulations were disproportionate. The Secretary of State appeals to this court on this issue. Mr Chamberlain submits that Judge Ward erred in relation to both the grounds on which he found that the Extension Regulations were disproportionate and that the Court of Appeal erred in endorsing his assessment. We consider that there is force in Mr Chamberlains criticism of the first ground relied on by Judge Ward at paras 112 and 113 of his judgment, in relation to the first question that arises on a proportionality review (whether the measure is suitable or appropriate to achieve the objective pursued). Mr Chamberlain submits that, as found by the MAC in its report, extending the WRS in 2009 would have a small effect in reducing the inward flow of workers as compared to what would happen if it were not extended, and to that (admittedly small) extent it would prevent the then existing serious disturbance of the labour market from getting worse. Therefore, the extension of the WRS pursuant to paragraph 5 of Annex VIII was a measure appropriate to achieve the relevant objective, namely alleviation of the disturbance in the labour market as compared with the position which would obtain if the WRS were not extended, even if only to a small degree. Moreover, under paragraph 5 of Annex VIII, by virtue of the binary choice that it imposed on the UK in 2009, that was the only measure available to the Secretary of State to take at that time to alleviate the general disturbance in the national labour market. It could not be said that there was any less onerous method of achieving that objective. Mr Thomas de la Mare QC for the Interveners submitted that in order for the Secretary of State to satisfy the first stage of the proportionality test he had to be able to show that the extension of the WRS was materially capable of tackling or mitigating the serious disturbances to the labour market referred to in paragraph 5 of Annex VIII. He further submitted that the Secretary of State could not show that this was the case. We did not understand Mr Chamberlain to dispute the first of these submissions, save that he emphasised that the idea of materiality in this context is not a demanding one, and would only exclude measures which were immaterial or wholly de minimis in relation to their effect in tackling or mitigating the serious disturbances to the labour market in question. We agree. Mr Chamberlain took issue with the second submission. He was right to do so. The MAC report showed that extending the WRS would have a material, though small, effect in mitigating the serious disturbances to the UK labour market by reducing the flow of workers from A8 States which would otherwise occur, which would have the effect of exacerbating those disturbances. However, we cannot accept Mr Chamberlains wider submission that Judge Ward and the Court of Appeal erred in their assessment regarding the third stage of the proportionality analysis (proportionality stricto sensu). The position was stark. The extension of the WRS would have only a small and rather speculative mitigating effect in relation to the serious disturbances in the UKs labour market, as found by the MAC, whereas the burdens and detriments it would impose on employers and A8 nationals working in the UK were substantial and serious. We should say that we have some reservations about whether Rupert Jackson LJ was right to criticise the level at which Judge Ward pitched the intensity of review which he considered to be appropriate in this case. Although, obviously, Judge Ward did not have the benefit of the analysis by this court in Lumsdon when he made his assessment, we think that in broad terms the level of intensity he judged to be appropriate in this case is compatible with the guidance given in Lumsdon. In particular, the extension of the WRS was rightly regarded by Judge Ward as a national measure which was restrictive of the fundamental freedom of movement for A8 nationals as protected by the Treaties, taken in reliance on a reservation or derogation in an EU instrument, in relation to which a relatively demanding intensity of review is appropriate: see Lumsdon at para 74. However, this is not a case which turns on the precise calibration of the intensity of review to be applied in relation to the decision to extend the WRS in 2009. Both Judge Ward and the Court of Appeal considered that this measure failed to pass muster even if the markedly more generous manifestly inappropriate test was applied. In our view, they were plainly entitled to come to that conclusion in the circumstances of this case, particularly in the absence of any attempt by the Secretary of State to explain why the very limited and rather speculative benefits associated with the extension of the WRS in addressing labour market disturbances outweighed the considerable detriments for employers and workers from A8 States associated with the scheme. We agree with their conclusion. In arriving at this view, we have noted that in the Zalewska case in the House of Lords it was held, by a majority, that it was not disproportionate for the WRS to be introduced and implemented from 2004 as a monitoring measure in the initial phase of the expansion of the European Union by the accession of the A8 States. That conclusion does not provide a relevant guide for the outcome of the proportionality analysis in the present case. By contrast with the proportionality review in Zalewska, the analysis in this case has to be undertaken in the very different legal context set out in paragraph 5 of Annex VIII. In order to justify the extension of the WRS in 2009, the Secretary of State has to be able to say that this is a measure which is proportionate having regard to the objective of mitigating serious disturbances in the labour market. Factors which were relevant to the assessment in the Zalewska case, including a desire to protect against additional and inappropriate demands on the UKs social security system (see paras 35 36 per Lord Hope), are no longer relevant in the present context. In Zalewska, the Governments position was that the WRS was intended to be a monitoring measure and was not expected to be a barrier to those who wanted to work (see para 34 per Lord Hope), whereas in the present context this position is reversed: the justification of the extension of the WRS is said to be that it does provide, to a degree, a barrier to A8 nationals who might otherwise come to work in the UK and the justification does not rely upon the effect of the WRS as a monitoring measure. The result of the analysis relevant in the present case is that the extension of the WRS in 2009 was a disproportionate measure which was unlawful under EU law. As we have come to the clear conclusion that the decision to extend the WRS in 2009 was required to conform with the principle of proportionality in EU law and as the CJEU would take the view that the application of that principle to the facts is a matter for the national court, these matters are acte clair and this court is not required to make a preliminary reference to the CJEU. Issue (3): If the Secretary of State succeeds on Issue 1 or Issue 2, does article 17(1)(a) of the Citizens Directive require a person to show that, throughout the period of continuous residence, she enjoyed a right of residence under that Directive? The conclusion on the proportionality issue above means that the Secretary of States appeal falls to be dismissed, as happened in the Court of Appeal. However, Ms Helen Mountfield QC on behalf of the respondent contends that there is another, alternative reason why the Secretary of States appeal should be dismissed, even if the extension of the WRS in 2009 was proportionate and lawful. On her alternative case the respondent submits that as a result of her residence in the UK from 2008 and working here from 14 September 2009 she had acquired the right of permanent residence by virtue of article 17(1)(a) of the Citizens Directive and regulation 5(2)(c) of the 2006 Regulations by the time she made her claim for state pension credit on 24 October 2012 and was for that reason entitled to claim that benefit. Although, on the hypothesis that the extension of the WRS was lawful, she did not qualify as a worker with a right of residence under article 7 of the Citizens Directive in the period before she registered for a certificate to work on 20 August 2010, that does not matter. Article 17(1)(a) confers the right of permanent residence on workers or self employed persons who reach the age of retirement provided that they have been working in that member state for at least the preceding 12 months and have resided there continuously for more than three years; the relevant requirement of residence in this provision is residence in fact, rather than residence pursuant to the provisions set out in the Citizens Directive; and the respondent can show that by the time of her claim for state pension credit she had resided in the UK for more than three years. The Secretary of State disputes this alternative argument of the respondent. She submits that the concept of residence in article 17(1)(a) is to be read in the light of article 16(1) of the Citizens Directive, from which it is said to derogate. Article 16(1) provides that Union citizens who have resided legally in a host member state for a stipulated continuous period will acquire a right of permanent residence there. Similarly, although article 17(1)(a) uses the term resided without the adverb legally, it should be taken to be referring to the same concept of legal residence. The case law of the CJEU has established that legal residence in the context of article 16(1) means residence in accordance with article 7 of the Citizens Directive: see, in particular, the judgment in Ziolkowski v Land Berlin (Joined Cases C 424/10 and C 425/10) EU:C:2011:866; [2014] All ER (EC) 314, paras 31 51. The respondent cannot show that her period of residence in the UK was legal in this sense; in particular, since she did not comply with the requirement of registration under the WRS until 20 August 2010, she cannot show that before that date she was resident here as a worker or self employed person within the scope of article 7(1)(a) of the Citizens Directive. On this issue, Judge Ward accepted the submission of the respondent, whereas the Court of Appeal accepted the submission of the Secretary of State. Resolution of the dispute on this issue is not necessary for the determination of the present appeal, because the Secretary of State has lost on the proportionality issue in relation to the extension of the WRS. However, since the issue regarding the interpretation of article 17(1)(a) may be important in other cases and we are of the view the Court of Appeal has erred on this point, we consider that we should deal with it. It is unnecessary to decide whether the position is acte clair, because by reason of our conclusion on the proportionality issue there is no need for a reference to the CJEU. Recital (17) to the Citizens Directive explains the purpose of article 16. Recital (19) explains the purpose of article 17. Recital (17) is explicit in stating that the right of permanent residence which article 16 provides for should be laid down for all Union citizens and their family members who have resided in the host member state in compliance with the conditions laid down in this Directive during a continuous period of five years . Recital (19) is in different terms. It does not refer to residence in compliance with the conditions laid down in the Citizens Directive. It refers to, among others, workers who have resided in the host member state who have acquired rights under Regulation 1251/70. Article 1 of Regulation 1251/70 stipulates that the Regulation shall apply to nationals of a member state who have worked as employed persons in the territory of another member state, and it uses the term worker in this sense. Article 2(1)(a) of Regulation 1251/70 provides for a right to remain permanently in the territory of a host member state for a worker who satisfies certain conditions, including where she has been employed in that state for at least the last 12 months and has resided there continuously for more than three years. Article 4 provides that continuity of residence may be attested by any means of proof in use in the country of residence. Accordingly, Regulation 1251/70 uses the term worker in a simple factual sense and similarly refers to continuous residence in a simple factual sense. By contrast with the Citizens Directive, the Regulation contains no reference to lawful residence which could be taken to inform the meaning of continuous residence. The reference in Recital (19) to the Citizens Directive to rights of permanent residence acquired under Regulation 1251/70 is a strong indication that the EU legislature intended the concept of continuous residence as used in article 17(1)(a) of the Directive to reflect the concept of continuous residence as used in article 2(1)(a) of the Regulation. Accordingly, both in its text, which contrasts with the text of recital (17), and by reason of its reference back to rights acquired under Regulation 1251/70, Recital (19) indicates that the concept of residence as referred to in article 17(1)(a) is factual residence, as the respondent contends. We consider that recital (3) to the Citizens Directive reinforces this interpretation of article 17(1)(a). It explains that the EU legislature intended to codify and review the existing EU instruments dealing with workers and others in order to simplify and strengthen the right of free movement and residence of all Union citizens. Thus, it was part of the purpose of the Directive to enhance existing rights of free movement and residence, such as those which had arisen under Regulation 1251/70, and not to subject them to new restrictive conditions. The same point emerges from recital (1) to Regulation 635/2006, which repealed Regulation 1251/70, as follows: [The Citizens Directive] consolidated in a single text the legislation on the free movement of citizens of the Union. Article 17 thereof includes the main elements of [Regulation 1251/70] and amends them by granting beneficiaries of the right to remain a more privileged status, namely that of the right of permanent residence. There are in addition two textual features of article 17(1)(a) which in our view point strongly in favour of the interpretation arrived at by Judge Ward. First, the text in article 17(1) essentially tracks that in article 2 of Regulation 1251/70, with appropriate minor modifications. Secondly, the language used in article 17 (residence; have resided continuously) is in marked contrast to that used in article 16 and again in article 18 (have resided legally and after residing legally). This has every appearance of being deliberate, and the underlying purpose of article 17 as set out in recital (19) and the correspondence of its text with article 2 of Regulation 1251/70 confirms that impression. It is also noteworthy that in the CJEUs analysis in the Ziolkowski judgment of the meaning of legal residence in article 16 and article 18, which itself turns on a close textual analysis of the Directive, the court did not suggest that the term residence in article 17 had to be interpreted as having the same meaning. Furthermore, since article 17(1) is concerned with preserving and protecting rights already acquired under Regulation 1251/70, it seems impossible to read it as referring to legal residence in the sense given by the Ziolkowski judgment. When the Citizens Directive first came into force in 2004 and when it was first implemented at national level throughout the EU within two years after that as required by article 40, no one could have built up any period of continuous residence pursuant to their rights under article 7 of the Directive, let alone the three years of continuous residence referred to in article 17(1)(a). Yet individuals could in principle have rights under article 17(1) as soon as implementation of the Directive took effect. Accordingly, it seems necessary to interpret the concept of continuous residence in article 17(1)(a) as referring to factual residence rather than legal residence as that term is used in article 16. The meaning of continuous residence in article 17 cannot change over time, so it is no answer to the respondents claim to be entitled to a right of permanent residence in the UK under article 17(1)(a) that she had not herself acquired rights under Regulation 1251/70 in the UK prior to the coming into force of the Citizens Directive and the domestic regulations which implemented it in domestic law. Mr Chamberlain emphasised the introductory sentence in article 17(1), which states that the provision applies By way of derogation from article 16 and refers to acquisition of a right of permanent residence before completion of a continuous period of five years of residence by the persons then specified in the sub paragraphs. He submitted that the reference back to article 16 meant that residence in article 17(1) was being used in the same sense as residence in article 16, that is to say legal residence. However, we do not consider that the opening words of article 17(1) can bear the weight which Mr Chamberlain sought to place on them. In itself the use of the word residence in the opening part of article 17(1) is neutral on the question of what form of residence is referred to in the sub paragraphs which follow. It is those sub paragraphs which set out positively the conditions which have to be satisfied for an individual to acquire the right of permanent residence under that provision. For a right of permanent residence to arise under article 16(1) a five year period of residence which has the quality of being legal in the requisite sense is required. In order to indicate that article 17(1) sets out a right of permanent residence which departs from, and is more generous than, the right conferred under article 16(1), it was sufficient for the drafter to state that the right under article 17(1) arises where there is a period of residence of less than five years, without needing to refer also to whether the residence in question had to be legal or not. Further, it is natural for the drafter simply to speak of residence in the opening words of article 17(1) if it is the concept of factual residence rather than legal residence which is employed in the following sub paragraphs in that provision. In any event, the indications from the text of article 17(1) and its purpose as set out in recital (19), as discussed above, appear to us to have far greater weight than any indication to be derived from the opening words of the provision. Mr Chamberlain also relied on other judgments of the CJEU, but they were not concerned with the interpretation of article 17(1), nor did they involve any attempt to examine the purpose of that provision. In particular, Mr Chamberlain referred to the judgments in Alarape v Secretary of State for the Home Department (Case C 529/11) [2013] 1 WLR 2883 and in FV (Italy) v Secretary of State for the Home Department and B v Land Baden Wrttenberg (Joined Cases C 424/16 and C 316/16) [2019] QB 126. However, these judgments do not support his interpretation of article 17(1). In the Alarape case the CJEU addressed the question whether periods of residence completed pursuant to article 12 of Regulation 1612/68, which provides a right for the child of a worker to be admitted to educational courses in the host member state, could count towards the five years of legal residence required for acquisition of a right of permanent residence under article 16(1) of the Citizens Directive. The CJEU applied its ruling in the Ziolkowski judgment regarding the meaning of legal residence in article 16(1) and held that residence pursuant to article 12 of Regulation 1612/68, but which did not comply with article 7 of the Citizens Directive, did not count for the purposes of article 16(1). In our view, this does not support Mr Chamberlains interpretation of article 17(1) of the Citizens Directive. If anything, it tends to support Judge Wards interpretation of that provision. That is because, following the guidance in the judgments in Ziolkowski and Alarape, residence in a host member state pursuant to rights under Regulation 1251/70 and Directive 75/34/EEC likewise would not count as legal residence for the purpose of article 16(1) of the Citizens Directive; but it is rights acquired by residence pursuant to Regulation 1251/70 and Directive 75/34/EEC which are intended to be respected and protected by article 17 of the Citizens Directive: see recital (19) to that Directive. FV (Italy) concerned the interpretation of article 28(3)(a) of the Citizens Directive, which provides for enhanced protection against expulsion of EU citizens if they have resided in the host member state for the previous ten years: in such a case the host member state may only decide to expel them on imperative grounds of public security. The CJEU held that article 28 had to be read as a whole, as creating steadily increasing protection for EU citizens according to their integration in the society of the host member state. Therefore, the protection in article 28(3) was to be taken to be conditional on the EU citizen having a right of permanent residence in the host member state, as referred to in article 28(2): see paras 40 61 in the judgment. In answer to the first question referred by this court, the CJEU held at para 61 that article 28(3)(a) must be interpreted as meaning that it is a prerequisite of eligibility for the protection against expulsion provided for in that provision that the person concerned must have a right of permanent residence within the meaning of article 16 and article 28(2) of [the Citizens] Directive. Again, the ruling in Ziolkowski regarding the interpretation of article 16(1) was applied: see para 59. In FV (Italy) there was no question of acquisition of a right of permanent residence pursuant to article 17 of the Citizens Directive, so the question referred did not mention that provision: see para 39. The CJEU made no reference to it in its judgment. Since article 28(2) refers in general terms to Union citizens or their family members who have the right of permanent residence, if an individual had acquired such a right by virtue of article 17 rather than by virtue of article 16 of the Citizens Directive it seems entirely possible that by extension of its reasoning in FV (Italy) the CJEU would hold that such an individual likewise enjoys enhanced protection under article 28(3)(a). The important point, however, is that the judgment in FV (Italy) does not support Mr Chamberlains submission regarding the proper interpretation of article 17(1). Mr Chamberlain also relied on observations by Advocate General Trstenjak in her opinion in Secretary of State for Work and Pensions v Lassal (Case C 162/09) [2011] 1 CMLR 31, at points 68 69, to the effect that article 16(1) and article 17(1) of the Citizens Directive are closely connected and that therefore it must in principle be assumed that the two factual elements whose wording is almost identical a continuous period of five years of residence in the host member state in article 16(1) of the Directive and resided continuously in the host member state for more than two years in article 17(1)(b) of the Directive are to be interpreted in the same way. However, this part of the Advocate Generals reasoning was not endorsed by the CJEU in its judgment. Moreover, as Judge Ward pointed out in his judgment at para 58, the Advocate Generals recitation of the text in the two provisions contains an unfortunate and highly significant misquotation, in that she omits the critical phrase, have resided legally, in article 16(1). Also, the Advocate Generals view is not supported by any positive reasoning, other than to point out the linkage between article 16 and article 17(1) which appears from the opening sentence of article 17(1) as to which, see above. Accordingly, we do not consider, with respect, that Advocate General Trstenjaks opinion on this point represents a sound guide to the interpretation of article 17(1). For the reasons set out above, in our judgment the Court of Appeal erred in its interpretation of article 17(1). Judge Ward arrived at a correct interpretation of that provision, in holding that residence in article 17(1) refers to factual residence rather than legal residence as required under article 16(1), as interpreted by the CJEU in the Ziolkowski judgment. Issue (4): If article 17 of the Citizens Directive requires legal residence in the relevant sense, is actual residence sufficient for the purposes of the 2006 Regulations? As we would hold that the term residence in article 17(1)(a) has the meaning set out above, no question arises regarding a possible difference of meaning between article 17(1)(a) and regulation 5(2)(c) of the 2006 Regulations which implements that article in domestic law by using the phrase resided in the United Kingdom continuously for more than three years prior to the termination [of employment or self employment]. Therefore the fourth issue on the appeal does not arise. Conclusion For the reasons we have set out, we would dismiss the Secretary of States appeal. |
These appeals require the Court to consider once again the impact of article 2 of the European Convention on Human Rights (the Convention) on the scope of an inquest. They arise because of a change that the Grand Chamber of the Strasbourg Court has made as to the nature of the obligations imposed by article 2. I shall start by describing briefly the nature of that change. The Convention is a living instrument and over time the Strasbourg Court has extended the ambit of application of Convention rights in many areas. Article 2 provides a good example of this tendency. Article 2 provides that (1) Everyones right to life shall be protected by law. No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law. In McCann v United Kingdom (1995) 21 EHRR 97 the Strasbourg Court held that article 2 by implication gave rise not merely to a substantive obligation on the state not to kill people but, where there was an issue as to whether the state had broken this obligation, a procedural obligation on the state to carry out an effective official investigation into the circumstances of the deaths (the procedural obligation). Romania acceded to the Convention on 20 June 1994. In 1993 a pogrom had taken place in a Roma village, resulting in a number of deaths and widespread destruction of property. The State, in the form of the local police, was alleged to have been implicated. Investigations into the pogrom, and proceedings arising out of it commenced in 1993 but continued up to 2000. In Moldovan v Romania (Application Nos 41138/98 and 64320/01) (unreported) 13 March 2001 the applicants sought to invoke the procedural obligation under article 2, and a parallel obligation arising under article 3, alleging various deficiencies in the investigations. The Court held that the Convention only applied with respect to Romania after the date of its accession; it did not apply to Romania at the time of the pogrom. Because the procedural obligation to conduct an effective investigation was derived from the killings and the destruction of property, whose compatibility with the Convention could not be examined by the Court, it followed that the complaint of breach of the procedural obligations was also incompatible ratione temporis with the provisions of the Convention and had to be rejected. This reasoning was followed by the Court, when reaching similar decisions, in Voroshilov v Russia (Application No 21501/02) (unreported) 8 December 2005 and Kholodov and Kholodova v Russia (Application No 30651/05) (unreported) 14 September 2006. The issue that the Strasbourg Court considered in these cases was echoed by an issue that arose in this jurisdiction in relation to the application of the Human Rights Act 1998 (HRA). In a series of decisions the House of Lords had decided that no claim lay in respect of an alleged breach of the Convention if the facts giving rise to the alleged breach predated the entry into force of the HRA. The issue then arose of whether the procedural obligation to investigate a death applied after the HRA had come into force in relation to a death that had occurred before the Act came into force. In In re McKerr [2004] UKHL 12; [2004] 1 WLR 807 the House of Lords held that it did not. Their reasoning also echoed that of the Strasbourg Court. Because the death occurred before the HRA came into force it was not within the reach of the Act. Because the obligation to hold an investigation was triggered by the death, that consequential obligation was not within the reach of the Act either. This decision was applied by the House of Lords in R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189 and Jordan v Lord Chancellor [2007] UKHL 14; [2007] 2 AC 226. In 2009 the Grand Chamber of the Strasbourg Court took a decision which departed from the reasoning in Moldovan, Voroshilov and Kholodov and further extended the effect of article 2. In ilih v Slovenia (2009) 49 EHRR 996 the Court ruled that article 2 imposed, in certain circumstances, a freestanding obligation in relation to the investigation of a death which applied even where the death itself had occurred before the member state ratified the Convention. The appellants contend that the decision in ilih has destroyed the basis of the decision of the House of Lords in McKerr. Henceforth, if an inquest is held into a death that predated the coming into force of the HRA there is none the less an obligation under the HRA to ensure that it complies with the requirements of article 2. As the HRA came into force on 2 October 2000 it might be thought that this issue is of no great moment. Such a conclusion would be wrong. These appeals relate to two of a significant number of deaths that occurred in Northern Ireland well before 2 October 2000 in respect of which inquests are still pending. The facts The appellants are the next of kin of Martin McCaughey and Dessie Grew who were shot and killed by members of the British Army on 9 October 1990. Allegations have been made that they were victims of a shoot to kill policy. I need not go into the reasons why it is that, despite the fact that they died so long ago, no inquest has yet been held into their deaths, for on these appeals no issue arises in respect of this delay. A Coroner has been assigned to the case, and on 14 September 2009 he held a preliminary hearing. At that hearing the appellants applied to the Coroner for a ruling that he would hold an inquest into the two deaths that complied with the requirements of article 2. The Coroner declined to give such a ruling. He indicated, however, that he intended to hold a vigorous, thorough and transparent inquest. Following a further hearing, on 1 December 2009 the Coroner issued the following preliminary definition of the scope of the inquest that he proposed to hold: The Coroner will consider the four basic factual questions concerning: (a) the identity of the deceased; (b) the place of death; (c) the time of death; and (d) how the deceased came by their deaths. Further, related to the how question, the Coroner will examine in evidence the surveillance operation that culminated in the deaths with reference in particular to the following: (i) the purpose of the operation; (ii) the planning of the operation; (iii) the actions of those involved in the operation; (iv) the state of knowledge of those involved in the operation; (v) the nature and degree of the force used in the operation. In considering this matter, the Coroner will also examine such evidence as exists concerning the circumstances in which the deceased came to be at the locus of death at the relevant time. He stated that this was only preliminary and might be subject to revision at any time. He invited written representations from the parties in relation to it. The appellants made representations to the Coroner to the effect that the scope of the inquest should cover the question of whether the operation was planned and controlled so as to minimise to the greatest extent possible recourse to lethal force. The Police Service of Northern Ireland and the Ministry of Defence made written representations which asserted that the Coroner was precluded from investigating the planning and control of the operation. They asserted that McKerr established that there was no requirement for the inquest to comply with article 2. It followed that the scope of the inquest was restricted to establishing by what means rather than in what broad circumstances the deceased came to their deaths, ie a Jamieson inquest: see R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1. The Coroner has not yet made any ruling in relation to these representations. He is, no doubt, wisely awaiting the outcome of these proceedings. It is by no means clear that, even if this Court rules that article 2 has no application to these inquests, the Coroner will not be able lawfully to conduct an inquest which satisfies the requirements of that article or that he will not do so: see the speech of Lord Bingham of Cornhill in Jordan and my comments at para 69 in R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29; [2011] 1 AC 1. What is clear is that a decision of this Court is needed to prevent the delay and expense involved in interlocutory in fighting in this and future inquests raising the same issue. The proceedings below In an application for permission to apply for judicial review [2009] NIQB 77 the appellants sought to persuade Weatherup J that they were entitled to a declaration that the Coroner was obliged to conduct the inquest in a way that satisfied the procedural obligation of article 2. They argued that he was not bound by McKerr because the subsequent decision of the Grand Chamber in ilih was inconsistent with it. Weatherup J held that whether or not ilih was inconsistent with McKerr, he was obliged by the law of precedent to follow the latter. Accordingly he refused the appellants the relief that they sought. The Court of Appeal in Northern Ireland [2010] NICA 13 agreed with Weatherup J that McKerr was binding, even if inconsistent with ilih. Indeed that much was conceded by Ms Quinlivan for the appellants. She did not succeed in persuading the Court that ilih was, in fact, in conflict with McKerr. She did, however, persuade them that it was possible that this Court would choose to extend ilih to our domestic law, that they should give the appellants leave to apply for judicial review and, having denied them substantive relief, grant them permission to appeal to this Court. The Strasbourg law at the time of the decision of the House of Lords in McKerr As a backcloth to the decision of the House of Lords in McKerr it is helpful to identify the characteristics of the procedural obligation as laid down by the Strasbourg Court at the time of that decision. McCann, the death on the Rock case, was the first occasion on which the Strasbourg Court identified that article 2 gave rise to the procedural obligation. In so doing the Court was responding to a submission made by the applicants. The applicants complained about the planning, or lack of planning, that had taken place before the shooting of the IRA unit. They alleged that the shooting had either been premeditated or had resulted from negligence. And they complained that the inquest that had been held into the deaths had not constituted an adequate investigation into the circumstances of the killings. They submitted (see para 185 of the Commissions Opinion) that Article 2 should be interpreted as including a procedural element, namely, the provision of an effective procedure after the event for establishing the facts the procedures in this case were inadequate. The Court accepted this last submission. It held, at para 161: [The Court] confines itself to noting, like the Commission, that a general legal prohibition of arbitrary killing by the agents of the state would be ineffective, in practice, if there existed no procedure for reviewing the lawfulness of the use of lethal force by state authorities. The obligation to protect the right to life under this provision [article 2], read in conjunction with the states general duty under article 1 of the Convention to secure to everyone within their jurisdiction the rights and freedoms defined in [the] Convention, requires by implication that there should be some form of effective official investigation when individuals have been killed as a result of the use of force by, inter alios, agents of the state. The Court held at para 162 that there was no need to decide on what form such investigation should take as the inquest that had been held had satisfied the procedural obligation. The Strasbourg Court repeated the McCann formulation of the ancillary duty in Kaya v Turkey (1998) 28 EHRR 1 and Gle v Turkey (1998) 28 EHRR 121. In McCann no issue of jurisdiction ratione temporis arose, for both the killings and the inquest had taken place long after the ratification of the Convention by the United Kingdom. That issue arose for the first time in Moldovan. I have already outlined the facts of Moldovan at para 3 above. The applicants complained that the police had been implicated in the pogrom and that a failure to carry out an adequate criminal investigation had deprived them of their opportunity to file a civil claim for damages against the state. The relevant passage in the Courts judgment on admissibility is at p 13: In the present case, the Court notes that the killings happened in September 1993 before the entry into force of the Convention with regard to Romania, ie 20 June 1994. However, in accordance with the generally recognised rules of international law, the Convention only applies in respect of each contracting party to facts subsequent to its coming into force for that party. The possible existence of a continuing situation must be determined, if necessary ex officio, in the light of the special circumstances of each case (eg, [X and Y v Portugal (1979) 16 DR 209]). The Court must therefore verify whether it is competent ratione temporis to examine the present complaint. It observes however that the alleged obligation under the Convention of the Romanian authorities to conduct an effective investigation capable of leading to the identification and punishment of all individuals responsible for the deaths of the applicants relatives is derived from the aforementioned killings whose compatibility with the Convention cannot be examined by the Court. This passage suggests that the Court considered that it was implicit in the applicants case that the procedural obligation was a continuing obligation which would persist until an investigation was held that satisfied article 2. The Court held that it was not necessary to consider whether this was correct. It was enough to deprive the Court of competence that the obligation asserted was to investigate the circumstances of deaths whose compatibility with the Convention could not be examined by the Court. Moldovan left unanswered the question of whether, if there is an initial obligation under article 2 to conduct an adequate investigation, that obligation continues until such an investigation has been held. That question had, however, been answered by the Commission in a decision on admissibility in McDaid v United Kingdom (1996) 85 A DR 134. 14 residents of Derry made an application alleging inter alia that there had been a breach of the procedural obligation under article 2 to hold a full investigation into the Bloody Sunday killings in 1972. They alleged inadequacies in the Widgery Report, an investigation conducted by the RUC and the inquest that had been held into the deaths. In an attempt to get round the six month time limit for bringing a complaint they submitted that this was a continuing obligation. In rejecting that submission the Commission said this, at p 140: In so far as the applicants complain that they are victims of a continuing violation to which the six month is inapplicable, the Commission recalls that the concept of a continuing situation refers to a state of affairs which operates by continuous activities by or on the part of the state to render the applicants victims (see, eg, [Montion v France (1987) 52 DR 227; Hilton v United Kingdom (1988) 57 DR 108; A P v United Kingdom (Application No 24841/94) (unreported) 30 November 1994]). Since the applicants complaints have as their source specific events which occurred on identifiable dates, they cannot be construed as a continuing situation for the purposes of the six month rule. While the Commission does not doubt that the events of Bloody Sunday continue to have serious repercussions on the applicants lives, this however can be said of any individual who has undergone a traumatic incident in the past. The fact that an event has significant consequences over time does not itself constitute a continuing situation . A precursor to the judicial review proceedings brought by Mr McKerr which ended in the House of Lords was an application that he made to the Strasbourg Court (2001) 34 EHRR 553. It was heard together with three other applications which raised similar issues. His complaint related to the killing of his father on 11 November 1982 by a special unit of the RUC. He alleged, inter alia, that there had been a failure to satisfy the article 2 procedural obligation. Specific complaint was made of a police investigation, a criminal trial, an independent police inquiry and an inquest. These complaints were, in large measure, upheld by the Court. At para 111 the Court expanded on the purpose of the procedural obligation beyond the explanation given in McCann: The essential purpose of such an investigation is to secure the effective implementation of the domestic laws which protect the right to life and, in those cases involving state agents or bodies, to ensure their accountability for deaths occurring under their responsibility. What form of investigation will achieve those purposes may vary in different circumstances. However, whatever mode is employed, the authorities must act of their own motion, once the matter has come to their attention. This then became a standard part of the summary of the Strasbourg law given by the Court in cases where the procedural obligation was in issue. By way of summary of this jurisprudence, the procedural obligation was initially closely related to the substantive obligation that article 2 imposed on the state. The object of the procedural obligation was to check whether there had been a breach of the substantive obligation. If the substantive obligation did not exist the procedural obligation could not exist either. The expanded reason for the procedural obligation given by the Court in McKerr arguably extended the obligation to circumstances in which there was no allegation that the death had resulted from breach by the state of its primary duty under article 2. None the less the instances where there had been a complaint of breach of the procedural obligation had always involved allegations of state implication in the death. Furthermore the complaints had focussed on alleged deficiencies in the historic investigations that had been held. In no case had it been held that there was a continuing obligation to hold an adequate investigation, and in McDaid the Commission had held that there was not. There is one discordant note. In Balasoiu v Romania (Application No 37424/97) (unreported) 20 April 2004 the applicant complained of being beaten up by police in 1993, before Romania had acceded to the Convention, but also of delay in the procedural investigation, which was still ongoing. The Court held the latter complaint admissible, without explaining how this could be reconciled with the reasoning of the Court in Moldovan. The reasoning of the House of Lords in McKerr I must now consider the decision in McKerr in greater detail. This is necessary because the question that arises on the current appeals is whether the reasoning in McKerr applies in the light of the change in nature of the procedural obligation that the decision in ilih has produced. Having secured a finding by the Strasbourg Court of historic failures to comply with the procedural obligation imposed by article 2, Mr McKerr returned to the domestic courts. In judicial review proceedings he contended that the procedural obligation was a continuing obligation and that failure to provide an article 2 compliant investigation was unlawful and a breach of section 6 of the HRA. The Court of Appeal in Northern Ireland upheld this contention and made a declaration that the Government had failed to comply with article 2. The majority in the House of Lords addressed an appeal advanced on the premise that article 2 gave rise to a continuing obligation to hold an adequate investigation that had persisted for over 20 years from the time of the death of Mr McKerrs father: see paras 25, 48, 61, 76. This premise was, however, questioned by Lord Hoffmann in para 66, Lord Rodger at para 80 and Lord Brown at paras 92 to 95, rightly in my view: see para 22 above. Section 6 of the HRA provides that it is unlawful for a public authority to act in a way which is incompatible with a Convention right. The issue before the House was whether, on true interpretation of the HRA, this provision applied to the assumed continuing procedural obligation, notwithstanding that it had its origin in a death that occurred before the HRA had come into force. By the time of McKerr it was well established that the death itself could not give rise to any breach of the HRA because the Act did not apply to conduct that took place before it came into force: see R v Kansal (No 2) [2001] UKHL 62; [2002] 2 AC 69; R v Lambert [2001] UKHL 37; [2002] 2 AC 545; Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816. The Lords were unanimous in holding that the obligations created by the HRA did not, on the true interpretation of that Act, extend to the assumed continuing procedural obligation. The reasoning of Lord Nicholls appears in the following passages: 19. The application of section 6(1) of the Human Rights Act to a case of an unlawful killing is straightforward. Section 6(1) applies if the act, namely, the killing, occurred after the Act came into force. Section 6(1) does not apply if the unlawful killing took place before 2 October 2000. So much is clear. 20. The position is not so clear where the violation comprises a failure to carry out a proper investigation into a violent death. Obviously there is no difficulty if the death in question occurred post Act. The position is more difficult if the death occurred, say, shortly before the Act came into force and the necessary investigation would fall to be held in the ordinary course after the Act came into force. On which side of the retrospectivity line is a post Act failure to investigate a pre Act death? 21. In my view the answer lies in appreciating that the obligation to hold an investigation is an obligation triggered by the occurrence of a violent death. The obligation to hold an investigation does not exist in the absence of such a death. The obligation is consequential upon the death. If the death itself is not within the reach of section 6, because it occurred before the Act came into force, it would be surprising if section 6 applied to an obligation consequential upon the death. Rather, one would expect to find that, for section 6 to apply, the death which is the subject of investigation must itself be a death to which section 6 applies. The event giving rise to the article 2 obligation to investigate must have occurred post Act. 22. I think this is the preferable interpretation of section 6 in the context of article 2. This interpretation has the effect, for the transitional purpose now under consideration, of treating all the obligations arising under article 2 as parts of a single whole. Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death). For this reason I consider these judicial review proceedings are misconceived so far as they are sought to be founded on the enabling power in section 7 of the 1998 Act. At para 25 Lord Nicholls explained why it was that some of the lower courts had erred in reaching a contrary conclusion in earlier cases. This was by failing to keep clearly in mind the distinction between (1) rights arising under the Convention and (2) rights created by the 1998 Act by reference to the Convention. These two sets of rights now exist side by side. But there are significant differences between them. The former existed before the enactment of the 1998 Act and they continue to exist. They are not as such part of this country's law because the Convention does not form part of this country's law. That is still the position. These rights, arising under the Convention, are to be contrasted with rights created by the 1998 Act. The latter came into existence for the first time on 2 October 2000. They are part of this countrys law. The extent of these rights, created as they were by the 1998 Act, depends upon the proper interpretation of that Act. It by no means follows that the continuing existence of a right arising under the Convention in respect of an act occurring before the 1998 Act came into force will be mirrored by a corresponding right created by the 1998 Act. Whether it finds reflection in this way in the 1998 Act depends upon the proper interpretation of the 1998 Act. Lord Steyn at para 48 appears to have decided the issue on the simple basis that there was no continuing article 2 obligation to hold an investigation. Any breach of the procedural obligation occurred before the HRA came into force and could give rise to no remedy under domestic law. Lord Hoffmann at para 66 reasoned as follows: the fallacy of the reasoning lies in the notion of a continuing breach of articles 2 and 3. The judge was concerned with the rights of the claimants in domestic law. Before 2 October 2000, there could not have been any breach of a human rights provision in domestic law because the Act had not come into force. So there could be no continuing breach. There may have been a breach of article 2 as a matter of international law and this may have continued after 1 October 2000, although, for the reasons given by my noble and learned friend, Lord Brown of Eaton under Heywood, I think it unlikely. But that is irrelevant to whether the claimants had rights in domestic law, for which there can be no source other than the 1998 Act. The Act did not transmute international law obligations into domestic ones. It created new domestic human rights. The simple question is whether as a matter of construction, those rights applied to deaths which occurred before the Act came into force. 67. Your Lordships House has decided on a number of occasions that the Act was not retrospective. So the primary right to life conferred by article 2 can have had no application to a person who died before the Act came into force. His killing may have been a crime, a tort, a breach of international law but it could not have been a breach of section 6 of the Act. Why then should the ancillary right to an investigation of the death apply to a person who died before the Act came into force? In my opinion it does not. Otherwise there can in principle be no limit to the time one could have to go back into history and carry out investigations. In R (Wright) v Secretary of State for the Home Department Jackson J was prepared to accept the possibility of investigations into breaches of article 2 during the 50 year period between the UKs accession to the Convention and the coming into force of the [1998 Act]. But that was because he regarded an international law right under the Convention as a necessary (and sufficient) springboard for a domestic claim on the basis of a continuing breach. In my opinion, however, the international law obligation is irrelevant. Either the Act applies to deaths before 2 October 2000 or it does not. If it does, there is no reason why the date of accession to the Convention should matter. It would in principle be necessary to investigate the deaths by state action of the Princes in the Tower. Lord Hoffmann added at para 69: In my opinion Parliament intended section 6 of the 1998 Act to be enforced, but enforced only in respect of breaches occurring after it came into force. I have not, with respect, found all of this reasoning easy to follow. Some of it does not appear to focus on the basis of the claim, which was that a continuing obligation under the Convention had given rise to an obligation under domestic law once the HRA came into force. He appears to have concluded, however, that any breach of the Convention that had taken place occurred at the time of the death, which was before the HRA had come into force, so that it gave rise to no breach of domestic law. Lord Rodgers reasoning appears in the following paragraphs of his speech: 79. What the applicant claims, however, is an article 2 Convention right under the Act to have his fathers death investigated even though, as he accepts, the killing did not violate, and is not to be regarded as having violated, any article 2 Convention right under the Act. Such a claim is fatally flawed and must be rejected. 80. Like Lord Brown I am doubtful whether, even in international law terms, there was by October 2000 any continuing breach of the relatives right to an effective investigation of Gervaise McKerrs death under article 2 of the Convention. But, even supposing that there was, that continuing breach of an international obligation was not turned into a continuing breach of an article 2 Convention right in domestic law when the Act came into force. Any breach that there was remained a breach in international law and nothing more. The applicant relies on the Act as part of the domestic law of Northern Ireland. Under the Act the right to an investigation, deriving from an article 2 Convention right, presupposes that the killing could have been in violation of that selfsame Convention right. So, when the applicants father was killed in 1982, his relatives had no right to an investigation under the Act. Moreover, since the Act is not retroactive, they are not now to be regarded as having had such a right in 1982 or at any time after that. Conversely, the Secretary of State is not to be regarded as having been in breach, or continuing breach, of such a right either in 1982 or at any time after that. 81. What the applicant is really saying, therefore, is that, when the Act came into force, it conferred on him a right under article 2 to have his fathers death investigated even though his killing was not, and is not to be regarded as having been, in breach of any article 2 Convention right under the Act. Therefore, the applicant is not asking the courts to apply the Act according to its terms, but to amend them so as to fit this case. That cannot be done. If Parliament had intended the rights under article 2 to be split up, with the Act applying differently to the different aspects, then it would have provided for this expressly. The potential objections are obvious. It would be curious to give a right, under the Act, to an investigation of a killing to which the Act did not apply. If there were to be such a right to an investigation, how far back would it go? Speculation is fruitless: what matters is that Parliament could have made, but did not make, any such transitional provision. The obvious conclusion is that the right to an investigation under the Act is confined to deaths which, having occurred after the commencement of the Act, may be found to be unlawful under the Act. The applicant seeks to contradict the policy of Parliament. There were a number of strands in this reasoning. The one that most closely echoed the reasoning of the Strasbourg Court in Moldovan was that if the Act did not apply at the time of the death, the Act could not sensibly impose an obligation to have an investigation into the circumstances of the death. But Lord Rodger also based his decision on an objective assessment of what Parliament must have intended. Lord Brown, at paras 88 and 89, referred to the object of the procedural investigation as set out by the Strasbourg Court in McKerr at para 111. He observed that the article 2 obligation asserted was a procedural obligation properly to be regarded as secondary or ancillary or adjectival to the substantive obligation to protect life, an obligation arising directly out of the loss of a life. Lord Brown then held that because the obligation to investigate was linked to the death it could not arise under domestic law: The duty to investigate is, in short, necessarily linked to the death itself and cannot arise under domestic law save in respect of a death occurring at a time when article 2 rights were enforceable under domestic law, ie on and after 2 October 2000. The issue in McKerr was whether, on true construction of the HRA, the article 2 procedural obligation could give rise to obligations under the Act after the Act had come into force notwithstanding that the death that triggered that obligation had occurred before the Act came into force. The House of Lords gave a negative answer to that question. In doing so their reasoning echoed that of the Strasbourg Court when giving a negative answer to the different question of whether the procedural obligation could arise under the Convention after it came into force in a particular state when the death that triggered the obligation occurred before the Convention had come into force in respect of that state. The echo was, however, unconscious. Moldovan was not referred to in McKerr and no analogy was drawn with the principle established by that decision. Further developments at Strasbourg before ilih In Voroshilov the Court applied, and extended, the reasoning in Moldovan in relation to an application that alleged breach of the procedural obligation in respect of a breach of the substantive obligation under article 3. The applicant alleged that he had been tortured by the police in 1997, the year before the Convention came into force in respect of the Russian Federation. Criminal proceedings were commenced in 1997 but had not concluded. The applicant claimed that the state had failed to conduct an adequate investigation into his treatment. The Court held the applicants complaint inadmissible for the following reasons: The Court observes that the procedural obligation under article 3 arises where an individual makes a credible assertion of having suffered treatment contrary to article 3 (see Labita, cited above). However, since the Court is prevented from examining the applicants assertions relating to the events outside its jurisdiction ratione temporis, it is unable to reach a conclusion as to whether the applicant has made a credible assertion as required by the above provision. Accordingly, it cannot examine whether or not the Russian authorities had an obligation under the Convention to conduct an effective investigation in the present case (see Moldovan v Romania (Application No 41138/98, 13 March 2001) Likewise the alleged failure to conduct the investigation cannot be held to constitute a continuous situation raising an issue under article 3 in the present case, since the Court is unable to conclude that such an obligation existed. The Court applied similar reasoning to the same effect in Kholodov. The Strasbourg Court gave further consideration to the object of the procedural obligation in Angelova and Iliev v Bulgaria (Application No 55523/00) (unreported) 26 July 2007. The applicants were the mother and brother of a Roma man who had been stabbed to death by a gang of teenagers. There was no suggestion that the killing itself was accompanied by any direct involvement of the state. The applicants complained, however, of inadequacies in the investigation of the crime carried out by the police. The Court held at para 93 that the absence of any direct state responsibility for the death did not exclude the applicability of section 2. The Convention imposed a duty to secure the right to life by putting in place effective criminal law provisions to deter the commission of offences backed by law enforcement machinery. The Court continued at para 94: The Court reiterates that in the circumstances of the present case this obligation requires that there should be some form of effective official investigation when there is reason to believe that an individual has sustained life threatening injuries in suspicious circumstances. The investigation must be capable of establishing the cause of the injuries and the identification of those responsible with a view to their punishment. Where death results, as in the present case, the investigation assumes even greater importance, having regard to the fact that the essential purpose of such an investigation is to secure the effective implementation of the domestic laws which protect the right to life. The Court added at para 98 that it was particularly important that the investigation should be pursued with vigour and impartiality where the attack was racially motivated. This was a further formulation of the purpose of the procedural investigation, whose effect was to treat the duty to investigate almost as part of the substantive duty imposed on the state by article 2 to take positive action to protect life. I have drawn attention in para 20 above to the Commissions finding in McDaid that the article 2 procedural obligation to hold an investigation was not a continuing obligation. In Brecknell v United Kingdom (2007) 46 EHRR 957 the Court considered the circumstances in which that obligation might be revived. The applicant was the widow of a man gunned down by loyalist gunmen in 1975. Investigations took place and consideration was given to criminal prosecutions, but these were concluded in 1981. In 1999 and thereafter further evidence came to light suggesting the possibility of RUC and UDR collusion with loyalist paramilitaries. The applicant contended that this revived the procedural obligation. The Court upheld this contention. It ruled at para 70 that if article 2 did not impose the obligation to pursue an investigation into an incident, the fact that the State chose to pursue some form of inquiry did not have the effect of imposing article 2 standards on the proceedings. The Court then ruled, at para 71: With those considerations in mind, the Court takes the view that where there is a plausible, or credible, allegation, piece of evidence or item of information relevant to the identification, and eventual prosecution or punishment of the perpetrator of an unlawful killing, the authorities are under an obligation to take further investigative measures. The steps that it will be reasonable to take will vary considerably with the facts of the situation. The lapse of time will, inevitably, be an obstacle as regards, for example, the location of witnesses and the ability of witnesses to recall events reliably. Such an investigation may in some cases, reasonably, be restricted to verifying the credibility of the source, or of the purported new evidence. The Court would further underline that, in light of the primary purpose of any renewed investigative efforts (see para 65 above), the authorities are entitled to take into account the prospects of success of any prosecution. The importance of the right under article 2 does not justify the lodging, willy nilly, of proceedings. Meanwhile, the Grand Chamber had had occasion to reconsider its temporal jurisdiction in Blei v Croatia (2006) 43 EHRR 1038. The claimant complained, inter alia, of violation of article 8 as a result of being deprived of a protected tenancy in her absence. Litigation in relation to this continued until 15 February 1996, when the applicant lost an appeal to the Supreme Court. She then lodged a constitutional complaint with the Constitutional Court, which was dismissed on 8 November 1999. Croatia acceded to the Convention on 5 November 1997. The State objected that the Court had no jurisdiction to hear the applicants complaint ratione temporis. The Court held at paras 77 and 82 that this issue fell to be determined by reference to the facts constitutive of the alleged interference. In consequence it was essential to identify, in each specific case, the exact time of the alleged interference. The Court ruled that the complaint to the Constitutional Court did not constitute part of the alleged interference. It was an attempt to obtain a remedy for it. It followed that all the matters complained of had occurred before the date of accession and the Court had no jurisdiction. The decision of the Grand Chamber in ilih The decision in ilih was reached by a Grand Chamber of 17, of which 7 delivered concurring opinions and 2 dissented. The applicants were the parents of a young man who died as a result of medical negligence on 19 May 1993. The applicants made repeated attempts to bring criminal proceedings, which foundered finally and conclusively on 14 July 2003. They also pursued civil proceedings, which reached an unsuccessful conclusion on 10 July 2008. They then lodged a constitutional appeal with the Constitutional Court, which was still pending at the time of the Strasbourg judgment. Slovenia acceded to the Convention on 28 June 1994. The issue before the Grand Chamber was whether, in these circumstances, the applicants could demonstrate that alleged deficiencies in the criminal proceedings after that date violated the procedural obligation of article 2. The Grand Chamber considered the prior jurisprudence and noted that it was faced with a conflict between Moldovan, Voroshilov and Kholodov on the one hand and Balasoiu on the other. At para 152 the Grand Chamber analysed its task as being to determine whether the procedural obligations arising under article 2 can be seen as being detachable from the substantive act and capable of coming into play in respect of deaths which occurred prior to the critical date or alternatively whether they are so inextricably linked to the substantive obligation that an issue may only arise in respect of deaths which occur after that date. The Grand Chambers conclusion appears from the following passage of its judgment: 159. Against this background, the Court concludes that the procedural obligation to carry out an effective investigation under article 2 has evolved into a separate and autonomous duty. Although it is triggered by the acts concerning the substantive aspects of article 2 it can give rise to a finding of a separate and independent interference within the meaning of the Blei judgment . In this sense it can be considered to be a detachable obligation arising out of article 2 capable of binding the state even when the death took place before the critical date. 161. However, having regard to the principle of legal certainty, the Courts temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended. 162. First, it is clear that, where the death occurred before the critical date, only procedural acts and/or omissions occurring after that date can fall within the Courts temporal jurisdiction. 163. Second, there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent state for the procedural obligations imposed by article 2 to come into effect. Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account (Vo, cited above, para 89) will have been or ought to have been carried out after the critical date. However, the Court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner. Applying those principles, the Grand Chamber held that the applicants complaint fell within the Courts temporal jurisdiction. The considerations that led to this conclusion were as follows: 165. Applying the above principles to the circumstances of the present case, the Court notes that the death of the applicants son occurred only a little more than a year before the entry into force of the Convention in respect of Slovenia, while, with the exception of the preliminary investigation, all the criminal and civil proceedings were initiated and conducted after that date. The criminal proceedings opened effectively on 26 April 1996 (see para 23 above) following the applicant's request of 30 November 1995, and the civil proceedings were instituted in 1995 (see para 48 above) and are still pending. I am not alone in having difficulty in identifying the precise circumstances in which the procedural obligation attaches as a separate and autonomous duty. Similar difficulty was expressed by those who delivered concurring opinions, five of them commenting that the application of the relevant principles was likely to be difficult, debatable and unforeseeable. It is, however, necessary to identify what the Grand Chamber decided in order to determine how this impacts on the decision of the House of Lords in McKerr. I can start by stating with some confidence what the Grand Chamber did not decide. It did not decide that there is a continuing obligation to hold a procedural investigation that persists from the time of the death until the obligation has been satisfied. On the contrary it proceeded on the premise that there was no such obligation. That is quite plain from an earlier passage in the judgment. At para 157 the Grand Chamber stated: Moreover, while it is normally death in suspicious circumstances that triggers the procedural obligation under article 2, this obligation binds the state throughout the period in which the authorities can reasonably be expected to take measures with an aim to elucidate the circumstances of death and establish responsibility for it (see, mutatis mutandis, Brecknell v United Kingdom 46 EHRR 957, paras 66 72 and Hackett v United Kingdom (Application No 34698/04) 10 May 2005). This leads me directly to my next conclusion. The procedural acts and/or omissions referred to in para 162 relate to specific incidents of a particular process or procedure. Omissions cannot be read as applying to historic failings before the critical date that have not been remedied. This conclusion is based on the natural meaning of the phrase acts or omissions and is also required by the conclusion expressed at para 47 above. The meaning of each of the three sentences of para 163 is far from clear. The concept of a connection between a death and the entry into force of the Convention for the state in question is not an easy one if, as seems to be the case, this connection is more than purely temporal. The final sentence of the paragraph is totally Delphic and would seem designed to prevent the closing of the door on some unforeseen type of connection. I shall say no more about it. The second sentence is designed to explain the meaning of the first. In part the explanation seems to me to be simple. The obligation to comply with the procedural requirements of article 2 is to apply where a significant proportion of the procedural steps that article 2 requires (assuming that it applies) in fact take place after the Convention has come into force. This appears to be a free standing obligation. There is no temporal restriction on the obligation other than that the procedural steps take place after the Convention has come into force. Thus if a state decides to carry out those procedural steps long after the date of the death, they must have the attributes that article 2 requires. It is this obligation that is of potential relevance in the current case. The United Kingdom is not under a continuing obligation under article 2 to carry out an investigation into the deaths over 20 years ago of Martin McCaughey or Dessie Grew. But an inquest is going to be held into those deaths. As a matter of international obligation it is now apparent that the United Kingdom has come under a free standing obligation under article 2 to ensure that the inquest complies with the procedural requirements of that article, at least in so far as this is possible under domestic law. In ilih the Grand Chamber was satisfied that the two sets of proceedings that had been initiated were theoretically capable of leading to the establishment of the exact circumstances which had led to the death and potential responsibility for it at all levels, see para 125. The appeals before us have proceeded on the basis that the Coroner will be able, if so required, to conduct an inquest that satisfies the requirements of article 2. What of the requirement that the article 2 procedural obligation will apply where a significant proportion of the procedural steps required by the provisionought to have been carried out after the critical date? I think that the meaning of this is illuminated both by para 157 of the Grand Chambers judgment (see para 47 above) and by para 165 (see para 45 above). If the death occurs so soon before the date that the Convention takes effect that (assuming it to have been applicable) the article 2 obligation to hold an investigation would still have persisted, then that obligation will arise as a free standing obligation. I am fortified by the conclusions that I have reached about this difficult passage of the Grand Chambers judgment by the fact that it accords with the clearer statement of the relevant principles in the concurring opinion of Judge Lorenzen. The majority judgment was a radical departure from the reasoning of the Court in Moldovan, Voroshilov and Kholodov, and one that Judges Bratza and Trmen were unable to endorse, as they indicated in a powerful dissent. Sequels to ilih In Varnava v Turkey (Application Nos 16064/90 16066/90, 16068/90 16073/90) (unreported) 18 September 2009 the Court held that where an individual has disappeared in circumstances that raise a suspicion that he may have been killed, article 2 imposes a continuing duty to investigate the death. In that case the duty was said to have persisted for 34 years since the disappearance of a number of Greek Cypriots at the time of the Turkish invasion of Northern Cyprus. An example of that duty was the obligation to investigate a mass grave discovered in 2007. The activities of the Serious Crimes Review Team and the Historical Enquiry Team in relation to historic deaths in Northern Ireland was given by way of illustration of what was sufficient to satisfy this obligation: see para 192. Lyubov Efimenko v Ukraine (Application No 75726/01) (unreported) 25 November 2010 is a very recent example of the application of the procedural obligation as identified in ilih. The applicant was the mother of a young man who was robbed and killed in an attack in a bar. He died on 6 June 1993, four years and three months before the Convention came into force in relation to Ukraine. Investigations were suspended shortly after his death, but resumed after the Convention had come into force. The Court held that the resumed investigations fell within its jurisdiction ratione temporis and that article 2 applied to them. McKerr reviewed The precise meaning of the most difficult passage of the Grand Chambers judgment, which I have analysed at para 52 above, has no implications for the United Kingdom, either directly or by analogy, for we ratified the Convention over half a century ago and incorporated it into our domestic law over a decade ago. What matters is that this country is under an international obligation under the Convention to ensure that, if it does hold an inquest into an historic death, that inquest complies with the procedural obligations of article 2. The issue directly raised by these appeals is whether that obligation is, on true interpretation of the HRA, one to which that Act applies. In considering that issue, however, it is right to bear in mind that a similar issue arises in respect of the article 2 procedural obligation that the Strasbourg Court has held can revive on the discovery of fresh facts and which persists in respect of a suspicious disappearance. The exercise that these appeals involve, as was also the case in McKerr, is one of deducing from the terms of the HRA, and from any relevant Parliamentary or background material, the presumed intention of Parliament as to the ambit of application of that Act. I say presumed intention because Parliament cannot be expected to have foreseen the manner in which the Strasbourg Court would develop the ambit of particular Convention rights. It is, however, possible to determine certain principles that Parliament intended should govern the application of the legislation. There are two relevant principles, and they are potentially in conflict. The first principle is that the HRA does not have retroactive effect (the non retroactive principle). It does not permit a claimant to bring a claim for breach of a Convention obligation that occurred before the Act came into force. I have at para 26 referred to the authorities that support that principle, and need say no more about it. The second principle is that the ambit of application of the Act should mirror that of the Convention (the mirror principle). The object of the Act was to bring human rights home. This will only be achieved if claimants are able to bring in this jurisdiction claims that they would otherwise be permitted to bring before the Strasbourg Court. This principle was applied in relation to the territorial ambit of the HRA in R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2005] UKHL 57; [2006] 1 AC 529 and R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26; [2008] AC 153. As Lord Rodger remarked in the latter case at para 57 in case of doubt, the Act should be read so as to promote, not so as to defeat or impair, its central purpose. Lord Carswell added at para 98 that statements made both in and outside Parliament pointed very clearly to a general intention to equate the scope of the Act with the scope of the Convention and Lord Brown at para 140 protested at an interpretation of the HRA that required human rights complaints to be taken to Strasbourg rather than brought under the Act. The two principles were in conflict in McKerr and the non retroactive principle prevailed. It precluded the courts of this country from entertaining a claim by Mr McKerr in respect of the historic breaches of article 2 which pre dated the coming into force of the HRA. Those human rights were not brought home and he had to go off to Strasbourg to assert them. His subsequent domestic claim raised the spectre that claims could be made under the HRA for breach of a continuing duty to hold an inquest in respect of any death that had occurred since 1951 when this country ratified the Convention, founded on the possibility that the death had involved a breach of the substantive obligation imposed by article 2. In these circumstances it is not surprising that the House of Lords applied the non retroactive principle rather than the mirror principle and held that Mr McKerrs claim did not fall within the scope of the HRA. The close nexus between the post HRA obligation and the pre HRA obligation was of the essence of the approach of most of their Lordships to their decision on the ambit of the Act: see Lord Nicholls reference to treating all the article 2 rights as part of a single whole (para 27 above), his reference to the continuing existence of a right arising under the Convention (para 28 above), Lord Rodgers reference to rights under article 2 being split up (para 32 above) and my first quotation from the speech of Lord Brown (para 34 above). What difference has ilih made? I believe that the most significant feature of the decision in ilih is that it makes it quite clear that the article 2 procedural obligation is not an obligation that continues indefinitely. The spectre that the House of Lords confronted in McKerr is shown to be a chimera. Just because there has been an historic failure to comply with the procedural obligation imposed by article 2 it does not follow that there is an obligation to satisfy that obligation now. Insofar as article 2 imposes any obligation, this is a new, free standing obligation that arises by reason of current events. The relevant event in these appeals is the fact that the Coroner is to hold an inquest into Martin McCaugheys and Dessie Grews deaths. ilih establishes that this event gives rise to a free standing obligation to ensure that the inquest satisfies the procedural requirements of article 2. That obligation is not premised on the need to explore the possibility of unlawful state involvement in the death. The development of the law by the Strasbourg Court has accorded to the procedural obligation a more general objective than this, albeit that in the circumstances of these appeals state involvement is likely to be a critical area of investigation. Is the presumed intention of Parliament when enacting the HRA that there should be no domestic requirement to comply with this international obligation? This is a very different question to that considered by the House of Lords in McKerr, and so far as I am concerned it produces a different answer. The mirror principle should prevail. It would not be satisfactory for the Coroner to conduct an inquest that did not satisfy the requirements of article 2, leaving open the possibility of the appellants making a claim against the United Kingdom before the Strasbourg Court. On the natural meaning of the provisions of the HRA they apply to any obligation that currently arises under article 2. These appeals are concerned with such an obligation. The mirror principle reinforces an interpretation that does not exclude this obligation from the ambit of the HRA. It may be that this involves a departure from the decision of the House of Lords in McKerr. I am inclined to think that it does. If so, it is a departure that it is right to make having regard to the fact that the decision in McKerr was premised on the existence of an international obligation which was very different from that which is now seen to exist. I am not dissuaded from this conclusion by the fact that it opens the door to the argument that the article 2 obligation to re open an investigation because of the discovery of fresh facts as held in Brecknell, or the article 2 continuing obligation to investigate a suspicious disappearance as held in Varnava, also fall within the scope of the HRA. For these reasons I would allow these appeals. LORD HOPE The decision of the Grand Chamber of the Strasbourg Court in ilih v Slovenia (2009) 49 EHRR 996 requires us to take a fresh look at the present state of our domestic law about the holding of inquests in cases where the death occurred before the Human Rights Act 1998 was commenced on 2 October 2000. There are two issues. The first is whether article 2 of the European Convention on Human Rights as interpreted in McCann v United Kingdom (1995) 21 EHRR 97, para 161 gives rise to a procedural obligation on the state to carry out an effective public investigation into the circumstances of a death where agents of the state are, or may be, in some way implicated, even though because the death occurred before 2 October 2000 the substantive obligation does not apply to it in domestic law. The second is whether, if there is no such obligation in domestic law but the state nevertheless decides to carry out an investigation into a pre commencement death of that kind, the investigation which it carries out must meet the procedural requirements of article 2 as explained in R (Middleton) v West Somerset Coroner [2004] UKHL 10, [2004] 2 AC 182. These questions require us to attempt to understand what the Grand Chambers decision in ilih means, and then to see how the message that it conveys can be fitted into domestic law. As we are concerned with pre commencement deaths, the focus must be on the transitional provisions in section 22(4) of the 1998 Act. The struggle which some members of the House of Lords, including myself, had with those provisions are now a distant memory: see R v Kansal (No 2) [2002] 2 AC 69; R v Lambert [2002] 2 AC 545; Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816. But they must now be addressed again, as the decision in ilih appears to have detached the procedural obligation under article 2 from the substantive obligation. The question is whether giving effect to that decision in either of the two ways referred to above would contravene the policy choice by Parliament to which section 22(4) of the Act gave effect. The policy choice was that, save to the limited extent referred to in section 22(4), the Act was not to apply retrospectively. As Lord Nicholls of Birkenhead said in Wilson v First County Trust Ltd, para 12, sections 6 to 9 are forward looking in their reach: one would not expect a statute promoting human rights values to render unlawful acts which were lawful when done. I would add that, as section 6(6) provides that an act includes a failure to act, one would not expect it to apply to failures to act which were not unlawful when the alleged failure occurred. The deaths with which these appeals are concerned took place in October 1990. The papers were passed to the Coroner in 1994, but they were incomplete as they omitted statements from the soldiers who committed the killings. Those statements were not provided to him until 2002. It was not until 14 September 2009 that the Coroner held the preliminary hearing in which he was asked to hold an inquest which complied with the procedural requirements of article 2. It is common ground that, as the deaths occurred before article 2 was made part of domestic law, the substantive aspects of that article cannot be applied to them under the Human Rights Act. Section 22(4) of the Act precludes this. Sections 6(1) and 7(1)(a) of the Act do not apply because the killings occurred before the Act came into force. Any attempt that might have been made in domestic law prior to 2 October 2000 to require the Coroner to carry out an investigation into them that met the requirements of article 2 would have been bound to fail. Human rights had not yet been brought home. The simple fact is that from the date when the deaths occurred to the date immediately before the Act came into force there was no obligation to investigate these deaths in the manner that meets the procedural requirements of article 2 under domestic law. The House of Lords held in In re McKerr [2004] 1 WLR 807 that, where there had been no breach of the procedural obligation before 2 October 2000, there could be no continuing breach thereafter. But the proceedings that the Coroner was asked to undertake when the papers were passed to him were still pending when the Human Rights Act came into force, and they are still pending. In ilih, para 159 the Grand Chamber held that the procedural obligation to carry out an effective investigation under article 2 has evolved into a separate and autonomous duty. It can give rise to a finding of a separate and independent interference with the article 2 right which is capable of binding a State even when the death took place before it ratified the Convention. In so doing, as Judges Bratza and Trmen pointed out in their joint dissenting opinion, it departed from the general rule that the provisions of the Convention do not bind a contracting party in relation to any act or fact which took place before the date of their entry into force with regard to that party. The question is whether section 22(4) of the Human Rights Act permits that novel approach to be adopted in domestic law. In para 21 of McKerr Lord Nicholls said that the obligation to hold an investigation is an obligation triggered by the occurrence of a violent death: The obligation to hold an investigation does not exist in the absence of such a death. The obligation is consequential upon the death. If the death itself is not within the reach of section 6, because it occurred before the Act came into force, it would be surprising if section 6 applied to an obligation consequential upon the death. So, for the new cause of action in section 6 to apply to it, the death which is the subject of investigation must itself be a death to which section 6 applies. The event giving rise to the article 2 obligation to investigate must have occurred after the Act came into effect. He went on in para 22 to say that in this way, for the transitional purpose, all obligations arising under article 2 must be treated as parts of a single whole: Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death). The reasons given by Lord Hoffmann at para 67, by Lord Rodger of Earlsferry at para 81 and by Lord Brown of Eaton under Heywood at para 89, as I read them, are to the same effect. Lord Rodger said that, if Parliament had intended the rights under article 2 to be split up, with the Act applying differently to the different aspects, it would have provided for this expressly. When it made those observations the House was, of course, approaching the matter as one of domestic law. But it was doing so at a time when there was no indication in the jurisprudence of the Strasbourg Court that the procedural obligation under article 2 was detachable from the substantive obligation. The matter was being approached on the assumption, as Lord Nicholls made clear in para 21 of his speech, that it was not. The question whether or not those obligations can be detached from one another is pre eminently a matter for Strasbourg. Section 2(1) of the Act tells us that in determining any question that has arisen in connection with a Convention right we must take into account any judgment of the European Court of Human Rights so far as, in our opinion, it is relevant to the proceedings in which the question has arisen. The judgment in ilih is such a judgment. If we can find a clear ruling on the point in that judgment we should follow it, even if this contradicts the assumption on which the House based its decision in McKerr. We are not absolutely bound to do so, as section 2(1) does not go that far. But our practice is to follow the guidance of the international court unless there are strong reasons for not doing so. As Lord Bingham of Cornhill said in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20, its case law is not strictly binding but courts should, in the absence of some special circumstances, follow any clear and constant jurisprudence of the Strasbourg court as the Convention is an international instrument, the correct interpretation of which can be authoritatively expounded only by that court. He added that it followed that a national court subject to a duty such as that imposed by section 2 should not without strong reason dilute or weaken the effect of the Strasbourg case law. Only the most starry eyed admirer of the Strasbourg court could describe the guidance that the Grand Chamber offered in para 163 of its judgment in ilih as clear. Judge Lorenzens criticisms in his concurring opinion of the reasoning of the majority and the powerful dissenting opinion of Judges Bratza and Trmen show that it has many shortcomings. But I do not think that it is difficult to identify the point that matters for our purposes. In para 159 the Court concluded from the fact that it had consistently examined the question of procedural obligations under article 2 separately from the question of compliance with the substantive obligation, and where appropriate found a separate violation of article 2 on that account, as revealed by the decisions listed in para 158, that the procedural obligation to carry out an effective investigation under article 2 had evolved into a separate and autonomous duty. Although it was triggered by the acts concerning the substantive aspects of article 2, it could be considered to be a detachable obligation arising out of that article which was capable of binding a state even when the death took place before it ratified the Convention. Support for the view that this was the essential basis for the decision is to be found in para 9 of the dissenting opinion, where Judges Bratza and Trmen said that they could not agree with the reasoning of the majority which was founded on the alleged detachability of the procedural obligation from the substantive obligation. In para O IV14 they said that, while they had no quarrel with the idea that the procedural obligation had evolved into a separate and autonomous duty, they differed from them as to their view that it was detachable from the death which gives rise to it. While the working out of the concept as indicated in para 163 of the Courts judgment is far from clear, the ruling that the procedural obligation is detachable from the death is not. I return then to the two questions which I identified in para 65, above. As to the first question, I see no reason to disagree with the way it was answered in McKerr. One must distinguish between rights arising under the Convention and rights created by the Act by reference to the Convention. The effect of section 22(4) of the Act is that the rights created by the Act came into existence for the first time on 2 October 2000: Lord Nicholls in McKerr, para 25. The right to an investigation under the Act in domestic law is confined to deaths which, having occurred after the commencement of the Act, may be found to be unlawful under the Act: Lord Rodger in McKerr, para 81. The trigger that gives rise to the procedural obligation under the Convention is prevented from operating in domestic law in the case of a pre commencement death by the bar that has been applied by section 22(4). I agree with Lord Rodger (see para 161, below) that, if it were otherwise, a time limit to identify which deaths trigger the duty in domestic law, and which do not, would have had to have been written into the Act. There is none, and I do not think that we should be deflected from holding fast to that position by the way the Strasbourg court has attempted to work out the limits of its own temporal jurisdiction for its own purposes in para 163 of ilih. The concept of a temporal connection with a pre commencement event, so as to bring the event itself within the scope of domestic law, is entirely alien to the system that the Act lays down. As I see it, however, the second question can and does admit of a different answer. We are told by Strasbourg that the procedural obligation, as now understood, has a life of its own as it is detachable from the substantive obligation. Furthermore, there is no need for a trigger to bring the obligation into operation in this case, as it has been decided that an inquest is going to be held into these deaths. The objection that this would be giving retrospective operation to section 6 of the 1998 Act does not arise. The question whether the inquests must satisfy the procedural requirements of article 2 otherwise they will be unlawful in terms of that section is being directed to something that has yet to take place. The answer to it is not to be found in McKerr, as the House treated the procedural and the substantive obligations in that case as inseparable. Lord Rodger says (see para 155, below) that to approach the issue in this way does not reflect the decision in ilih. I, for my part, think that it does. It is true that it does not say this in terms. What the decision seeks to do in para 163 is to identify those pre ratification deaths that will bring the procedural obligation into effect after the date of ratification. Its concern is with the circumstances that the Strasbourg court will accept jurisdiction in such cases. The question whether there is an article 2 obligation to investigate these deaths in domestic law is a different question. But the holding of inquests into the deaths in this case will be a procedural act which the state itself has decided should take place and, as the deaths were the result of acts by agents of the state, the circumstances meet the test for an article 2 inquiry that was identified in R (Middleton) v West Somerset Coroner [2004] 2 AC 182, para 3. These pre commencement deaths could not have given rise to any violation of the obligations of the state under article 2 in domestic law. But I do not think that we can ignore the possibility that they may have violated the deceaseds article 2 rights under the Convention. That certainly is how the matter would be viewed in Strasbourg. There is no doubt that these deaths fall within the jurisdiction of the Strasbourg court, as the events that have happened since the appellants lodged their application with that court have shown. The effect of ilih is to breathe life into the procedural obligation post commencement in a way that domestic law can recognise and give effect to. It may be said that to extend the procedural obligation to these cases would be to give a more generous interpretation to the judgment in ilih than it deserves. I think however that it would be unduly cautious for us not to do this. The whole idea of bringing rights home was to enable effect to be given to the Convention rights in domestic law. I do not think that we need any further guidance on this matter from Strasbourg. As there is nothing in the wording of the 1998 Act to prevent us from directing that when he conducts these inquiries the Coroner must comply with the procedural obligation under article 2, I would hold that we should do so. I would allow the appeals and direct the Coroner to hold an inquiry in each case that complies with the states procedural obligation under article 2 of the Convention. LADY HALE In ilih v Slovenia (2009) 49 EHRR 996, the Grand Chamber of the European Court of Human Rights decided that the procedural obligation under article 2 of the Convention, to investigate deaths where the state might have been in breach of its obligation to protect the right to life, was separate or detachable from the substantive obligation to protect life. In certain ill defined circumstances, therefore, that procedural obligation might still be in existence after the date on which a new Member State had acceded to the Convention, and the Court would have jurisdiction to investigate whether or not it had been broken, even though the death to which it related had taken place before that date. This controversial decision undoubtedly broke new ground. But at first sight it has nothing to do with the United Kingdom. The United Kingdom accepted the right of individual petition to the Strasbourg Court as from 14 January 1966. The deaths in question in these appeals took place on 9 October 1990. So there is no doubt that the Strasbourg Court has jurisdiction to decide whether the United Kingdom is in breach of any of its obligations under article 2. The ilih case makes no difference to that. The obligations of the United Kingdom in international law have not changed. The question, however, is whether the obligations of United Kingdom public authorities in United Kingdom domestic law have changed. This would not matter if all inquests were automatically sufficient to comply with the procedural obligation in article 2. Unfortunately, there remain some differences between those which do, and those which do not, have to comply. Those differences centre on the scope of the available verdict as to how the deceased met his death: in a conventional inquest, how means only by what means whereas in an article 2 compliant inquest it must also encompass in what broad circumstances: see R (Middleton) v West Somerset Coroner [2004] UKHL 10, [2004] 2 AC 182. As Lord Bingham made clear in Jordan v Lord Chancellor [2007] UKHL 14, [2007] 2 AC 226, para 37, the scope of the inquiry is a different matter: . the purpose of an inquest is to investigate fully and explore publicly the facts pertaining to a death occurring in suspicious, unnatural or violent circumstances, or where the deceased was in the custody of the state, with the help of a jury in some of the most serious classes of case. The coroner must decide how widely the inquiry should range to elicit the facts pertinent to the circumstances of the death and responsibility for it. Furthermore, at para 39, there is nothing to prevent a jury finding facts directly relevant to the cause of death which may point very strongly towards a conclusion that criminal liability exists or does not exist. And, at para 40, if those factual findings point towards the commission of a criminal offence, or it appears to the coroner that an offence may have been committed, the coroners duty . is to report promptly to the Director of Public Prosecutions . In this case the coroner gave a preliminary ruling on the scope of the inquest which clearly encompassed the purpose and planning of the surveillance operation which led to these deaths. The appellants were content with this but the Police Service of Northern Ireland argued that it should be made clear that this would be a conventional inquest, concerned in producing a verdict on how the deceased met their deaths, with by what means rather than in what broad circumstances. Hence, in addition to a declaration on delay, which is no longer an issue, the appellants sought a declaration that the coroner is obliged to conduct the inquest in an article 2 compliant manner. It is the refusal of that declaration which has led to these appeals. The Human Rights Act 1998 came into force on 2 October 2000. It became unlawful for a public authority to act in a way which is incompatible with a convention right: section 6(1). A person claiming that a public authority has acted unlawfully may (a) bring proceedings against the authority, or (b) rely on the Convention right or rights concerned in any legal proceedings: section 7(1). However, with one exception, this does not apply to an act taking place before section 7(1) came into force: section 22(4). If the act in question is the death itself, then there is no remedy for deaths taking place before 2 October 2000 (In re McKerr [2004] UKHL 12, [2004] 1 WLR 807) nor does the interpretative obligation in section 3(1) apply (R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189). The exception applies to proceedings brought by or at the instigation of a public authority; in such proceedings, a victim may rely on a Convention right whenever the act in question took place: section 22(4) read with section 7(1)(b). It was argued in Hurst that an inquest was proceedings brought by or at the instigation of a public authority and that the mother of the deceased was therefore entitled to rely on her Convention right to an article 2 compliant inquiry whenever the death took place. That argument was roundly rejected (at paras 60 to 64) on the basis that the exception was meant to allow people against whom a prosecution or civil proceedings had been brought to rely upon his Convention rights to defend himself against the state: Convention rights may be used as a shield to defeat proceedings brought against victims by public authorities, but not as a sword (Lord Brown of Eaton under Heywood, at para 62). In Hurst, the mother was seeking to use the Human Rights Act to compel the coroner to re open an inquest when he had thought that it would serve no useful purpose. Unless she succeeded, there would be no proceedings. Similarly, in McKerr, the son of the deceased was seeking to use the Act to compel the holding of an inquiry which would not otherwise take place. In this case, by contrast, there is indeed to be an inquest. If the application of the exception in section 22(4) had first arisen in this context, I do wonder whether the result would have been the same. Section 7(1)(b) does not require that the proceedings are brought against the victim: it simply says that the victim may rely upon the Convention right in any legal proceedings. And it can plausibly be argued that, for the purpose of section 22(4), an inquest is a legal proceeding brought by a public authority, the coroner. Thus, even if the act in question is the death, were it not for Hurst, I would have been inclined to hold that where there is an inquest on foot it must be conducted in an article 2 compliant way, whenever the death took place. Unsurprisingly, in the light of Hurst, that is not how Ms Quinlivan puts the appellants case. I mention the point only because it leads to the same result as that at which I have arrived by another route. This is where the decision in ilih comes in. The obligation to hold an article 2 compliant inquiry into certain deaths has now to be understood to be separate from the obligation to protect life. The Attorney General complains that this is wrong: the object of the duty to hold an inquiry is to find out what happened, who was responsible, and to hold those responsible to account for the breach of their substantive obligations under article 2. If what they did cannot be an actionable breach of those obligations, because the Human Rights Act was not then in force, it makes no sense to oblige the state to hold an inquiry into whether or not there was a breach. That seems to me to take an unduly narrow view of the purpose of an article 2 investigation. Where deaths take place for which the state may bear some responsibility, a fortiori where, as here, deaths take place at the hands of state agents, there is always a useful purpose in finding out, so far as is possible, what took place, so that everyone, but in particular the relatives, may learn the truth about what took place, and lessons may be learned for the future. As the Court observed in ilih, at para 156, the procedural obligation has not been considered dependent on whether the State is ultimately found to be responsible for the death. The serious criticism of the ilih decision is that it leaves so much uncertainty about when the investigative duty continues. As the Court says in paragraph 161 of its judgment, the obligation cannot be open ended. But, with respect, I agree with the concurring opinion of Judge Lorenzen, when he complains that the criteria laid down in paragraph 163 of the Courts judgment (quoted by Lord Phillips at para 44 above) are not easy to understand. However, I also agree with him that in one respect, they are quite clear. That is, in his words, where the event occurred and an investigation was initiated before the entry into force of the Convention, but a significant part of that investigation was only carried out after that date (p 1045, para O I4). That is this case. The Coroner began his inquiries at the very latest once the Director of Public Prosecutions had announced on 2 April 1993 that there was to be no prosecution. But for a variety of reasons things have proceeded very slowly since then and a significant part of the investigation, in particular the inquest, has still to take place. I do not see this as involving the retrospective operation of the 1998 Act. As public authorities, the coroner and the court have now to act compatibly with the Convention rights. The question is what the Convention rights now entail. It has always been clear that the content of the Convention rights can evolve over time. When the 1998 Act was passed, Parliament must be taken to have known of the jurisprudence which described the Convention as a living instrument in Tyrer v United Kingdom (1978) 2 EHRR 1; which implied further rights into those expressed in Golder v United Kingdom (1975) 1 EHRR 524; which developed autonomous concepts in Engel v The Netherlands (1976) 1 EHRR 647; which recognised positive obligations in Marckx v Belgium (1979) 2 EHRR 330; and which insisted that rights be made practical and effective rather than theoretical and illusory in Airey v Ireland (1979) 2 EHRR 305. In the light of that well known jurisprudence, it cannot have been Parliaments intention that the Convention rights enshrined in the 1998 Act were to remain set in stone as they were when the Act was passed or when it came into force. It must have been intended, as Lord Bingham famously put it in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20, that the national courts would, at the very least, keep pace with the Strasbourg jurisprudence as it evolves over time. If the evolutive interpretation of the Convention rights means that they now mean something different from what they meant when the 1998 Act was passed, then it is our duty to give effect to their current meaning, rather than to the one they had before. In Bellinger v Bellinger [2003] UKHL 21, [2003] 2 AC 467, to take an obvious example, the House of Lords made a declaration that section 11(c) of the Matrimonial Causes Act 1973 was incompatible with the Convention rights, because in Goodwin v United Kingdom (2002) 35 EHRR 447, decided in July 2002, the Strasbourg court had finally held that the non recognition of a change of sex was in breach of articles 8 and 12 of the Convention. This was a change, albeit well telegraphed in advance, from its previous jurisprudence in Rees v United Kingdom (1986) 9 EHRR 56, Cossey v United Kingdom (1990) 13 EHRR 622, and Sheffield and Horsham v United Kingdom (1998) 27 EHRR 163. No one suggested that the Act did not apply. At the same time, of course, we are not obliged to follow that jurisprudence if there are good reasons to depart from it. We have not so far failed to follow a decision of the Grand Chamber; as Lord Rodger equally famously put it in Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269, para 98, Argentoratum locutum, iudicium finitum. But the day might come when we would find good reasons to do so. Despite the urgings of the Attorney General, however, I do not think there are such good reasons here. This case fits into the limited class of case identified by Judge Lorenzen in ilih. Accepting that this inquest must comply with the procedural requirements of article 2 does not require that old inquests be re opened (unless there is important new material) or that inquiries be held into historic deaths. The one case which does not quite fit into Judge Lorenzens formula is where there is a death before the relevant date and the decision to hold an inquest or other inquiry is taken after that date. To my mind that would still fit into the criterion of a significant proportion of the procedural steps required by this provision . will have been . carried out after the critical date. In other words, if there is now to be an inquiry into a death for which the state may bear some responsibility under article 2, it should be conducted in an article 2 compliant way. The coroner himself obviously wishes to conduct these inquests in way which complies with article 2. It will save a great many procedural arguments if he does. His concern before us was with the wider potential ramifications of ilih. I hope that these concerns are allayed by our judgments, which seek to provide a principled basis for drawing the line. For these reasons, I would allow this appeal and make the declaration sought by the appellants. LORD BROWN In 1995 the European Court of Human Rights decided that article 2 of the European Convention on Human Rights gives rise to a procedural obligation to hold an inquiry to specified standards into those deaths which occur in circumstances where the states responsibility is or may be engaged. Hitherto it has been understood that this obligation is secondary and ancillary to the death in question. True, it was recognised by Strasbourg as a free standing obligation. But that meant no more than that it was not dependent on the existence of a substantive violation of article 2. It was on that understanding that the House of Lords decided in In re McKerr [2004] 1 WLR 807 that no such procedural obligation can arise in respect of a death occurring before 2 October 2000 when the Human Rights Act 1998 took effect. The recent, post McKerr, decision of the Grand Chamber in ilih v Slovenia (2009) 49 EHRR 996 requires, however, submit the appellants, a fundamental change in that approach. Now it appears that the article 2 procedural obligation is not correctly to be understood as merely ancillary to a particular death but is rather to be seen as a separate and autonomous duty, a detachable obligation arising out of article 2 . even when the death took place before the critical date (para 159 of the courts judgment). In short, the court held that in point of time (and it is time which is all important in the present domestic context just as it was in the international context in which the court in ilih was determining its own temporal jurisdiction over subscribing states) the obligation may arise subsequent to the death requiring investigation and is not to be regarded as outwith the courts jurisdiction merely because the death itself preceded the courts assumption of jurisdiction. I acknowledge, as Lord Rodger points out in his powerful dissenting judgment, that we are here concerned with what Parliament chose to enact in the 1998 Act, not with what it might have chosen to enact. Equally, of course, we are concerned to decide the domestic courts jurisdiction under that Act, not the Strasbourg Courts jurisdiction under the Convention. All that said, by the same token that had McCann v United Kingdom (1995) 21 EHRR 97 been decided after, rather than before, the 1998 Act, we should still have accepted the need under domestic law to give effect to the newly discovered ancillary article 2 procedural obligation, so too it now seems to me right to construe the Act as recognising a domestic law obligation to give effect to what we now learn is a detachable article 2 procedural duty. As for the precise circumstances in which this detachable duty should henceforth be recognised to arise, this, I acknowledge, in the light of the deeply unsatisfactory purported delineation of the duty to be found at paras 161 163 of the Grand Chambers judgment in ilih, is more difficult. Our essential task must be to construe the Act in the context of Parliaments underlying intention that Convention obligations arising after 2 October 2000 should be enforceable here rather than have to be litigated in Strasbourg, but provided always that no particular difficulty results from events having occurred before 2 October 2000 hence Parliaments decision not to apply the Act retroactively save to the limited extent provided for by section 22(4). These considerations are, I believe, essentially those described by Lord Phillips (at paras 58 and 59 of his judgment) respectively as the mirror principle and the non retroactive principle. On this approach I too, in common with Lord Phillips (para 61) and Lord Hope (para 77), would hold that any inquests still outstanding, even, as in these cases, in respect of deaths occurring before 2 October 2000, must so far as remains possible comply with the relatives article 2 Convention rights. Such a conclusion will not to my mind present any great difficulties. There are, we were told, 16 existing legacy inquests (involving 26 deaths) currently outstanding on the coroners books, a further six incidents (involving eight pre 2000 deaths) referred by the Attorney General to the Coroner for inquests pursuant to section 14 of the Coroners Act (Northern Ireland) 1959 and a further 7 deaths (between August 1994 and January 2000) not yet the subject of inquests. Moreover, not merely will there therefore be only comparatively few inquests affected by this ruling but it may be doubted whether in reality there is all that much difference between an article 2 compliant inquest (a Middleton inquest: see R (Middleton) v West Somerset Coroner [2004] 2 AC 182) and one supposedly not (a Jamieson inquest: see R v Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1) a topic exhaustively discussed by this court in R (Smith) v Oxfordshire Assistant Deputy Coroner [2011] 1 AC 1, see particularly Lord Phillips judgment at paras 73 78 and my own at paras 152 154. I too, therefore, would allow these appeals. LORD KERR On 9 October 1990 Martin McCaughey and Desmond Grew were shot and killed by members of the British Army. Some twenty one years later an inquest into their deaths has not been held. These bare facts are testament to the difficulties that beset the investigation of controversial killings in Northern Ireland. Those difficulties are, of course, by no means unique to that province. Lord Phillips in his review of Strasbourg jurisprudence has amply illustrated the huge problems encountered in many member countries of the Council of Europe in the conduct of inquiries into how people come to be killed. The stream of cases that have flowed throughout domestic courts and in Strasbourg paint a disheartening picture. But perhaps the decision of this court in these appeals will mark the end of at least one area of controversy. Lord Phillips has said that a decision of this court is needed to prevent the delay and expense involved in interlocutory in fighting in future inquests raising the same issue as arises here. I share his hope that we can achieve that goal. Before the hearing of this appeal, the appellants (who are the next of kin of Mr McCaughey and Mr Grew) lodged an application with the European Court of Human Rights (ECtHR) complaining of substantive and procedural breaches of article 2 of the European Convention on Human Rights and Fundamental Freedoms (ECHR). That court asked the government of the United Kingdom to provide its written observations on the admissibility and merits of the appellants application. The government applied to the court for suspension of the time limit within which those observations must be submitted while the decision of this court was awaited. The Strasbourg court has agreed to this request. As Lord Rodger has pointed out, ECtHR unquestionably has jurisdiction to deal with a complaint that there has been a failure by the United Kingdom to fulfil its duty to investigate the violent deaths of Mr McCaughey and Mr Grew. If the appellants do not succeed in enforcing that duty in the courts of this jurisdiction, therefore, it is to be presumed that, if there is a failure on the part of the government to institute an article 2 compliant inquiry, the appellants will proceed with the application that they have already lodged. This unsatisfactory and anomalous situation can be avoided if the decision in ilih v Slovenia (2009) 49 EHRR 996 that the procedural obligation to investigate deaths is detachable has the effect in domestic law for which the appellants contend. Whatever may be said about the reasoning in ilih (and, as Lord Dyson has said, it has been the subject of trenchant criticism, not least by the Attorney General for Northern Ireland, intervening in these appeals) the essential ratio of the case is clear. It is to the effect that article 2 involves two distinct and separable obligations, one procedural, the other substantive. Where a death occurs before the accession of a member state to the ECHR, the procedural obligation to investigate the circumstances of the death will, in certain circumstances, require the acceding state to comply with article 2. The real difficulty that the decision of the Grand Chamber creates is in defining the circumstances in which the procedural obligation arises. Clearly not every death that occurred before the ratification of ECHR by a particular state can be subject to the duty to investigate under article 2. Must there be a temporal connection between the death and the procedural obligation to investigate? If so, how close to the time of accession must the death have occurred? Or is another form of connection sufficient to generate the link? Is it sufficient that the ratifying state decides, after it has acceded to the Convention, to investigate a death that occurred before ratification? In that event, can the ratifying state avoid inspiring the procedural obligation by deciding not to investigate the death? Many of these questions remain unanswered by ilih. It seems to me probable that they will ultimately require to be addressed by ECtHR and, for that reason alone, one cannot hope to provide a comprehensive statement on the precise, indispensable elements of the necessary connection but some aspects of this question require to be considered in order to determine whether, if ilih is to be applied to the HRA, these appeals can succeed. First, however, it is necessary to grapple with the issue whether, in light of ilih, the article 2 Convention right under the HRA applies to the investigation, after 2 October 2000, of violent deaths which occurred before that date. Lord Rodger makes a powerful case for the proposition that the temporal application of the Convention is irrelevant for purposes of deciding the temporal application of the HRA but that, as it seems to me, does not provide an answer to the essential question. The majority of the Grand Chamber in ilih elided the criticism of the dissenting minority that the effect of the majority judgment was to make the Convention retroactive. It did so by finding that the procedural right was detachable. The invocation of that right therefore could and did occur after Slovenia had ratified the Convention. In this way, no impact on the temporal jurisdiction of the Convention was involved. The duty arose or at least continued to exist after the Convention had been ratified. The right could be asserted when Slovenia was squarely within the temporal jurisdiction of the Convention and no question of retroactive effect was involved. This process of reasoning brings to centre stage the decisive finding that the separable right either comes to life or continues to exist after the critical date. That central finding, that the procedural right is detachable and not linked inexorably to the death, cannot now be ignored in deciding whether, after the coming into force of HRA, there is a procedural obligation to investigate a death that occurred before that date. The decision in McKerr depended crucially on the indissolubility of the procedural and substantive rights. The passages from Lord Nicholls speech which have been quoted by Lord Phillips in para 27 of his judgment make that unmistakably clear. In particular, Lord Nicholls statement that the interpretation that he proposed had the effect of treating all the obligations arising under article 2 as parts of a single whole makes the point decisively. That stance is no longer possible. Strasbourg has positively said that the obligations arising under article 2 are not parts of a single whole. That inescapable conclusion must inform this courts approach to the application of the HRA. The procedural right has the capacity to be animated or to continue to exist after the coming into force of HRA. If it does come alive or if it continues to have life, then there is no question of HRA being applied retrospectively. It is applied to an extant right. Of course, it is undoubtedly true, as Lord Rodger has said, that Parliament had it in mind that Convention rights would only be accessible domestically for acts that occurred after 2 October 2000 (apart from the closely defined exceptions in section 22(4)). But the phenomenon of an Act having an unintended consequence is by no means unusual. Moreover, the divisibility of the article 2 rights which has now been recognised eliminates any conflict that might otherwise have occurred with Parliaments intention that only rights that accrue after the coming into force of HRA should be enforceable in this jurisdiction. The procedural right to an article 2 compliant investigation, if it accrues or continues to exist after the coming into force of HRA, does not clash with that legislative intention. It is entirely consonant with Parliaments manifest intention that HRA should apply to acts or omissions that take place after the date of the coming into force of HRA. The essence of the decision in ilih is that the procedural obligation is either animated or that it endures after the critical date. I therefore agree with all the judgments of the majority in this case that HRA requires that the procedural obligation under article 2 of the Convention, if it arises or endures after the coming into force of HRA, must be complied with notwithstanding that the death in respect of which the obligation arises occurred before October 2000. How does one determine whether the procedural obligation exists after the critical date in the case of ilih the date of ratification of the Convention by Slovenia, in this case the coming into force of HRA? It is, I think, important to note that the Grand Chamber in ilih reiterated the well established principle that death in suspicious circumstances normally triggers the procedural obligation under article 2 see para 157. But the court also found that this obligation binds the State throughout the period in which the authorities can reasonably be expected to take measures with an aim to elucidating the circumstances of death and establishing responsibility for it also para 157. So, although the procedural obligation is detachable, it is triggered by the death of the deceased. In this case the starting point for the existence of the obligation was plainly before the coming into force of HRA. One must focus, therefore, on the question whether, by reason of its detachability from the substantive right, it continued to have an existence following the coming into force of HRA such as to keep alive after that date the procedural duty to conduct an article 2 compliant inquiry. The fact that the right has been triggered before the critical date is in no sense determinative of whether it continues to have life after that date. In para 159 the court said that Although [the right] is triggered by the acts concerning the substantive aspects of article 2 it can give rise to a finding of a separate and independent interference within the meaning of the Blei judgment. (The decision in Blei v Croatia (2006) 43 EHRR 1038 is discussed by Lord Phillips in paras 40 and 41 of his judgment). Although the court found that separate interference can arise after the critical date, it also made clear that only procedural acts and omissions occurring after that date can fall within the Court's temporal jurisdiction para 162. It would appear, therefore, that procedural obligations spanning the period before and after the coming into force of HRA must be segregated in order to determine which are amenable to article 2 requirements and which are not. This might well have implications in relation to a complaint of delay in holding an article 2 inquiry although, as Lord Phillips has pointed out, this is no longer an issue in the present appeals. The critical passage in the majoritys judgment in ilih is contained in para 163: there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent State for the procedural obligations imposed by article 2 to come into effect. Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account (Vo, cited above, 89) will have been or ought to have been carried out after the critical date. However, the Court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner. A number of points should be noticed about the statements contained in this passage. First, the majority stipulates that there must be a genuine connection between the death and the critical date. It does not, however, specify what genuine connotes in this context. True it is that it is stated that a significant proportion of the procedural steps required by article 2 will have been or ought to have been carried out after the critical date. But it is not at all clear that the court is there postulating that this is an indispensable requirement for the connection to be established or merely observing that this is the consequence of the existence of the connection. In any event, the catch all final section appears to contemplate that the connection could be established by circumstances quite unrelated to any temporal proximity between the death and the critical date. Indeed, this final part of the paragraph is drawn in such wide and general terms that it is difficult to forecast the range of cases that might fall within its embrace. The best, I think, that one can make of this paragraph is that a connection must exist between the death and the critical date; that where much of the investigation into the death occurs or should occur after the critical date, this will be evidence of the existence of the necessary connection; and that there are other unspecified circumstances in which, although the death is not proximate temporally to the critical date, the need to protect the basic guarantees and principles of the Convention dictates that such a connection should be recognised. That this provides a less than clear prescription for all the circumstances in which a sufficient connection is to be recognised has already been made clear by the concurring opinion of Judge Lorenzen in the ilih case. At pp 1044 1045, paras O I3 to O I4 of the report he said: I fail to see that the criteria established by the majority in paragraph 163 are in conformity with this requirement [of legal certainty]. Thus, it is not easy to understand what is meant by the requirement for a genuine connection between the death and the entry into force of the Convention in respect of the respondent State for the procedural obligations imposed by article 2 to come into effect. Furthermore the fact that the majority seem ready to accept such a connection based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner appears to confirm that the jurisdictional limits will be difficult to identify, if they exist at all. I find it incompatible with the declared intention to respect the principle of legal certainty to define the Court's temporal jurisdiction in such a vague and far reaching way. In my opinion, there must be a clear temporal connection between on the one hand the substantive event death, ill treatment, etc and the procedural obligation to carry out an investigation and, on the other, the entry into force of the Convention in respect of the respondent State. This will be the case where the event occurred and an investigation was initiated before the entry into force of the Convention, but a significant part of that investigation was only carried out after that date. Likewise where the event occurred or was only discovered so close to the critical date that it was not possible to commence an investigation before that date. Where on the other hand no investigation was carried out despite knowledge of the event or where the investigation was terminated before the critical date, I would say that the Court would have jurisdiction only where an obligation to carry out investigative measures was triggered by relevant new evidence or information (see, mutatis mutandis, Brecknell v United Kingdom, no. 2457/04, 70 71, 27 November 2007). The statement at the beginning of the second paragraph of this passage that there must be a clear temporal connection between the substantive event and the procedural obligation on the one hand and the critical date on the other hand suggests, at first sight, that Judge Lorenzen considered that unless the substantive event preceded the critical date by a short period, the necessary connection would not be present. On this analysis, the appellants in this case could not succeed for the deaths preceded the coming into force of HRA by some ten years. But Judge Lorenzen appears in the succeeding sentence of the second paragraph to have made an important qualification to his statement about the need for a temporal connection. He suggests that the two elements will be sufficiently connected temporally where the event occurred and an investigation was initiated before the critical date, but a significant part of that investigation was carried out subsequent to that date. On this formulation the appellants cases would qualify because an investigation into the deaths of Mr McCaughey and Mr Grew was begun before the coming into force of HRA but a significant part indeed, the most significant part, the inquest will take place subsequently. It is perhaps unwise to parse the judgments of the majority and of Judge Lorenzen too closely in order to produce a set of precise principles from views which have been expressed at a level of some generality. But it seems to me that the following may reasonably be deduced from both judgments: (i) There must be a connection between the substantive event (the death) and the critical date (in this case, the coming into force of HRA) the majority and Judge Lorenzen; (ii) A close temporal link (in other words where the death has preceded the critical date by a short period) will provide the necessary connection the majority and Judge Lorenzen; (iii) Where much of the investigation into the death occurs after the critical date, the connection is present the majority; (iv) Where a significant part of the investigation ought to take place after the critical date, this will be sufficient to make the connection the majority; (v) Where an investigation begins before the critical date but a significant part of this takes place after the critical date, the connection is present Judge Lorenzen. Although expressed slightly differently from the manner in which the majority put it in para 163, this formulation approximates to that set out in (iii) above; (vi) In certain unspecified circumstances the connection might be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner the majority. Judge Lorenzen expressly disagreed with this statement; (vii) If the investigation has been completed before the critical date or if, despite knowledge of the event, no investigation was conducted, there will be no sufficient connection. In that event the procedural duty will only arise after the critical date if triggered by relevant new evidence or information Judge Lorenzen. The present appeals come within (iii) and (v) of this list of the principles to be gleaned from the judgments of the majority and Judge Lorenzen. On that account I too would allow the appeals. LORD DYSON The decision of the majority of the ECtHR in the Grand Chamber decision of ilih v Slovenia (2009) 49 EHRR 996 has, with justification, been the subject of trenchant criticism. But I agree with Lord Hope (paras 73 and 74 of his judgment) that the core of the decision is clear enough. It is that the procedural obligation to investigate a death under article 2 of the European Convention on Human Rights (the Convention) is not only distinct from the substantive aspect of the article but is autonomous and detachable from it. It is not profitable to condemn the decision on the grounds that the language used by the majority, in particular at paras 161 to 163 of their judgment, is obscure. Their decision is not a one off aberration. It is an important decision of the Grand Chamber which is now well entrenched in the Strasbourg jurisprudence: see, for example, Varnava v Turkey (2008) 50 EHRR 467, paras 136 to 138 (another decision of the Grand Chamber). There is no good reason not to follow ilih. Both Lord Rodger and Lord Hope say that ilih is a decision about the temporal jurisdiction of the Convention and that it is therefore irrelevant to the interpretation and application of the Human Rights Act 1998 (HRA) and, in particular, to the temporal application of the HRA. To hold otherwise, they say, in effect involves adding to the HRA a transitional provision that is not to be found in section 22 of the act. It involves an impermissible application of the HRA. I shall call this the section 22 argument. Lord Hope would allow the appeals on the narrow basis that, if the state decides to hold an investigation post HRA into a pre HRA death, then it must do so in a way which is compatible with article 2 of the Convention. The position under the Convention In order to see whether the section 22 argument is right, it is necessary first to examine the essential reasoning of the majority decision in ilih. The death in that case occurred before Slovenia ratified the Convention. A question arose as to whether the ECtHR had temporal jurisdiction to adjudicate on the question whether Slovenia had discharged its procedural obligation under article 2 to investigate the death. The fundamental principle that the ECtHR has no temporal jurisdiction to examine a complaint of breach of a Convention obligation by a state which is alleged to have occurred on a date before it ratified the Convention (referred to as the critical date) was not in issue. There is no doubt that the Convention does not have retroactive effect. Indeed, this important principle was asserted and acknowledged in ilih as being the source of the problem that arose in that case: how was the principle to be applied where the death occurs before the critical date and the investigation is conducted wholly or in part after the date of ratification? Thus at para 146, the majority referred to Blei v Croatia (2006) 43 EHRR 1038 (para 82) as confirming that in order to establish the Courts temporal jurisdiction it is therefore essential to identify, in each specific case, the exact time of the alleged interference. At paras 149 to 151, the majority referred to the varying approaches taken by different Chambers of the Court to the issue of temporal jurisdiction in the particular context of a death occurring before the critical date and an investigation into the death occurring wholly or partly after the critical date. These included the decision in Moldovan v Romania (Application Nos 41138/98 and 64320/01) (unreported) where the court held that it had no temporal jurisdiction to deal with the procedural obligation under article 2 as that obligation derived from killings which had taken place before Romania ratified the Convention. At para 152 of their judgment in ilih, the majority said that having regard to the varying approaches taken by different Chambers of the Court to the problem: the Grand Chamber must now determine whether the procedural obligations arising under article 2 can be seen as being detachable from the substantive act and capable of coming into play in respect of deaths which occurred prior to the critical date or alternatively whether they are so inextricably linked to the substantive obligation that an issue may only arise in respect of deaths which occur after that date. This was the question that the court set itself to answer. It is clear, therefore, that it was not the aim of the court to undermine or vary in any way the temporal jurisdiction principle. The question was how that principle was to be applied where the death occurs before the date of ratification and the investigation is conducted wholly or in part after that date. The majority answered that question by reinterpreting the investigative obligation created by article 2. It was now declared to be a distinct free standing obligation. As the majority put it at para 159 of the judgment, the procedural obligation to carry out an effective investigation under article 2 had evolved into a separate and autonomous duty which could give rise to a separate and independent interference within the meaning of the Blei judgment which can be considered to be a detachable obligation arising out of article 2 capable of binding the State even when the death took place before the critical date. This new interpretation of the procedural obligation in article 2 had an important consequence for the temporal jurisdiction of the court. It meant that the court would now have temporal jurisdiction to deal with complaints that investigations into deaths before the critical date were not being conducted in accordance with article 2. Previously, this was not possible because the investigative obligation was seen as deriving from the death and an integral part of the substantive article 2 obligation. If the courts temporal jurisdiction prevented it from dealing with a complaint of breach of the substantive obligation, it inevitably followed that for the same reason it was prevented from dealing with a complaint of breach of the procedural obligation. But the principle that the Convention does not have retroactive effect was left untouched by ilih. It is worth noting that in ilih an objection of the dissenting judges was that the majority interpretation of article 2 would be tantamount to giving retroactive effect to the Convention: see para 9 of the Joint Opinion of Judges Bratza and Trmen. But the majority did not see it that way. Their approach was that they were reinterpreting article 2 by detaching the investigative obligation from the death. The consequence of this was that in certain circumstances there could now be an obligation to investigate deaths that occurred before the critical date. But this was achieved by a substantive interpretation of the article and not by departing from the fundamental principle that the Convention does not have retroactive effect. I have already said that the core reasoning of the decision of the majority in ilih is that the investigative obligation is distinct and detachable from the substantive obligation. But the court recognised that there had to be limits to this distinct obligation in the particular context of the obligation to investigate deaths occurring before the critical date. The court was alive to the need to exclude from the procedural obligation (i) investigations into deaths that occurred many years before the critical date and (ii) investigations into deaths that occurred (even shortly) before the critical date but which are not started until many years after the critical date. Thus the majority said in terms at para 161 that, having regard to the principle of legal certainty, the courts temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended. They defined the limits at paras 162 and 163 in language which, in parts, is extremely obscure. Lord Phillips has quoted the passages at para 44 above. The use of the word genuine in the first sentence of para 163 to describe the nature of the connection that must exist between the death and the critical date is puzzling, but it is not necessary to decide what this means for the purposes of determining the present appeal. There must, however, be a temporal connection between the death and the investigative obligation on the one hand and the critical date on the other hand. Thus if the date of death was not long before the critical date and a significant proportion of the procedural steps required by article 2 falls to be carried out after the critical date, then the investigation should be carried out in accordance with article 2 and the ECtHR will entertain a complaint of non compliance. This is made clear at para 165 of the judgment of the majority in ilih, where they noted that the death occurred little more than a year before the ratification of the Convention by Slovenia and that, with the exception of the preliminary investigation, all the relevant proceedings were initiated and conducted after that date. It was in the light of these factors that they concluded that the alleged interference with the procedural article 2 rights fell within the courts temporal jurisdiction. It was the closeness of the temporal connection between the death and the critical date that led Judge Lorenzen to agree at p 1045, para O I3 of the EHRR report, that the court had jurisdiction to examine the procedural complaint under article 2. It does not, therefore, necessarily follow from the mere fact that an investigation is to take place after the critical date into a death that occurred before the critical date that the investigation must comply with the article 2 procedural obligation. There must be some temporal connection between the investigation and the critical date. That connection will exist where, for example, an investigation was initiated before the critical date, but a significant part was conducted after the critical date. The position under the HRA So much for the position under the Convention. But how does this affect the position in our domestic law under the HRA? I return to the section 22 argument. Unquestionably, the effect of section 22 of the HRA is that there is no remedy under the HRA for breach of the substantive aspect of article 2 of the Convention in respect of deaths occurring before 2 October 2000. In In re McKerr [2004] 1 WLR 807, the House of Lords decided that, in the context of the article 2 investigative duty, the obligation in section 6(1) of the HRA did not apply to a death which occurred before the Act came into force. It is sufficient to refer to the reasoning of Lord Nicholls which Lord Phillips has set out at para 28 above. In particular, at para 22 Lord Nicholls said that this interpretation of section 6: has the effect, for the transitional purpose now under consideration, of treating all the obligations arising under article 2 as parts of a single whole. Parliament cannot be taken to have intended that the Act should apply differently to the primary obligation (to protect life) and a consequential obligation (to investigate a death). But this reasoning cannot stand in the light of ilih. It is no longer right to treat all the obligations arising under article 2 as parts of a single whole. It has now been explained that the procedural obligation is distinct and detachable from the substantive obligation. I agree with Lord Phillips that this is where the mirror principle becomes relevant. Subject to the limits which I have mentioned, the ECtHR has now defined the procedural obligation in article 2 as being detachable from the substantive obligation. That definition must be reflected in our domestic law. This does not make the HRA retroactive in circumstances not permitted by section 22 any more than ilih made the Convention retroactive contrary to the long standing principle of temporal jurisdiction. As Lord Hope said in Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, para 44 the purpose of [sections 6 and 7 of the HRA] is to provide a remedial structure in domestic law for rights guaranteed by the Convention. One of those rights is to have an article 2 compliant investigation after the critical date into a death that occurred before the critical date. Translated into terms of the HRA, that must mean that there is a right to have such an investigation after 2 October 2000 into a death that occurred before that date if such a right would be recognised by the ECtHR. In my view, it is nothing to the point to speculate what Parliament might have chosen to do if ilih had been decided before the enactment of the HRA. The same question might be asked about any development of the Convention by the ECtHR post HRA. The fact is that Parliament chose to incorporate the Convention and must be taken to have known that, in doing so, it would be likely to be re interpreted by the ECtHR from time to time. The Convention is a living instrument which evolves over time as a result of interpretative decisions of the ECtHR. The procedural obligation implicit in article 2 is itself a good example of such evolution. It was recognised by the ECtHR in McCann v United Kingdom (1995) 21 EHRR 97 when, for the first time, the court held that the obligation to protect life under article 2 requires by implication that there should be some form of effective official investigation when individuals have been killed as a result of the use of force by, inter alios, agents of the State (para 161). Suppose that the decision in McCann itself had postdated the coming into force of the HRA. It would not have been arguable on the basis of the section 22 argument that, since the re interpretation of article 2 had occurred after the HRA came into force, section 6(1) did not require an article 2 compliant investigation. The present case The deaths occurred on 9 October 1990. The papers were passed to the Coroner in 1994, but they were incomplete as they omitted statements from the soldiers who committed the killings. These were not provided until 2002 and it was not until 14 September 2009 that the Coroner held the preliminary hearing in which he was asked to hold an inquest which complied with the procedural requirements of article 2. The deaths were 10 years before the HRA came into force. That is a relevant factor to be taken into account when considering whether there is a sufficient connection between the deaths and the coming into force of the Act. But ilih shows that it is not the only factor. In particular, of considerable importance is the fact that at that date the investigation had been initiated, but a significant proportion of the procedural steps required to be taken had not yet been taken. In that respect, the facts of the case are similar to the facts in ilih. This is the feature of ilih which is emphasised by the majority at para 165 and by Judge Lorenzen at p 1045, para O I4 of the EHRR report. I would hold that the inquests into the deaths should be conducted in accordance with the requirements of article 2. I also agree with Lord Phillips that this conclusion is reinforced by the mirror principle. It would be unsatisfactory for the Coroner to conduct an inquest which did not satisfy article 2 leaving open the possibility of a claim against the United Kingdom in the ECtHR. Conclusion I would allow these appeals. I would add that I hope that before long the ECtHR will have an opportunity to clarify the meaning of para 163 of the judgment of the majority. If nothing else, the present appeal has served to highlight some of its obscurity and the difficulties of its application. DISSENTING JUDGMENT LORD RODGER The appellants are the next of kin of Martin McCaughey and Dessie Grew, who were shot and killed by the Army on 9 October 1990 long after the United Kingdom had ratified the European Convention and recognised the right of individual petition under it. So at all relevant times those who can be regarded as victims of the killings could have applied either to the Commission or, after 1999, to the Court in Strasbourg if they had considered that the United Kingdom had violated article 2 of the Convention and the matter had not been remedied by the domestic courts. The Director of Public Prosecutions decided that no one should be prosecuted for the deaths and he passed papers to the coroner in 1994. While preparatory steps have been taken, so far no inquest has been held. In 1995 the European Court first identified a positive duty inherent in article 2 of the Convention that requires states to investigate relevant deaths: McCann v United Kingdom (1995) 21 EHRR 97. Assuming, therefore, for the sake of the argument, that there had been a failure by the United Kingdom to fulfil its duty to investigate the violent deaths of McCaughey and Grew, the European Court would unquestionably have had jurisdiction ratione temporis to deal with it and to grant any appropriate remedy. By contrast, the widow of Gervaise McKerr, who was shot and killed by police officers in November 1982, did make an application to Strasbourg, alleging inter alia a violation of article 2. In McKerr v United Kingdom (2002) 14 EHRR 553 the European Court held that there had been a violation of article 2 in respect of failings in the investigative procedures relating to that death. The court also awarded McKerrs son, who had taken over the case on his mothers death, 10,000 as just satisfaction in respect of the frustration, distress and anxiety which he must have suffered. The Government paid that sum and presented a package of proposals to the Committee of Ministers with responsibility for supervising execution of judgments. The Human Rights Act 1998 (HRA) came into force on 2 October 2000, some ten years after the deaths of McCaughey and Grew. The issue in the present appeals is whether any failure by the authorities to investigate these deaths can give rise to a breach of the appellants article 2 Convention rights under the HRA. In other words, even if the United Kingdom would be in violation of its international law obligation to investigate the deaths under article 2 of the Convention, would the same facts also constitute a breach of a domestic law duty of the relevant public authorities under the HRA to investigate those deaths? In the case of McCaughey the House of Lords has already answered that question in the negative in Jordan v Lord Chancellor; McCaughey v Chief Constable of the Police Service of Northern Ireland [2007] 2 AC 226. Lord Bingham simply observed, at p 240, para 4 and p 256, para 35, that, since the deaths occurred well before the HRA came into force, the decision of the House of Lords in In re McKerr [2004] 1 WLR 807 meant that the HRA did not apply to any investigation of them. So, although no plea has been taken by the Chief Constable, in substance the point raised in the present appeals is res judicata, so far as the first appellant and the Chief Constable are concerned. In McKerr the issue in the appeal by McKerrs son was the same as in the present appeal. The House of Lords held, unanimously, that the obligation under section 6(1) of the HRA and the article 2 Convention right in Schedule 1 to the Act, to carry out a proper investigation into a violent death, did not apply to a death which occurred before the HRA came into force on 2 October 2000. A significant element in the reasoning of the members of the Appellate Committee was their view that the investigative obligation on a state under article 2 of the Convention was designed to ensure that the state had procedures which would discover whether, in the case of a particular death, there had been a violation of the victims right to life under that article. It followed that there was no obligation under article 2 of the Convention to investigate a death which could not involve a substantive violation of article 2. Their Lordships concluded that, similarly, there was no obligation under section 6 of, and Schedule 1 to, the HRA to investigate a death which could not itself be unlawful under the same provisions. The appellants do not suggest that in McKerr the House of Lords misunderstood the international law as it stood at the time. Rather, they point out that, for the first time, in ilih v Slovenia (2009) 49 EHRR 996 the Grand Chamber of the European Court declared that the investigative obligation under article 2 of the Convention is not only independent of the substantive obligation (that had long been recognised) but also detachable from it. Therefore the investigative obligation was capable of binding a state, even when the death had taken place before the date of the states ratification of the Convention: 49 EHRR 996, 1030, para 159. Similarly, Ms Quinlivan argued, this court should now hold that, for the purposes of the HRA, the investigative obligation under section 6 and under the article 2 Convention right was capable of binding the relevant public authorities even when the death had taken place before the HRA came into force. Having held that an obligation of investigation under article 2 could arise in respect of deaths which had occurred before the state ratified the Convention, the European Court added, at paras 161 163 of its judgment in ilih, that this obligation was limited in some way: 161. However, having regard to the principle of legal certainty, the court's temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended. 162. First, it is clear that, where the death occurred before the critical date, only procedural acts and/or omissions occurring after that date can fall within the court's temporal jurisdiction. 163. Second, there must exist a genuine connection between the death and the entry into force of the Convention in respect of the respondent state for the procedural obligations imposed by article 2 to come into effect. Thus a significant proportion of the procedural steps required by this provision which include not only an effective investigation into the death of the person concerned but also the institution of appropriate proceedings for the purpose of determining the cause of the death and holding those responsible to account will have been or ought to have been carried out after the critical date. However, the court would not exclude that in certain circumstances the connection could also be based on the need to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective manner (internal citation omitted). It would be a work of supererogation for me to criticise the courts legal analysis in para 163 or to emphasise the blow to legal certainty which it has struck. All that need be said on these matters has been said concisely, authoritatively and trenchantly by the best qualified of critics, Sir Nicolas Bratza, in his joint dissenting opinion with Judge Trmen, O IV: 49 EHRR 996, 1050 1055. Since the majority of the Grand Chamber adopted the analysis in para 163 of its judgment in ilih despite this powerful dissent and despite the problems pointed out by other judges, they were clearly determined to bring at least some deaths occurring before a states ratification of the Convention within the courts temporal jurisdiction. Predictably, the Strasbourg court has gone on to apply its new approach in other cases, including Varnava v Turkey (2008) 50 EHRR 467 where it held that it had jurisdiction over a disappearance in 1974, long before Turkey ratified the Convention. Doubtless, similar decisions will follow in future. This court has nothing to do with the temporal jurisdiction of the European Court. Even on the most extensive interpretation of what it said in ilih, the European Court might hesitate to assert jurisdiction over the investigation of deaths before January 1966 when the United Kingdom recognised the right of individual petition. But, even if it did assert jurisdiction, there would be nothing which this court could do about it. In a novel twist to the thinking behind the HRA, however, Ms Quinlivan submits that this court should bring the many problems created by ilih home from Strasbourg. In other words, this court should abandon its clear decision in McKerr and should hold that, in the light of ilih, the article 2 Convention right under the HRA applies to the investigation, after 2 October 2000, of violent deaths which occurred before that date. Understandably perhaps, she declined to formulate a version of the ilih principles which would define the scope of this new obligation under the HRA. It was enough, she said, that the obligation would apply to the inquests into the deaths of McCaughey and Grew since they are to be held at a time when the HRA is in force. According to counsel, ilih means that, even if the public authorities are not under an obligation to hold an investigation, if they actually choose to do so after 2 October 2000, the investigation must comply with the relatives article 2 Convention rights. She drew a comparison with criminal proceedings: while the DPP may not be under an obligation to prosecute someone, if he chooses to do so, after 2 October 2000 the prosecution and trial must comply with the defendants article 6 Convention rights. Whatever else may be said about this carefully crafted and deliberately low key submission, it does not reflect the decision in ilih. Article 2 is not concerned simply with the procedures to be adopted in any investigation which a state may choose to hold after ratification: on the contrary, as para 163 of the decision makes clear by the use of ought, according to the European Court, in an appropriate case the Convention requires the State to hold an article 2 compliant investigation into pre ratification deaths. So, if this court were to apply the reasoning of the European Court by analogy and there is no other pretended justification for overruling McKerr it would have to hold that the HRA requires the relevant public authorities to hold an investigation which complies with the article 2 Convention right into violent deaths that occurred before 2 October 2000. As the court was told, quite a few violent deaths in Northern Ireland have not been investigated in this way. Plainly, if ilih had been decided before McKerr, some of the reasoning of the Appellate Committee would have been different. But it may be more instructive to suppose that ilih had been decided before royal assent was given to the HRA in November 1998. In other words, suppose it had been known then that article 2 of the Convention could apply to the investigation of certain deaths that had occurred before a state ratified the Convention or recognised the right of individual petition. In that situation Parliament would have known that individuals could apply to the Strasbourg court and allege that an investigation should be held into certain deaths occurring within the jurisdiction of the United Kingdom before 14 January 1966. Perhaps let us suppose some such applications had already succeeded. What difference, if any, would this have made to Parliaments decision as to the appropriate temporal application of the HRA? It is hard to see why it should have made any difference at all. The decision as to the temporal application of the HRA cannot have depended on the technicalities of the analysis of the various rights. Rather, recognising that it was about to make a major change to our domestic legal systems, Parliament had to decide how that major change was to be carried through. So, for example, Parliament decided that the HRA should not come into operation for almost two years after royal assent in order to allow time for appropriate preparations to be made. And then, except as provided by section 22(4), the Act was not to be retroactive. Another question was whether, and, if so, how, the HRA was to apply to situations such as the situations in these appeals are said to be which were ongoing when it came into operation on 2 October 2000. These were broad policy questions. I find it impossible to believe that, if the Government and Parliament had been aware of the decision in ilih in 1998, this would have had any effect at all on their choice of policy. After all, the temporal application of the Convention was irrelevant for purposes of deciding the temporal application of the HRA. Moreover, the Government and Parliament knew very well, for example, that, between royal assent and 2 October 2000, there were liable to be many alleged violations of, say, articles 6 and 8 of the Convention. It would have been easy to bring them within the scope of the Act by a suitable transitional provision saying that the Act applied to acts occurring on or after 8 November 1998. But Parliament introduced no such transitional provision: subject to section 22(4), these acts would continue to be justiciable only in Strasbourg. Making the HRA apply to the investigation of violent deaths occurring as far back as 1980 or 1990 would have raised particularly sensitive questions. Is it really to be supposed that Parliament would have decided to introduce a transitional provision that would have imposed a duty to investigate all such pre commencement deaths merely because the European Court thought that it had jurisdiction in respect of violent deaths that had occurred before a state ratified the Convention? Surely not. The reality is that including a transitional provision to cover the investigation of deaths in the 1980s and 1990s would have had significant practical effects. These effects would have been felt, in particular, in Northern Ireland where as was well known from the McKerr case in Strasbourg among others there was pressure for such investigations to be held. The Good Friday Agreement was still in its uncertain infancy. Whether to bring past deaths within the scope of the Act was therefore a policy question, with potentially far reaching ramifications, for the executive and the legislature. And, as the House of Lords held in McKerr, the plain text of the HRA shows that Parliament decided not to bring them within its scope. If, by contrast, Parliament had intended to include them, the relevant provisions would have had to be drafted differently in order to reflect the difference in the way that section 6(1) was intended to apply both in relation to different article 2 Convention rights and in relation to article 2 Convention rights as opposed to, say, article 8 Convention rights. See McKerr [2004] 1 WLR 807, 814, para 22, per Lord Nicholls, and p 831AB, para 81 of my speech. This court is concerned with what Parliament chose to enact, rather than with what it might have chosen to enact. Since the only transitional provision in the HRA is section 22(4), the inevitable inference is that, with this exception, all the provisions, including section 6(1) and the Convention rights in Schedule 1, were intended to apply only to events occurring on or after 2 October 2000. So there was to be no article 2 Convention right to an inquiry into a death that occurred before the Act commenced. If as the House of Lords held in McKerr that is indeed the correct interpretation of the temporal application of the HRA when it was passed, it is both incoherent and impossible to suggest that its temporal application can have been altered by the poorly reasoned and unstable decision of the Strasbourg court on the Convention in ilih more than ten years later. To hold otherwise involves adding to the HRA a transitional provision that never was. That is no small matter since drafters know very well that they must painstakingly consider how all the provisions of the legislation are to apply to circumstances as they will exist on commencement: G C Thornton, Legislative Drafting (4th edition, 1996), p 383. Moreover, if the compelling force for introducing this imaginary transitional provision is para 163 of ilih, then it can safely be said that no Parliamentary counsel would ever have inserted a transitional provision that even remotely resembled the supposed principles in that paragraph. But, if the imaginary transitional provision does not reflect and fully reflect that paragraph, including its open ended tailpiece, then the simple fact is that this court would be overruling McKerr by inventing its own transitional provision which is designed to insert into the Act a backwards time limit that Parliament did not enact. In McKerr [2004] 1 WLR 807, 827, para 67, Lord Hoffmann commented that, if the HRA applies to pre commencement deaths, it would in principle be necessary to investigate the deaths by state action of the Princes in the Tower. That was a vivid illustration of the point that provided the claimant was a victim there would be nothing in the Act to limit the deaths which would have to be investigated. The campaigns by relatives of soldiers who were court martialled and shot during the First World War and by relatives of certain people who were executed in the 1950s suggest that the victim requirement could be satisfied long after the event. A time limit for the deaths to be investigated would therefore have been essential if the HRA had been intended to apply to the investigation of pre commencement deaths. The Act contains no time limit and nothing to provide a proper basis for inferring the existence of one. This was one of the crucial reasons for the decision in McKerr and it remains as powerful today as it was seven years ago. For all of these reasons I would dismiss the appeals. If, having deciphered ilih, Parliament feels moved to amend the HRA so as to impose an obligation on public authorities to investigate deaths which occurred before the HRA came into force, it has every opportunity to do so. It has not done so over the last two years. Somehow, I would be surprised if it did so in future. |
These are three of five conjoined appeals which were heard by the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336, [2010] LGR 559. They are concerned with possession proceedings brought by a local authority in circumstances where the occupier is not a secure tenant under Part IV of the Housing Act 1985. Two of them, Leeds City Council v Hall (Hall) and Birmingham City Council v Frisby (Frisby), are cases where the claims for possession were made against tenants occupying under introductory tenancies entered into under Chapter 1 of Part V of the Housing Act 1996. In the third, London Borough of Hounslow v Powell (Powell), the claim for possession was made against a person who was granted a licence of property under the homelessness regime in Part VII of the 1996 Act. Permission to appeal was given in a fourth case, Salford City Council v Mullen. But the proceedings in that case were stayed to await the outcome of these appeals. Common to all three cases is the claim by each of the appellants that the property which is the subject of the proceedings for possession against them is their home for the purposes of article 8(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which provides: Everyone has the right to respect for his private and family life, his home and his correspondence. Their case is that, to avoid a breach of article 8, the interference must be justified under article 8(2) as being necessary in a democratic society and that this means that it must be in accordance with the law, it must be for a legitimate aim and it must be proportionate to the aim that the local housing authority is seeking to achieve. They maintain that, as the court did not assess the proportionality of making the orders against them, there was a breach of their article 8 rights. The Court had the opportunity in Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441 (Pinnock) of considering the application of article 8 to a claim for possession brought against a demoted tenant under Chapter 1A of Part V of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003). It held that article 8 requires a court which is being asked to make an order for possession under section 143D(2) of the Housing Act 1996 against a person occupying premises under a demoted tenancy as his home to have the power to consider whether the order would be necessary in a democratic society: para 2. Although Mr Arden QC submitted forcefully that it should not apply to introductory tenancies in view of their probationary nature, I would hold that this proposition applies to all cases where a local authority seeks possession in respect of a property that constitutes a persons home for the purposes of article 8. There is a difference of view between the parties, however, as to its consequences, and in particular as to how cases of this kind should be dealt with in practice by the courts and local authorities. The Court recognised that cases of the type that was examined in Pinnock arise relatively rarely and that cases of the kind represented by these appeals, which involve possession orders in different and more common circumstances, were likely to provide a more appropriate vehicle for the giving of general guidance: paras 58 59. It was expected that the lawyers preparing for these appeals would have the opportunity of giving particular attention to the guidance that might usefully be given where possession is sought against introductory tenants and against applicants under the homelessness regime where there is no provision for the kind of procedure envisaged in Chapters 1 and 1A of Part V of the 1996 Act for introductory and demoted tenancies. I wish to pay tribute to counsel on all sides for the way in which they have taken full and careful advantage of that opportunity. The issues The Court of Appeal delivered its judgment in Salford City Council v Mullen [2010] EWCA Civ 336 on 30 March 2010. As Waller LJ explained in para 4, the court held that it was bound by what was said in Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465, para 110, as to the circumstances in which a county court might decline to make a possession order. They were limited to two situations: first, if it was seriously arguable that the law which enables the county court to make the possession order is itself incompatible with article 8 (which the Court of Appeal in Doherty v Birmingham City Council [2006] EWCA Civ 1739, [2007] LGR 165, para 28 called gateway (a)); and second, if it was seriously arguable that the decision of the public authority was (regardless of the tenants Convention rights) an improper exercise of its powers because it was a decision that no reasonable person would consider justifiable (which the Court of Appeal in Doherty called gateway (b)). So, where the local authority had fulfilled the requirements for the recovery of possession contained in the ordinary domestic law, a defence which did not challenge the law under which the order was sought as being incompatible with article 8 but was based on the proposition that the interference with the persons home was disproportionate should be struck out. Writing extrajudicially, Lord Bingham of Cornhill said of the Strasbourg jurisprudence that its strength lies in its recognition of the paramount importance to some people, however few, in some circumstances, however rare, of their home, even if their right to live in it has under domestic law come to an end: Widening Horizons, The Hamlyn Lectures (2009), p 80. There has never been any dispute about gateway (a). It can be traced back to Kay v Lambeth London Borough Council [2006] 2 AC 465, para 39 where, in head (3)(a) of his summary of the practical position, Lord Bingham described the first of the two grounds on which the court might consider not making a possession order as being that the law which required the court to make the order despite the occupiers personal circumstances was Convention incompatible. But gateway (b), albeit widened to some degree by what was said in Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, para 55, has always been controversial. The central issue which divided the parties in Pinnock was whether the proposition which was encapsulated in it should still be applied in the light of subsequent decisions of the European Court of Human Rights in McCann v United Kingdom (2008) 47 EHRR 913, osi v Croatia (Application No 28261/06) (unreported) given 15 January 2009, Zehentner v Austria (Application No 20082/02) (unreported) given 16 July 2009 and Pauli v Croatia (Application No 3572/06) (unreported) given 22 October 2009. This Court held that those cases, together with Kay v United Kingdom (Application No 37341/06) given 21 September 2010, The Times 18 October 2010, provided a clear and constant line of jurisprudence to the effect that any person at risk of being dispossessed of his home at the suit of a local authority should in principle have the right to question the proportionality of the measure and to have it determined by an independent tribunal in the light of article 8: para 45. The decision in Doherty v Birmingham City Council had shown that our domestic law was already moving in that direction, and the time had come to accept and apply the jurisprudence of the European court. So, where a court is asked to make an order for possession of someones home by a local authority, the court must have the power to assess the proportionality of making the order and, in making that assessment, to resolve any relevant dispute of fact: para 49. It is against the background of that decision that the issues that arise in the present appeals must be considered. They can be summarised briefly at this stage as follows. (1) What is the form and content of the proportionality review that article 8 requires? (2) What procedural protections are implicit in article 8 in homelessness cases before service of a notice to quit and after service but before possession proceedings are commenced? (3) Can the court defer the delivery of possession for a period in excess of the maximum permitted by section 89 of the Housing Act 1980 if it considers that it would be the proportionate course to do so and, if not, should there be a declaration of incompatibility? (4) Can section 127(2) of the 1996 Act be read compatibly with the introductory tenants article 8 Convention right so as to allow him to defend a claim for possession on the grounds recognised in Pinnock, or must there be a declaration that section 127(2) is incompatible with the Convention right? These issues are dealt with in paras 33 64. The correct disposal of each appeal will also have to be considered, having regard to the facts of each case. This is dealt with in paras 65 70. The statutory background As was explained in paras 5 7 of Pinnock, most residential occupiers of houses and flats owned by local authorities are secure tenants under Part IV of the Housing Act 1985. In those cases the tenant must be given a notice setting out the reasons why possession is sought, the tenant cannot be evicted unless the landlord establishes that one of the grounds for possession listed in Schedule 2 to the 1985 Act applies and, except in some specified categories of case where suitable alternative accommodation is available, the court is satisfied that it is reasonable to make the order. But certain types of tenancy are excluded from this regime. They are listed in Schedule 1 to the 1985 Act. They include two types of tenancy that were included in that Schedule by amendment: introductory tenancies referred to in paragraph 1A, added by paragraph 5 of Schedule 14 to the 1996 Act; and demoted tenancies referred to in paragraph 1B, added by paragraph 2(4) of Schedule 1 to the Anti social Behaviour Act 2003. In addition, paragraph 4 of Schedule 1 to the 1985 Act (as substituted by paragraph 3 of Schedule 17 to the 1996 Act) provides that a tenancy granted in pursuance of any function under Part VII of the 1996 Act, which deals with homelessness, is not a secure tenancy unless the local housing authority concerned has notified the tenant that the tenancy is to be regarded as a secure tenancy. The legislature has excluded these types of tenancy from the statutory scheme which applies to secure tenancies for very good reasons, which are firmly rooted in social policy. In seeking democratic solutions to the problems inherent in the allocation of social housing, Parliament has sought to strike a balance between the rights of the occupier and the property rights and public responsibilities of the public authority. The regimes that apply to introductory tenancies and demoted tenancies have been designed to address the problem of irresponsible or disruptive tenants whose presence in social housing schemes can render life for their neighbours in their own homes intolerable. The homelessness regime provides the local housing authority with the flexibility in the management of its housing stock that it needs if it is to respond quickly and responsibly to the demands that this pressing social problem gives rise to. Measures which would have the effect of widening the protections given to the occupiers by the statutes must be carefully tested against Parliaments choice as to who should, and should not, have security of tenure and when it should be given to them, if at all. Social housing law draws a clear distinction between cases where security of tenure has been given, and those where it has not. There are clear policy reasons why Parliament has denied security to certain classes of occupier. It is with this in mind that the homelessness and introductory tenancy regimes must now be described in more detail. (a) homelessness The duties of local authorities in relation to homeless persons are set out in Part VII of the 1996 Act. Ms Powell was provided with accommodation under section 193(2). That section applies where the local housing authority is satisfied that an applicant is homeless, eligible for assistance and has a priority need, and is not satisfied that he became homeless intentionally. In these circumstances section 193(2) imposes a duty on the local housing authority to secure that accommodation is available for occupation by the applicant. The duty ceases in various circumstances, such as if the applicant became homeless intentionally from the accommodation that was made available for his occupation or otherwise voluntarily ceases to occupy that accommodation as his only or principal home. Where the local housing authority decides that its duty under section 193(2) has ceased, the applicant has the right to request that it reviews its decision: section 202(1)(b). If the applicant is dissatisfied with the decision on review he may appeal to the county court on any point of law arising from the decision on review or, as the case may be, the original decision: section 204(1). Where an applicant has been found to be homeless and eligible for assistance but the local housing authority is also satisfied that he became homeless intentionally and has a priority need, it is under a duty to secure that accommodation is available for his occupation for such period as it considers will give him a reasonable opportunity of securing accommodation for his occupation: section 190(2). As already noted, tenancies granted under Part VII of the 1996 Act are not secure tenancies unless the local housing authority has notified the tenant that the tenancy is to be regarded as a secure tenancy. So the local authority is not required under domestic law to establish any particular ground for the termination of the tenancy when seeking possession from a tenant on whom it has served a notice to quit who has not been so notified. The only procedural protections are to be found in the requirement under sections 3 and 5 of the Protection from Eviction Act 1977 that an order of the court must be obtained in order to recover possession and the requirement to give notice to quit in the form stipulated by that Act. Section 89 of the Housing Act 1980 provides that, when the court makes an order for the possession of any land (except in the circumstances set out in section 89(2)), the giving up of possession may not be postponed for more than 14 days or, in cases of exceptional hardship, to a date no later than six weeks after the making of the order. (b) introductory tenancies Mr Hall and Mr Frisby were tenants under introductory tenancies when the possession orders were sought against them. The regime under which they were granted these tenancies is set out in Chapter 1 of Part V of the 1996 Act. It was created in response to concerns among social landlords about anti social behaviour among their tenants. In April 1995 a consultation paper was issued in which views were sought on what were then described as probationary tenancies. The idea was that, as a probationary tenancy would be converted automatically into a secure tenancy only if it was completed satisfactorily, a clear signal would be given to new tenants that anti social behaviour was unacceptable and would result in the loss of their home: para 3.2. The White Paper Our Future Homes: Opportunity, Choice, Responsibility (Cm 2901, June 1995) identified the governments aims as being to encourage responsible social tenants and to protect the quality of life for the majority by supporting effective action against the minority of anti social tenants. Social landlords were to be given the means to act rapidly to remove tenants in the worst cases, as a measure of last resort. Section 124 of the 1996 Act provides that a local housing authority or a housing action trust may elect to operate an introductory tenancy regime. Section 124(2), prior to its amendment by the Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010 (SI 2010/866), provided : (2) When such an election is in force, every periodic tenancy of a dwelling house entered into or adopted by the authority or trust shall, if it would otherwise be a secure tenancy, be an introductory tenancy, unless immediately before the tenancy was entered into or adopted the tenant or, in the case of joint tenants, one or more of them was (a) a secure tenant of the same or another dwelling house, or (b) an assured tenant of a registered social landlord (otherwise than under an assured shorthold tenancy) in respect of the same or another dwelling house. The duration of an introductory tenancy is defined by section 125. The tenancy remains as an introductory tenancy until the end of the trial period which, unless shortened because the tenant was formerly a tenant under another introductory tenancy, lasts for the period of one year: section 125(2). It does not become a secure tenancy until the end of the trial period: Housing Act 1985, Schedule 1, paragraph 1A. The conversion then takes place automatically unless the introductory tenancy has been terminated. Section 127 deals with proceedings for possession of a property which is subject to an introductory tenancy. It provided (prior to its amendment by the Housing and Regeneration Act 2008): (1) The landlord may only bring an introductory tenancy to an end by obtaining an order of the court for the possession of the dwelling house. (2) The court shall make such an order unless the provisions of section 128 apply. (3) Where the court makes such an order, the tenancy comes to an end on the date on which the tenant is to give up possession in pursuance of the order. Section 128(1) provides that the court shall not entertain proceedings for the possession of a dwelling house let under an introductory tenancy unless the landlord has served on the tenant a notice of proceedings complying with that section. The notice must state that the court will be asked to make an order for possession, set out the reasons for the landlords decision to apply for such an order, specify a date after which proceedings may be begun, inform the tenant of his right to request a review of the landlords decision to seek a possession order and inform him that he can receive help or advice about the notice from a Citizens Advice Bureau, a housing aid centre or a solicitor: subsections (2) (7). Section 129 provides that a request for a review of the landlords decision to seek an order for possession of the dwelling house must be made within no more than 14 days of service of the notice of proceedings under section 128. The procedures of the demoted tenancy regime, which is the regime with which the Court was concerned in Pinnock, are closely based on the regime for introductory tenancies. The procedure governing the landlords right to recover possession during the probationary period is set out in sections 143D, 143E and 143F which, as was noted in Pinnock, para 13, are virtually identical to sections 127, 128 and 129 of the 1996 Act. But there is one important difference. A tenant under a demoted tenancy was previously a tenant under a secure tenancy, that tenancy having been brought to an end by a demotion order under section 82A of the Housing Act 1985 (as inserted by section 14 of the Anti social Behaviour Act 2003). The social purpose of the introductory tenancy regime is to allow local authorities to grant tenancies to new tenants without conferring security of tenure upon them until they have demonstrated that they are responsible tenants during the introductory period. This is a factor which will always be highly relevant in any assessment of the proportionality of the landlords claim for possession, as the effect of denying the claim will be that an introductory tenant who may not deserve a secure tenancy will automatically obtain one. The facts (a) Ms Powell As already noted, the local housing authority was satisfied that Ms Powell was homeless, eligible for assistance and had a priority need, and was not satisfied that she had become homeless intentionally. She was given a licence by the London Borough of Hounslow (Hounslow) to occupy a two bedroom ground floor flat at 15 Pine Trees Close, Cranford from 2 April 2007. She and her two sons Zaid, born on 3 April 2005, and Nour, born on 14 April 2006, were noted on the agreement as the occupiers. A claim for housing benefit was received by Hounslow on 4 April 2007 in which Ms Powell indicated that she had a partner named Mr Ahmad Sami who normally resided with her. By letter dated 11 May 2007 Hounslow wrote to Ms Powell stating that there were arrears of rent and warning her that this could lead to termination of her licence to occupy the property. But on 14 May a credit of housing benefit was received which reduced the arrears to zero. There was a further period when the payments fell into arrears, but they were fully cleared by a payment of housing benefit on 3 December 2007. On 5 February 2008 Hounslows housing benefit section wrote to Ms Powell asking her to provide it with information in connection with her claim. On 7 March 2008 it wrote to her stating that the information which it had asked for had not been provided. As a result the housing benefit claim was terminated from 23 December 2007. On 10 March 2008 Hounslows income recovery officer wrote to Ms Powell informing her that there were arrears of licence payments and asking her to attend for an interview on 17 March 2008. Ms Powell did not attend as she had an interview at about the same time and on the same day with the Department of Work and Pensions. On 17 March 2008 Hounslow sent a letter to Ms Powell with a notice to quit. On 20 March 2008 she attended its offices and discussed the arrears with one of its officers. On the same day a letter was sent to her setting out the possible effect on Hounslows homelessness duty towards her were she to be evicted due to rent arrears. On 28 April 2008 Hounslows housing benefit section sent Ms Powell a housing benefit form. It was received on 12 May 2008 and payment of housing benefit was resumed on 26 May 2008. But there were substantial arrears of rent, represented by some 11 weeks rent, which were not covered by the initial credit of housing benefit and which remained unpaid. On or about 19 September 2008 Hounslow issued a claim for possession of the premises, relying on the notice to quit dated 17 March 2008. It was explained that there were arrears as at 30 June 2008 of 3,536.39. The matter came before Deputy District Judge Shelton on 14 May 2009, who heard evidence from witnesses, including Ms Powell. He found that the measures that had been taken by Hounslow were reasonable and proportionate (in the Doherty sense), and granted possession of the premises to Hounslow. Having heard submissions as to her personal circumstances, he required Ms Powell to give possession of the property on or before a date 14 days after the date when the order was made. Ms Powell was granted permission to appeal against the judges order by Mummery LJ on 2 July 2009, with a stay of execution on condition that Ms Powell paid off the arrears at 5 per week. Her appeal was heard as one of five appeals by the Court of Appeal in March 2010. It held that the decision in Ms Powells case was lawful, as the circumstances were not highly exceptional in the context of the homelessness legislation: [2010] EWCA Civ 336, para 76. Her appeal was dismissed and the judges order was stayed pending the filing of a notice of appeal to this Court. Ms Powells current position is that she is 23 years old and that her household consists of herself, her partner Mr Ahmad Sami and their four children, Zaid who is now 5, Nour who is now 4, Taysier who was born on 13 July 2007 and is now 3, and Laila who was born in July 2009 and is now 1. The family is in receipt of various benefits including housing benefit which covers all of the rental liability. In December 2009 the family was moved from 15 Pine Tree Close so that disrepair within the premises could be dealt with. Work was completed in April 2010, and the family returned to the premises and has remained in occupation ever since. (b) Hall Mr Hall became an introductory tenant of property at 147 Leeds and Bradford Road, Bramley, Leeds of which he was granted a sole tenancy by Leeds City Council (Leeds) on 21 April 2008 and where he lives alone. Allegations were made of noise nuisance and anti social behaviour by Mr Hall and by visitors to the property. The behaviour which was complained of was mainly of noise nuisance from loud music and television and the banging and slamming of doors. Mention was also made of shouting, screaming and arguing, banging on the communal door and ringing a neighbours doorbell at night and in the early hours of the morning. It was also said that Mr Hall had engaged in threatening and intimidating behaviour and had been verbally abusive towards his neighbours. On 1 July 2008 a noise abatement notice was served on him. He did not appeal against this notice, and he appears to have disregarded it as complaints continued to be received. On 28 November 2008 Leeds served a notice of proceedings for possession on him under section 128 of the 1996 Act. A review was sought, and the notice was withdrawn following the review. Leeds continued nevertheless to receive allegations of noise nuisance and anti social behaviour, so on 6 March 2009 it served a further notice of proceedings for possession on Mr Hall. He again requested a review, but this time the review hearing upheld the service of the notice. When the claim for possession came before His Honour Judge Spencer QC in the county court on 6 August 2009 the appropriateness of the notice was not challenged, nor was its validity. Mr Hall accepted in a statement that was produced for the trial that there may have been occasions when he had played loud music and that, when his now ex girlfriend visited him and they drank alcohol together, they would sometimes argue. He claimed that he had been drinking excessively because he had been suffering from depression and said that he had been receiving support from an organisation which supports vulnerable people who were having difficulty in maintaining their tenancies. He asked the court to consider whether matters occurring after the review could provide a basis for challenging Leeds decision to seek possession. The judge held that he could not consider anything occurring after the date of the review because section 127(2) of the 1996 Act provides that when, as happened in this case, the tenant has been served with a notice of proceedings that complies with section 128, the court shall make the order. He made an order for possession, the effect of which was that Mr Hall was required to give possession of the property on or before a date 28 days after the date when the order was made. He gave Mr Hall permission to appeal, and stayed execution of the order for possession pending the appeal. On 21 September 2009 Mr Hall lodged a notice of appeal and his appeal was heard together with that of Ms Powell and Mr Frisby as one of five appeals by the Court of Appeal (Waller, Arden and Patten LJJ) in March 2010. The court said that the judge ought to have considered whether the facts that had become known after the review made it arguable that the decision to pursue the proceedings was unlawful and in fact held that this was unarguable. This was because tenants are on probation under the introductory tenancy scheme, because the review was not challenged and because there was no basis for arguing that it was unlawful for a local authority to refuse to change its mind by reference to facts which simply sought to demonstrate that the occupiers behaviour had improved: [2010] EWCA Civ 336, para 79. The appeal was dismissed and the judges order was stayed for pending the filing of a notice of appeal to this Court. Mr Hall remains in occupation of the property. (c) Mr Frisby Mr Frisby became an introductory tenant of property at 9 Hebden Grove, Hall Green, Birmingham under a tenancy agreement with Birmingham City Council (Birmingham) dated 23 April 2007. Birmingham received complaints of excessive noise, including singing, music and banging emanating from the property. It served a noise abatement notice on Mr Frisby on 19 November 2007 which permitted proceedings to be brought for a warrant to confiscate sound producing equipment. On 4 February 2008 it served a notice under section 125A of the 1996 Act which had the effect of extending the trial period of the tenancy by six months to 22 October 2008. Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy but he did not do so. Having received further complaints of noise, Birmingham executed a warrant under the Environmental Protection Act 1990 and seized and removed sound producing equipment from the property. On 2 May 2008 Birmingham served a notice of proceedings for possession on Mr Frisby under section 128 of the 1996 Act. He requested a review of the decision to seek the order. When the review panel convened he raised a number of issues and the panel decided to adjourn the hearing as they needed further information. He did not attend the resumed hearing which proceeded in his absence, and the decision to commence proceedings was upheld. On 17 September 2008 Birmingham commenced proceedings for possession in Birmingham County Court. Mr Frisby filed a defence in which it was averred that Birmingham was amenable to judicial review and that the decision to seek possession was an improper exercise of its common law powers and an interference with his rights under article 8. The possession claim was heard by District Judge Gailey on 3 July 2009. He held in favour of Birmingham and struck out Mr Frisbys defence. But he acceded to an application that he should not make a possession order there and then but should first hear argument as to whether or not he should adjourn the proceedings to enable an application for a judicial review to be brought in the administrative court. On 27 October 2009 Mr Frisby was given permission to appeal against the judges decision, and the matter was referred to the Court of Appeal under CPR 52.14. As in the cases of Ms Powell and Mr Hall, his appeal was heard as one of five appeals by the Court of Appeal in March 2010. Having allowed certain additional expert evidence to be admitted, it dismissed the appeal: [2010] EWCA Civ 336, para 80. The judges order was stayed pending the filing of a notice of appeal to this Court. Mr Frisby remains in occupation of the property. The form and content of the proportionality review The basic rules are not now in doubt. The court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and it has crossed the high threshold of being seriously arguable. The question will then be whether making an order for the occupiers eviction is a proportionate means of achieving a legitimate aim. But it will, of course, be necessary in each case for the court first to consider whether the property in question constitutes the defendants home for the purposes of article 8. This is because it is only where a persons home is under threat that article 8 comes into play: Pinnock, para 61. It is well established in the jurisprudence of the Strasbourg court that an individual has to show sufficient and continuing links with a place to show that it is his home for the purposes of article 8: Gillow v United Kingdom (1986) 11 EHRR 335, para 46; Buckley v United Kingdom (1996) 23 EHRR 101, 115, para 54; see also Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, paras 9, 61 68. In Pauli v Croatia, para 33 the court said: Home is an autonomous concept which does not depend on classification under domestic law. Whether or not a particular premises constitutes a home which attracts the protection of article 8(1) will depend on the factual circumstances, namely, the existence of sufficient and continuous links with a specific place. This issue is likely to be of concern only in cases where an order for possession is sought against a defendant who has only recently moved into accommodation on a temporary or precarious basis. The Leeds appeal in Kay v Lambeth London Borough Council [2006] 2 AC 465, where the defendants had been on the recreation ground in their caravan for only two days without any authority to be there, provides another example of a situation where it was not seriously arguable that article 8 was engaged: see para 48. In most cases it can be taken for granted that a claim by a person who is in lawful occupation to remain in possession will attract the protection of article 8. (a) homelessness The first question is whether in a case where domestic law imposes no requirement of reasonableness and gives an unqualified right to an order for possession, there is a requirement for an independent determination by a court of the issue of proportionality. In Pinnock it was held that the court must have the ability to assess the article 8 proportionality of making a possession order in respect of a persons home: para 63. This is so even if the defendants right of occupation has come to an end: Pinnock, para 45, applying McCann v United Kingdom, para 50; osi v Croatia, para 22; Zehentner v Austria, para 59; Pauli v Croatia, para 43; and Kay v United Kingdom, para 68. But it was also held that, as a general rule, article 8 need only be considered if it is raised by or on behalf of the residential occupier, and that if an article 8 point is raised the court should initially consider it summarily and if it is satisfied that, even if the facts relied on are made out, the point would not succeed it should be dismissed. Only if it is satisfied that it is seriously arguable that it could affect the order that the court might make should the point be further entertained: para 61. I would hold that these propositions apply as much in principle to homelessness cases as they do to demoted tenancies. It follows that in the great majority of cases the local authority need not plead the precise reasons why it seeks possession in the particular case. But if an article 8 defence is raised it may wish to plead a more precise case in reply. Mr Luba QC accepted that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases. I think that he was right to do so: see also Pinnock, para 54. Practical considerations indicate that it would be demanding far too much of the judge in the county court, faced with a heavy list of individual cases, to require him to weigh up the personal circumstances of each individual occupier against the landlords public responsibilities. Local authorities hold their housing stock, as do other social landlords, for the benefit of the whole community. It is in the interests of the community as a whole that decisions are taken as to how it should best be administered. The court is not equipped to make those decisions, which are concerned essentially with housing management. This is a factor to which great weight must always be given, and in the great majority of cases the court can and should proceed on the basis that the landlord has sound management reasons for seeking a possession order. If the threshold is crossed, the next question is what legitimate aims within the scope of article 8(2) may the claimant authority rely on for the purposes of the determination of proportionality and what types of factual issues will be relevant to its determination. The aims were identified in Pinnock, para 52. The proportionality of making the order for possession at the suit of the local authority will be supported by the fact that making the order would (a) serve to vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock. Various examples were given of the scope of the duties that the second legitimate aim encompasses the fair allocation of its housing, the redevelopment of the site, the refurbishing of sub standard accommodation, the need to move people who are in accommodation that now exceeds their needs and the need to move vulnerable people into sheltered or warden assisted housing. In Kryvitska and Kryvitskyy v Ukraine (Application No 30856/03) (unreported) given 2 December 2010, para 46 the Strasbourg court indicated that the first aim on its own will not suffice where the owner is the State itself. But, taken together, the twin aims will satisfy the legitimate aim requirement. So, as was made clear in Pinnock, para 53, there will be no need, in the overwhelming majority of cases, for the local authority to explain and justify its reasons for seeking a possession order. It will be enough that the authority is entitled to possession because the statutory pre requisites have been satisfied and that it is to be assumed to be acting in accordance with its duties in the distribution and management of its housing stock. The court need be concerned only with the occupiers personal circumstances and any factual objections she may raise and, in the light only of what view it takes of them, with the question whether making the order for possession would be lawful and proportionate. If it decides to entertain the point because it is seriously arguable, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order that is being sought by the local authority: Kryvitska and Kryvitskyy v Ukraine, para 44. Mr Underwood QC drew attention to the fact that there was no express provision in Part VII of the 1996 Act which empowers a court to refuse to grant a possession order to the local authority where the occupier is accommodated following an exercise of the authoritys functions under that Part of the Act. He said that this was because Parliament had taken a positive decision not to provide secure tenancies to persons who were accommodated under the homelessness provisions unless the local authority chooses otherwise. Part VII was intended to be a life line for those who had nowhere to live; it uses accommodation which may be needed quickly for other cases; an occupier who is evicted through no fault of her own will be accommodated elsewhere; and if there is an issue about fault there is a right of review and of appeal. The thrust of this part of his argument was that it was not possible under the scheme of Part VII to meet the article 8 procedural requirement in a way that was called for by the decision in Pinnock. The answer to this argument is to be found in the fact that there is nothing in Part VII of the 1996 Act which either expressly or by necessary implication prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so. In contrast to Pinnock, where the court was faced with a direction by the statute that, if the procedural requirements were satisfied, it must grant the order for possession, no equivalent provision is set out anywhere in Part VII. There is, of course, an important difference between Part VII and the regimes that apply to introductory and demoted tenancies, in that it is likely in homelessness cases that the occupier will be the subject of a continuing duty if she is still homeless, eligible for assistance and has a priority need and will be entitled to contest a finding that she became homeless intentionally. But the legitimate aims that justify seeking a possession order are just as relevant in homelessness cases. The question for the court will always be whether the making of an order for possession would be lawful and proportionate. Mr Luba then said that each of the exceptions to the security of tenure regime was there for a particular social housing reason. It was material to a consideration of the issue of proportionality, therefore, for the court to know whether the local authoritys reason for seeking a possession order was relevant in that context. In the case of an occupier who had been provided with accommodation under Part VII, seeking a possession order to enable the local authority to perform its homelessness functions, such as moving a family whose numbers had reduced to smaller accommodation, the case for granting the order would in the overwhelming number of cases be proportionate. But if the local authoritys decision was based on other factors such as rent arrears which were not related to the performance of its homelessness functions, it was not enough to tell the court that it was the local housing authority and to rely on the two legitimate aims. He said that a structured approach was required to the issue of proportionality so that the interests of the local authority could be balanced against that of the occupier: Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, paras 19 20. Support for this was to be found in Zehentner v Austria, para 56 where the court said that, while it was for the national authorities to make the initial assessment of necessity, the final evaluation as to whether the reasons cited for the interference are relevant and sufficient remains subject to its review for conformity with the requirements of the Convention. A structured approach of the kind that Mr Luba was suggesting may be appropriate, and indeed desirable, in some contexts such as that of immigration control which was the issue under discussion in Huang v Secretary of State for the Home Department. But in the context of a statutory regime that has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy it would be wholly inappropriate. I agree with Mr Stilitz QC for the Secretary of State that to require the local authority to plead its case in this way would largely collapse the distinction between secured and non secure tenancies. It would give rise to the risk of prolonged and expensive litigation, which would divert funds from the uses to which they should be put to promote social housing in the area. In the ordinary case the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52. It is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances. It is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration of the issues of lawfulness or proportionality. If this test is not met, the order for possession should be granted. This is all that is needed to satisfy the procedural imperative that has been laid down by the Strasbourg court. The decision of the local authority to seek possession in a homelessness case will, of course, have been taken against the background of all the advice and assistance that the provisions of Part VII of the 1996 Act require to be given to the applicant. It is unlikely, as the course of events in Ms Powells case demonstrates, that the reason why it has decided to take proceedings for eviction will not be known to the tenant. The right to request a review of the decisions listed in section 202 and the right of appeal under section 204 are further factors to be taken into account. They provide the tenant with an opportunity to address any errors or misunderstandings that may have arisen and to have them corrected. She will have a further opportunity to raise such issues as a judicial review challenge by way of a defence in the county court. But that is a matter for the tenant, not for the local authority. There is no need for the court to be troubled with these issues unless and until, at the request of the tenant, it has to consider whether it should conduct a proportionality exercise. There may, as was pointed out in Pinnock, para 53, be cases where the local authority has a particularly strong or unusual reason for wanting to obtain possession of the property. It may think it desirable to inform the court of this fact so that it can take account of it in addition to the two given legitimate aims when it is determining the issue of proportionality. There is no reason why it should not ask for this to be done. But, if it wishes to do so, it must plead the reason that it proposes to found upon and it must adduce evidence to support what it is saying. The particular grounds on which it relies can then be taken into account in the assessment. No point can be taken against the local authority, however, if it chooses not to take this course and to leave it to the tenant to raise such points as she wishes by way of a defence. (b) introductory tenancies The above analysis applies equally to introductory tenancies. It cannot be said in their case that there is nothing in the statutory scheme which prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so. Section 127(2) is a direction to the contrary. But, for the reasons set out in paras 50 56 below, that subsection can be read and given effect so as to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8. As to what this entails, the twin legitimate aims that were held in Pinnock to justify seeking a possession order in the case of demoted tenancies are just as relevant in the case of introductory tenancies. The question for the court will always be whether the making of an order for possession in their case too would be lawful and proportionate. The question as to what the procedural requirements are in the case of introductory tenancies must be judged against the fact that the tenant has a statutory right to request a review of the local authoritys decision to seek possession under section 129 of the 1996 Act. This strengthens the grounds for rejecting the structured approach to the issue of proportionality contended for by Mr Luba. As has already been stressed, the regime that applies to introductory tenancies has been deliberately designed by Parliament so as to withhold enjoyment of the right to a secure tenancy until the end of the trial period. In the ordinary case, as in cases of homelessness, the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52. It is against those aims that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances, and it is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration. If this test is not met, the order for possession should be granted. Procedural protections The Court was invited to answer a series of practical questions which were designed to obtain advice as to the course that should be followed in homelessness cases to enable the occupier to make representations before or after service of a notice to quit and to enable the tenant to know the reasons why possession was being sought. Drawing upon the practice of pre action protocols, Mr Luba said that the procedural dimensions of article 8 could best be satisfied by requiring that, before possession proceedings are begun, the non secure occupier knows why the proceedings are being initiated and has an opportunity to make representations to the official charged with making the decision whether to bring proceedings. The Court was also invited to answer a series of questions directed to the way claims for possession in the case of introductory tenancies should be dealt with procedurally in the county court. Detailed questions as to the way claims should be dealt with procedurally are best addressed in the light of facts and circumstances arising from the way proceedings are actually being handled in practice. Otherwise there is a risk that such guidance as this Court can give will create more problems than it will solve. The statutory regimes that are in place must also be taken into account. These are not cases where the defendants were granted secure tenancies. There is no statutory obligation to give reasons with the notice to quit in homelessness cases, and the local authority does not have to justify its motives for seeking a possession order. It is not obvious that pre action protocols have a place in proceedings of this kind. Furthermore, on the facts of the present cases there is no real issue that needs to be addressed. Ms Powell was given warnings about her rent arrears and an opportunity to attend for interview and she discussed the problem of arrears with one of Hounslows officers. The notice to quit was accompanied by a letter giving reasons, and the claim for possession explained that there were arrears. The common law requirement of fair notice was, very properly, observed in her case by Hounslow and none of the steps that they took have been criticised as inadequate. As for the cases of Mr Hall and Mr Frisby, the local authorities told them that they had received complaints of excessive noise, noise abatement notices were served on them against which they did not appeal and in Mr Frisbys case offending equipment was removed from the property. The reasons for the decision to apply for a possession order were set out in the notice of proceedings as required by section 128(3) and the tenants were informed of their right to request a review, all as required by section 128(6). In R (McLellan) v Bracknell Forest Borough Council [2001] EWCA Civ 1510, [2002] QB 1129, para 103 Waller LJ said that where a review has taken place it should be the norm for the local authority to spell out in affidavits before the county court how the procedure was operated, how the hearing was conducted and the reason for taking the decision to continue with the proceedings. As Mr Luba pointed out, that suggestion was directed at the task of enabling the judge to decide whether to adjourn the claim so that a judicial review of the decision might be sought in the High Court. He invited the Court to set out a revised list of requirements that had to be satisfied in the context of a case which might raise issues of proportionality. I would, with respect, decline that invitation. Matters of that kind are more appropriate for a practice direction. In any event it is not for this court to give directions on matters of practice where the points at issue in the case do not require this to be done. Section 127(2) of the 1996 Act As already noted (see para 17, above), section 127(1) of the 1996 Act provides that the landlord may only bring an introductory tenancy to an end by obtaining an order of the court for possession of the dwelling house. Section 127(2) provides that the court shall make such an order unless the provisions of section 128 apply. That section directs the court not to entertain proceedings for possession unless the landlord has served on the tenant a notice complying with its requirements. One of the things that the notice must do is inform the tenant of his right to request a review of the landlords decision to seek a possession order: section 128(6). Section 129 provides that, so long as the request for a review is made no later than 14 days after the service of the possession order, the landlord must review its decision and that the review shall be carried out and the tenant notified before the date specified in the notice as the date after which proceedings for the possession of the dwelling house may be begun. On the face of it, the court has no discretion under section 127(2) as to whether or not it should make the order for possession. Its ordinary meaning is not in doubt. If the requirements of section 128 and by implication section 129 (see para 56, below) are met, the court must make the order whether or not it considers it proportionate to do so. The question that this issue raises is whether section 127(2) can nevertheless be read and given effect under section 3 of the Human Rights Act 1998 so as to permit the tenant to raise his article 8 Convention right by way of a defence to the proceedings in the county court and enable the judge to address the issue of proportionality. In Pinnock, paras 68 79, the Court addressed the proper interpretation of section 143D(2) of the 1996 Act, as amended, which together with sections 143E and 143F are so similar to those of sections 127 to 129 as to indicate that they were modelled on what those sections provide. Like section 127(2) in the case of a dwelling house let under an introductory tenancy, section 143D(2) provides when the court is asked to make an order for the possession of a dwelling house let under a demoted tenancy that the court must make the order (the word shall is not used, but the sense is the same) if the notice and review requirements have been complied with. As the Court noted in para 68, if section 143D was construed in accordance with the traditional approach to interpretation, it was hard to see how the court could have the power either to investigate for itself the facts relied on to justify the decision to seek possession, or to refuse to make an order for possession if it considered that it would be disproportionate to do so. The same problem arises with regard to section 127(2). Unless a solution can be found under section 3 of the 1998 Act, the language of that section appears to deprive the court of almost any ability to stand in the way of a landlord who had decided to seek possession against an introductory tenant: see Pinnock, para 69. In Pinnock it was held that it is open to a tenant under a demoted tenancy to challenge the landlords decision to bring possession proceedings on the ground that it would be disproportionate and therefore contrary to his article 8 Convention rights: para 73. This finding applies just as much in the case of introductory tenancies, so it must be concluded that, wherever possible, the traditional review powers of the court should be expanded to permit it to carry out that exercise in their case too. The courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering the facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view: Pinnock, para 74. As was observed in that case, however, much the more difficult question is whether it is possible to read and give effect to section 127(2) in a way that would permit the county court judge to do this. It is difficult because the wording of the subsection indicates that its purpose is to ensure that the court does nothing more than check whether the procedure has been followed. An introductory tenancy, after all, has been deliberately deprived of the protections that apply to a secure tenancy. It could be argued, as it was in Pinnock, that for the court to assess the proportionality of the decision to bring and continue the possession proceedings would go against the whole import of the section. It would amount to amending it rather than interpreting it: para 75. The Court decided in Pinnock to reject that argument for the reasons set out in paras 77 81. The question in this case is whether there is any good reason for not applying that decision to the regime that the 1996 Act has laid down for introductory tenancies. There are some differences between the two regimes. There is no demotion stage, as a tenancy becomes an introductory tenancy upon its commencement and it remains an introductory tenancy until the end of the trial period. And, while the language of sections 127 129 is for the most part reproduced, mutatis mutandis, in sections 147D 147F, there is one difference between them. Section 127(2) does not refer to section 129, unlike section 143D(2), which states: The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed. Furthermore, as Mr Underwood pointed out, Parliament had made a clear choice that introductory tenants were not to have the protection from eviction that secure tenants have. He said that there were many ways in which section 127(2) could be made compatible with article 8, and that it should be left to Parliament to choose between them. The fact that there is no mention in section 127(2) of the review procedure under section 129 can be seen to be of no consequence, in view of the direction in section 128(6) that the tenant must be informed of his right to request a review. The fact that there is no demotion stage in the case of an introductory tenancy does not affect the reasoning on which the decision in Pinnock was based. It was that, as lawfulness must be an inherent requirement of the procedure for seeking a possession order, it must equally be open to the court to consider whether that procedure has been lawfully followed having regard to the defendants article 8 Convention rights: para 77. It was by this route, and by the application of sections 3(1) and 7(1)(b) of the 1998 Act, that the Court held that section 143D(2) could be read and given effect to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8. There is a sufficient similarity between section 127(2) and section 143D(2) to apply the reasoning in Pinnock to introductory tenancies also. Although the word procedure is not used in section 127(2), it does refer to the procedural requirements in section 128. So it should be read and given effect in the same way, and it is not necessary to resort to the making of a declaration of incompatibility. Section 89 of the 1980 Act The question raised by this issue is whether, if the argument is made out that the proportionate course would be to defer the delivery of possession for a period such as three months or to make a suspended order for possession, this can be done in the face of the provisions of section 89(1) of the Housing Act 1980. That section provides: (1) Where a court makes an order for the possession of any land in a case not falling within the exceptions mentioned in subsection (2) below, the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than fourteen days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order. (2) The restrictions in subsection (1) above do not apply if (a) the order is made in an action by a mortgagee for possession; or (b) the order is made in an action for forfeiture of a lease; or (c) the court had power to make the order only if it considered it reasonable to make it; or (d) the order relates to a dwelling house which is the subject of a restricted contract (within the meaning of section 19 of the [Rent Act 1977]); or (e) the order is made in proceedings brought as mentioned in section 88(1) above [proceedings for possession of a dwelling house let under a rental purchase agreement]. None of the exceptions listed in section 89(2) apply to tenancies which are not secure tenancies. The effect of subsection (1) of that section is to remove from the court the discretion which it had at common law to select whatever length of postponement it thought fit: see McPhail v Persons Unknown [1973] Ch 447. In his commentary on this section in Current Law Statutes Mr Andrew Arden (as he then was) suggested that the section did not prevent a greater period being allowed by consent. But it is difficult to see how the consent of the parties could confer a discretionary power on the court which has been removed from it by the statute. The question whether the section permits the court to allow a longer period on grounds of article 8 proportionality was left open in Pinnock, para 63. It did not need to be addressed on the facts of that case. It does not arise in any of the cases that are before this Court either, as it has not been suggested in any of them that an order postponing possession for a period in excess of six weeks is necessary to meet the requirements of article 8. In Ms Powells case the giving up of possession was postponed by 14 days. In Mr Halls case the period allowed was 28 days. In Mr Frisbys case the judge decided not make a possession order, so that an application could be made to the administrative court. But as the point was fully argued, and as it is a matter of some importance to know what scope there is for departing from the strict timetable on grounds of proportionality in cases of exceptional hardship, it is appropriate that the Court should deal with it. Two possible ways of enabling the court to depart from the strict timetable were suggested in argument. One was to read down the section under the power that the court is given by section 3(1) of the Human Rights Act 1998. The other was to exercise powers of case management by adjourning the proceedings if the six week period was likely to be insufficient to enable the tenant to remove from the property without incurring exceptional hardship, for such length of time as might be necessary to avoid it. The timetable is very precise as to the limit to the power to postpone. The words shall not in any event could hardly be more explicit. Its language is in sharp contrast to that of section 87 of the 1980 Act (now contained in section 85 of the Housing Act 1985, as amended), the first two subsections of which provided: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of grounds 1 to 6 or 10 to 13 in Part I of Schedule 4 to this Act, the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any time before the execution of the order, the court may (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court may think fit. The scheme of the 1980 Act, as the contrast between sections 87 and 89 illustrates, was to confer protection on secure tenants but to restrict it in relation to non secure tenants. Its long title states that among the Acts purposes was to restrict the discretion of the court in making orders for possession. Section 89 contains an express prohibition against exercising the extended powers given by section 85 in the case of secure tenancies. In the face of such strong statutory language, any reading down of the section to enable the court to postpone the execution of an order for possession of a dwelling house which was not let on a secure tenancy for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits. As Lord Nicholls of Birkenhead said in Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, para 33, for the courts to adopt a meaning inconsistent with a fundamental feature of legislation would be to cross the constitutional boundary that section 3 of the 1998 Act seeks to demarcate and preserve. Section 89 of the 1980 Act does not, of course, take away from the court its ordinary powers of case management. It would be perfectly proper for it, for example, to defer making the order for possession pending an appeal or to enable proceedings to be brought in the administrative court which might result in a finding that it was not lawful for a possession order to be made, as was contemplated by the judge in the case of Mr Frisby but is now no longer necessary. An adjournment would also be a permissible exercise of the courts discretion if more information was needed to enable it to decide what order it should make. But what the court cannot do, if it decides to proceed to make the order, is play for more time by suspending or staying its effect so as to extend the time limit beyond the statutory maximum. The question then is whether the Court should make a declaration of incompatibility under section 4 of the 1998 Act. This would be appropriate if there was good reason to believe that the time limit that the section sets is likely in practice to be incompatible with the article 8 Convention right of the person against whom the order for possession is made. Mr Ardens comment in Current Law Statutes indicates that at the time when section 89 of the 1980 Act was enacted postponements of orders for possession for periods of four to six weeks was normal. No evidence has been put before the Court to show that in practice the maximum period of six weeks is insufficient to meet the needs of cases of exceptional hardship. Furthermore, this is an area of law where the judgment of Parliament as to what was necessary to achieve its policy of restricting the discretion of the court in the case of non secure tenancies should be respected, unless it was manifestly without reasonable foundation: Blei v Croatia (2004) 41 EHRR 13, para 65. In these circumstances, as no obvious need for the section to be revisited has been demonstrated, I would decline to make a declaration of incompatibility. The disposal of these appeals (a) Ms Powell Mr Underwood informed the Court that Hounslow had decided, in the light of the decision in Pinnock, to offer Ms Powell suitable alternative accommodation. As before, this accommodation was to be provided on a non secure basis. Her rent arrears would be carried forward to the new tenancy on the basis that she continued to pay off the arrears at 5 per week, subject to any changes in her circumstances which would enable her to pay more. Mr Luba said that he was grateful for this offer, and he submitted that in any event the order that had been made against his client should not stand. Evidence had been heard by the district judge in her case. But this was not a full proportionality hearing of the kind contemplated by Pinnock, and her personal circumstances had not been examined. He invited the court to allow Ms Powells appeal. In view of the offer that had been made, Mr Underwood did not oppose this invitation in his oral argument. But in his written case, in which he invited the court to dismiss the appeal, he pointed out that the judge observed that the action taken by Hounslow was proportionate. Had it not been for the offer of suitable alternative accommodation, there might have been grounds for remitting Ms Powells case to the county court for consideration of article 8 proportionality. Giving effect to the order for possession would have the inevitable consequence of making Ms Powell homeless again so that the local authoritys duties to her will continue, unless she were to be found to be intentionally homeless or not to have a priority need. Had there been a live issue to be examined, it would have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances. As it is, it is not necessary to reach a view on this point. An offer of suitable alternative accommodation having been made, no good purpose would be served by maintaining the order for possession or the notice to quit which preceded it. I would allow this appeal for this reason and set the order and the notice to quit aside. (b) Mr Hall Mr Underwood informed the Court that Leeds had decided, in the light of the decision in Pinnock and as there had been no recent reports of his having caused a nuisance, to offer Mr Hall a secure tenancy of his current accommodation. Mr Luba said that he was grateful for this offer, but he submitted that the order that had been made against his client should not stand in any event as the judge had been wrong to refuse to consider anything occurring after the date of the review. He invited the court to dispose of the matter by allowing Mr Halls appeal. Mr Underwood acknowledged that Mr Hall did not have a proportionality hearing. But he submitted that under the introductory tenancy scheme it had no power to give him one, so the appeal should be dismissed. Mr Underwoods submission that the county court had no power to consider whether it was proportionate to make the order must be rejected. For the reasons set out in paras 50 56 above, it has that power. So, if there were grounds for thinking that it was seriously arguable that the making of the order was disproportionate, I would have remitted his case to the county court to enable him to present that argument. But the reasons given by the Court of Appeal for holding that it was unarguable that the decision was unlawful apply with equal force to the question whether, on the facts presented by Mr Hall, the decision was disproportionate. No grounds have been put before this Court for thinking that he could present a case which was seriously arguable. Had it not been for the offer of a secure tenancy, I would have dismissed his appeal. As it is, no good purpose would be served by maintaining the order for possession. I would, for this reason only, allow this appeal. (c) Mr Frisby Birmingham has not made any offer of settlement in Mr Frisbys case and Mr Arden indicated that it was not minded to do so. Mr Luba submitted that, as the district judge had considered only the question of venue and had adjourned the proceedings so that an application could be made for judicial review, the proper course was for this Court to allow the appeal so that proceedings could be resumed in the county court. Mr Arden, on the other hand, invited the Court to dismiss the appeal as Mr Frisby did not take advantage of the adjournment to take proceedings for judicial review and had given no indication of what the issues were that he wanted to raise. He said that he had had his chance, and that he should not be given a further opportunity. He pointed out that Mr Frisby did not appeal against the noise abatement notice, and it appeared that he was not in position to say that the notice of proceedings had not been properly served on him. In view of the way the case was dealt with in the county court, Mr Frisby did not have an opportunity to present his arguments on proportionality in that court. But I do not think that there is any reason for thinking that it is seriously arguable that the making of an order for possession in his case was disproportionate. As already noted (see para 30 and 31, above), when Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy he did not do so and, having requested a review of the decision to seek an order for possession, he did not attend the resumed hearing. The facts on which that decision was based are compelling, and no notice has been given of any grounds on which it might be suggested that the making of the order was disproportionate. I would dismiss this appeal. LORD PHILLIPS Introduction I am grateful to Lord Hope for setting out the facts and issues raised by these appeals with such clarity. I agree with his conclusions, but in relation to some of these I wish to add some comments of my own. I propose to do this, after an introductory overview, by addressing, in some cases very shortly, the issues set out in the Statements of Facts and Issues agreed by the parties. Article 8(1) of the Convention confers on everyone a right to respect for his home. It does not impose on a state, or a public authority within a state, a duty to provide a home or to sort out a persons housing problems see the comment of Lord Bingham in Kay v Lambeth London Borough Council [2006] 2 AC 465, at para 28 and the Strasbourg authorities cited by him. English law, and public authorities acting pursuant to that law, have gone further than the Convention requires. The law lays down a complex framework dealing with rights and obligations in relation to housing. Under this public authorities are under an obligation to provide accommodation for the homeless in the circumstances described by Lord Hope at para 11. The law also regulates the manner in which public authorities provide housing for those requiring this. Article 8, together with section 6 of the Human Rights Act 1998 (HRA), imposes on a public authority which has provided a person with a home a duty to have respect for that home. This imposes a fetter on the right of the authority to dispossess the occupier of his home. As a matter of substance, article 8(2) requires that dispossession should be pursuant to one or more of the specified legitimate aims and that it should be a proportionate means of achieving that aim. As a matter of procedure, the occupier is entitled to have any issue as to whether article 8(2) is satisfied determined by an independent tribunal. Parliament has gone a long way towards satisfying these requirements by express statutory provisions. It has created a class of secure tenants who cannot be dispossessed unless a court is satisfied, inter alia, that it is reasonable that they should be. Parliament has also, however, deliberately created classes of tenants who do not have security of tenure (non secure tenants). Parliament has conferred on some of these a degree of substantive and procedural protection, but has sought to place the decision on whether or not they should be dispossessed fairly and squarely on the local authorities themselves. It has sought to avoid, in so far as possible, questions of proportionality being pursued before the courts. The policy behind this approach is not in doubt. It is to prevent the delay and expense that may occur if those who are not entitled to security of tenure are permitted to resist the grant of possession orders by the courts by attacking the reasons that have led the local authorities to claim possession. The Strasbourg Court has made it plain that ousting the powers of the court to consider the proportionality of dispossessing a non secure tenant is not compatible with the procedural requirements of article 8. In Manchester City Council v Pinnock [2010] 3 WLR 1441 this Court held that it was possible to read section 143D(2) of the Housing Act 1996 as permitting a demoted tenant to raise the issue of proportionality by way of defence to an application for a possession order. These appeals require the Court to decide whether the reasoning in Pinnock applies where a local authority seeks, pursuant to section 127 of that Act, to recover possession of a property occupied by an introductory tenant or where possession is sought of property occupied pursuant to Part VII of the Act after the tenancy, or licence, has been terminated by a notice to quit. More generally, these appeals raise a number of questions which are not clearly answered by the decision in Pinnock. Foremost among these is the question of the matters to which the court must pay regard when an issue of proportionality is raised. INTRODUCTORY TENANCIES Mr Frisby, which arise in relation to introductory tenancies. Issue 1: Does article 8 apply at all to a claim for possession of premises held on an introductory tenancy? All parties were agreed that, in normal circumstances, the premises occupied by an introductory tenant constitute his home for the purposes of article 8. I endorse that agreement. When a tenant enters into occupation under an introductory tenancy the common intention is that, provided that the probationary period passes without incident, the tenancy will become secure. The tenant enters into the premises with the intention of making them his home and, for the purposes of article 8, they normally become his home. I shall start by considering the issues agreed in the appeals of Mr Hall and Issue 2: Must repossession of property that is occupied under an introductory tenancy be subject to an independent determination of proportionality under article 8(2)? It might have been thought that an affirmative answer to the first issue would necessarily require a similar answer to this issue. Counsel for the appellants, for Leeds City Council, and for the Secretary of State were agreed that this was so. Mr Andrew Arden QC, for Birmingham City Council, submitted to the contrary. He accepted that the premises occupied by an introductory tenant were his home for the purposes of article 8. He submitted, however, that the Strasbourg Court had never laid down an absolute requirement for an independent determination of proportionality. The grant of a non secure tenancy for a probationary period was properly to be considered as part of the process of allocating accommodation, or of the selection of tenants. This was a matter for the local authority, not for the courts. The existence of this probationary scheme was plainly in the interest of other tenants. In these circumstances, and having regard to the requirement that local authorities should be able to act swiftly, economically and decisively in allocating accommodation, there was, exceptionally, no requirement for an independent determination of proportionality. The exigencies of the introductory tenancy scheme outweighed the need for the tenant to be able to challenge proportionality before an independent tribunal. Pinnock could be distinguished because it dealt with demoted tenancies, which were not an integral part of the scheme of allocation. While I was initially attracted by this argument, I have not been persuaded by it. The provisions of Part V of the 1996 Act that relate to demoted tenancies closely mirror the provisions that relate to introductory tenancies. Each set of provisions has the effect of placing the tenant on probation, with good behaviour likely to earn the reward of a secure tenancy. I can see no principled basis for distinguishing between the two so far as concerns the manner of application of article 8. I would give an affirmative answer to the second issue. Issue 3: What legitimate aims may the local authority invoke when seeking to justify under article 8(2) the dispossession of an introductory tenant? This issue, and issue 4 which follows, arise on the premise that an affirmative answer is given to issue 5, a premise which, as I shall explain, I consider to be valid. I agree with Lord Hope (para 36) that the answer to this issue is provided by para 52 of the judgment of this Court in Pinnock. The legitimate aims itemised in article 8(2) include the protection of the rights and freedoms of others. This phrase is wide enough to embrace (i) the vindication of the authoritys ownership rights in the property and (ii) the compliance by the authority with its duties in relation to the distribution and management of the housing stock for the benefit of other tenants. A public authority can properly seek to justify its actions in dispossessing an introductory tenant by asserting that this was reasonably necessary to achieve these legitimate ends. I do not understand any of the parties to dissent from this conclusion which reflects the views expressed by the Strasbourg Court in McCann v United Kingdom (2008) 47 EHRR 913, at para 48. Issue 4: In the light of the legitimate aims, what types of factual issue will be relevant to any proportionality determination? This substantive question is distinct from the procedural question of how the relevant factual issues are to be brought before the court. The contentions of the parties. On this issue there was a wide variety of submissions. At one extreme was the case advanced by Mr Stilitz QC on behalf of the Secretary of State. He submitted that each of the two legitimate aims was individually so cogent that the particular reasons that motivated the local authority to seek to recover possession were an irrelevance. A local authoritys right to recover its own property from a recipient who had no legal right to remain in possession did not require to be supported by reference to the reasons which motivated the authority in seeking to exercise this right. This is how this proposition was expressed in para 50.1 of the Secretary of States written case in relation to homelessness cases: When assessing proportionality by reference to this legitimate aim, it is not necessary or appropriate for the court to investigate the factual merits of the local authoritys reasons for serving the notice to quit, as the merits of the local authoritys reasons are irrelevant to the assessment of proportionality against this particular legitimate aim. So far as the second legitimate aim was concerned, the Secretary of State submitted that it should be assumed that possession proceedings were brought in the proper, and (in terms of domestic public law) lawful discharge of the local authoritys housing duties. Similar submissions were advanced at para 64 of the Secretary of States case in relation to introductory tenancies: Unless the local authority specifically seeks to invoke the particular reasons for seeking possession given to the occupier under the statutory scheme, the factual inquiry on an article 8 challenge in the county court will be confined to the determination of the occupiers personal circumstances. At the other extreme, Mr Luba QC for Mr Frisby submitted that there was no restriction or inhibition on the factual matters that either party might deploy in relation to an issue of proportionality raised in possession proceedings. In relation to an introductory tenancy he submitted that the local authority could properly rely on anti social behaviour or rent arrears, indeed on any breach of the terms of the tenancy other than those which had no adverse impact on third parties, such as a modest failure to maintain the garden or the keeping of an innocuous pet. The tenant could raise any matters that he wished in support of his contention that dispossession was disproportionate. Mr Arden did not adopt the extreme case of the Secretary of State. He contended that it was open to the local authority to rely on a presumption that it was acting in proper pursuance of its duties in relation to the management and distribution of housing. It could, however, if it chose, rely upon specific reasons for seeking to recover possession. He accepted that it was open to a tenant to raise at the hearing of the possession application any of the matters previously raised in opposition to the dispossession on the statutory review under section 129 of the 1996 Act. Lord Hopes analysis Lord Hope deals with issues 3 and 4 together. He does so first in relation to homelessness cases, but goes on to apply the same reasoning to introductory tenancies. So far as issue 3 is concerned, I have agreed with Lord Hopes identification of the legitimate aims. He deals very shortly with the factual issues that may be relevant to the issue of proportionality. He states at para 37 that in the overwhelming majority of cases no issue will arise as to whether the authority is pursuing legitimate aims, for this will be presumed. The only factual issue that may arise will be whether, in the light of the occupiers personal circumstances, the order is lawful and proportionate. At para 41, dealing with homelessness, and again at para 45, when dealing with introductory tenancies, he states that in the ordinary case the relevant facts will be encapsulated in the two legitimate aims that were identified in Pinnock and that it is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what he has to say about his personal circumstances. Discussion I agree with Lord Hopes analysis. In seeking an order for possession, the local authority is not required to advance a positive case that this will accord with the requirements of article 8(2). This will be presumed by reason of the authoritys ownership of the property and duties in relation to the management of the housing stock. Ownership alone is not enough to satisfy article 8(2), where the owner is a social landlord, as Lord Hope observes at para 36, citing Kryvitska and Kryvitsky v Ukraine (Application No 30856/03) given 2 December 2010. Article 8(2) requires that the authority should be seeking possession in order to further the performance of its housing duties but, unless the tenant raises a challenge, this will be presumed. The question raised by issue 4 is, however, the nature of the challenge that it is open to the tenant to make. This is an important question. If article 8(2) requires that repossession of accommodation let on an introductory tenancy should be in furtherance of the authoritys housing duties, the same is true of the independent requirements of English public law. If the latter are satisfied, then, so it seems to me, it will almost inevitably follow that the requirements of article 8(2) are also satisfied. The policy behind the introductory tenancy scheme is not in doubt. It was well summarised in three short quotations at para 28 of Mr Ardens printed case, one from a consultation paper on Probationary Tenancies and two from parliamentary debates on the Housing Bill 1996. Introductory tenancies place the tenant on probation. They require the tenant to demonstrate that he is a good tenant, both as regards his behaviour towards his neighbours and as regards his contractual obligations to his landlord, before he is granted a tenancy that is secure for life. When deciding whether to dispossess a tenant who has been granted an introductory tenancy, a local authority must have regard to this policy. The authority cannot simply rely upon the fact that it owns the property and that the tenant has no security of tenure. The decision to dispossess the tenant must be a reasoned decision. Section 128(3) of the 1996 Act requires the tenant to be given notice of the reasons for the landlords decision to seek a possession order and section 129 entitles the tenant to a review of the decision and to the reasons for its confirmation if, indeed, it is confirmed. Under the Introductory Tenants (Review) Regulations 1997 (SI 1997/72) made pursuant to section 129(3) of the 1996 the tenant is entitled to an oral hearing of the review, carried out by a person who was not involved in the original decision and (where the decision makers are officers) senior to that person. He is entitled to be represented at that hearing. It is implicit in this scheme that the reasons for terminating the introductory tenancy before it becomes secure will be that, in one way or another, the tenant has proved unsatisfactory. That has certainly been the position in the cases of Mr Hall and of Mr Frisby. It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances which have nothing to do with the reasons for seeking the possession order. Normally, however, any attack on the proportionality of dispossession is likely to amount to an attack on the reasons given to the tenant for seeking the possession order. Either the tenant will argue that the facts relied upon by the authority to justify seeking the order do not do so, or he will contend that those facts were not accurate. In paras 51 to 53 this Court in Pinnock commented on the proposition that it will only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument. I believe that this proposition is an accurate statement of fact in relation to introductory tenancies. This is because the judge should summarily dismiss any attempt to raise a proportionality argument unless the defendant can show that he has substantial grounds for advancing this. Two factors make it extremely unlikely that the defendant will be in a position to do this. The first is the relatively low threshold that the authority has to cross to justify terminating the introductory tenancy. The second is the significant procedural safeguards provided to the tenant that I have described in para 90 above. As to the threshold, the arguments advanced by Mr Arden that I have considered at para 78 above are of some relevance. The introductory scheme is designed to enable a local authority to select as long term secure tenants those who demonstrate that they are unlikely to pose problems for the authority or for their neighbours. The authority can properly require a high standard of behaviour by the tenant during the probationary period. Thus I do not accept Mr Lubas suggestion that the authority could not properly rely upon a breach of the tenancy condition if it had no adverse impact on any third party. Furthermore, if a tenancy has given rise to complaints by neighbours of anti social behaviour the authority does not have to be in a position to prove that these are well founded in order to justify terminating the tenancy. As Waller LJ remarked in R(McLellan) v Bracknell Forest Borough Council [2002] QB 1129, at para 97: Under the introductory tenancy scheme it is not a requirement that the council should be satisfied that breaches of the tenancy agreement have in fact taken place. The right question under the scheme will be whether in the context of allegation and counter allegation it was reasonable for the council to take a decision to proceed with termination of the introductory tenancy. As to the procedural safeguards, they may not be enough in themselves to satisfy article 8(2) in that the decision makers are representatives of the authority and thus not independent. None the less, they have no axe to grind when deciding whether or not an introductory tenant has shown himself to be a suitable candidate for a secure tenancy. It is likely to be a rare case, particularly as the defendant has a right to a review, where the defendant will be in a position to demonstrate that there are substantial grounds for attacking the authoritys findings of fact, or the decision based on them. I note that in McCann at para 54 the Strasbourg Court accepted that it would only be in very exceptional cases that an applicant would succeed in raising an arguable case which would require the court to examine the issue and that in the great majority of cases it would be possible for possession orders to continue to be made in summary proceedings. Issue 5: Can section 127(2)of the 1996 Act be read compatibly with the occupiers article 8 rights so as to allow him to defend a claim for possession of premises held on an introductory tenancy in the county court? Mr Luba and Mr Stilitz submitted that this question should be answered in the affirmative on the ground that the reasoning of this Court in Pinnock in relation to section 143D(2) of the 1996 Act applied equally to section 127(2). Mr Arden and Mr Underwood submitted to the contrary. Mr Arden advanced two reasons for distinguishing the reasoning in Pinnock. The first was that demoted tenancies are relatively rare whereas introductory tenancies are the norm for all new lettings nationally and amount to tens of thousands a year. The second was that, syntactically it was not possible, as it had been in Pinnock, to imply the word lawfully into the statutory conditions precedent to making the possession order. Mr Underwood QC advanced a further argument against applying the reasoning in Pinnock to section 127(2). Section 143D(2) was inserted into the 1996 Act by amendment after the HRA came into force. Accordingly the construction of the subsection was subject to section 3 of the latter Act. The same was not true of section 127(2), which predated the HRA. Consequently the latter subsection had to be given its natural meaning. I have not found any of these arguments persuasive. Mr Arden himself accepted that, in principle, the volume of cases affected had no obvious impact on construction. As to the syntactical argument, the precise formulation of the proviso required by article 8 is of no significance. Compatibility can be achieved in the case of either subsection by implying the phrase provided that article 8 is not infringed. As to Mr Underwoods argument, section 3 of the HRA applies to all legislation, whether enacted before or after the HRA came into force. Insofar as this alters the construction given to legislation before the HRA came into force, the HRA has the effect of amending legislation: see Ghaidan v Godin Mendoza [2004] 2 AC 557. For the reasons given by Lord Hope in paras 50 to 56 I would give an affirmative answer to Issue 5. Issues 6 and 8: Procedural questions The parties agreed a considerable list of procedural questions which would arise if an affirmative answer were given to Issue 5. There is no doubt that the affirmative answer that I would give to that issue creates a requirement for some procedural rules in order to provide an orderly process by which (i) an introductory tenant can raise a proportionality issue by way of defence to a claim for a possession order in respect of his home and (ii) the authority seeking possession can respond to such a defence. I agree with Lord Hope that it is not appropriate for this Court to attempt to give directions or guidance in relation to the appropriate procedures. These are much better formulated in the form of rules of court, practice directions or protocols by those who are normally responsible for producing these. There is, however, one important matter of principle upon which I wish to comment. This is whether the local authority should be required to give notice of the reasons that have led it to seek possession of the defendants home. In the case of introductory tenancies this question is academic, for sections 128 and 129 of the 1996 Act expressly require reasons to be given. Accordingly I propose to deal with this question in the context of homelessness cases. Section 89 of the Housing Act 1980 Section 89 of the 1980 Act is of general application, so that it applies in relation to both introductory tenancies and homelessness cases. In Pinnock, at para 63, this Court raised, but did not answer, the question of whether article 8 of the Convention impacts on, or is incompatible with, the true construction of section 89. Lord Hope has dealt with this question at paras 57 to 64 of his judgment. I agree with his conclusions, but wish to add a word on the question of incompatibility, which he has considered at para 64. In any situation where the judge dealing with an application for a possession order has power to refuse to make the order on the ground that it would infringe article 8, no question of incompatibility can arise in relation to section 89. That section merely increases the options open to the judge. He can (i) make an immediate order for possession; (ii) make an order the operation of which is postponed up to the limit permitted by section 89; (iii) refuse to make the order on the ground that it would infringe article 8. The clear limit on the judges discretion to postpone the operation of the order may thus, in rare cases, have the consequence that the order is refused, whereas it would otherwise have been granted, subject to postponement of its operation for a greater period than section 89 permits. This is not a consequence that Parliament can have envisaged. Issue 7 This does not arise Issue 9: Disposal. For the reasons that he gives I would make the orders proposed by Lord Hope in respect of the appeals in the cases of both Mr Hall and Mr Frisby. HOMELESSNESS CASES I now turn to consider the position of those who, like Rebecca Powell, are provided with accommodation by a local authority pursuant to its duties under Part VII of the 1996 Act, which deals with homelessness. Lord Hope has summarised the essential features of this scheme at paras 11 to 13 of his judgment. The first two issues that I have considered in relation to introductory tenancies have not been raised in relation to tenancies under Part VII, for all parties have accepted, correctly in my view, that accommodation provided to the homeless will normally become their homes for the purposes of article 8 and that a judge, usually a district judge, who is considering an application for a possession order under Part VII, is entitled to entertain by way of defence to the application a submission that to make the order will infringe article 8. Issue 1: What special features, if any, apply to the determination of an article 8 defence in the context of accommodation provided under Part VII? Mr Luba has helpfully set out in his printed case six reasons why a person may be accommodated by a local authority under Part VII: (1) the authority has not yet reached a decision on the homelessness application but the applicant is being accommodated in the interim because he may be eligible, homeless and have a priority need: Housing Act 1996, section 188; (2) the authority is in the process of referring the application to a different local housing authority but accommodating the applicant until that process is resolved: Housing Act 1996, section 200; (3) the authority has determined the application but the applicant has invoked a statutory review or statutory appeal and the authority is accommodating until the review/appeal is determined: Housing Act 1996, sections 188 and 204(4); (4) the authority has decided to exercise its power to accommodate an applicant who is eligible, homeless, not intentionally homeless but not in priority need: Housing Act 1996, section 192(3); (5) the authority has decided that because the applicant is eligible, homeless, and in priority need but has become homeless intentionally it is under a duty to accommodate for such time as gives the applicant a reasonable opportunity of securing his own accommodation: Housing Act 1996, section 190(2)(b); or (6) the authority has decided that the applicant is eligible, homeless, in priority need and did not become homeless intentionally (the main housing duty): Housing Act 1996, section 193. It is apparent from this list why it is that a local authority will not normally be prepared to grant security of tenure where accommodation is provided under Part VII. The scheme is concerned with the provision of temporary accommodation while a persons claim under Part VII is addressed. The housing stock from which the authority provides this temporary accommodation may well not all be owned by the authority. Often it will have been obtained from a housing association or a private landlord. It is important that the authority should have the maximum flexibility to move, where necessary, a tenant from one unit of accommodation to another. Nevertheless, a tenant may be permitted to remain in accommodation provided under Part VII for a considerable period and the local authority may wish to remove the tenant from that accommodation not simply in the interests of the more efficient management of the housing stock, but because of shortcomings in the tenants behaviour, such as anti social activity or a failure to pay rent. Issue 2: What legitimate aims may the local authority invoke when seeking to justify under article 8 (2) the dispossession of a tenant who is in occupation of premises pursuant to Part VII? This issue is the same as Issue 3 in relation to introductory tenancies and the answer is the same (see para 80 above). The difference in practice is that the local authoritys decision under Part VII is more likely to be dictated by the practical requirements of making the best allocation of a limited and fluctuating housing stock. Issue 3: In the light of the legitimate aims what type of factual issues will be relevant to any such proportionality determination? Just as in the case of introductory tenancies, the factual issues that will be relevant if a defendant makes a proportionality challenge to the making of a possession order are likely to depend upon the reasons that have led the local authority to seek the order. As Mr Luba accepted, where the local authority simply wishes to relocate the defendant in alternative accommodation in the interests of the more efficient allocation of limited and fluctuating housing stock, it is not easy to envisage any issue of fact that the defendant could raise that would constitute a substantial ground for making a proportionality challenge. In this context it is relevant that section 202 of the 1996 Act gives a statutory right to a review of the suitability of accommodation offered to a person pursuant to a local authoritys duties under Part VII. Where the reason for seeking possession is alleged shortcomings on the part of the tenant, such as failure to pay rent, it will be open to the tenant to seek to challenge the facts upon which the decision is based. The position will be similar to that considered in relation to introductory tenancies. The defendant will have to show that he has substantial grounds for the challenge if he is to avoid the summary imposition of the possession order. As Mr Luba pointed out, where the reason is non payment of rent there is not likely to be much scope for bona fide issues of fact. For these reasons the statement that it will only be in rare cases that a valid proportionality challenge can be raised by way of defence to a possession order applies equally to repossession of accommodation provided under Part VII. Issue 4: Does article 8 require the local authority to give notice of its reasons for seeking possession? Mr Luba submitted that the procedural protections implicit in article 8 required that the tenant should be informed of the authoritys intention to seek possession and the reasons for it before service of the notice to quit, or at least before the commencement of the possession proceedings, in order to permit the tenant the opportunity to challenge those reasons and the authoritys decision. This raises an important question of principle. Sometimes a local authority will wish to recover possession of premises in the interests of a more effective allocation of the housing stock. Sometimes the authority will be reacting to the behaviour, or perceived behaviour of the tenant. In the latter event the authority may be proceeding on the basis of a factual assumption that is unsound. If the only reason that the authority is seeking possession is that the tenant has been guilty of bad behaviour, obtaining possession will not further the legitimate aims of the authority if that factual premise is unsound. If the defendant is not informed of the reason why the authority is seeking possession he will be denied the opportunity of displacing the presumption that the authoritys action will serve a legitimate aim. I do not believe that the Strasbourg Court would tolerate a regime under which a person can be deprived of his home by a public authority without being told the reason for this. Nor would I, for it is fundamentally unfair. In Connors v United Kingdom (2004) 40 EHRR 189, at para 94 the Strasbourg Court said: The power to evict without the burden of giving reasons liable to be examined as to their merits by an independent tribunal has not been convincingly shown to respond to any specific goal . The references to flexibility or administrative burden have not been supported by any concrete indications of the difficulties that the regime is thereby intended to avoid. The Court was there dealing with gipsies but those words are equally applicable in the present context. I do not suggest that there is any burden on a local authority, in the first instance, to justify to the court its application for a possession order or to plead the reason for seeking this. What I do suggest is that the tenant must be informed of the reason for the authoritys action so that he can, if so minded, attempt to raise a proportionality challenge. I do not believe that recognition of this obligation will have any significant practical consequences for I find it inconceivable that local authorities are, in practice, seeking possession orders against tenants accommodated pursuant to Part VII without telling them why they are doing so. Mr Luba told the Court that tenants under Part VII who are relocated by the local authority usually agree to this course. I would expect the local authority to inform the tenant of the reason for the proposed relocation, in order to procure this consent. Where it is the conduct of the tenant that has led to the authoritys action, I would equally expect the authority to make this plain. Certainly Hounslow did so in the case of Rebecca Powell. Mr Luba urges that notice of the authoritys reasons should be given before service of a notice to quit. I suspect that this is precisely what does happen in practice, but I would not, without further consideration, rule that article 8 requires this. It is possible that article 8 will be satisfied provided that the occupier is given the information he needs in time to decide whether or not to raise a challenge in the possession proceedings. Issue 5: When and how should notice of the authoritys reasons be given? These are matters of procedure on which I do not propose to comment. Mr Luba has referred the Court to a paper prepared by HH Judge Madge on Article 8 la lutta continua? (2009), JHL 2009, 12(3), 43 47, which has been approved by the Housing and Land Committee of the Civil Justice Council. I consider that Judge Madge and that Committee are better placed to decide upon the appropriate procedural changes required by Pinnock and by the decision on these appeals than am I. Issue 6 This raises the point on section 89 that I have already considered in the context of introductory tenancies. Issue 7: Should the judge hearing the application for possession also rule on the validity of the notice to quit? Mr Luba draws attention to the fact that if the judge refuses to make a possession order on article 8 grounds, but does not also rule that the notice to quit was unlawful, the defendant will remain in possession as a tolerated trespasser rather than as a non secure tenant. He urges that this court should endorse the view expressed by Lord Scott in Doherty v Birmingham City Council [2008] UKHL 57; [2009] AC 367, at para 84 that the judge hearing a challenge to the claim for a possession order should also be prepared to entertain an article 8 challenge to the validity of the notice to quit. This issue interrelates with the point that I have considered under Issue 4. I can, in principle, see no reason why, if the validity of the notice to quit is challenged by way of defence to the claim for possession, the judge should not be entitled to deal with that challenge. Issue 8: Disposal I agree, for the reasons that he gives, that Rebecca Powells appeal should result in the order proposed by Lord Hope. LORD RODGER, LORD WALKER, LADY HALE, LORD BROWN LORD COLLINS For the reasons given by Lord Hope and Lord Phillips, with which we entirely agree, we too would make the orders proposed by Lord Hope. |
This case is about the proper approach to ordering the unsuccessful party to pay the costs of a successful appeal in cases about the care and upbringing of children. It arises in the specific context of a parents successful appeal to the Court of Appeal against care and placement orders made in a county court. But that issue obviously has to be seen in the wider context of appeals in childrens cases generally. This case These are care proceedings concerning the four children of Ms A, a girl now aged 13, a boy aged 12, a girl aged seven and a boy aged three. We are concerned only with the seven year old, whom I shall call Amelia. The respondent to this appeal is the father of Amelia and her older brother. He is also the social father of the oldest child, who was born during his marriage to the childrens mother. The mother comes from Portugal and the father comes from Nepal. They married in 2002 and separated in 2007, before Amelia was born. The father is not the biological, social or legal father of the youngest child. As it happens, the oldest and youngest have the same biological father, but he has played little part in their lives or in these proceedings. From May 2009 there were increasing concerns about the presentation and behaviour of the children in their mothers care. Care proceedings were eventually brought in January 2012 and in November 2012 Her Honour Judge Karp found that there had been a serious lack of supervision and neglect of the children; they had suffered physical injuries from each other as a result of not being properly supervised; the mother was unable to meet their emotional, developmental and educational needs; they were at risk of sexual abuse because of their mothers inability to safeguard them from men allowed into the home about whom she knew little; and the two oldest had shown inappropriate sexual behaviour. She found, therefore, for the purpose of the threshold conditions in section 31(2) of the Children Act 1989, that they had suffered or were likely to suffer significant harm owing to a lack of proper parental care. This is conceded by the father. The mother was ruled out as a future carer for any of the four children. The father had had only limited contact with the family since separating from the mother and was not implicated in her neglect of the children during that time. He had since remarried. When the proceedings were begun, it was agreed that the older boy would live with his father and his new wife under an interim supervision order. In breach of his agreement with the local authority, however, the father left the boy with the mother for a short time while he went to work in Norway. And in May 2012 the father asked the local authority to take the boy back into foster care because of his challenging behaviour. He was soon joined by Amelia and their older sister, who had been removed from their mother. They remained together as a sibling group with the same foster family for a year, until the two oldest had to be separated because of their sexual behaviour together. Between August and October 2012 the father and his wife were assessed by an independent social worker as potential carers for the three older children, including Amelia. The first assessment was positive, but the social worker had not been told that the wife was now pregnant. At that stage, a consultant child and adolescent psychiatrist had reported that Amelias development appeared normal for a child of her age. An updating assessment, conducted between October and December 2012, became negative, largely because of the couples lack of candour and the fathers lack of insight into the need to be resilient, consistent and able to implement firm boundaries when looking after children who had suffered as these children had suffered. The father and his wife separated in February 2013, before their child was born. The father decided to move permanently to Norway, where he had obtained steady and well paid employment and spacious accommodation. He asked to be assessed there as a carer for all three children, but both the local authority and the childrens guardian resisted that. The local authoritys plan was for long term fostering for the two oldest children and a closed adoption (that is without contact with the birth family) for the two youngest. The childrens guardian had originally wanted the three children to stay with the foster family which had looked after them for a year, but when that placement failed because of the older childrens sexual behaviour with one another, he supported the local authoritys plan. A placement order was made in relation to the youngest child in February 2013. (This has now been implemented; he was adopted in May 2014.) At the final hearing in relation to the elder three children in July 2013, the local authority sought a placement order for Amelia, by now aged five. The father opposed this because it would result in her losing all her established family relationships with her parents and her siblings. He had maintained good contact with the children since his move to Norway and asked to be assessed as her sole carer. This was opposed by the local authority and the childrens guardian. Amelia had been assessed by a social worker and family therapist in 2013 (in contrast to the view of the child psychiatrist in late 2012) as having a high level of emotional and behavioural need and their view was that the father did not have the capacity to meet this. Judge Karp accepted their opinions and made a placement order authorising Amelias placement for adoption without her fathers consent. The father appealed. In the meantime, in September 2013, the Court of Appeal had delivered judgment in In re B S (Children) (Adoption Order: Leave to Oppose) [2013] EWCA Civ 1146, [2014] 1 WLR 563, emphasising the need for the court to evaluate all the options for the childs future where adoption was proposed, analysing the pros and cons of each in the light of the paramount consideration of the childs future in the long term. The fathers appeal was allowed: [2014] EWCA Civ 135, [2015] 1 FLR 130. The Court of Appeal held that the judge had been wrong to make the order without further assessment of the situation of the father and child and in any event did not adequately articulate her reasons to proceed to make a placement order in the circumstances of this case (para 4). We are told that the process of assessing the father and increasing his contact with Amelia since then has been successful and she has now been placed with him in Norway under a child arrangements order. The issue before us is not whether the Court of Appeal was right to allow the appeal. The issue is whether it was right to order the local authority to pay the fathers costs of the appeal (assessed in the sum of 13,787.70). The father had funded it privately, the non means tested legal aid which is available to all parents in care proceedings not being available on appeal. It was not suggested that the local authority had behaved reprehensibly in relation to the child or unreasonably in the stance taken at first instance (para 30). But they had resisted the appeal while recognising the deficiencies in the judgment in the lower court (para 32). A parent should not be deterred from challenging decisions which impact upon the most crucial of human relationships (para 30). The decision in this court in In re T (Care Proceedings: Costs) [2012] UKSC 36, [2012] 1 WLR 2281 was distinguishable and the courts discretion broad (para 31). In their application for permission to appeal, the local authority made it clear that, whatever the outcome, they would not seek to recover the costs awarded and paid to the father. They argued that the case raises matters of public interest which merit consideration by this court, but it is not intended that Mr S should suffer financial detriment as a result. Permission to appeal was given on that basis. The court is accordingly very grateful to Dr Bainham and the fathers legal team, who acted for him pro bono, thus enabling the case to be properly and fully argued. In re T (Care Proceedings: Costs) In In re T, care proceedings were brought in respect of two children who had made allegations of sexual abuse against their father and a number of men, in which it was alleged that their paternal grandparents had colluded. The grandparents intervened in the proceedings in order to refute the allegations. As interveners they did not qualify for the non means tested legal aid which is available to parents. Their means were modest but above the legal aid threshold. They therefore had to borrow to pay for their own representation. The allegations were investigated at a split fact finding hearing, at which the grandparents were exonerated, although no criticism was made of the local authority for putting the allegations before the court. The Supreme Court held that the trial judge had been correct not to make an order that the local authority pay the grandparents costs. Lord Phillips, giving the judgment of the court held, at para 44, that the general practice of not awarding costs against a party, including a local authority, in the absence of reprehensible behaviour or an unreasonable stance, is one that accords with the ends of justice and which should not be subject to an exception in the case of split hearings. It was irrelevant whether or not a party was legally aided. If the grandparents were entitled to their costs, so too should have been the five publicly funded men who were also exonerated. The local authority had a statutory duty to protect the children, by bringing proceedings where appropriate. It was for the court, and not for the local authority, to decide whether or not the allegations were true. Local authorities should not be deterred from putting such cases before the court by the prospect of having to pay the costs of those who were exonerated. This would reduce the funds available to provide for children in need. There was no warrant for distinguishing between hearings where fact finding was split from deciding what was best for the child and hearings where all issues were dealt with together. There are, of course, several distinctions between that case and this. In re T was a first instance trial, indeed that part of the care proceedings trial in which the essential facts are found, before moving on to discuss what solution will best serve the interests of the child in the light of those facts. Costs at first instance are governed by the Family Procedure Rules 2010, Part 28. This case concerns an appellate hearing, in which the essential facts were not in dispute, and the issue was what would be best for the child. Costs on appeal are governed by the Civil Procedure Rules, Part 44. In re T concerned the costs to be borne by interveners, indeed interveners whose interest was in clearing their names rather than in looking after the child. This case concerns the costs to be borne by a parent of the child, indeed a parent who wishes to undertake the care of the child himself. again to examine the issue of costs in childrens cases from first principles. In order to decide whether those are material distinctions, it is necessary once Costs in childrens cases Under section 51 of the Senior Courts Act 1981, costs in the civil division of the Court of Appeal and in the family court are in the discretion of the court but subject to the rules of court. Under the Civil Procedure Rules, the general rule in civil proceedings is that the unsuccessful party will be ordered to pay the costs of the successful party (CPR, rule 44.2(2)(a)). However, this general rule does not apply to first instance proceedings about children (FPR rule 28.2(1) disapplies CPR rule 44.2(2)). Nor does the general rule apply to proceedings in the Court of Appeal in connection with proceedings in the Family Division of the High Court or from a judgment, direction, decision or order in any court in family proceedings (CPR, rule 44.2(3)). However, CPR 44.2(4) and (5) do apply to childrens proceedings both at first instance and on appeal: (4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including (a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and (c) any admissible offer to settle made by a party which is drawn to the courts attention, and which is not an offer to which costs consequences of Part 36 apply. (5) The conduct of the parties includes (a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed . any relevant pre action protocol; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim. As was pointed out in In re T, rule 44.2(4)(b) is relevant in a situation where the general rule applies but has no direct relevance where it does not (para 11). This is not, of course, to say that success or failure is irrelevant in childrens cases: no one has suggested in this case that the successful party should have to pay the unsuccessful partys costs (although, as will be seen, there may be circumstances where this would be appropriate). Nor does rule 44.2(4)(c) readily fit the conduct of childrens cases, save as an aspect of the general desirability of the parties co operating and negotiating to reach an agreed solution which will best serve the paramount consideration of the welfare of the child. As such, it is part of the general conduct of the proceedings, some aspects of which are listed in rule 44.2(5). As long ago as Gojkovic v Gojkovic (No 2) [1992] Fam 40, at 57B, the Court of Appeal observed that it was unusual to make an order for costs in childrens cases. In Keller v Keller and Legal Aid Board [1995] 1 FLR 259, at 267 268, Neill LJ went further: In the last decade, however, it has become the general practice in proceedings relating to the custody and care and control of children to make no order as to the costs of the proceedings except in exceptional circumstances. He did, however, go on to say that it was unnecessary and undesirable to try to limit or place into rigid categories the cases which a court might regard as suitable for such an award. Nevertheless, the cases which might be regarded as suitable may be deduced from the reasons why the courts have adopted the no costs approach. The classic explanation is that given by Wilson J in Sutton London Borough Council v Davis (No 2) [1994] 1 WLR 1317, at 1319: Where the debate surrounds the future of a child, the proceedings are partly inquisitorial and the aspiration is that in their outcome the child is the winner and indeed the only winner. The court does not wish the spectre of an order for costs to discourage those with a proper interest in the welfare of the child from participating in the debate. Nor does it wish to reduce the chance of their co operation around the future life of the child by casting one as the successful party entitled to his costs and another as the unsuccessful party obliged to pay them. The proposition applies in its fullest form to proceedings between parents and other relations; but it also applies to proceedings to which a local authority are a party. Thus, even when a local authoritys application for a care order is dismissed, it is unusual to order them to pay the costs of the other parties. Whenever a court has to determine a question relating to the upbringing of a child, the welfare of the child is the courts paramount consideration: Children Act 1989, section 1(1). This applies just as much to care proceedings brought to protect a child from harm as it does to disputes between parents or other family members about the childs future. Although the proceedings are adversarial in form, they have many inquisitorial features. An application cannot be withdrawn without the courts consent (FPR, rule 29.4). The court is not bound by the cases put forward by the parties, but may adopt an alternative solution of its own. The court is not bound by the choice of evidence put forward by the parties, but can decide for itself what evidence it wishes to hear. The court is very often assisted by the independent investigations and reports of the family court reporter (in private law cases) or the childrens guardian (in care and adoption proceedings) and other experts. Even in care proceedings, there are many possible outcomes available to the court. Thus, for example, in a case such as this, the available outcomes ranged from a closed adoption with no contact (other than letterbox contact) with the birth family to the child going to live with her father with no further intervention by the local authority. In between could be, for example, an open adoption, a special guardianship order, long term fostering under a care order with only limited contact with the birth family, medium term fostering with increasing contact with a view to restoring the child to her birth family in due course, placement with the birth family under a care order, placement with the birth family under a supervision order together with a child arrangements order, a child arrangements order or even no order at all. It can readily be seen, therefore, why in such proceedings there are no adult winners and losers the only winner should be the child. Furthermore, it can generally be taken for granted that each of the persons appearing before the court has a role to play in helping the court to achieve the best outcome for the child. It would be difficult indeed for a court to decide how to secure that the child has a meaningful relationship with each parent without hearing from them both. It would be difficult indeed for a court to decide the best way of protecting a child from the risk of harm without hearing from her parents and those whose task it is to protect her. That is why parents are compellable witnesses in care proceedings, even when it is alleged that they have committed criminal offences. No one should be deterred by the risk of having to pay the other sides costs from playing their part in helping the court achieve the right solution. It can also generally be assumed that all parties to the case are motivated by concern for the childs welfare. The parents who dispute with one another or with the local authority over their childrens future do generally love their children dearly and want the best for them as they see it. There are of course some wicked, neglectful, selfish or merely misguided parents who are not motivated to do their best for their children, but these are not the generality of parents, even those whose children are the subject of care proceedings. Local authorities are not motivated by love, in the way that parents are motivated by love, but they do have statutory duties to investigate and take action to protect children if there is reasonable cause to suspect them to be suffering or likely to suffer significant harm: Children Act 1989, section 47. They will be severely criticised by press and public alike if they fail to take action when they should have done. Another consideration is that, in most childrens cases, it is important for the parties to be able to work together in the interests of the children both during and after the proceedings. Childrens lives do not stand still. Their needs change and develop as they grow up. The arrangements made to cater for those needs may also have to change. Parents need to be able to co operate with one another after the case is over. Unless there is to be a closed adoption they also need to co operate with the local authority and the people who are looking after their children. The local authority need to be able to co operate with them. Stigmatising one party as the loser and adding to that the burden of having to pay the other partys costs is likely to jeopardise the chances of their co operating in the future. There is one final consideration. In certain circumstances, having to pay the other sides costs, or even having to bear ones own costs, will reduce the resources available to look after this child or other children. Thus, for example, if a mother who is bringing up the children on modest means had not only to bear her own costs but also to pay the fathers costs, when unsuccessfully resisting his application for more contact with the children, the principal sufferers might well be the children. Nor can it be ignored that, if local authorities are faced with having to pay the parents costs as well as their own, there will be less in their budgets for looking after the children in their care, providing services for children in need, and protecting other children who are or may be at risk of harm. On the other hand, there is one consideration which cannot be taken into account. The automatic availability of non means tested and non merits tested public funding for parents at first instance in care proceedings has masked the issue. It has only surfaced on appeal, as here, or for interveners, where public funding is means tested. But the question of whether it is just to make an order for costs should as a matter of principle be determined irrespective of whether any of the parties are publicly funded. As Baker J put it in G v E (Costs) [2010] EWHC 3385 (Fam), [2011] 1 FLR 1566, para 39. Gone are the days when it is appropriate for a court to dismiss applications for costs on the basis that it all comes out of the same pot. (The consequences of making a costs order for or against a publicly funded litigant are a separate matter.) Thus, as Lord Phillips pointed out in In re T, at para 41, if in principle the local authority should be liable in costs to interveners against whom allegations, reasonably made, have been held to be unfounded, this liability should arise whether or not those interveners were publicly funded. The other five men who were exonerated in that case should also have got their costs. Parents, automatically publicly funded, who successfully resist care proceedings would also get their costs. It might even be said that successful local authorities should get their costs against the parents (or interveners) irrespective of public funding. All the reasons which make it inappropriate as a general rule to make costs orders in childrens cases apply with equal force in care proceedings between parents and local authorities as they do in private law proceedings between parents or other family members. They lead to the conclusion that costs orders should only be made in unusual circumstances. Two of them were identified by Wilson J in Sutton London Borough Council v Davis (No 2): where, for example, the conduct of a party has been reprehensible or the partys stance has been beyond the band of what is reasonable: Havering London Borough Council v S [1986] 1 FLR 489 and Gojkovic v Gojkovic [1992] Fam 40, 60C D (p 1319). Those were also the two circumstances identified in In re T, at para 44. Should this case be distinguished? Two questions arise: first, is there any reason to depart from the general approach in In re T in this case; and second, are there any other circumstances, beyond the two identified in In re T, in which a costs order might be justified? It cannot be a valid distinction that the people claiming costs in In re T were interveners wishing to clear their names rather than parents wishing to care for their children. All the reasons why costs orders are inappropriate in childrens cases apply much more strongly to parents and local authorities than they do to such interveners. The fact that parents are resisting the claim of the state to take their children away from them is undoubtedly relevant, but it is relevant to whether one of the exceptions should apply. As a general proposition, I would accept Dr Bainhams argument that parents are always entitled to resist the claim of the state to remove their children from them. They will usually be reasonable in doing so. They should not have to pay the local authoritys costs if they lose. But it does not follow from that that if the local authority lose, they are unreasonable in seeking to protect the child: that will all depend upon the particular circumstances of the case. Nor in my view is it a good reason to depart from the general principle that this was an appeal rather than a first instance trial. Once again, the fact that it is an appeal rather than a trial may be relevant to whether or not a party has behaved reasonably in relation to the litigation. As Wall LJ pointed out in EM v SW, In re M (A Child) [2009] EWCA Civ 311, there are differences between trials and appeals. At first instance, nobody knows what the judge is going to find (para 23), whereas on appeal the factual findings are known. Not only that, the judges reasons are known. Both parties have an opportunity to take stock and consider whether they should proceed to advance or resist an appeal and to negotiate on the basis of what they now know. So it may well be that conduct which was reasonable at first instance is no longer reasonable on appeal. But in my view that does not alter the principles to be applied: it merely alters the application of those principles to the circumstances of the case. Secondly, however, are there circumstances other than reprehensible behaviour towards the child or unreasonable conduct of the proceedings which might justify a costs order in care proceedings? It is clear from the authorities cited above that there may be other such circumstances in private law proceedings between parents or family members. Should care proceedings be any different? I do not understand that Lord Phillips, giving the judgment of the court in In re T, was necessarily intending to rule out the possibility that there might be other circumstances in which an award of costs in care proceedings might be appropriate and just. That would be to ascribe to para 44 of the judgment the force of a statutory provision. Such a rigid rule was unnecessary to the decision in that case and cannot be treated as its ratio decidendi. On the other hand, it was necessary to the decision in that case that local authorities should not be in any worse position than private parties when it comes to paying the other parties costs. There is an attraction in regarding local authorities in a different light from private parties, because of their so called deep pockets. But, as Lord Phillips observed, at para 34, Local authorities have limited funds. Their costs in relation to care proceedings are met from their childrens services budget. There are many other claims on this budget. No evidence is needed, , to support the proposition that if local authorities are to become liable to pay the costs of those [whom] they properly involve in care proceedings this is going to impact on their finances and the activities to which these are directed. The court can also take judicial notice of the fact that local authorities are financially hard pressed, While it is true that appeals are comparatively rare and their costs comparatively low compared with the costs of care proceedings generally, that is not by itself a good reason for making an exception in their case. But nor should local authorities be in any better position than private parties to childrens proceedings. The object of the exercise is to achieve the best outcome for the child. If the best outcome for the child is to be brought up by her own family, there may be cases where real hardship would be caused if the family had to bear their own costs of achieving that outcome. In other words, the welfare of the child would be put at risk if the family had to bear its own costs. In those circumstances, just as it may be appropriate to order a richer parent who has behaved reasonably in the litigation to pay the costs of the poorer parent with whom the child is to live, it may also be appropriate to order the local authority to pay the costs of the parent with whom the child is to live, if otherwise the childs welfare would be put at risk. (It may be that this is one of the reasons why parents are automatically entitled to public funding in care cases.) Pro bono costs The Access to Justice Foundation (whose legal team has also acted pro bono) has helpfully intervened, principally in order to argue that the principles applicable to pro bono costs orders should be the same as those applicable in other cases. Under section 194 of the Legal Services Act 2007, the court may make a pro bono costs order in favour of the Access to Justice Foundation in respect of legal representation which has been provided free of charge. In making such an order the court has to have regard to whether it would have made a costs order had the pro bono represented party been represented on a fee paying basis and if so what such an order would have been (section 194(4)). In In re E (B4/2014/0146), the Court of Appeal made a pro bono costs order against a local authority which had unsuccessfully opposed a fathers appeal in care proceedings. In a short written ruling, they explained that they did so on the basis that this created an exception to the general position: There is a public interest in the Bar Pro Bono Unit being compensated on a reasonable basis by an award of costs where such an award is available under the legislation. The Foundation argues that it was right to make the order but the reasoning was wrong. The general position should be that local authorities are ordered to pay the costs of parents who successfully appeal in care proceedings. Pro bono costs should be no exception. However, we have decided that the general position should be that local authorities, like any other party to childrens proceedings, should not be ordered to pay the costs. The logic of the Foundations argument is that no exception should be made for pro bono costs. Indeed, it would be hard to reconcile such an exception with section 194(4), but the point does not arise in this case. Application in this case It is not suggested that the local authority have behaved in any way reprehensibly towards these children or their parents. It is not a case like A and S (Children) v Lancashire County Council (Costs) (No 2) [2013] EWHC 851 (Fam), [2013] 2 FLR 122, where the local authoritys conduct towards the children over many years was blatantly unlawful and unreasonable and led inexorably to substantial litigation (para 22). Indeed, the only criticism which could be levied against them was that they might have taken action to protect these children earlier than they did (see para 10 of the Court of Appeals judgment). There is, perhaps, a faint suggestion (see para 32 of the Court of Appeals judgment) that the local authority behaved unreasonably in relation to the appeal, by resisting it despite the deficiencies in the first instance judgment. In this case, I consider any such suggestion to be unwarranted. It is true that Judge Karp had not gone through the pros and cons of the various possibilities in the detail expected since the judgment in In re B section But had the Court of Appeal considered that she had reached the right conclusion on the merits of the case, I have little doubt that they would have remedied this deficiency. The crux of the matter is that they considered that there should have been an assessment of the fathers ability to care for his daughter in Norway. It is not difficult to understand why: there were several positives in his favour and the evidence of Amelias particular needs was contentious. But neither is it difficult to understand why the local authority maintained their stance, supported as it was by the childrens guardian as well as the independent social worker and the psychotherapist, that Amelia should be placed for adoption. The Court of Appeal would have been surprised indeed had the local authority failed to respond to the appeal (and risked the criticism incurred by the local authority which failed to respond to application for permission to appeal in In re S (Children) Care Proceedings: fact Finding Hearing) [2014] EWCA Civ 638, [2014] 3 FCR ). In the circumstances, it was also in my view reasonable of them to have maintained the stance that they had taken at first instance. As to the question of whether a refusal to award costs might indirectly create hardship for the child, this would have required the Court of Appeal either to reserve the costs of the appeal until the outcome of the assessment had been known and the childs future decided or to remit the question of the appeal costs to be decided at the future first instance hearing. At that point it would have been clear where Amelia was to live and evidence could have been filed as to the impact upon her of the father having to bear his own costs in the appeal. It has not been suggested that that would have been an appropriate course in this case. In these circumstances, it is unnecessary to address the alternative argument mounted by the local authority, that the costs should have been apportioned between the authority and the childrens guardian, as both were opposing the appeal, although the guardian took no part in the hearing. We note that the Legal Aid Agency has expressed the view that they do not think that there is any lawful way that a proportion of the fathers costs can be paid by the child under his certificate. That issue is not before us and I would prefer to make no comment. Conclusion For all those reasons, none of the exceptions to the general approach applicable to awards of costs in childrens cases applies in this case. The appeal should be allowed and the costs order made in the Court of Appeal set aside (the local authority having given the assurance referred to in para 10). |
Biometric data such as DNA samples, DNA profiles and fingerprints is of enormous value in the detection of crime. It sometimes enables the police to solve crimes of considerable antiquity. There can be no doubt that a national database containing the data of the entire population would lead to the conviction of persons who would otherwise escape justice. But such a database would be controversial. It is not permitted by our law. Parliament has, however, allowed the taking and retention of data from certain persons. The questions raised by these appeals are whose data may be retained and for how long. originally enacted, provided: Section 64 of the Police and Criminal Evidence Act 1984 (PACE), as (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken. Section 64(1A) of PACE was enacted by section 82 of the Criminal Justice and Police Act 2001. It is still in force. It provides: (1A) Where(a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came. It will be seen at once that section 64(1A) does not specify any time limit for the retention of the data or any procedure to regulate its destruction. These are matters which are addressed in guidelines issued by the Association of Chief Police Officers (the ACPO guidelines) entitled Exceptional Case Procedure for Removal of DNA, Fingerprints and PNC Records and published on 16 March 2006. So far as is material, these provide: it is important that national consistency is achieved when considering the removal of such records. Chief Officers have the discretion to authorise the deletion of any specific data entry on the [Police National Database] owned by them. They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry. It is suggested that this discretion should only be exercised in exceptional cases. Exceptional cases will by definition be rare. They might include cases where the original arrest or sampling was found to be unlawful. Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance. In R (S) v Chief Constable of the South Yorkshire Police and R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) the claimants sought judicial review of the retention by the police of their fingerprints and DNA samples on the grounds inter alia that it was incompatible with article 8 of the European Convention on Human Rights (ECHR). The majority of the House of Lords held that the retention did not constitute an interference with the claimants article 8 rights, but they unanimously held that any interference was justified under article 8(2). The ECtHR disagreed: see its decision in S and Marper v United Kingdom (2008) 48 EHRR 1169 (Marper ECtHR). In considering whether retention of data in accordance with the ACPO guidelines was proportionate and struck a fair balance between the competing public and private interests, the court said at para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales. The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be takenand retainedfrom a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences. The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected. Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. The court concluded at para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society. On 16 December 2008, the Secretary of the State for the Home Department announced the Governments preliminary response to the ECtHR decision. The data of children under the age of 10 would be removed from the database immediately and the Government would issue a White Paper and consult on bringing greater flexibility and fairness into the system by stepping down some individuals over timea differentiated approach, possibly based on age, or on risk, or on the nature of the offences involved. The White Paper, Keeping the Right People on the DNA Database, was published on 7 May 2009. It contained a series of proposals for the retention of data, the details of which are immaterial for present purposes. On 28 July 2009, ACPOs Director of Information wrote to all chief constables (including the respondent Commissioner) saying that the final draft for publication of new guidelines was not expected to take effect until 2010 and that until that time the current retention policy on fingerprints and DNA remains unchanged. On 11 November 2009, after the consultation period had ended, the Secretary of State made a written ministerial statement outlining a revised set of proposals. Again, the details are not material. It was decided to include these proposals in the Crime and Security Act 2010 (the 2010 Act) which had its first reading on 19 November 2009. The 2010 Act received the Royal Assent on 8 April 2010, but the relevant provisions (sections 14, 22 and 23) have not been brought into effect. Section 23 provides that the Secretary of State must make arrangements for a National DNA Database Strategy Board (Database Board) to oversee the operation of the National DNA Database (section 23(1)); the Database Board must issue guidance about the immediate destruction of DNA samples and DNA profiles which are or may be retained under PACE (section 23(2)); and any chief officer of a police force in England and Wales must act in accordance with any such guidance issued (section 23(3)). The Coalition Government stated in the Queens Speech on 25 May 2010 that it intended to seek amendment of the 2010 Act by bringing forward legislative proposals (in Chapter 1 of Part 1 of the Protection of Freedoms Bill) along the lines of the Scottish system. This system permits retention of data for no more than three years if the person is suspected (but not convicted) of certain sexual or violent offences, and permits an application to be made to a Sheriff by a Chief Constable for an extension of that period (for a further period of not more than two years, although successive applications may be made): see sections 18 and 18A of the Criminal Procedure (Scotland) Act 1995, as inserted by sections 83(2) and 104 of the Police, Public Order and Criminal Justice (Scotland) Act 2006. GC and C issued proceedings for judicial review of the retention of their data on the grounds that, in the light of Marper ECtHR, its retention was incompatible with their article 8 rights. Recognising that there was an irreconcilable conflict between Marper UK and Marper ECtHR and that the former decision was binding on it, the Divisional Court (Moses LJ and Wyn Williams J) dismissed both judicial review challenges on 16 July 2010 and in both cases granted a certificate pursuant to section 12 of the Administration of Justice Act 1969 that the cases were appropriate for a leapfrog appeal to the Supreme Court. The facts of these two cases can be stated briefly. On 20 December 2007, GC was arrested on suspicion of common assault on his girlfriend. He denied the offence. A DNA sample, fingerprints and photographs were taken after his arrest. On the same day, he was released on police bail without charge. Before the return date of 21 February 2008, he was informed that no further action would be taken. On 23 March 2009, GCs solicitors requested the destruction of the DNA sample, DNA profile and fingerprints. The Commissioner refused to do so on the grounds that there were no exceptional circumstances within the meaning of the ACPO guidelines. On 17 March 2009, C was arrested on suspicion of rape, harassment and fraud. His fingerprints and a DNA sample were taken. He denied the allegations saying that they had been fabricated by his ex girlfriend and members of her family. No further action was taken by the police in respect of the harassment and fraud allegations. On 18 March 2009, he was charged with rape. On 5 May 2009 at Woolwich Crown Court, the prosecution offered no evidence and C was acquitted. C requested the destruction of the data and its deletion from the police database. On 12 November and again on 2 February 2010, the Commissioner informed C that his case was not being treated as exceptional within the meaning of the ACPO guidelines and his request was refused. The issue It is common ground that, in the light of Marper ECtHR, the indefinite retention of the appellants data is an interference with their rights to respect for private life protected by article 8 of the ECHR which, for the reasons given by the ECtHR, is not justified under article 8(2). It is agreed that Marper UK cannot stand. The issue that arises on these appeals is what remedy the court should grant in these circumstances. On behalf of C, Mr Fordham QC submits that the court should grant a declaration under section 8(1) of the Human Rights Act 1998 (HRA) that the retention of Cs biometric data is unlawful. Section 8(1) provides that In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate. He seeks no other relief. On behalf of GC, Mr Cragg seeks an order quashing the ACPO guidelines and a reconsideration of the retention of GCs data within 28 days. The primary submission of Lord Pannick QC (on behalf of the Commissioner of Police of the Metropolis) is that the correct remedy is to grant a declaration of incompatibility under section 4 of the HRA. The primary submission of Mr Eadie QC (on behalf of the Secretary of State) is that, although there is no fundamental objection to a declaration of incompatibility, it is not necessary to grant one. The arguments in support of a declaration of incompatibility Section 6 of the HRA provides: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. In summary, Lord Pannick and Mr Eadie say that it is not possible to read or give effect to section 64(1A) of PACE in a way which is consistent with Marper ECtHR. They accept that section 64(1A) confers a discretionary power on the police to retain the data obtained from a suspect in connection with the investigation of an offence. That is why they concede that section 6(2)(a) of the HRA is not in play. But they say that it is a power which, save in exceptional circumstances, must be exercised so as to retain the data indefinitely in all cases. Section 64(1A) cannot, therefore, be read or given effect so as to permit the power to be exercised proportionately in the way described in Marper ECtHR. The hands of the police are tied by section 64(1A) and that position is faithfully reflected in the ACPO guidelines. Two arguments are advanced in support of this submission. The first (and principal) argument is that to interpret section 64(1A) as requiring police authorities to comply with article 8 would defeat the statutory purpose of establishing a scheme for the protection of the public interest free from the limits and protections required by article 8. It would rewrite the statutory provision in a manner inconsistent with a fundamental feature of the legislative scheme which is that, instead of being destroyed, data taken from all suspects shall be retained indefinitely. It is this feature of the scheme which leads Lord Rodger to invoke authorities such as Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997. Parliament intended that the discretion conferred by section 64(1A) should be exercised to promote the statutory policy and object that data taken from all suspects in connection with the investigation of an offence should be retained indefinitely. Accordingly, any exercise of the discretion conferred by section 64(1A) which does not meet this statutory policy and object would frustrate the intention of Parliament. The second argument is that the nature of the changes to the ACPO guidelines that would be required in order to make them compatible with the ECHR is such that, for reasons of institutional competence and democratic accountability, these should be left to Parliament to make. The choice of compatible scheme involves a difficult and sensitive balancing of the interests of the general community against the rights of the individual and a number of different schemes would be compatible. Neither the police nor the court (in the event of a judicial review challenge to the scheme devised by the police) is equipped to make the necessary policy choices. Thus, for example, only Parliament is constitutionally and institutionally competent to decide whether to adopt the Scottish model in preference to the 2010 Act model. Discussion The first argument This argument is based on the premise that it was the intention of Parliament that, save in exceptional cases, the data taken from all suspects in connection with the investigation of an offence should be retained indefinitely. It goes without saying that, if that premise is correct, section 64(1A) of PACE can only be interpreted as conferring a discretion which must be exercised so as to give effect to that intention. The conclusion necessarily follows from the premise. On that hypothesis, a purposive interpretation of the statute inevitably leads to the conclusion that the first argument is correct. But I do not accept the premise. It is uncontroversial that Parliament intended (i) to abrogate section 64(1) of PACE and remove the obligation to destroy data as soon as practicable after the conclusion of the proceedings if the suspect is cleared of the offence; (ii) to create a scheme for the retention of the data taken from a suspect, whether or not he is cleared of the offence and whether or not he is even prosecuted; and (iii) that the data was to be retained so that it might be used for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came (to use the language of section 64(1A)). I shall refer to these purposes as the statutory purposes. It is also clear that, in order to promote the statutory purposes, Parliament must have intended that an extended, even a greatly extended, database should be created. But in my view that is as far as it goes. To argue from the premise that Parliament intended that a greatly extended database should be created to the conclusion that it intended that, save in exceptional circumstances, the data should be retained indefinitely in all cases is a non sequitur. Parliament did not prescribe the essential elements of the scheme by which the statutory purposes were to be promoted. That task was entrusted to the police, no doubt with the assistance of the Secretary of State. If it had been intended to require a scheme whose essential elements included an obligation that, save in exceptional circumstances, the data lawfully obtained from all suspects should be retained indefinitely, that could easily have been expressly stated in the statute. If that had been intended, surely section 64(1A) would have said in terms that, save in exceptional circumstances, the fingerprints and samples taken shall in every case be retained indefinitely after they have fulfilled the purpose for which they were taken. This would have been the obvious way of expressing that intention. The grant of an apparently unfettered discretion (signalled by the unqualified use of the word may) was certainly not the obvious way of expressing that intention. The natural meaning of the word may is permissive, not mandatory. As I have said, it is clear that Parliament intended to get rid of the requirement to destroy data after it has served its immediate purpose and to permit the retention of data in order to fulfil the statutory purposes. But the statute is silent as to how the statutory purposes are to be fulfilled. There is no reason to suppose that Parliament must have intended that this should be achieved in a disproportionate way so as to be incompatible with the ECHR. Lord Rodger suggests that Mr Fordhams argument entails the proposition that under section 64(1A) the police were free to do what they liked and that the subsection contains nothing to delimit the exercise of their discretion. I agree that, if this is the effect of Mr Fordhams argument, it would cast doubt as to its correctness. But section 64(1A) clearly delimits the exercise of the discretion. It must be exercised to enable the data to be used for the statutory purposes. I would add that the discretion must be exercised in a way which is proportionate and rationally connected to the achievement of these purposes. Thus, for example, the police could not exercise the power to retain the data only of those suspected of minor offences; or only of serious offences of a particular type; or only of suspects of a certain age or gender; or only for a short period. But it is possible to exercise the discretion in a rational and proportionate manner which respects and fulfils the statutory purpose and does not involve the indefinite retention of data taken from all suspects, regardless of their age and the nature of the alleged offence. The Commissioner and the Secretary of State assert that a fundamental feature (possibly the fundamental feature) of section 64(1A) is that data should be retained for use from all suspects indefinitely. But, although expressed in different words, this is the same as the premise argument that I have already rejected. For the reasons I have given for rejecting that argument, it is not possible to extract this fundamental feature from the statute, whether one looks at its language alone or in the context of the mischief which it was intended to cure. In my view, the fundamental feature of section 64(1A) is that it gives the police the power to retain and use data from suspects for the stated statutory purposes of preventing crime, investigation of offences and the conduct of prosecutions. But that does not justify a blanket or disproportionate practice. Neither indefinite retention nor indiscriminate retention can properly be said to be fundamental features of section 64(1A). As I have said, following the judgment of the ECtHR the Secretary of State for the Home Department took steps to take the DNA of children under the age of 10 off the database. If the meaning of section 64(1A) is that, save in exceptional cases, there is a duty to retain samples taken from all suspects indefinitely, then surely this amendment to the ACPO guidelines was ultra vires section 64(1A). That is not, however, suggested by Lord Pannick or Mr Eadie. It seems to me that, once it is accepted that section 64(1A) permits a scheme which does not insist on the indefinite retention of data in all cases, then the extreme position advocated by the Commissioner and the Secretary of State cannot be maintained. So what did Parliament intend if it was not a scheme of indefinite retention in all cases? The obvious answer is a proportionate scheme which gives effect to the statutory purposes and is compatible with the ECHR. The fact that it is possible to create a number of different schemes all of which would meet these criteria does not matter. Section 64(1A) gives a power. Powers can often be lawfully exercised in different ways. The Commissioner and the Secretary of State seek support for the first argument from two sources. The first is the Explanatory Notes to the 2001 Act which explained at para 210: An additional measure has been included to allow all fingerprints and DNA samples lawfully taken from suspects during the course of an investigation to be retained and used for the purposes of prevention and detection of crime and the prosecution of offences. This arises from the decisions of the Court of Appeal (Criminal Division) in R v Weir and R v B (Attorney General's Reference No 3/199) May 2000. These raised the issue of whether the law relating to the retention and use of DNA samples on acquittal should be changed. In these two cases compelling DNA evidence that linked one suspect to a rape and the other to a murder could not be used and neither could be convicted. This was because at the time the matches were made both defendants had either been acquitted or a decision made not to proceed with the offences for which the DNA profiles were taken. Currently section 64 of PACE specifies that where a person is not prosecuted or is acquitted of the offence the sample must be destroyed and the information derived from it can not be used. The subsequent decision of the House of Lords overturned the ruling of the Court of Appeal. The House of Lords ruled that where a DNA sample fell to be destroyed but had not been, although section 64 of PACE prohibited its use in the investigation of any other offence, it did not make evidence obtained as a failure to comply with that prohibition inadmissible, but left it to the discretion of the trial judge. The Act removes the requirement of destruction and provides that fingerprints and samples lawfully taken on suspicion of involvement in an offence or under the Terrorism Act can be used in the investigation of other offences. This new measure will bring the provisions of PACE for dealing with fingerprint and DNA evidence in line with other forms of evidence. But this does not advance matters. It shows that Parliament intended to remove the requirement of destruction of data and that fingerprints and samples lawfully taken on suspicion of involvement in an offence . can be used in the investigation of other offences. But that sheds no light on whether it was intended that there should be a policy of blanket indefinite retention. The Commissioner and the Secretary of State draw attention to the words an additional measure has been included to allow all [data]to be retained (emphasis added). But in my view this is an insufficient foundation on which to base a conclusion that the true meaning of section 64(1A) is that, save in exceptional circumstances, biometric data must be retained indefinitely in all cases. Even if all means all data taken from all suspects, the Explanatory Notes do not say that data must be retained in all cases, still less do they say anything about how long the data must or may be kept. There is no indication in the Notes that Parliament intended all material to be kept indefinitely even if it was not necessary to do so in an individual case within the meaning of article 8(2) of the ECHR. The second source is certain passages in speeches of the House of Lords in Marper UK. The issue there was whether section 64(1A) and the ACPO guidelines were compatible with article 8 and 14 of the ECHR: see para 6 of the speech of Lord Steyn. At para 2, Lord Steyn said: But as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable. But that is a statement at a high level of generality. Lord Steyn was not purporting to define the statutory purpose with any precision. At para 39 Lord Steyn addressed the submission on behalf of the appellants that the legislative aim (of assisting in the investigation of crimes in the future) could be achieved by less intrusive means. He considered the conclusion of Sedley LJ in the Court of Appeal that the degree of suspicion should be considered in individual cases before a decision was made whether or not to retain the data. He rejected this suggestion saying: this would not confer the benefits of a greatly expanded database and would involve the police in interminable and invidious disputes (subject to judicial review of individual decisions) about offences of which the individual had been acquitted. I have already accepted that Parliament intended that the exercise of the section 64(1A) power should lead to a greatly expanded database and that Lord Steyn was rejecting the idea that the scheme contemplated by section 64(1A) should involve assessment of the degree of suspicion on a case by case basis. But he was not saying that, subject to exceptional circumstances, section 64(1A) required the introduction of a scheme under which the data taken from all suspects would be retained indefinitely, since any other interpretation would undermine the statutory purpose. At para 78, Lady Hale said that the whole community (as well as the individuals whose samples are collected) benefits from there being as large a database as it is possible to have. The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has. That is undoubtedly true. But the system included the ACPO guidelines. It was, therefore, not contentious that the system was designed to catch and retain as many samples as possible. Moreover, leaving ECHR issues aside, section 64(1A) does allow the collection and retention of as many samples as possible. Lady Hale was not, however, saying that section 64(1A) required the collection and retention of as many samples as possible. Similarly, at para 88 Lord Brown said that the benefits of the larger database brought about by the now impugned amendment to PACE were manifest. The more complete the database, the better the chance of detecting criminals and of deterring future crime. But here too, Lord Brown was not considering the question whether section 64(1A) conferred a power which, save in exceptional circumstances, could only be exercised by requiring the retention of the data taken from all suspects indefinitely. The question whether, leaving ECHR issues aside, section 64(1A) required the retention of the data taken from all suspects indefinitely was not in issue in Marper UK. The focus of the argument in Marper UK was on whether section 64(1A) and the ACPO guidelines were compatible with the ECHR. In particular, it was on whether article 8(1) was engaged and whether the ACPO scheme was justified under article 8(2). The context of the observations relied on to support the first argument was the practice of the police, save in exceptional cases, to retain all data indefinitely. There was no debate on whether, if article 8(1) was engaged and the ACPO guidelines could not be justified under article 8(2), section 64(1A) could be read and given effect in a way compatible with the ECHR. So I reject the submission that Marper UK provides support for the submission that underpins the first argument, namely that it was the intention of Parliament that, save in exceptional cases, the data of all suspects should be retained indefinitely. In my view, section 64(1A) permits a policy which (i) is less far reaching than the ACPO guidelines; (ii) is compatible with article 8 of the ECHR; and (iii) nevertheless, promotes the statutory purposes. Those purposes can be achieved by a proportionate scheme. It is possible to read and give effect to section 64(1A) in a way which is compatible with the ECHR and section 6(2)(b) of the HRA cannot be invoked to defeat the claim that the ACPO guidelines are unlawful by reason of section 6(1) of the HRA. For the reasons that I have given, to interpret section 64(1A) compatibly with article 8 does not impermissibly cross the line where, to use the words of Lord Bingham in Sheldrake v Director of Public Prosecutions [2005] 1 AC 264, para 28, it would be incompatible with the underlying thrust of the legislation, or would not go with the grain of it, or would call for legislative deliberation, or would change the substance of a provision completely, or would remove its pith and substance, or would violate a cardinal principle of the legislation. This conclusion is consistent with the decision in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410. The claimant was employed by an agency providing staff for schools. The agency required her to apply under section 115(1) of the Police Act 1997 for an enhanced criminal record certificate giving the prescribed details of every relevant matter relating to her which was recorded in central records, since she was a prospective employee who was being considered for a position involving regularly being involved with persons under the age of 18. Section 115(7) provided that, before issuing a certificate, the Secretary of State shall request the chief police officer of every relevant police force to provide any information which, in the chief officers opinion (a) might be relevant for the purpose described in the statement under subsection (2), and (b) ought to be included in the certificate. The Commissioner of Police of the Metropolis disclosed certain information about the claimant which was included in the certificate. She sought judicial review of the decision to disclose the information on the ground that her article 8 rights had been violated. On behalf of the Secretary of State, it was submitted that the words any information and ought to be included in section 115(7) showed that Parliament intended widespread disclosure of relevant material and a narrow exception. This interpretation was supported by the protective purpose of the legislation: see p 416G. That was the practice under the relevant police guidelines. It is true that there was no issue in that case about section 6(2) of the HRA. That is why the analogy cannot be pressed too far. But in essence it was being argued in the context of article 8(2) of the ECHR that it was a fundamental feature of the Police Act 1997 that all relevant information could (and should) be disclosed in a criminal record certificate, since anything less would defeat the fundamental protective purpose of the statute. These submissions are similar to those advanced in the present case. But they were rejected. Despite the protective purpose of the legislation and the use of the word any, at para 44, Lord Hope said that the words ought to be included should be read and given effect in a way that was compatible with the applicants article 8 rights. At para 81, Lord Neuberger MR adopted a broad interpretation of section 115(7)(b) and said that, in deciding whether the information ought to be included, there would be a number of different, sometimes competing, factors to weigh up. For all these reasons, I would reject the first argument advanced on behalf of the Commissioner and the Secretary of State. The second argument The second argument is that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police (with or without the assistance of the Secretary of State) subject only to the judicial review jurisdiction of the court. It is said that the creation of guidelines for the exercise of the section 64(1A) power is a matter for Parliament alone and that it could not have been intended that section 64(1A) should grant a broad discretion to the police such as is contended for by Mr Fordham. This is because the context involves high policy, balancing the public interest in the effective detection, prosecution and prevention of crime against individual freedoms. It is a matter of political controversy, as evidenced by the different policy solutions of the previous and present Government. There are choices to be made between a variety of compatible legislative schemes. These choices are for Parliament alone. The police are in no position, constitutionally or institutionally, to choose between them. It is important to note the scope of this argument. It is not that Parliament could not have granted the police a discretionary power to retain data otherwise than on a blanket indefinite basis. If it had wished to grant such a power to the police, Parliament obviously could have done so. Rather, the argument is that the constitutional and institutional limits on the competence of the police are such that Parliament could not have intended to grant such a power to them. I cannot accept this argument. No question of constitutional competence arises here. Parliament is entitled to give the police the power to create a scheme. No doubt it would have envisaged that a national scheme would be produced such as the ACPO guidelines. The Secretary of State is accountable to Parliament for the scheme so that the democratic principle is preserved. There are circumstances in which institutional competence is a factor in the courts deciding the extent to which it should pay deference to a decision of the executive and allow a discretionary area of judgment. But we are not concerned with the courts judicial review jurisdiction in the present context. We are concerned with a question of statutory interpretation. There is no reason in principle why the police (together with the Secretary of State) should be less well equipped than Parliament to create guidelines for the exercise of the section 64(1A) power. In creating a proportionate scheme, they have to strike a balance. That is inherent in any exercise of this kind, whether it is performed by the executive or Parliament. The police guidelines that were in play in L were not the product of work by Parliament. Policy and guidance documents of this kind, often in areas of acute sensitivity, are frequently created by the executive. Provided that they fulfil the purposes of the enabling statute, they are valid and enforceable. In my view, the fact that difficult decisions would have to be made in producing guidelines for the exercise of the section 64(1A) power is not a sufficient reason for concluding that Parliament could not have intended to give the power to produce them to the police and the Secretary of State. What relief, if any, should be granted? The Biometric Data In deciding what relief to grant, it is important to have regard to the present state of play. As previously stated, Chapter 1 of Part 1 of the Protection of Freedoms Bill includes proposals along the lines of the Scottish model. The history of the varying responses to Marper ECtHR shows that it is not certain that it will be enacted. But we were told by Mr Eadie that it is the present intention of the Government to bring the legislation into force later this year. In shaping the appropriate relief in the present case, I consider that it is right to proceed on the basis that this is likely to happen, although not certain to do so. In these circumstances, in my view it is appropriate to grant a declaration that the present ACPO guidelines (amended as they have been to exclude children under the age of 10), are unlawful because, as clearly demonstrated by Marper ECtHR, they are incompatible with the ECHR. It is important that, in such an important and sensitive area as the retention of biometric data by the police, the court reflects its decision by making a formal order to declare what it considers to be the true legal position. But it is not necessary to go further. Section 8(1) of the HRA gives the court a wide discretion to grant such relief or remedy within its powers as it considers just and appropriate. Since Parliament is already seised of the matter, it is neither just nor appropriate to make an order requiring a change in the legislative scheme within a specific period. The ECtHR has recently decided that, where one of its judgments raises issues of general public importance and sensitivity, in respect of which the national authorities enjoy a discretionary area of judgment, it may be appropriate to leave the national legislature a reasonable period of time to address those issues: see Greens and MT v United Kingdom (Application Nos 60041/08 and 60054/08) (ECtHR, 23 November 2010) at paras 113 115. This is an obviously sensible approach. The legislature must be allowed a reasonable time in which to produce a lawful solution to a difficult problem. Nor would it be just or appropriate to make an order for the destruction of data which it is possible (to put it no higher) it will be lawful to retain under the scheme which Parliament produces. In these circumstances, the only order that should be made is to grant a declaration that the present ACPO guidelines (as amended) are unlawful. If Parliament does not produce revised guidelines within a reasonable time, then the appellants will be able to seek judicial review of the continuing retention of their data under the unlawful ACPO guidelines and their claims will be likely to succeed. The Photographs of GC Mr Cragg raises a discrete issue about the photographs that were taken of GC when he was arrested. Section 64A of PACE confers a power to take, use and retain photographs of arrested persons who are not subsequently convicted of the offence for which they were arrested. In the application for judicial review, the issue of whether the retention of the photographs violated GCs article 8 rights was mentioned in what Moses LJ described as a passing reference in the claim form and in paragraph 20 of the grounds. At para 43, Moses LJ said: the issues of justification for their retention cannot now properly be considered where the Commissioner has had no opportunity to give evidence as to justification. Lord Pannick submits that, in view of the manner in which the issue was raised in the Divisional Court, the consequent absence of any evidence as to justification and the absence of any substantive judgment on the issue from the Divisional Court, the Supreme Court should express no opinion on this part of the appeal, but leave the matter to be determined if and when the point is properly raised in another case. I accept these submissions. I should also mention that Mr Fordham raises a discrete point about information held on the Police National Computer about C. This was the subject of two agreed issues which were dealt with by the Divisional Court at paras 24 26 and 46 47 of the judgment of Moses LJ. It is common ground that the retention of this information raises no separate issues from those raised by the retention of Cs DNA material and his fingerprints. Conclusion For the reasons that I have given, I would allow the appeals and grant a declaration that the present ACPO guidelines are unlawful because they are incompatible with article 8 of the ECHR. I would grant no other relief. I agree with the judgment of Lord Dyson. I have, however, a little that LORD PHILLIPS would add to his reasoning. Section 3 of the Human Rights Act 1998 (the HRA) requires this Court, in so far as it is possible to do so, to interpret legislation in a way which is compatible with Convention rights. Sometimes this results in the Court according to a statutory provision a meaning that conflicts with the natural meaning of a statutory provision see Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557. In summarising the effect of that decision in Sheldrake v Director of Public Prosecutions [2004] UKHL 43; [2005] 1 AC 264, para 28 Lord Bingham of Cornhill stated that the interpretative obligation under section 3 was very strong and far reaching and might require the court to depart from the legislative intention of Parliament. This is not a case where the HRA requires the Court to accord to a statutory provision a meaning which it does not naturally bear. There is no difficulty in giving section 64(1A) of PACE, set out in para 3 of Lord Dysons judgment (section 64(1A)), an interpretation which is compatible with article 8 of the Convention, as interpreted by the Strasbourg Court in S and Marper v United Kingdom (2008) 48 EHRR 1169. The section gives a discretionary power to the police to retain samples taken from a person in connection with the investigation of an offence. Section 3 of the HRA imposes a duty on the police, as a public authority, in so far as it is possible to do so, to give effect to the power conferred on them in a way which is compatible with Convention rights. There is nothing in the wording of section 64(1A), giving it its natural meaning, which either requires or permits the police to exercise the power conferred on them in a manner which is incompatible with article 8. In order to hold that section 64(1A) is incompatible with the Convention it is thus necessary to identify some matter, extrinsic to the wording of the section itself, that compels one to interpret the section as either requiring or permitting the police to exercise the power conferred on them in a manner incompatible with article 8. Such a matter needs to be extraordinarily cogent in order to overcome the effect of section 3 of the HRA. I have not been able to identify any such matter. In R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] UKHL 39; [2004] 1 WLR 2196 the House of Lords held, wrongly as the Strasbourg Court was to rule, that in so far as section 64(1A) interfered with article 8 rights the interference was justified under article 8(2). In so far as Parliament considered the matter when enacting section 64(1A) it is likely to have taken the same view. Parliament may well have considered that the Convention did not require any restriction to be placed on the exercise of the power conferred by section 64 (1A). It does not follow, however, that Parliament must be presumed to have intended that, if the Convention did require the power to be exercised subject to constraints, the police should none the less be required, or permitted, to disregard those constraints. The effect of section 64(1A) was to reverse the requirement of the previous section 64 of PACE that fingerprints and samples should be destroyed when a suspect was cleared of an offence. The purpose of this reversal was plainly that the police should be permitted to establish a database of such material obtained from those suspected of criminal activity. I see no basis for concluding, however, that Parliament intended that the establishment and maintenance of this database should be untrammelled by any requirements that might be imposed by the Convention. While those requirements limit the circumstances in which material can be retained by application of the familiar test of proportionality, they do not prohibit the maintenance of a database that satisfies that test. Had Parliament foreseen that the Convention required restrictions on the power conferred by section 64(1A) the likelihood is that Parliament, guided by the executive, would itself have wished to define those restrictions rather than leaving them to be determined by executive action. That can be deduced from the fact that Parliaments reaction to Strasbourgs ruling in S and Marper (2008) 48 EHRR 1169 was to pass amending legislation and that the present Government intends to introduce an amending Bill. I do not consider, however, that it follows from this that one must interpret section 64(1A) as requiring the police to exercise the power conferred by that section in a manner which infringes the requirements of the Convention, or even as permitting the police to disregard those requirements. For these additional reasons I can see no warrant for making a declaration of incompatibility, convenient though this might be, and concur in the order proposed by Lord Dyson. LADY HALE Whether and in what circumstances the police should be able to keep the DNA samples and profiles, fingerprints and photographs of people who have been arrested but not convicted is a deeply controversial question. The Government is promoting the Protection of Freedoms Bill which will adopt in England and Wales the present system in Scotland. This allows retention only for a limited period and in respect of certain crimes. It reflects a strong popular sentiment that the police should not be keeping such sensitive material relating to innocent people, even if they are only allowed to use it for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution (Police and Criminal Evidence Act 1984, section 64(1A), as substituted by the Criminal Justice and Police Act 2001, section 82). If the popular press is any guide to public opinion, the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169 is one which captures the public mood in Britain much more successfully than many of its other decisions. Among the arguments marshalled against retaining the data are these: (a) The agencies of the state cannot be trusted to use such information only for the permitted purposes, nor can the state be trusted not to enlarge those purposes in future. DNA samples, in particular, might be put to many more controversial uses should the state feel so inclined. (b) Serious bodies have cast doubt upon the usefulness of retaining it even for the permitted purposes. Both the Human Genetics Commission (Nothing to hide, nothing to fear? Balancing individual rights and the public interest in the governance and use of the national DNA Database, November 2009) and the Nuffield Council on Bioethics (The forensic use of bioinformation: ethical issues, September 2007) suggest that the value of casting the net so wide has not yet been proved. (c) The Equality and Human Rights Commission argue, in their intervention in this case, that the premise on which such data are kept, that people who are arrested are more likely than the general population to be involved in future offending, is unsustainable. (d) Liberty point out, in their intervention, that certain sections of the population, in particular men and people from the black and minority ethnic communities, run a disproportionate risk of arrest and therefore of having their data taken and kept. This is a detriment with a discriminatory impact. (e) The detriment is the stigma, certainly felt and possibly perceived by others, involved in having ones data on the database. This stigma, together with wider concerns about potential misuse, is sufficient to outweigh the benefits in the detection and prosecution of crime. Among the arguments marshalled in favour of retaining the data are these: (a) Those of a more trusting nature find it difficult to imagine that there is a serious risk that the agencies of the state will indeed misuse this information for more sinister purposes. The risk would in any event be much reduced if DNA samples were destroyed and only profiles, fingerprints and photographs retained. (b) As to their usefulness, the Chief Constable of the West Midlands gave evidence on 22 March 2011 to the House of Commons Public Bill Committee hearing on the Protection of Freedoms Bill that between 2 and 3 per cent of the 36,000 hits on the database would be lost if the proposals in the Bill became law. These may only be a small proportion of the total, but among the 1000 or so crimes which would not be solved some would be very serious. (c) It is not clear that the underlying premise is indeed that people who have been arrested but not charged or convicted are more likely than the general population to commit crimes. After all, the Act also allows the police to keep data they have collected from people who have never been arrested, provided that they consent. The reality is that arrest gives the police the opportunity compulsorily to collect the data: it is not the reason why they do so. (d) The discriminatory impact of disproportionate arrest rates among male and black and minority ethnic members of the population could as logically be addressed by compiling a national database of everyone, rather than by restricting it to people involved in the criminal justice system. There is now a proliferation of national databases holding data on large sections of the population which data can be put to far more detrimental uses than this. (e) Any stigma felt or perceived is irrational, at least if the information is used for its permitted purposes. A person who might otherwise have been among the usual suspects arrested for a crime may be eliminated before he even gets to the police station. A person who is rightly arrested, prosecuted and convicted because a match is found does not deserve our sympathy. We should be concentrating on the quality of the scientific evidence as to sampling and matching rather than on the feelings of those whose samples have been kept. The feelings of the victims of crime are at least as important as the feelings of the criminals. They too have a human right to have their physical and mental integrity protected by the law, and it is in this context that DNA evidence, in particular, has proved most useful. We are not called upon to resolve that debate in this case. It is common ground that the decision of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 (Marper UK) cannot stand in the light of the decision of the European Court of Human Rights in S and Marper v United Kingdom (2008) 48 EHRR 1169. The only question is what we should do about it in this case. This is, as I understand it, a question governed by legal principle and the Human Rights Act 1998 and not by our particular preferences for how the United Kingdom should solve the problem. There are three broad options open to the court: (i) We could decide, in the light of the individual facts of the cases before us, whether the retention of data in each case is compatible with the appellants Convention rights. If it is not, we could make declarations to that effect and even mandatory orders for the deletion and destruction of the data involved. (ii) We could declare that the current ACPO guidelines, approved in Marper UK, are unlawful, without determining what would be lawful in the cases before us. (iii) We could declare that section 64(1A) of PACE is incompatible with the Convention rights, thus leaving the current guidelines in place and everything done under them lawful until Parliament enacts a replacement either by primary legislation or under the fast track remedial procedure laid down in section 10 of the Human Rights Act. The choice between (i) or (ii), on the one hand, and (iii), on the other hand, depends upon the difficult and important question (see Lord Mance in Doherty v Birmingham City Council [2008] UKHL 57, [2009] 1 AC 367, para 141) of the meaning and scope of section 6(2)(b) of the Human Rights Act. This, rather than the policy debate outlined above, is the important issue in this case. If it is resolved in favour of (i) or (ii) and against (iii), then the choice between (i) and (ii) depends upon what the court considers a just and appropriate remedy under section 8(1) of the 1998 Act. I should say at once that on both issues I agree with the conclusions reached by Lord Dyson. Under section 6(1) of the Act, it is unlawful for a public authority to act in a way which is incompatible with a Convention right. But the sovereignty of Parliament requires that exceptions be made for certain things which are done pursuant to an Act of the United Kingdom Parliament. As the annotations to the Act (by Peter Duffy QC and Paul Stanley) in Current Law Statutes explain, the exceptions are all designed to prevent section 6 being used to circumvent the general principle of the Act embodied in sections 3(2)(b) and 4(6)(a), that incompatible primary legislation shall remain fully effective unless and until repealed or modified. In that event, the most that the court can do is make a declaration under section 4(2) that the Act is incompatible and leave it to Parliament to decide what, if anything, to do about it. It follows, however, that the exceptions must be read along with section 3(1). Section 3(1) requires that So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. This obligation is laid upon everyone, not just upon the courts. Two exceptions to the general rule in section 6(1) are provided by section 6(2). Section 6(2)(a) has presented little difficulty: it provides that subsection (1) does not apply if as the result of one or more provisions of primary legislation, the authority could not have acted differently. This covers situations where the public authority was required by an incompatible Act of Parliament to do as it did (or perhaps where it had a choice between various courses of action, each of which was incompatible with the Convention rights). Although section 6(2)(a) does not say so, it must be read subject to section 3(1). So both the public authority and the courts, in deciding whether or not the authority could have acted differently, will have first to decide whether the Act of Parliament can be read or given effect in a way which is compatible rather than incompatible with the Convention rights. If the Act can be read compatibly, then it follows that the authority could have acted differently and will have no defence if it has acted incompatibly. Section 6(2)(b) makes the link with section 3(1) explicit, but has caused much more difficulty in practice. It provides that section 6(1) does not apply to an act (or failure to act) if in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. So the first question is always whether the primary legislation can be read or given effect in a compatible way. If it can, that is an end of the matter: see Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441, paras 93 to 103. In that case, both the provision requiring the court to make a possession order in respect of a demoted tenancy and the provision empowering the local authority to seek one could be read and given effect in a compatible way. This bears out the prediction by Beatson and others, in Human Rights: Judicial Protection in the United Kingdom (2008), para 6 23, that cases where legislation cannot be read down under section 3 are likely to be rare. However, if the legislation cannot be so read or given effect, the second question is whether the public authority was acting so as to give effect to or enforce it. As to this, it is possible to detect some differences of opinion among the judges. Some have taken the view that the fact that there may be choices involved in whether or not to give effect to or enforce the incompatible provision makes no difference: the authority was acting so as to give effect to or enforce it. Others, most notably Lord Mance in Doherty, would draw a distinction between the court, which might have no choice but to give effect to an incompatible provision, and the public authority bringing the proceedings, which could choose whether or not to do so and should be guided by Convention values when making its decisions. Fortunately, we do not have to resolve that debate. This case is about the first question: can section 64(1A) be read and given effect compatibly with the Convention rights? In my view it clearly can. This is for two principal reasons. The first relates to the requirement to read that is, interpret statutory language compatibly with the Convention rights. In this case, to say that section 64(1A) cannot be so read involves reading may be retained as must be retained, save in exceptional circumstances. This would be doing the reverse of what section 3(1) requires. In other words, it would be reading into words which can be read compatibly with the Convention rights a meaning which is incompatible with those rights. It would be giving the broad discretion provided in section 64(1A) an unnatural or strained meaning to require it to be given effect in an incompatible way. That view is reinforced by the fact that it was the clear intention of Parliament to legislate compatibly rather than incompatibly with the Convention rights. Section 64(1A) was introduced into PACE by section 82 of the Criminal Justice and Police Act 2001. When the Bill which became that Act was introduced into Parliament, it was prefaced by the ministerial statement required by section 19(1)(a) of the Human Rights Act. The Home Secretary, Mr Straw, stated that In my view the provisions of the Criminal Justice and Police Bill are compatible with the Convention rights. He was not alone in that view. After all, the House of Lords in Marper UK unanimously took the view that section 64(1A) was compatible with the Convention rights. But this does not suggest to me that Parliaments intention was that the apparent discretion which it conferred should inevitably be read incompatibly with the Convention rights should that view later prove to be unfounded. Quite the reverse. The second relates to the requirement in section 3(1) that legislation be given effect compatibly with the Convention rights. As Lord Rodger emphasised in Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, para 107, section 3(1) contains not one, but two, obligations. In retrospect, that is what the Court of Appeal had in mind in the case which became In re S (Minors) (Care Order: Implementation of Care Plan) [2002] UKHL 10, [2002] 2 AC 291: that the courts power to make a care order giving the local authority enhanced (that is, determinative) parental responsibility for a child should be given effect in such a way as to prevent the local authority exercising that responsibility incompatibly with the Convention rights of either the child or his parents. Also in retrospect, one can see that the proper remedy for incompatible actions by the local authority is a free standing action under section 7(1)(a) of the Human Rights Act, rather than by the care court adopting powers which contradicted the cardinal principle of the separation of powers between court and local authority in care proceedings. In re S is the strongest case in favour of the position adopted by the Chief Constable and the Secretary of State in this case. They have to argue that, despite ostensibly giving the police a discretion, the cardinal principle was, not that data may be kept, but that they must be kept. The ACPO guidelines could say only one thing. Further, they must argue that that principle is so fundamental to the legislative purpose that only Parliament can modify it if it turns out that those guidelines are incompatible with the Convention rights. I can readily accept that it may be desirable for Parliament rather than the Association of Chief Police Officers to put something in its place. But I cannot see how it was possible for the discretion conferred by section 64(1A) to be exercised in accordance with ACPO guidelines when it was first enacted but it is not possible for it to be so exercised now. In other words, if it was possible to read and give effect to section 64(1A) by means of ACPO guidelines when it was first enacted, it must be possible to do so now. And ACPO as a public authority has to act compatibly with the Convention rights. For these reasons, therefore, section 64(1A) is not incompatible with the Convention rights and cannot be so declared. However, the need for a consistent national approach must be relevant to the choice between remedy (i) and remedy (ii). The court is empowered by section 8(1) to grant such relief or remedy in relation to an unlawful act as it considers just and appropriate. There would be nothing to stop ACPO promulgating some new and Convention compliant guidelines. Now that Marper UK has been overruled, they clearly should set about doing so unless Parliament does it for them within a reasonably short time. But I certainly accept that the system will not work if different police forces adopt different policies. So it would not be appropriate (such a flexible word) for this court to make mandatory decisions in individual cases unless and until it becomes clear that neither ACPO or Parliament is prepared to make the difficult choices involved. I therefore agree that we should declare the current guidelines unlawful but grant no further relief. LORD JUDGE I agree with the reasoning and conclusions of the majority of the members of the Court. In deference to the contrary views I shall add some brief words of my own. The insertion of section 64(1A) in the Police and Criminal Evidence Act 1984 (the 1984 Act) by section 82 of the Criminal Justice and Police Act 2001 resulted in the promulgation of the Retention Guidelines for Nominal Records on the Police National Computer (the ACPO Guidelines) 2006. Thereafter in England and Wales the retention of biometric data (DNA samples) was governed by these guidelines which derived their authority from section 64(1A). The judicial examination of these provisions in England and Wales culminated in a decision of the House of Lords in R (S and Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 that the retention of DNA samples did not constitute an interference with the rights granted by article 8 of the European Convention of Human Rights, or if it did, that the interference was modest and proportionate. The Grand Chamber of the European Court of Human Rights disagreed, and concluded that the system created by the ACPO Guidelines constituted an interference with article 8 rights. (S v United Kingdom (2008) 48 EHRR 1169). Taking account of the decision and applying its reasoning we are all agreed that the decision of the House of Lords should no longer be treated as authoritative. Therefore these appeals must be allowed. The forensic battle is directed at the consequences which should now flow. The starting point is the reasoning of the Grand Chamber which identified the way in which different member states addressed the retention issue, and acknowledged that even following acquittal, it was permissible, subject to specific limitations within the domestic arrangements, for DNA samples to be retained. What however was required of any arrangements for retention was an approach which discriminated between different kinds of cases and for the application of strictly defined storage periods for data, even in more serious cases. Attention was drawn to the position in Scotland where the legislative arrangements permitted the retention of the DNA of unconvicted individuals, limited in the case of adults to those charged with violent or sexual offences and even then, for three years only, with the possibility of an extension for a further two years with judicial agreement. These arrangements were not criticised. Indeed the court acknowledged that the retention of DNA profiles represented the legitimate purpose of assisting in the identification of future offenders. In short the existence of the legislative provisions for the retention of DNA samples was endorsed, but criticism was directed at the blanket and indiscriminate nature of the power of retention found in the ACPO Guidelines. Accordingly nothing in the judgment of the Court leads to the conclusion that a different, less all encompassing scheme deriving its authority from section 64(1A) would contravene article 8, or that the law in relation to DNA samples should revert to the former wide ranging prohibition against the retention of samples of any kind which was the striking feature of section 64 of the 1984 Act as originally enacted. Rather the judgement confirmed that legislative arrangements may provide for the retention of the DNA samples of those acquitted of criminal offences. That is what section 64(1A), reversing the provisions of section 64, permits. In these circumstances it was open to ACPO to reconsider and amend the guidelines (as indeed, at least in part, it did) in the light of the decision of the European Court, and it would be open to ACPO to do so in the light of the decision of this court. Section 64(1A) does not preclude an amendment to the Guidelines which addresses the criticisms. In other words, although the process of further amendment to the arrangements for the retention of DNA samples in England and Wales has been and continues to be addressed through legislation, this was not and is not the only way to provide for the protection of article 8 rights against the current scheme for their indiscriminate retention. In my judgment section 64(1A) is Convention compliant, whereas the ACPO Guidelines in their present form are not. Accordingly, the retention of the DNA samples of these appellants was unlawful, but a declaration of incompatibility would be inappropriate. LORD KERR Lord Rodger and Lord Brown in powerfully reasoned judgments, which I initially found persuasive, have concluded that section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE) had as its purpose the institution of a scheme for the indefinite retention of biometric data taken from all suspects (with very limited exceptions) in connection with the investigation of offences. On that account they found that, despite the seemingly permissive language of the subsection, the Association of Chief Police Officers (ACPO), to whom the task of drawing up guidelines for the implementation of section 64(1A) had been entrusted, were obliged to ensure that, instead of being destroyed as previously required by section 64(1) of PACE, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database. If indefinite retention of data was indeed section 64(1A)s unmistakable purpose, I would have readily agreed that the discretion that samples may be retained after they have fulfilled the purposes for which they were taken would have to be exercised so as to give effect to that intention. That, as Lord Rodger has said, would be the inevitable consequence of the application of the principle for which Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 is the seminal authority: that a discretion conferred with the intention that it should be used to promote the policy and objects of the Act can only be validly exercised in a manner that will advance that policy and those objects. More pertinently, the discretion may not be exercised in a way that would frustrate the legislations objectives. Everything therefore depends on what one decides is the true intention or purpose of the legislation. This is not as easy a question to answer as the simple formulation, what was the purpose of the legislation, suggests. As Lord Brown has pointed out in para 145 of his judgment, the search for the purpose of a particular item of legislation may have to follow a number of avenues and may require consideration of several aspects of the enactment what is the grain of the legislation, what its underlying thrust etc. An important factor in the conclusion on this critical question which Lord Rodger has identified is the fact that Parliament clearly saw the need for retreat from the position that had hitherto obtained under section 64(1) and (3) of PACE as originally enacted. Those subsections were in these terms: (1) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. (3) If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) that person is not suspected of having committed the offence, they must be destroyed as soon as they have fulfilled the purpose for which they were taken. As Lord Rodger has pointed out, the decision of the House of Lords in Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 brought to the attention of the public and Parliament the effect of these provisions. Potentially useful evidence was not being used for reasons that, as Lord Steyn put it, were contrary to good sense (p 118). No doubt reaction to the experience in that case contributed to Parliaments decision to enact section 64(1A) but did it, as Lord Rodger has concluded, lead to Parliaments resolve that samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database? In my judgment, and largely for the reasons given by Lord Dyson, it did not. In the first place, if that was Parliaments intention it chose a curious way to achieve it. A simple, unambiguous provision to that effect would not have been difficult to devise. And if the purpose of the legislation was to obtain a blanket, universally applied (apart from exceptional cases) policy, why would Parliament have left the practicalities of implementing the policy to ACPO? The drafting of the provision at a level of generality surely suggests that Parliament intended a measure of flexibility to be a feature of its application. This is unsurprising. The history of evolving knowledge as to the use to which DNA evidence could be put provided the clearest possible reasons not to adopt over prescriptive rules that might impede its full exploitation in circumstances unforeseen at the time of their enactment. Just as it was judged, in retrospect, to be unwise to have an immutable requirement to destroy all samples from certain categories of suspects and defendants, so also it would be unwise to substitute that obligation with a blanket requirement to retain all samples. Various members of the Appellate Committee of the House of Lords in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 described the benefits that can flow from the maintenance of an expanded database for DNA samples and I am in respectful agreement with all that Lord Steyn, Lady Hale and Lord Brown had to say on this subject in that case. But I do not consider that it necessarily follows that an inflexible policy requiring retention of virtually every sample taken from suspects and defendants is needed in order to have a viable and worthwhile resource. Whatever view one takes of the competing policy arguments on this issue, however, it is, to my mind, quite clear that Parliament did not intend that this was the only way in which the legislation could be implemented. Not only does section 64(1A) use the permissive may in relation to the retention of samples but subsection (3) is retained in its original state, albeit that it may now be disapplied in a variety of circumstances outlined in section 64(3AA) to (3AD). This seems to me clearly to indicate recognition that there should be limits on the retention of samples but, not surprisingly, Parliament did not attempt to forecast comprehensively what those limits should be. The structure of the new section 64 is strongly suggestive of an intention to devise a scheme that would respond to developments in this field, not least any view that might be taken as to the human rights implications that might come to be recognised. As Lord Dyson has put it, Parliaments intention must be taken to have been to create a proportionate scheme which is compatible with ECHR. There is nothing to impel the conclusion that Parliament intended that the scheme could not adapt to whatever the compatibility requirements were found to be. On the contrary, there is every reason to suppose that Parliament intended that the scheme could be adapted to meet those requirements as and when they became apparent. What the Commissioner and the Secretary of States argument resolves to is that, in interpreting section 64, we should recognise that an underlying, not expressly articulated, purpose was that the samples had to be retained indefinitely, regardless of the circumstances in which they were taken or of the circumstances of the individual from whom they had been taken. There is nothing in the language of the section itself that compels such an exclusive interpretation. Indeed, as Lord Phillips has pointed out, acceptance of this argument would involve reading more into section 64(1A) than its ordinary language conveys. ACPOs guidelines were an essential complement to the statutory scheme. Those guidelines have been altered (in relation to children under 10) as a result of the decision of the Grand Chamber in S and Marper v United Kingdom (2008) 48 EHRR 1169. There is no lawful impediment to ACPO devising and implementing guidelines that take full account of the other features which Strasbourg has decreed are necessary for the operation of the scheme to be Convention compliant. Classifications (as to which categories of offences or individuals should require retention of samples) and long stop provisions (as to the period that they should be retained) are well within the institutional reach of ACPO. So also are the circumstances in which exceptions to the guidelines can be permitted. ACPO chose the exceptionality criteria. They may equally change those criteria. And because there is no legal impediment in them doing so, then under section 6 of HRA, they or Parliament must. Section 6(2)(b) can only come into play if ACPO cannot act. If it can, then it must. Because Parliamentary change is imminent, however, and because significant policy issues need to be considered, it is not unreasonable to leave this to Parliament. I therefore agree with the order proposed by Lord Dyson. I also agree with all that Lord Dyson has had to say on the argument that Parliament could not have intended to entrust the creation of a detailed scheme pursuant to section 64(1A) to the police subject only to the judicial review jurisdiction of the court. As he has said, the scope of the argument is confined. It is to the effect that, although it could have done so if it had considered it appropriate, Parliament must be taken not to have intended to grant such a power because of the constitutional and institutional limits on the competence of the police. But Parliament does not appear to have felt such qualms in giving the initial responsibility for the devising of guidelines to ACPO and, as Lord Dyson has pointed out, no question of constitutional competence arises. Finally, I agree with Lord Dysons conclusion on the discrete issue of GCs photographs. DISSENTING JUDGMENTS ON THE APPROPRIATE RELIEF LORD RODGER In September 1984 Sir Alec Jeffreys made his ground breaking discovery of DNA fingerprints. A few weeks later, on 31 October, the Police and Criminal Evidence Act 1984 (PACE) was enacted. Within a few years Sir Alecs discovery was being used routinely in the criminal courts in this country. Section 64(1) of PACE, as originally enacted in ignorance of this major development that lay just ahead, provided: If (a) fingerprints or samples are taken from a person in connection with the investigation of an offence; and (b) he is cleared of that offence, they must be destroyed as soon as is practicable after the conclusion of the proceedings. In January 1997 an unidentified intruder raped and assaulted a woman in her home in London. Swabs were taken from her and were found to contain semen. A DNA profile was obtained from the semen and placed on the national DNA database. In January 1998 a man was arrested for an unrelated offence of burglary. A saliva sample was taken from him and a DNA profile was derived from it. In August of the same year the man was acquitted of the burglary and, by virtue of section 64(1) of PACE, his sample should have been destroyed. In fact, however, his profile was left on the DNA database and in October a match was made between this profile and the DNA profile derived from the semen in the swabs taken from the woman who had been raped in January 1997. The man was arrested and a DNA profile was obtained from a hair plucked from him. As was to be expected, this profile also matched the DNA derived from the semen. At his trial for the rape the judge held, however, that, since the material which had led to his identification should have been destroyed as required by section 64(1), the evidence relating to the profile from the plucked hair was not admissible. The man was acquitted. The Attorney General referred the matter to the Court of Appeal who agreed with the judge but referred the point to the House of Lords. In Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 the House reversed the Court of Appeal. The speech of Lord Steyn, with which the other members of the appellate committee agreed, was notable for his observation, at p 118, that the austere interpretation of the Court of Appeal produced results which were contrary to good sense. For present purposes, that case is important because it alerted the public and politicians to the fact that the obligation under section 64(1) of PACE to destroy samples if the suspect was acquitted meant that evidence which might lead to the detection and prosecution of the perpetrators of other crimes would be lost. Just a few weeks after their Lordships decision, in the course of the second reading debate on the Criminal Justice and Police Bill, the Home Secretary introduced Part IV of the Bill which, he explained, was designed, inter alia, to amend section 64(1) of PACE to prevent evidence being lost in this way. The Home Secretary referred to Lord Steyns speech as demonstrating the need for the change: Hansard (HC Debates), 29 January 2001, col 42. This history shows beyond doubt that Parliaments purpose in enacting section 82 of the Criminal Justice and Police Act 2001, which inserted section 64(1A) into PACE, was to ensure that, in future, instead of being destroyed, samples taken from suspects would be retained indefinitely and so remain available to the police on the national DNA database. This would protect the public by facilitating the detection and prosecution of the perpetrators of crimes. Section 64(1A) provides: (1A) Where (a) fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence, and (b) subsection (3) below does not require them to be destroyed, the fingerprints, impressions of footwear or samples may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came. After this provision came into force, in accordance with guidelines from the Association of Chief Police Officers (ACPO) the police proceeded to retain data indefinitely and so to build up their DNA database of samples and profiles obtained from people who had been suspected of crimes, even if they had not been prosecuted or had been acquitted. In due course in two appeals to the House of Lords this system was challenged as being in violation of the suspects article 8 Convention rights: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196. In the leading speech Lord Steyn said, at p 2198E F, para 2, that as a matter of policy it is a high priority that police forces should expand the use of [DNA] evidence where possible and practicable. He went on to refer to public disquiet that the obligation to destroy samples under the unamended section 64(1) of PACE had sometimes enabled defendants who had in all likelihood committed grave crimes to walk free. Baroness Hale of Richmond observed, at p 2219G H, para 78, that The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has. The benefit to the aims of accurate and efficient law enforcement is thereby enhanced. In the light of such considerations the House of Lords held unanimously that the system did not violate the appellants article 8 Convention rights. To Strasbourg, however, the matter appeared differently. In S v United Kingdom (2008) 48 EHRR 1169 the Grand Chamber first held unanimously and contrary to the majority view in the House of Lords that the English system did indeed involve an interference with suspects article 8 rights. Then, when considering the proportionality of that interference, the court observed, at pp 1200 1201, para 119: In this respect, the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales. The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences. The retention is not time limited; the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected. Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. The court went on to conclude, at p 1202, para 125: that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. Accordingly, the retention at issue constitutes a disproportionate interference with the applicants right to respect for private life and cannot be regarded as necessary in a democratic society. In response to the European Courts judgment the last Parliament passed the Crime and Security Act 2010, section 14 of which was designed to amend section 64 of PACE with a view to establishing a regime for the retention and destruction of DNA material and profiles that would be compatible with article 8 as interpreted by the European Court. The new Government, which came into office in May 2010, decided, however, not to commence this legislation Instead, in Chapter 1 of Part 1 of the Protection of Freedoms Bill, it has put fresh legislative proposals, along similar lines to the legislation in Scotland, before Parliament. There were indications in the European Courts judgment that a system along those lines would indeed be compatible with article 8. As in the earlier legislation, the complex proposals include provision for a National DNA Database Strategy Board to oversee the operation of the DNA database. Obviously, in the light of the European Courts judgment the indefinite retention of the data relating to the appellants under the existing system is incompatible with their article 8 rights. The decision of the House of Lords to the contrary in R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196 must accordingly be overruled. That is accepted by the respondent, the Metropolitan Police Commissioner, and by the Home Secretary, who has intervened in the proceedings. Where the Commissioner and the Home Secretary part company with the appellants is as to the order, if any, which the court should pronounce in these circumstances. In effect, for the appellant C Mr Fordham QC argued that section 64(1A) is worded (may be retained) so as to give the Commissioner and chief constables an open discretion as to whether data should be retained and, if so, for how long and subject to what conditions. The position was therefore quite straightforward. By virtue of section 6(1) of the Human Rights Act 1998 the Commissioner and chief constables were obliged to exercise that discretion so as to establish and maintain a system for the retention of samples and data that would comply with suspects article 8 Convention rights as they are now to be interpreted in the light of the decision of the European Court. It was unlawful for them not to do so. Mr Fordham indicated that he would be content for the court to pronounce a declaration to this effect, without making any order for the removal of the data relating to his client. While adopting the bulk of Mr Fordhams submissions, on behalf of the appellant GC, Mr Cragg asked the court to go further and indicate that in his case the position should be put right within 28 days. Mr Fordhams argument is, of course, unanswerable if he is right to say that the crucial words (may be retained) in section 64(1A) confer a wide indeed open discretion on the Commissioner and the chief constables whose forces retain the samples and data that make up the national DNA database. If that is correct, then, even though, when section 64(1A) came into force, ACPO issued guidelines requiring that subject to a narrow exception all the DNA samples and data relating to suspects should be retained indefinitely, the Association could with equal propriety have issued completely different guidelines which would have resulted in a system that did not provide for the indefinite retention of the samples and data. On that interpretation, any credit for the creation of the present DNA database is to be accorded to ACPO for choosing, of its own freewill, to issue the guidelines which it did. More particularly, since ACPO had been, and still was, free to adopt other completely different guidelines, ACPO could now issue fresh guidelines which would produce a system that was compatible with the European Courts judgment. The key question, therefore, is whether Mr Fordhams construction of section 64(1A) as conferring this wide discretion on the police is correct. On behalf of the Commissioner Lord Pannick QC argued that it is not. He drew attention to the context, which I have already described, in which Parliament enacted section 64(1A). This showed that Parliament had set out to cure the mischief that the original version of section 64(1) of PACE meant that suspects samples and data were removed from the database even although as Attorney Generals Reference (No 3 of 1999) demonstrated the retention of that material could potentially result in the detection and prosecution of serious criminals. Parliament plainly intended that in future this material should be retained on the DNA database indefinitely. In other words, under section 64(1A) the police had to retain it indefinitely. Mr Fordham said, rhetorically, that, if this were correct, then the Home Secretary could have brought proceedings against the police if they had failed to retain the material indefinitely. Accepting the challenge, Mr Eadie QC said that, while the matter would probably have been sorted out in a different way, if necessary, such proceedings could indeed have been brought. It is useful to notice just how far reaching Mr Fordhams argument is: essentially, under section 64(1A) the police were free to do what they liked. On his approach the provision contained nothing to delimit the exercise of their discretion. When listening to his argument, at times I felt that unconsciously, of course he was intent on pulling down one of the most important bulwarks which our predecessors so painstakingly erected against arbitrary acts of the executive. In Car Owners Mutual Insurance Co Ltd v Treasurer of the Commonwealth of Australia [1970] AC 527, 537E F, Lord Wilberforce observed that in a statutory framework it is impossible to conceive of a discretion not controlled by any standard or consideration stated, or to be elicited from, the terms of the Act. He was, of course, reflecting the thinking in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 where Lord Reid had said, at p 1030B D, that Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act, the policy and objects of the Act must be determined by construing the Act as a whole and construction is always a matter of law for the court. Following that classic authority, in my view the power which was conferred on the police by section 64(1A) had to be exercised in accord with the policy and objects of that enactment. As I have explained, the policy and objects of Parliament in enacting section 64(1A) were plainly that DNA samples and data derived from suspects should be retained indefinitely so that a large and expanding database should be available to aid the detection and prosecution of the perpetrators of crimes. The police were therefore bound to exercise the power given to them by section 64(1A) in order to promote that policy and those objects. This meant, in effect, that, subject to possible very narrow exceptions (e g, those suspected of a crime which turned out not to be a crime at all), the police had to retain on their database the samples and profiles of all suspects. In short, the police were under a duty to do so. By a slightly different route this analysis reaches the same result as the older well known line of authority to the effect that, on the proper construction of a statute as a whole and in its context, it can sometimes be seen that a power granted to, say, an official, court or other body in the public interest must be regarded as having been coupled with an implied duty on the recipient to exercise the power in the circumstances envisaged for its exercise. See, for instance, Julius v Lord Bishop of Oxford (1880) 5 App Cas 214; Attorney General v Antigua Times Ltd [1976] AC 16, 33F G, per Lord Fraser of Tullybelton. In my view, therefore, given the policy and objects of the enactment, before the decision of the European Court the police could not have exercised their power under section 64(1A) by choosing to retain samples and data for, say, only three years (or any other period deliberately not prescribed in the legislation) and then destroying them. Similarly, given the policy and objects of the enactment, the police could not have exercised the power to detain material indefinitely by choosing to delete material from those against whom, in their view, suspicion fell below some arbitrary level not recognised in the legislation. Any such exercise of their power would have defeated, rather than promoted, the policy of the enactment and would therefore have been unlawful. In the light of the European Courts decision, it can now be seen that the policy and objects of section 64(1A), to create a virtually comprehensive and expanding database of DNA profiles from suspects, violate the article 8 Convention rights of unconvicted suspects. Given that the Protection of Freedoms Bill has been introduced into Parliament, there is good reason to believe that legislation will be passed in the foreseeable future to establish a new system. The question in the present proceedings is whether in the meantime, by virtue of section 3(1) of the HRA or otherwise, the police must read and give effect to section 64(1A) in a way that is compatible with article 8 as interpreted by the European Court and whether they act unlawfully if they do not. Since I reject Mr Fordhams argument that section 64(1A) gives the police an open discretion as to what to do, I also reject his further, seductive, argument that, having regard to section 6(1) of the HRA, they can and should simply exercise that discretion in such a way as to establish a lawful system that meets the requirements of the Strasbourg court for example, by choosing to retain samples and data for only three years, subject, perhaps, to a power in an independent body to extend the period for some further defined period (as under the Scottish legislation), or by only retaining the material from those suspected of certain classes of crimes, or by only retaining the material from those against whom there is a high degree of suspicion etc. All of those suggested steps would have been inconsistent with the policy and objects of section 64(1A) as originally enacted. So they could only be adopted now, in order to comply with the European Courts decision, if section 3(1) of the HRA makes that not only possible but indeed obligatory. Section 3 provides: (1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. (2) This section (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility. The opening phrase in subsection (1) shows that there are limits to the duty which it imposes. The words of Lord Nicholls of Birkenhead in In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, are a useful guide to where those limits lie: For present purposes it is sufficient to say that a meaning which departs substantially from a fundamental feature of an Act of Parliament is likely to have crossed the boundary between interpretation and amendment. This is especially so where the departure has important practical repercussions which the court is not equipped to evaluate. In such a case the overall contextual setting may leave no scope for rendering the statutory provision Convention compliant by legitimate use of the process of interpretation. Mr Fordham submitted that the fundamental feature of section 64(1A) was the retention of the material for the purposes of creating a DNA database, not the indefinite retention of the material with a view to establishing a virtually comprehensive database of DNA material from suspects. In my view that submission is unrealistic. The truth is that Parliament wanted to eliminate the danger, which existed under the pre existing legislation, that valuable evidence would be lost and potential prosecutions of the guilty based on the latest science would be jeopardised if material had to be removed from the database. Providing for the material to be retained on the database indefinitely was therefore the fundamental feature of the amending legislation which inserted section 64(1A) into PACE. That being so, section 3(1) of the HRA does not oblige or permit the courts or the police to read or give effect to section 64(1A) in a way that departs substantially from that fundamental feature. And it is quite obvious that any reading of section 64(1A) which would be apt to obviate the defects identified in the existing system by the European Court would depart very substantially indeed from that fundamental feature of the provision would, indeed, contradict it. It is therefore nothing to the point that, from a linguistic point of view, the provision might easily be read as though it said that samples may be retained, consistently with the suspects article 8 Convention rights. The hypothetical additional words, though few in number, would have the effect, and would be intended to have the effect, of altering the provision so as, say, to limit the samples and data that were to be retained and the time for which they could be retained, and to impose a duty to remove them after that time and so to negate the defining feature of the legislation. In other words, the court would have crossed the line from interpreting to amending the legislation. Amending section 64(1A) in that way is something which only Parliament can do. Parliament showed itself willing to pass amending legislation in the Crime and Security Act 2010. The fact that the new Government decided not to commence that legislation, but chose to introduce a Bill providing for a different scheme shows that there is a range of possible ways to bring the system into line with the requirements of article 8 and room for doubt about which is the best policy to adopt. This court is in no position to weigh the competing practical advantages and disadvantages of the possible solutions. These are further features which confirm that the necessary changes require legislation and cannot be made by any legitimate interpretation, however extensive, under section 3(1): In Re S (Minors) (Care Order: Implementation of Care Plan) [2002] 2 AC 291, 313, para 40, per Lord Nicholls. Section 64(1A) is therefore incompatible with suspects article 8 Convention rights and cannot be made compatible under section 3(1) of the HRA. Section 3(2)(b) ensures that in these circumstances the continuing operation of section 64(1A) is unaffected. Section 6(1) and (2) provide: (1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. Like sections 3(2) and 4(6), section 6(2) is concerned to preserve the primacy and legitimacy of primary legislation. See Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank [2004] 1 AC 546, 556 557, para 19, per Lord Nicholls, cited with approval by Lord Hoffmann in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 51. If that is correct and section 3(1) of the HRA cannot be invoked in the present case, then section 64(1A) continues to operate, and Parliament intends it to operate, in the same way as when enacted. It therefore falls to be interpreted and applied just as when enacted. It is accepted that section 6(2)(a) applies to cases where the legislation, which cannot be read compatibly with Convention rights, imposed a duty on a public authority to act in one particular way the authority could not have acted differently. It follows, of course as Lord Hoffmann remarked in Hooper [2005] 1 WLR 1681, 1696, para 49 that, by contrast, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3. Since the Convention non compliant provision continues to operate, any public authority which is exercising a power conferred by it must continue do so in a way that promotes the object and purposes for which the provision confers the power and these are, ex hypothesi, incompatible with Convention rights. As Lord Hoffmann noted, section 6(2)(b) assumes, however, that under the relevant legislation the public authority could have acted in more than one way. For example, it might be that a public authority could have adopted either of two schemes, A and B, both of which would have promoted the policy and objects of the legislation. So it cannot be said that, when it chose to adopt scheme A, the public authority could not have acted differently. Nevertheless, since, when it adopted scheme A, the authority was promoting the policy and objects of the primary legislation and so was acting to give effect to the legislation, section 6(2)(b) disapplies section 6(1) and ensures that the authority was acting lawfully. In this way the primacy and legitimacy of the provision of primary legislation are preserved. For all the reasons which I have set out, in the present case, in substance the police could really not have acted differently: in order to promote the object and purposes of section 64(1A) of PACE, they had to retain all the samples which they did, indefinitely. If that is so, then what the police did, and continue to do, falls within section 6(2)(a) and is accordingly lawful. Even if one assumes, however, that, while promoting the policy and objects of the legislation, the police could, for example, have recognised a slightly wider exception and so created a slightly different system, that does not matter. The same goes if, while promoting the policy and objects of the legislation, the police could have chosen not to recognise even the very narrow exception which they did and could have decided to retain the samples and data relating to absolutely all suspects. In either event, even though the police could have done something (slightly) different, by doing what they actually did and are still doing, they were acting and are continuing to act so as to give effect to section 64(1A). Section 6(2)(b) of the HRA accordingly applies and so the police have at all times acted, and continue to act, lawfully. In these circumstances section 64(1A) is incompatible with suspects article 8 Convention rights. Even though Parliament and the Government have the matter under review, I consider that the better course is for this court to grant a declaration of incompatibility in terms of section 4(2) of the HRA. Cf Bellinger v Bellinger [2003] 2 AC 467, 482, para 55, per Lord Nicholls. I would accordingly allow the appeals to the extent of making a declaration that section 64(1A) of the Police and Criminal Evidence Act 1984 is incompatible with the article 8 Convention rights of suspects. LORD BROWN On 4 December 2008 the Grand Chamber of the ECtHR in S v UK (2008) 48 EHRR 1169 condemned on article 8 grounds the scheme for the indefinite retention of biometric data adopted in England and Wales pursuant to section 64(1A) of the Police and Criminal Evidence Act 1984 (PACE). The critical issue for decision on these appeals is whether, following that decision and pending the enactment by Government of a fresh legislative scheme compatible with article 8, the police have been acting unlawfully in continuing to operate the indefinite retention scheme. That in turn depends upon whether section 64(1A) can or cannot be read or given effect in a way which is compatible with the Convention rights within the meaning of section 6(2)(b) of the Human Rights Act 1998 (the HRA). Before turning to address this issue it is necessary to sketch out something of the background to the appeal and the circumstances in which the point now arises for decision. These appellants are two amongst the 850,000 odd unconvicted persons whose profiles are kept on the national DNA database, their fingerprints and samples having been taken from them when they were arrested as suspects (from 2003, whether or not they were actually charged). This database has built up following Parliaments introduction on 11 May 2001 of section 64(1A) of PACE in substitution for the original section 64(1) which had required the destruction of a suspects fingerprints and samples as soon as practicable after he was cleared. Section 64(1A) provides so far as is material: Where . fingerprints, impressions of footwear or samples are taken from a person in connection with the investigation of an offence . [they] may be retained after they have fulfilled the purposes for which they were taken but shall not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came. In 2004 this change in the law was unsuccessfully challenged, principally on article 8 grounds, all the way up to the House of Lords, by two complainants: S, an eleven year old boy with no previous convictions who had been acquitted of attempted robbery, and Mr Marper, a man of 38, also of good character, whose case was discontinued following his arrest on the charge of harassing his partner: R (S) v Chief Constable of the South Yorkshire Police; R (Marper) v Chief Constable of the South Yorkshire Police [2004] 1 WLR 2196. Lady Hale alone amongst the Appellate Committee thought that the retention and storage of DNA profiles constituted an interference with the claimants rights under article 8. But each member of the Committee, Lady Hale included, was quite clear that, even if it did, it was readily justifiable under article 8(2). Lord Steyn described such evidence as having the inestimable value of cogency and objectivity (para 1) and said that as a matter of policy it is a high priority that police forces should expand the use of such evidence where possible and practicable (para 2). At para 3 he observed that: It can play a significant role in the elimination of the innocent, the correction of miscarriages of justice and the detection of the guilty. At para 36 Lord Steyn dealt with a submission that retention is not in accordance with law (on the basis that a law which confers a discretion must indicate the scope of that discretion: Silver v United Kingdom (1983) 5 EHRR 347, 372, para 88): The discretion involved in the power to retain fingerprints and samples makes allowance for exceptional circumstances, eg where an undertaking to destroy the fingerprints or sample was given or where they should not have been taken in the first place, as revealed by subsequent malicious prosecution proceedings. At para 38 Lord Steyn observed that the expansion of the database by the retention confers enormous advantages in the fight against serious crime and at para 39 he remarked upon the benefits of a greatly extended database. Lord Rodger and Lord Carswell agreed with Lord Steyn. Lady Hale agreed that retention and storage of DNA samples and profiles was readily justifiable for the reasons given by Lord Steyn and myself. She added: The whole community, as well as the individuals whose samples are collected, benefits from there being as large a database as it is possible to have. The present system is designed to allow the collection of as many samples as possible and to retain as much as possible of what it has. The benefit to the aims of accurate and efficient law enforcement is thereby enhanced. (para 78) I myself suggested (para 88): that the benefits of the larger database . are so manifest . that the cause of human rights generally (including the better protection of society against the scourge of crime which dreadfully afflicts the lives of so many of its victims) would inevitably be better served by the databases expansion than by its proposed contraction. The more complete the database, the better the chance of detecting criminals, both those guilty of crimes past and those whose crimes are yet to be committed. The better chance too of deterring from future crime those whose profiles are already on the database. And I pointed out too that: The larger the database, the less call there will be to round up the usual suspects. Instead, those amongst the usual suspects who are innocent will at once be exonerated. These views notwithstanding, the Grand Chamber in Strasbourg, as already indicated, on the application of the same complainants, some four years later unanimously condemned the scheme as unjustifiable under article 8. It is sufficient for present purposes to quote just three paragraphs from the Courts lengthy judgment: 119 . the Court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales. The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age, arrested in connection with a recordable offence, which includes minor or non imprisonable offences. The retention is not time limited; the material is retained indefinitely, whatever the nature or seriousness of the offence of which the person was suspected. Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances. 125 In conclusion, the Court finds that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences, as applied in the case of the present applicants, fails to strike a fair balance between the competing public and private interests and that the respondent State has overstepped any acceptable margin of appreciation in this regard. 134 . In accordance with article 46 of the Convention, it will be for the respondent State to implement, under the supervision of the Committee of Ministers, appropriate general and/or individual measures to fulfil its obligations to secure the rights of the applicants and other persons in their position to respect for their private life. Before turning to the circumstances in which these particular appellants had their fingerprints and samples taken and the precise nature of the argument they advance on this appeal, it is convenient first to indicate something of the response to the Grand Chambers judgment, on the part both of the Government and of the police. So far as the Government was concerned, the then Home Secretary in a Press Release on 16 December 2008 indicated that the Home Office would institute a consultation process but that meantime: The DNA of children under ten the age of criminal responsibility should no longer be held on the database. There are around 70 such cases [we are told that there were in fact 96], and we will take immediate steps to take them off. (S and Mr Marpers data was also removed.) On 7 May 2009 the Home Office published a White Paper, Keeping the Right People on the DNA Database, setting out certain key proposals for the future and inviting views upon them. The White Paper also considered what should happen to the 850,000 odd profiles already on the national DNA database. On 28 July 2009 ACPOs Director of Information wrote to all Chief Constables indicating that new guidelines were not expected to take effect until 2010 and that: Until that time, the current retention policy on fingerprints and DNA remains unchanged. ACPO strongly advise that decisions to remove records should not be based on proposed changes. It is therefore vitally important that any applications for removals of records should be considered against current legislation and the Retention Guidelines Exceptional Case Procedure . Those Guidelines, which have remained essentially the same since section 64(1A) was introduced, provide: Chief Officers have the discretion to authorise the deletion of any specific data entry on the PNC owned by them. They are also responsible for the authorisation of the destruction of DNA and fingerprints associated with that specific entry. It is suggested that this discretion should only be exercised in exceptional cases . Exceptional cases will by definition be rare. They might include cases where the original arrest or sampling was found to be unlawful. Additionally, where it is established beyond doubt that no offence existed, that might, having regard to all the circumstances, be viewed as an exceptional circumstance. On 11 November 2009, following the consultation period, the Home Secretary made a written Ministerial statement outlining a revised set of proposals for the retention of fingerprints and DNA data (Hansard (HC Debates), 11 November 2009, col 25WS). It was originally intended to implement these by way of order making powers under the Policing and Crime Act 2009 but, following strong opposition to the introduction of a new scheme by secondary rather than primary legislation, the proposed new scheme was included in the Crime and Security Act 2010, introduced in the House of Commons on 19 November 2009 and receiving Royal Assent on 8 April 2010. Following a change of government in May 2010, however, rather than bringing the Crime and Security Act into force, the incoming government instead announced its proposal for new legislation designed essentially to mirror the Scottish system and this finally, by the Protection of Freedoms Bill 2011, introduced in the House of Commons as recently as 11 February 2011, it has now set in train. For reasons which will shortly become clear, it is unnecessary for the purposes of this judgment to indicate anything of the detailed nature of the various proposals which at one time or another have been considered for enactment in substitution for the existing scheme so as to achieve compatibility with article 8 pursuant to the Grand Chamber judgment. It is sufficient to indicate that a wide range of differing schemes have been canvassed and considered and that arriving at the preferred solution has inevitably involved complex and sensitive choices. It is similarly unnecessary to describe in any detail the facts of these appellants cases and the following brief summary will suffice. GC is 41. On 20 December 2007, following his girlfriends complaint that he had assaulted her (albeit without causing her injury), he voluntarily attended the police station and was arrested on suspicion of common assault. He strongly denied the allegation, explaining rather that he had been defending himself against attack by her. Following the taking of DNA samples, fingerprints and a photograph, GC was released on police bail without charge. Before 21 February 2008, when he was due to surrender to his bail, GC was told that no further action would be taken against him. GCs fingerprints (but not DNA) had in fact been taken previously and retained in connection with a firearms offence for which he had been sentenced at the Central Criminal Court on 18 February 1992 to seven years imprisonment. C is 34, a man of good character. On 17 March 2009 he was arrested on suspicion of rape, harassment and fraud following allegations made the previous day by a former girlfriend and members of her family, allegations which C strenuously denied. The same day, Cs fingerprints and DNA samples were taken. Although no further action was taken in relation to the alleged harassment and fraud, on 18 March 2009 C was charged with rape. On 5 May 2009, however, the prosecution offered no evidence on the rape charge and C was accordingly acquitted. Both appellants, through solicitors, applied to the respondent Police Commissioner to have their fingerprints and DNA data deleted from police records GC on 23 March 2009, C on 19 August 2009 (in each case, of course, after the Grand Chambers decision in S v UK). Consistently with ACPOs guidelines, however, both applications were refused. The appellants then issued judicial review proceedings, GC on 11 December 2009, C on 9 February 2010. The applications were heard together by the Divisional Court (Moses LJ and Wyn Williams J) on 15 July 2010 and on 16 July 2010 were dismissed, the Divisional Court correctly holding itself bound by the decision of the House of Lords in S and Marper v Chief Constable of the South Yorkshire Police (the subsequent Grand Chamber decision notwithstanding). The Divisional Court did, however, certify a point of law of general importance and, with the consent of all parties, granted a certificate pursuant to section 12 of the Administration of Justice Act 1969, thus enabling the matter to proceed directly to this court. Before this court, Mr Fordham QC for C and Mr Cragg for GC both submit that, in the light of the Grand Chambers judgment, the earlier decision of the House of Lords can no longer stand and the existing scheme must now be recognised to be unlawful so much, indeed, is clear and conceded. Pursuant to section 6 of the HRA, their argument then continues, the police must now therefore cease retaining their data incompatibly with their article 8 rights. Instead, they submit, the police must take account of the various criticisms made by the Grand Chamber of the existing scheme, must devise a new, compatible scheme, and must then deal with these appellants requests (and any other outstanding or future requests) for the removal of information from the national DNA database this, indeed, in GCs case, within 28 days, contends Mr Cragg. Not so, submit Lord Pannick QC for the Metropolitan Police Commissioner and Mr Eadie QC for the Home Secretary (properly joined in the proceedings as an interested party). It is, they submit, for the government, not for the police, to devise and enact a new scheme; the police meantime have no alternative but to continue operating the existing scheme pursuant to section 64(1A) of PACE. Their case is founded on section 6(2)(b) of the HRA which, they argue, disapplies section 6(1) and thus relieves the police of liability for continuing to operate what the Grand Chamber has ruled to be (in international law) an unlawful scheme. The most the appellants are entitled to is a declaration of incompatibility pursuant to section 4 of the HRA. As I indicated at the outset, this is the critical issue in the appeal and plainly it centres upon the proper understanding of, and interplay between, sections 3, 4 and 6 of the HRA which (as to their most material parts) I now set out: 3(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. 4(2) If the court is satisfied that [a provision of primary legislation] is incompatible with a Convention right, it may make a declaration of that incompatibility. 6(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right. 6(2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or (b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions. The precise symmetry between section 3(1) and section 6(2)(b) will at once be noted: each invites consideration of whether legislation can be read or given effect in a way which is [Convention] compatible section 3 indicating what must be done if this is possible, section 6(2)(b) indicating the consequence (the disapplication of section 6(1)) if it is not. At first blush the respondents argument appears distinctly unpromising. Section 64(1A) is, after all, couched in terms that appear to confer on the police an open discretion: samples may be retained. On the face of it, therefore, the police appear to be in a position to act compatibly with the article 8 rights of those whose samples have been taken and this, indeed, even without resort to section 3. But suppose there were some doubt about this, why would that not fall to be resolved by the interpretative imperative of section 3? How can it be appropriate, in the face of such a strong statutory direction, to place upon section 64(1A) a construction which denies the police the ability to exercise their data retention power compatibly? I confess to having come only comparatively late to the conclusion that, difficult though the respondents argument initially appears, it is in fact correct. Section 6(2)(b) has long been recognised to give rise to difficulty at the margins see, for example, the judgments respectively of Lord Hope, Lord Walker and Lord Mance in Doherty v Birmingham City Council [2009] AC 367. Clearly, as Lord Hoffmann observed in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, 1696, para 49, section 6(2)(b) assumes that the public authority could have acted differently but nevertheless excludes liability if it was giving effect to a statutory provision which cannot be read as Convention compliant in accordance with section 3. This, as was pointed out, was in contradistinction to section 6(2)(a) which applies when a public authority could not have acted differently when, in other words, the authority has been compelled by primary legislation to act in a way ex hypothesi incompatible with Convention rights. Superficially, of course, the very assumption that a public authority could have acted differently appears to postulate that the power in question could therefore have been exercised compatibly with Convention rights. Plainly, however, section 3 notwithstanding, it cannot follow that the power must therefore in all cases be exercised compatibly else section 6(2)(b) could never come into play. A simple illustration of section 6(2)(b) in operation is, of course, where primary legislation confers a power on a public authority and where a decision to exercise that power (or, as the case may be, not to exercise it) would in every case inevitably give rise to an incompatibility. R v Kansal (No 2) [2002] 2 AC 69 was just such a case and in such situations it can readily be understood why section 6(2)(b) applies. Otherwise, instead of giving effect to a provision conferring a power, the public authority would have to treat the provision (in cases where not to exercise it would give rise to incompatibility) as if it imposed a duty or, in cases where any exercise of the power would give rise to incompatibility (as in Kansal (No 2) itself), would have to abstain from ever exercising the power. In either instance, it is obvious, Parliaments will would be thwarted. I would take this opportunity to resile from what I myself said in the latter part of para 118 of my own judgment in Hooper. I was surely right to say in the first part of that paragraph: Plainly it is not the case that section 6(2)(b) applies whenever a statutory discretion falls to be exercised in a particular way to ensure compliance with a Convention right. This occurs in a host of different situations and, so far as I am aware, no one has ever suggested that, had the discretion not been exercised compatibly, the public authority would nevertheless have been protected against a domestic law claim by the section 6(2)(b) defence on the basis that otherwise a power would be turned into a duty. I was, however, wrong to suggest that the situation would be no different if to secure Convention compliance the statutory discretion had to be exercised in every case. It now seems to me that the underlying question in all these cases indeed, the determinative question in every case lying between the two extremes I have thus far dealt with is: what essentially was Parliament intent on achieving by this legislation? Is it or is it not something which could realistically be achieved consistently with the observance of Convention rights? If it is, then it must be so construed and applied. If, however, it is not, then section 6(2)(b) will apply: the legislation will be incompatible, a declaration of incompatibility may be made, and the public authority will be immune from liability. In short, the question to be asked in deciding whether section 6(2)(b) applies is essentially the same question as is more usually asked under section 3 when deciding whether or not, by a strained construction of apparently incompatible legislation, it is possible to read and give effect to it compatibly with Convention rights. Would such a construction depart substantially from a fundamental feature of the legislation? Would it be inconsistent with the underlying thrust of the legislation? Would it go with the grain of the legislation? Would it violate a cardinal principle of the legislation? Would it remove its pith and substance? Would it create an entirely different scheme? The Court must not cross the boundary from interpretation into legislation. All these familiar concepts and phrases are to be found in the well known cases on section 3 but their importance has hitherto not perhaps been fully recognised in the context also of section 6(2)(b). It is time to return to section 64(1A) of PACE and in the light of these considerations to ask whether realistically it could be construed for all the world as if, in enacting it, the government was leaving it to individual police forces or even to ACPO acting on their joint behalf to decide upon just what sort of scheme should be implemented for the future retention of biometric data. Is it really suggested that the police could and should then (in 2001) of their own volition have decided that, instead of retaining data indefinitely, they would retain it for only, say, one year or five years, or different periods in different cases and so forth? And if this was not open to them in 2001, how then could it become so merely because of the Grand Chambers condemnation of the indefinite scheme some years later? As Lord Nicholls observed in Ghaidan v Godin Mendoza [2004] 2 AC 557, 572, para 33, when indicating the limits of the courts section 3 powers: There may be several ways of making a provision Convention compliant, and the choice may involve issues calling for legislative deliberation. It is difficult to think of any case in which that objection to a section 3 construction applies more obviously than here. Lord Steyn reflected the same objection in the same case (para 49): Interpretation could not provide a substitute scheme. It is surely plain that legislative deliberation was required here. DNA retention can only sensibly operate on a national basis and section 64(1A), properly understood, in my judgment not merely authorised but required precisely the sort of scheme for the indefinite retention of biometric data that the House of Lords came to describe (and, indeed, so enthusiastically to support, in my case unrepentingly) in S and Marper. Realistically it was just not possible to construe the section differently, least of all as authorising the police to create for themselves a fundamentally different scheme which would achieve compatibility with the requirements of article 8 as subsequently identified by the Grand Chamber. Of course, some degree of latitude was given to the police as to how precisely the retention scheme was to operate. But this was essentially to decide what narrow categories should be excluded from its scope cases of the sort described by Lord Steyn at para 36 of S and Marper (see para 125 above) and, indeed, in the ACPO Guidelines (see para 129 above). The discretion could not sensibly be construed as extending to the basic nature of the scheme: whether retention should be indefinite or time limited. That section 64(1A) was intended to introduce a database for the indefinite retention of DNA samples is surely clear from the very circumstances in which this legislative change was brought about the deeply disturbing circumstances in which a violent rapist and a brutal murderer had both gone free because of the unsatisfactory existing scheme see Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91 and In re British Broadcasting Corporation [2010] 1 AC 145 and, indeed, to my mind clear also from the speeches in the House in S and Marper to which I have already referred. One of the specific issues before the House in S and Marper was, it should be noted: (4) if the retention of fingerprints and DNA profiles and/or samples is an unjustified interference with the appellants Convention rights, whether it would be possible to give section 64(1A) a Convention compatible interpretation under section 3 of the 1998 Act (Lord Steyns judgment at para 17) an issue, of course, as Lord Steyn observed at para 57, that in the event fell away. In short, the argument before the House assumed that section 64(1A) called for the indefinite retention of data and that, if this was incompatible with article 8, the appellants then needed to resort to section 3 of HRA for their requests for data removal to succeed. The appellants here submit that, following the Grand Chamber judgment, it was open to the police to adjust their data retention policy to meet the newly recognised requirements of article 8 in just the same way as they were required by this court in R (L) v Commissioner of Police of the Metropolis [2010] 1 AC 410 on article 8 grounds to adjust their previous approach to the disclosure of information for the purposes of enhanced criminal record certificates (ECRCs) pursuant to section 115(7) of the Police Act 1997. In my judgment, however, the two situations are entirely different: in L all that the courts decision required of the police was that in future they give no less weight to the statutory requirement that in their opinion the information ought to be included in the certificate than the requirement that they think it might be relevant (and in borderline cases give the prospective employee an opportunity to say why the information ought not to be disclosed). There was no requirement whatever for fresh policy choices to be made let alone legislative deliberation or democratic accountability. Rather the court was well able to decide the limited adjustment that needed to be made. Contrast the position in the present case. The Grand Chamber, in para 134 of its judgment (see para 126 above), can hardly have been expecting the police, rather than the Government, to implement the newly required measures under the supervision of the Committee of Ministers. Correspondingly, the States reaction to the Grand Chambers judgment was that it was plainly for Government, not the police, to devise and implement a new and Convention compliant scheme. It was, indeed, the Home Office rather than the police who decided that children under ten should be removed from the database (see para 127 above). No less significantly, the perceived need for a fully legitimate parliamentary solution to the problem was manifested by the political insistence upon the new scheme being introduced by primary and not merely secondary legislation. If this was not appropriate by secondary legislation, how much less so by revised ACPO guidelines. Even if it is suggested that section 64(1A) does not preclude ACPO from now amending their Guidelines to address the Grand Chambers criticisms in S v UK, that with respect is not a sufficient answer to the section 6(2)(b) defence. As I have said (para 143 above), the section 6(2)(b) defence necessarily postulates that the public authority could act differently. The critical question is whether they could do so consistently with the essential scheme and thrust of the legislation and a good test of that, I would suggest, is to ask whether it can really be said to be their duty to do so and to be unlawful and wrong for them not to do so. The whole purpose of section 6(2)(b) is to safeguard a public authority from liability (and, indeed, from misplaced criticism) in circumstances where in truth it is acting (as for my part I have no doubt that the police are acting here) perfectly properly. It follows from all this that, in common with Lord Rodger, with whose judgment on the section 6 issue I respectfully agree, I would hold that it is not unlawful (under domestic law) for the respondent police commissioner to continue to hold the appellants data on the national DNA database. As to whether this Court should now make a declaration of incompatibility in respect of section 64(1A) I hold no strong view. Nowhere is this identified as an issue before us and frankly I find it difficult to see any possible need or use for it in the present circumstances. But if others think it desirable, I would be quite content with that. I would add that, even had I concluded that the police could now act compatibly with article 8 under section 64(1A), I should certainly not have thought it just and appropriate within the meaning of section 8 of the HRA to require them to change their existing practice pending the introduction of a new legislative data retention scheme. It may be, indeed, that the strength of this reaction to the respondents fall back argument under section 8, on true analysis, reinforces the correctness of my primary conclusion on the section 6 issue: quite simply it would be wrong for the police to change their approach to section 64(1A) before Parliament so dictates and this court cannot properly direct them to do so. If anyone is to be criticised for the failure of the existing database to meet the States obligations under article 8, it is surely the Government, not the police. In my judgment they have a section 6(2)(b) defence to these claims. |
Is the description that there is in general in that State no serious risk of persecution of persons entitled to reside in that State, in section 94(5) of the Nationality, Immigration and Asylum Act 2002, applicable to a state in which a) there is a serious risk of persecution of gays and other members of the LGBT community, b) that community is estimated to amount to between 5% and 10% of the population and c) there is no such risk affecting the remainder of the population? The state in question is Jamaica. 3. At first instance Mr Nicholas Paines QC, sitting as a Deputy High Court Judge in the Administrative Court, held that the Home Secretary could rationally find that the words applied to Jamaica, since 90% or more of the population did not face a serious risk of persecution. The Court of Appeal reversed his decision by a majority [2014] 1 WLR 836. Moore Bick LJ agreed with the deputy judge. He considered that opinions might legitimately differ on the question whether the proportion of LGBT people in Jamaica was so substantial as to lead to the conclusion that there was a serious risk of persecution, viewed from the perspective of the population as a whole, and that it was not irrational for the Home Secretary to reach a negative conclusion. Pill and Black LJJ took a different view. Pill LJ said (at para 57): My conclusion is that a state in which there is a serious risk of persecution for an entire section of the community, defined by sexual orientation and substantial in numbers, is not a state where in general there is no serious risk of persecution. As Lord Hope stated in HJ (Iran) v Secretary of State [2011] 1 AC 596 at para 11, the group is defined by the immutable characteristics of its members orientation and sexuality. It does not follow from the absence of risk to the much larger heterosexual community that in general there is no serious risk in section 94(5) terms where an entire section of the community of significant size and defined by its immutable characteristics, is at serious risk of systematic persecution. Black LJs judgment was to similar effect. 5. Legislative framework 4. Under section 82(1) of the Act there is generally a right of appeal to the Asylum and Immigration Chamber of the First Tier Tribunal in respect of an immigration decision, which includes a decision that a person is to be removed from the UK. Section 92 limits the circumstances in which such an appeal may be made in country. They include cases where an appellant has made an asylum or human rights claim while in the UK, as the respondent did. But section 92 is qualified by section 94(2) so as to exclude an in country appeal if the Home Secretary has certified that the asylum or human rights claim is clearly unfounded. And section 94(3) requires the Home Secretary to certify the claim if satisfied that the claimant is entitled to reside in a state listed in subsection (4), unless satisfied that the claim is not clearly unfounded. Jamaica was added to the list of states designated under section 94(4) by article 3 of the Asylum (Designated States) Order 2003 (SI 2003/970). Section 94(5) sets pre conditions on the exercise of the power of designation under subsection (4). It provides: 7. 6. The Secretary of State may by order add a State, or part of a State, to the list in subsection (4) if satisfied that (a) there is in general in that State or part no serious risk of persecution of persons entitled to reside in that State or part, and (b) removal to that State or part of persons entitled to reside there will not in general contravene the United Kingdoms obligations under the Human Rights Convention. 8. Under section 94 (5A) to (5C), if the Home Secretary is satisfied that the statements in subsection (5) are true of a state, or part of a state, in relation to a description of person, an order may be made adding it to the list under section 94(4) in respect of that description of person. A description for this purpose may refer to a persons gender, language, race, religion, nationality, membership of a social or other group, political opinion or any other attribute or circumstance. These subsections were inserted by the Asylum and Immigration (Treatment of Claimants, etc) Act 2004, section 27. Facts 9. The respondent is a citizen of Jamaica. He was referred to by his initials in the judgments of the courts below but has no further wish to be anonymous. He came to the UK on 7 May 2010 on a visitors visa with leave to remain for one month. On 14 October 2010 he applied for asylum on the ground that he is a Jamaican homosexual and feared persecution if returned to Jamaica. On 20 October 2010 he was detained under section 62 of the Act pending a decision on his removal. The detention power was exercised in conjunction with a policy for fast tracking cases eligible to be dealt with under the so called Detained Non Suspensive Appeals (DNSA) process. It is not necessary for the purposes of this appeal to explain the details of the process, except to say that it applied only to asylum or human rights claimants from states designated under section 94(4). 10. Solicitors for the respondent complained to the Home Secretary that his case was not suitable for the DNSA process and his detention was unlawful. The complaint was rejected and on 15 November 2010 the respondent issued a claim for judicial review, seeking declarations that the decision to include Jamaica in the list of states designated under section 94(4) and the respondents detention were both unlawful. 11. On the same day the appellant served a decision on the respondent refusing his claim for asylum, but not certifying it as clearly unfounded. This meant that the respondent was free to pursue an in country appeal, and on 4 February 2011 the Tribunal upheld his claim to be a homosexual and at real risk of persecution if he were returned to Jamaica. Meanwhile the respondent had been released from detention on 24 November 2010. 12. The deputy judge dismissed the respondents claim in its entirety. The Court of Appeal not only allowed his appeal (by a majority) on the issue of the designation of Jamaica under section 94(4), but also held (unanimously) that his detention had been unlawful on other grounds. There is no appeal against the latter part of the Court of Appeals decision. Case law 13. The leading authority relevant to the interpretation of section 94(4) is the decision of the Court of Appeal in R (Asif Javed) v Secretary of State for the Home Department [2001] EWCA Civ 789; [2002] QB 129. The case arose under para 5(2) of Schedule 2 to the Asylum and Immigration Act 1993, as substituted by the Asylum and Immigration Act 1996. The sub paragraph applied to a claim if the country or territory to which the appellant is to be sent is designated in an order made by the Secretary of State by statutory instrument as a country or territory in which it appears to him that there is in general no serious risk of persecution. The claimant challenged the validity of an order designating Pakistan as such a country on the ground that women and Ahmadis were generally at risk of serious persecution. 14. Giving the judgment of the Court of Appeal, Lord Phillips MR said at para 57: the challenge made by the applicants to the inclusion of Pakistan in the order was to its legality rather than to its rationality. However, the language defining the state of affairs that had to exist before a country could be designated was imprecise. Whether there was in general a serious risk of persecution was a question which might give rise to a genuine difference of opinion on the part of two rational observers of the same evidence. A judicial review of the Secretary of States conclusion needed to have regard to that considerable margin of appreciation If the applicants were to succeed in showing that the designation of Pakistan was illegal, they had to demonstrate that the evidence clearly established that there was a serious risk of persecution in Pakistan and that this was a state of affairs that was a general feature in that country. For a risk to be serious it would have to affect a significant number of the populace. (Original emphasis) 15. The reference in the final sentence to the need for the risk to affect a significant number of the populace has given rise to debate, but it needs to be read in context. The evidence on behalf of the Home Secretary explained his reasoning in reaching his decision as follows: although certain minority groups [by which he included Ahmadis] may be subjected to acts of ill treatment by members of the general populace, the Government of Pakistan does not itself engage in such acts and Pakistan is not regarded as a country where the State is in general unwilling or unable to offer effective protection to its citizens against such acts. For that reason it is considered to be a country where there is in general no serious risk of persecution either from the State itself or from members of the public, either acting with the States sanction or encouragement, or against whose acts the State is in general unwilling or unable to protect. 16. It was not part of the Home Secretarys case that he regarded Ahmadis as too small a segment of the population to be relevant to his decision, and there was no evidence as to their estimated overall number or percentage of the general population. The case proceeded on the basis that they were a recognised religious minority. 17. The court held that the evidence clearly established that among women in Pakistan there was in general a serious risk of persecution. In relation to Ahmadis, the court referred to a nuanced judgment of the Immigration Appeal Tribunal available to the Home Secretary at the time of his decision, which had concluded that each case involving Ahmadis must be looked at on an individual basis, and that, while not all Ahmadis would be entitled to claim asylum, they lived in Pakistan as a religious minority who were likely to meet examples of intolerance, discrimination and at times persecution in their daily lives (Kaleem Ahmed v Secretary of State for the Home Department (unreported) of 7 December 1995, per Judge Pearl). The Court of Appeal concluded that if the evidence about Ahmadis had stood on its own, it would not have been incompatible with the Home Secretarys decision, but that when considered in conjunction with the evidence about women it added weight to the courts conclusion that the decision was irrational. The courts comments about the evidence concerning Ahmadis clearly related to the degree of risk which they faced and not to their size as a proportion of the community. 18. Lord Phillips did not amplify what he meant by his comment that for a risk to be serious, it would have to affect a significant number of the populace, but I doubt that he meant that the persons affected must not only be sufficient in number to form a recognisable section of the community but must exceed an unspecified percentage of the total population. If that was his intended meaning, he did not spell it out and it would have been unrelated to the argument. 19. In R (MD) (Gambia) v Secretary of State for the Home Department [2011] EWCA Civ 121, para 21, Elias LJ applied the words of Lord Phillips MR in Javed, para 57, to section 94(5) of the 2002 Act and said: It is not, therefore, enough to demonstrate occasional breaches of human rights standards even where they amount to persecution. The persecution must be sufficiently systematic properly to be described as a general feature in that country, and this in turn requires that it should affect a significant number of people. One of the groups alleged to be at risk in that case was homosexuals. The Home Secretarys response was to point out that there were no reports of homosexuals being arrested on a widespread basis or of other legal action being taken against them, although they were likely to face some social hostility. As in Javed, there was no reference to the number of homosexuals in Gambia or their percentage as a proportion of the community. Analysis 20. Mr James Eadie QC on behalf of the Home Secretary submitted that the judgment of Moore Bick LJ should be preferred to the majority of the Court of Appeal for the following main reasons: i) The natural meaning of section 94(5) was that it required the Home Secretary to reach a global judgment about the risk generally to those entitled to reside in the state (or relevant part of it) rather than the risk to any particular minority group. ii) Any other construction would mean that the identification of any group, however small, as being at risk of persecution would prevent the possibility of designation of the state, and this would seriously undermine the scheme. iii) Minority groups would still be properly protected under the statutory scheme, because designation did not necessarily result in an appeal being certified as clearly unfounded. The Home Secretary had still to consider under section 94(3) whether the appeal was clearly unfounded before issuing such a certificate. The present case was an example in point, because the Home Secretary decided not to issue such a certificate in the case of the respondent notwithstanding that Jamaica was a designated state. iv) The purpose of the legislative scheme, properly understood, was not to take away the protection of a vulnerable minority, but to achieve administrative efficiency in relation to the vast majority while still affording proper protection for the minority. It would be wrong to use the provisions of section 94(5A) to (5C), which enabled a state to be added to the list in relation to a particular description of person, as an aid to the construction of section 94(5), since subsections (5A) to (5C) were added by later amendment and therefore could not affect the meaning of section 94(5). v) 21. Section 94 is concerned with the return of unsuccessful asylum and human rights claimants. It is in that context that the Home Secretary may designate a state (or part of a state) only if satisfied that there is in general no serious risk of persecution of persons entitled to live there. I take section 94(5) in its natural meaning to refer to countries (or parts of countries) where its citizens are free from any serious risk of systematic persecution, either by the state itself or by non state agents which the state is unable or unwilling to control. This is the effect of the words in general and serious. I do not read the words there is in general no serious risk of persecution of persons, as meaning there is no serious risk of persecution of persons in general, and therefore as intended to permit the designation of a state which systematically carries out or tolerates persecution provided that it is limited so as not to affect the large majority. I read the words in general as intended to differentiate a state of affairs where persecution is endemic, ie it occurs in the ordinary course of things, from one where there may be isolated incidents of persecution. I am influenced by the fact that persecution within the meaning of the Refugee Convention will by its nature often be directed towards minorities (as Wilson J said in R (Husan) v Secretary of State for the Home Department [2005] EWHC 189 (Admin), para 55), and the great majority of asylum and human rights claimants belong to minorities of one kind or another. For a serious risk of persecution to exist in general, ie as a general feature of life in the relevant country, it must be possible to identify a recognisable section of the community to whom it applies, but to require it to be established also that the relevant minority exceeds x% of the population is open to several objections. The first is the absence of any yardstick for determining what x should be. If the Home Secretary was entitled to conclude that 10% was insufficient, would the same apply to 15%, 20% or 25%? It is no answer to 22. say that it is a question of degree for the judgment of the Home Secretary, within a wide margin of appreciation, if there is simply no way of deciding it. Secondly, if it were possible to place a value on x, it is nevertheless hard to see any reason why it should make a difference whether the group represented, say, more than 20% or only 15%. Thirdly, in the case of many minority groups there will be no way of obtaining reliable information as to their total size for obvious reasons. Even without the risk of persecution, a persons sexuality is a matter which many would prefer to keep private, and to disclose something which carries with it a serious risk of persecution is to court trouble. I am not persuaded by Mr Eadies argument that it makes little or no difference to members of minority groups who are exposed to a serious risk of persecution whether the state has been designated under section 94(4). As Mr Stephen Knafler QC argued, although there may be a different outcome in some cases, the purpose of designation is that applicants from designated countries will normally be detained and fast tracked. In the present case, although the Home Secretary did not certify that the respondents claim was clearly unfounded, he was previously detained as a claimant from a designated state. I would endorse Black LJs comment at [2014] 1 WLR 836, para 44 that the designation of a state changes the complexion of the analysis of the claim. 23. 24. Since the hearing the court has received written submissions from both parties on the issue whether it is permissible to have regard to the provisions of section 94(5A) to (5C) when construing section 94(5). The Secretary of State submits that it is impermissible and relies on Boss Holdings Ltd v Grosvenor West End Properties [2008] UKHL 5, [2008] 1 WLR 289, para 23, in which Lord Neuberger endorsed the proposition that a later amendment does not affect the construction of earlier legislation. The appellant submits that the revised statute should be construed as a whole, ie in its present form, and relies on R v Brown (Northern Ireland) [2013] UKSC 43, para 34, where Lord Kerr endorsed the proposition that an amended statute is to be construed as a whole in its amended form, although in so doing he did not suggest that the legislative history is to be ignored and he examined the purpose of the relevant amendment in its context. There is no inconsistency between what was said in the two cases. In construing any legislation it is relevant to consider its purpose and that may include considering the purpose of an amendment. Parliament may sometimes amend legislation in order to correct a previous interpretation by the court. That said, and with the qualification that we have not heard full argument, I am content for present purposes to accept that generally speaking an amendment cannot affect the construction of an Act as originally enacted, and therefore that it would not be right to be influenced by the later introduction of section 94(5A) to (5C) in interpreting section 94(5). It is nevertheless of interest that Parliament has considered it appropriate to give the Home Secretary the additional power to add a state to the list in relation to a particular description of person. The court was told that so far the exercise of this power has been limited to adding a state in relation only to men (as in the case of Gambia), but the language of the statute expressly contemplates a wide variety of descriptions of person. Parliament was therefore alive to the problem of designation of states where there is a serious risk of persecution limited to a particular target group or groups and has provided a means of addressing it. I would dismiss the appeal. 25. Postscript: Hansard 26. Mr Knafler asked the court to admit a considerable amount of Hansard material, including ministerial statements made during the passage of the predecessor Act, the Asylum and Immigration Act 1996, and in the debate on the motion that the draft statutory instrument which added Jamaica to the list of designated states should be approved. The attempt to rely on Hansard material was misjudged, and the Court of Appeal rightly refused to admit it. Moore Bick LJ gave three reasons the language of section 94(5) is not ambiguous, the statements relied upon did not have the necessary degree of clarity and they were not made in debates on the 2002 Act. I agree with the first and second reasons. As to the third, nothing said during the debate on the Order could possibly be admissible as an aid to construing the parent Act, but I would not wish to lay down a firm rule that the Hansard record of a ministerial statement in a debate on predecessor legislation can never be admissible in circumstances where the wording of the later Act is materially identical. However, it is unnecessary to discuss the point further because it is academic. 27. A full reading of the relevant debates in both Houses of Parliament on the 1996 Act shows why ministerial answers to questions should only be admitted under Pepper v Hart [1993] AC 593 in the plainest of cases. Ministers were asked a number of questions in an attempt to pin them on the meaning of in general. To extract a sentence here and a passage there from such a debate and use it as a legal tool would serve neither the Parliamentary nor the judicial process. Not surprisingly, the answers given were somewhat generalised and fell far short of a definitive statement of ministerial purpose. LORD HUGHES: 28. I agree with Lord Toulson that this appeal ought to be dismissed. For my part, however, I would add a few words of qualification to the reasons which he so clearly expresses. 29. The issue of principle raised by this appeal is the correct approach to the two related expressions in section 94(5) of the Nationality, Immigration and Asylum Act 2002, namely: i) and ii) in subsection (a): in general no serious risk of persecution in subsection (b): (removal) will not in general contravene the United Kingdoms obligations under the Human Rights Convention. I respectfully entirely agree that these expressions, and in particular the words in general, do not mean that a state can be designated so long as the population as a whole is not at risk of persecution, or unless the removal to it of any person will involve a breach by the UK of the Convention. Such an approach would substitute universal for general. Moreover, it is in the nature of persecution that it is very often applied to minority groups. I also agree that it is quite impossible to lay down any numerical threshold for a defined percentage of the population which needs to be at risk before it can be said that there does exist in general a serious risk of persecution or of removal contravening this countrys Convention obligations. It does not, however, follow that the Secretary of State is prevented from designating a destination state under section 94(4) simply because it is possible to identify some common feature or grouping of a few persons who may suffer persecution or ill treatment in breach of the Convention in that state when in general the state is free from those two risks. Such grouping will almost always be possible when persecution under the Refugee Convention is in question, since the status of refugee is there defined in terms of a well founded fear of persecution for reasons of race, religion, nationality, membership of a particular social group or political opinion. Whilst in theory there is perhaps room for a risk of ill treatment such as will occasion a breach of Convention rights in the event of removal (section 94(5)(b)) arising in the case of a single individual, or unconnected single individuals, it will much more often be the case that, as with a risk of persecution, the individual will be capable of categorisation into some form of grouping, or, as Lord Toulson 30. puts it, recognisable section of the community which constitutes the reason why he is at risk. So, to treat the existence of risk to a recognisable section of the community as a bar to certification however small the section will in effect be in danger of preventing certification of any state where there is any risk of persecution to anyone. That was indeed the construction urged upon us by the claimant, but as I understand it that is not the construction upheld. 31. Designation of a destination state does not mean automatic removal. Whether a state is designated or not, the Secretary of State is required to give individual consideration to each case and to reach a decision whether to certify the asylum or human rights claim as clearly unfounded. It is established law that the test at this stage is restrictive. The claim must be one which is so manifestly unfounded that it is bound to fail, or, to put it another way, one which cannot, on any legitimate view of fact and law, succeed. It is an objective test, not one which depends on the opinion of the Home Secretary and accordingly certification is, if challenged, to be subjected to the most anxious scrutiny; the court substitutes its own conclusion for that of the Secretary of State. For these rules of law, see R (Yogathas) v Secretary of State for the Home Department [2002] UKHL 36; [2003] 1 AC 920, para 34 and R (L) v Secretary of State for the Home Department [2003] EWCA Civ 25, [2003] 1 WLR 1230, paras 56 58. The designation of the state alters the starting point because section 94(3) requires certification as clearly unfounded unless the Secretary of State is satisfied that the claim does not qualify. Nevertheless the test for certification remains the same; the operation of this test is illustrated by the present case in which the claim was not certified, because as a homosexual the claimant was or might be at risk. 32. Designation of the destination state is a significant legal act, because the practice of the Secretary of State is to fast track decisions in relation to claimants from such a state. Thus, as Black LJ neatly put it, designation changes the complexion of the analysis of the claim. It is therefore important that the decision as to designation should be made with careful attention to the level of risk of persecution or of removal involving breach of human rights. 33. This decision has to be made by the Home Secretary. It will be subject to review on ordinary public law grounds. I agree with Lord Toulson that although subsections 94(5A) to (5C) cannot alter the meaning of in general, the presence of those subsections and the possible means of dealing with some situations in destination states which they now provide will be relevant to that decision. But there will, as it seems to me, remain instances where the risk of persecution (etc) is unusual in a particular state but still can be said to apply to an identifiable grouping of persons and thus, in that sense, to be systemic or systematic. I do not think that in ordinary language a risk 34. becomes one which exists in general because it exists in common for those who belong to an identifiable grouping, however limited in size. Hypothetical examples are no doubt dangerous, but one might be a few linked cells of political campaigners of particular and unpopular views whose activities have attracted the hostility of the public at large and/or of the state authorities and who are, as a result, not protected as they ought to be from persecution or inhuman treatment. Another might be social campaigners who favour a religious rite which the great majority of the local population regards with extreme distaste. These are classic examples of refugee claimants who may be at risk in a state otherwise entirely safe. There is no doubt that their claims to asylum ought where appropriate to succeed notwithstanding the designation of their home state. But it would, as it seems to me, be a misdescription of such a state to say of it that there was in general a serious risk of persecution, on the grounds that all members of this group were at risk, and the risk accordingly systemic. A systemic risk is a necessary but not always a sufficient basis for non designation. In the case of such a state it is perfectly sensible to designate it under section 94, so that the great majority of asylum or human rights claims from its nationals can correctly be refused, and to leave individual cases of applications by members of such a group to be considered separately. In other words, the assessment of when there is or is not in general a risk is a matter of degree and one on which reasonable people may take different views: see Lord Phillips MR in R (Asif Javed) v Secretary of State for the Home Department [2001] 1 EWCA Civ 789; [2002] QB 129 in the passage cited by Lord Toulson at para 14 above. But that is in the nature of a great many decisions which fall to be made in all fields of public administration. It is not a reason to substitute for the judgment committed to the Home Secretary a bar to designation whenever the risk can be described as systemic, in the sense that it applies to members of an identifiable group. That, as it seems to me, is to risk re defining the expression in general. Given the extra essential step of individual consideration of whether or not to certify a claim as clearly unfounded, it is entirely appropriate to allow the Secretary of State a degree of flexibility in considering the manifold different political and social situations which may obtain in different foreign states; that is the clear purpose of the term in general in the statute. That expression would no doubt be too imprecise without further definition if the outcomes of individual claims depended upon it, but they do not. 35. The clear purpose of section 94 designation is to streamline the administration of the great majority of decisions where the destination state can in general be relied upon to be safe. That is a legitimate aim, especially given the notorious delays which attend the processing of the very large number of immigration and removal cases in which asylum or human rights claims are made. It is in the interests of the public at large but also of meritorious asylum or human rights claimants that the latters good claims should not be delayed by large numbers of clearly unfounded ones. In the present case, however, the risk attaches to all who are homosexual, lesbian, bisexual or transsexual. That risk, as it seems to me, can only properly be described as a general risk in Jamaica. As Pill LJ put it in the Court of Appeal, the risk applies to an entire section of the community, defined by sexual orientation and substantial in numbers. Accordingly, whilst I agree that a decision on designation is one on which reasonable people may take different views, it does not seem to me that there is more than one answer which can be given on the present facts. It follows that I agree that the Secretary of States appeal ought to be dismissed. 36. |
PH has severe physical and learning disabilities and is without speech. He lacks capacity to decide for himself where to live. Since the age of four he has received accommodation and support at public expense. Until his majority in December 2004, he was living with foster parents in South Gloucestershire. Since then he has lived in two care homes in the Somerset area. There is no dispute about his entitlement to that support, initially under the Children Act 1989, and since his majority under the National Assistance Act 1948. The issue is: which authority should be responsible? This depends, under sections 24(1) and (5) of the 1948 Act, on, where immediately before his placement in Somerset, he was ordinarily resident. There are three possible contenders: Wiltshire, as the authority for the area where he was living with his family when he first went into care, and which remained responsible for him under the 1948 Act; Cornwall, where his family have lived since 1991; or South Gloucestershire, where he lived with his foster parents from the age of four until his move to Somerset. The Secretary of State, acting under section 32 of the 1948 Act, decided that Cornwall were responsible. In doing so, he followed the approach of his own published guidance on the determination of ordinary residence, which drew on two principal authorities R v Barnet LBC, Ex p Shah [1983] AC 309, and R v Waltham Forest, Ex p Vale (unreported, 11 February 1985). The latter is the source of what have become known as Vale tests 1 and 2 (described at paras 45 46 below), the correctness of which is in issue in this appeal. In judicial review proceedings brought by Cornwall, the Secretary of States decision was upheld in the High Court (Beatson J), but set aside by the Court of Appeal, who held that South Gloucestershire were responsible. The Secretary of State and Somerset have appeals with the permission of this court. The appeals are supported by South Gloucestershire and Wiltshire, but opposed by Cornwall. Cornwall also disputes the Secretary of States jurisdiction to make the determination. Although none of the other authorities has argued that Wiltshire should be responsible, the court indicated at the beginning of the hearing that this possibility should not be excluded from consideration. It is regrettable that in this way so much public expenditure has been incurred on legal proceedings. However, the amounts involved in caring for PH and others like him are substantial (some 80,000 per year, we were told). The legal issues are of general importance, and far from straightforward. The legislation The Children Act 1989 Part III Part III of the 1989 Act imposes duties on local authorities to provide support for children and their families. By section 30(1), nothing in this Part of the 1989 Act shall affect any duty imposed on a local authority by or under any other enactment. Section 17 is a general duty of authorities to safeguard and promote the welfare of children in need who are in their area. Section 20 deals with provision of accommodation. By section 20(1), every local authority is required to provide accommodation for any child in need within their area who appears to them to require accommodation as a result (inter alia) of (c) the person who has been caring for him being prevented (whether or not permanently, and for whatever reason) from providing him with suitable accommodation or care. By section 22 the local authority have a duty to promote and safeguard the welfare of a child who is provided with accommodation under section 20 (and is thus looked after by them). One of the ways in which the necessary accommodation and maintenance can be provided is by placing the child in foster care (section 22C). Although under the 1989 Act the primary duty lies with the authority in whose area the child happens to be, ordinary residence also has a part to play. By section 20(2), where a local authority provides accommodation under subsection (1) for a child who is ordinarily resident in the area of another local authority, that other local authority may following notification take over the provision of accommodation for the child. Section 29 provides for recoupment of costs. By section 29(7), where a local authority provide accommodation under section 20(1) for a child who, immediately before they began to look after him, was ordinarily resident within the area of another local authority, they may recover from that other authority the reasonable expenses of accommodation and maintenance. By section 30(2) any question arising under these provisions as to the ordinary residence of a child is to be determined by agreement between the local authorities or, in default of agreement, by the Secretary of State. By section 105(6): In determining the ordinary residence of a child for any purpose of this Act, there shall be disregarded any period in which he lives in any place (c) while he is being provided with accommodation by or on behalf of a local authority. Under section 23C the authoritys duties to children maintained under the 1989 Act (referred to as former relevant children) continue to a limited extent after majority, generally until the age of 21 (section 23C(6)). The authority have a continuing duty to provide for such a child various specific forms of support (not relevant in this case) and (by section 23C(4)(c)) other assistance, to the extent that his welfare requires it . They should also have prepared a pathway plan indicating the support to be provided (sections 22B, 22E). National Assistance Act 1948 Section 21 of the NAA provides: A local authority may with the approval of the Secretary of State, and to such extent as he may direct shall, make arrangements for providing . (a) residential accommodation for persons aged eighteen or over who by reason of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them. By subsection (5) references to accommodation are references to accommodation provided under this and the five next following sections, and include references to board and other services, amenities and requisites provided in connection with the accommodation. By subsection (8): Nothing in this section shall authorise or require a local authority to make any provision authorised or required to be made . by or under any enactment not contained in this Part of this Act . By section 24(1) the duty falls generally on the authority in whose area the person is ordinarily resident. Section 24(3) enables an authority to provide accommodation to someone urgently in need of it even though not ordinarily resident in the area. By section 24(5): Where a person is provided with residential accommodation under this Part of this Act, he shall be deemed for the purposes of this Act to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before the residential accommodation was provided for him. By section 29(1) a local authority may, and shall if directed, make arrangements for promoting the welfare of certain categories of persons ordinarily resident in their area, including those who suffer from mental disorder of any description. Certain specific forms of assistance are described in the section, but without prejudice to the generality of the power. The Secretary of State has made directions (under circular LAC (93)10) which have the general effect of turning these powers into duties, and also sets out in some detail the nature of the arrangements which have to be made. By section 32(3) any question arising under this Part as to a persons ordinary residence shall be determined by the Secretary of State . The procedure for such a determination is governed by the Ordinary Residence Disputes (National Assistance Act 1948) Directions 2010 (made under sections 21(1) and 29(1) of the 1948 Act). Article 2 deals with provision of services under Part III pending determination. The dispute must not be allowed to prevent, delay or otherwise adversely affect the provision of services; one of the authorities in dispute must provisionally accept responsibility pending determination; and, if they are unable to agree, the local authority in whose area the subject is living must do so. The authority providing provisional service is the lead local authority and as such must identify all the local authorities in dispute and co ordinate discussions between those authorities in an attempt to resolve the dispute (article 3(2)). The Secretary of States guidance Before turning to the determination in the present case, it is convenient to refer to the relevant parts of the Secretary of States guidance, which address the problem of defining ordinary residence of a person who is unable to make decisions for himself. As already noted, this is done by reference in part to the Vale tests 1 and 2 (paras 31 34). Of the first, which treats a mentally disabled person in the same way as a small child who was unable to choose where to live, the guidance says: the approach set out in test one of Vale may not always be appropriate and should be used with caution: its relevance will vary according to the ability of the person to make their own choices and the extent to which they rely on their parents or carers. This Vale test should only be applied when making decisions about ordinary residence cases with similar material facts to those in Vale. Of test 2, it says: 34. The alternative approach involves considering a person's ordinary residence as if they had capacity. All the facts of the persons case should be considered, including physical presence in a particular place and the nature and purpose of that presence as outlined in Shah, but without requiring the person themselves to have adopted the residence voluntarily Later paragraphs go into more detail in relation to young people in transition from childrens services to adult services: 147. Although the provisions of the 1989 Act no longer apply once a young person reaches 18 (other than the leaving care provisions, if the young person is eligible for such services), local authorities could reasonably have regard to the 1989 Act and start from a presumption that the young person remains ordinarily resident in the local authority that had responsibility for them under the 1989 Act. Section 105(6) of the 1989 Act provides that, in determining the ordinary residence of a child for any purposes of that Act, any period in which a child lives in the following places should be disregarded: while he is being provided with accommodation by or on behalf of a local authority. 148. Therefore, where a local authority has placed a child in accommodation out of area under the 1989 Act, that local authority remains the childs place of ordinary residence for the purposes of the 1989 Act. In such a case, there would be a starting presumption that the young persons place of ordinary residence remains the same for the purposes of the 1948 Act when they turn 18. 149. However, this starting presumption may be rebutted by the circumstances of the individuals case and the application of the Shah or Vale tests (see Part 1 of this guidance). Under these tests, a number of factors should be taken into account when considering a persons ordinary residence for the purposes of the 1948 Act. These include: the remaining ties the young person has with the authority that was responsible for their care as a child, ties with the authority in which they are currently living, the length and nature of residence in this area and the young person's views in respect of where he/she wants to live (if he/she has the mental capacity to make this decision). If the young person is being provided with residential accommodation under Part 3 of the 1948 Act at the time ordinary residence falls to be assessed, the deeming provision in section 24(5) applies and it would be necessary to assess their place of ordinary residence immediately before such accommodation was provided. 150. In many cases, establishing a young persons local authority of ordinary residence will be a straightforward matter. However, difficulties may arise where a young person has been placed in residential accommodation out of area as a child under the 1989 Act. In this situation, the young person may be found to be ordinarily resident in the local authority that had responsibility for them under the 1989 Act, or they may be found to have acquired a new ordinary residence in the area in which they are living, depending on the facts of their case . PH was born on 27 December 1986. In 1991, PHs parents asked Wiltshire, in whose area they were then living, to provide accommodation for him. Acting under section 20 of the 1989 Act, they placed him with foster parents, Mr and Mrs B, who lived in South Gloucestershire. In November 1991, PHs family moved to Cornwalls area. The parents have continued to be involved in decisions affecting PH and he has regular contact with them. In May 2001, anticipating his 18th birthday on 27 December 2004, Wiltshire wrote to Cornwall regarding the planning of his transition to adulthood. They suggested that his ordinary residence should be taken as that of his parents, in Cornwall. Cornwall maintained that the responsibility for managing the transition rested, under the 1989 Act, with Wiltshire. Inconclusive correspondence on this issue continued for more than a year. It seems to have culminated, on the legal side, with an exchange in June 2002 in which Wiltshire were proposing a reference to the Secretary of State to enable the matter to be resolved before his 18th birthday; Cornwall were taking the position that a reference would be premature until a decision had been made whether he was able to express his own wishes and a suitable placement on that basis had been determined. Meanwhile, on the basis of the residence of his parents in the county, Cornwalls social services department (in a letter of 25 July 2002) was asserting its own interest in assisting his transition to adult living. It seems that Wiltshire did not again take up the issue of legal responsibility with Cornwall until October 2005. In April 2004 Wiltshire conducted an assessment and a care review. It appeared that PH was happy and settled with his foster parents, and that they would have been content for PH to stay with them after his 18th birthday. However, it would not be possible for him to stay there, unless the foster placement were to be re registered as an adult placement. It was noted that PHs parents visited him four or five times a year with occasional visits to the family home usually over Christmas and in the summer. They wanted to maintain at least the current level of contact. The foster parents also wished to help him settle into a new place and to visit him as regularly as possible. Continuing contact with his parents and foster parents was regarded as vitally important. A placement within the M4/M5 corridor was therefore thought to be best for ease of travel. A care home was identified, Blackberry Hill in Somerset, where he would be able to move around the end of the year. At the end of 2004, PH went to Cornwall to stay with his parents for Christmas (including the day before his 18th birthday). He returned to stay with Mr and Mrs B until 24 January 2005, when he moved to Blackberry Hill. This placement was funded by Wiltshire on a provisional basis. Unfortunately, the placement at Blackberry Hill did not work well for him. On 6 June 2005, he moved to Langley House, also in Somerset, where he has remained ever since. His parents were involved in that decision. They have continued to maintain regular telephone contact with him, and he stays with them over Christmas and occasionally in the summer. Mr and Mrs B also keep in regular contact, now mainly by letters and cards. Wiltshire carried out a capacity assessment on 15 April 2008 which concluded that overall and at that time, it was not considered that PH had the capacity to make an informed choice about where he would want to live nor did he have the communication skills for this to be expressed. There appeared to be no evidence of any change in his intellectual abilities since 2004. The Dispute and the Secretary of States determination The question of responsibility as between the three possible authorities (Wiltshire, Cornwall and South Gloucestershire) remained unresolved for a number of years. In August 2011, they jointly referred the dispute to the Secretary of State for determination under section 32(3). On 22 March 2012 he issued a determination that PH had been on 26 December 2004, treated as the relevant date, ordinarily resident in Cornwall. On the basis that the need for accommodation under section 21 of the 1948 Act arose on his 18th birthday, it was considered right to consider the question of ordinary residence at that date. The determination continued: 19. As stated in paragraph 147 of the guidance issued by the Department, local authorities in determining ordinary residence could reasonably have regard to the 1989 Act and start from a presumption that the young person remains ordinarily resident in the local authority that had responsibility for them under the 1989 Act. 20. I consider that, for the purposes of the 1989 Act, [PH] was ordinarily resident in Wiltshire. Residence while accommodation was being provided by or on behalf of a local authority, in this case with foster carers, would be disregarded in accordance with section 105(6)(c) of the 1989 Act. 21. The starting presumption is that [PH] remained ordinarily resident in the area of the local authority which had responsibility for him under the 1989 Act, namely Wiltshire. However, as para 149 of the guidance points out, this starting point may be rebutted by the circumstances of the case and the application of the Shah and Vale tests. That paragraph refers to various factors that should be taken into account in applying those tests. First, I do not consider that [PH] was ordinarily resident in Wiltshire. He had no links to the area. [PHs] parents and siblings left Wiltshire in November 1991, and [by December 2004] there were no remaining ties with Wiltshire. The mere fact that Wiltshire was the responsible authority for [PH] under the 1989 Act is not enough to affirm the presumption that he is ordinarily resident in Wiltshire from 27 December 2004. 24. [PH] has severe learning difficulties and lacks mental capacity to decide where to live. The family home in Cornwall is a place to which [he] returns for holidays and his parents are in regular contact by telephone. In 2004 it was the case that [his] parents visited him four or five times a year. [His] parents have also been closely involved in decisions made in relation to his care. It is clear from the social services papers that proximity to the family home and ease of travel to and from Cornwall has been a consideration in planning the care and support needs of [PH]. I consider that [PHs] base is with [h]is parents. 25. I note that Cornwall question whether the family home in Cornwall can properly be described as a base for [PH] given the infrequency of his visits there. It is not merely the number or frequency of visits that are determinative. The entirety of the relationship between [PH] and his parents is to be taken into account, and when regard is had to that, it is clear that [PHs] base remained with his parents. 26. Nor do I consider that [PHs foster parents] can, despite the years spent caring for [PH], be treated, by analogy, as a parent, such that, in accordance with test 1 in Vale, [PH] could be considered to have been ordinarily resident in South Gloucestershire on 26 December 2004. [PHs] natural parents remained his base throughout [PHs] placement with [his foster parents]. His parents visited him, he stayed with them, and they were involved with decisions regarding his care and well being. I do not consider [his foster parents] to have so far replaced the role of [PHs] parents to be treated by analogy as [his] parents. 27. [I]t was clear that [PHs] remaining in South Gloucestershire was at 26 December a temporary matter. [PH] was to remain with [his foster parents] in South Gloucestershire only until his section 21 accommodation became available. It is clear from the papers that continuing contact with his foster carers was considered to be important and [they] have kept in regular contact, but this is now mainly by letters and cards. His school, respite care and church life were associated with this foster care placement, and ceased once he removed to the accommodation provided under section 21 of the 1948 Act. 22. For these reasons the Secretary of State determined that as at the relevant date, taken as 26 December 2004, PH was ordinarily resident in the area of Cornwall. The court proceedings The decision was upheld by Beatson J who, after a careful review of the authorities, held that the Secretary of States reasoning disclosed no error of law. In summary, he concluded: The Secretary of State examined whether there was a real relationship between PH and his natural parents and whether they were in fact making relevant decisions. He was entitled to take account of that and of the entirety of the relationship between [PH] and his parents. As part of that, he was also entitled to take account of the time spent by PH with them in Cornwall. The process of determining that PH was ordinarily resident in Cornwall may appear artificial. There would, however, have been a similar artificiality in determining that he was ordinarily resident in any of the other counties under consideration (paras 87 89) The Court of Appeal disagreed. Elias LJ (with whom the rest of the court agreed) gave the leading judgment. He took account of authorities since Shah, including Mohamed v Hammersmith and Fulham LBC [2001] UKHL 57; [2002] 1 AC 547 and A v A (Children: Habitual Residence) [2013] UKSC 60; [2014] AC 1. In the former (at para 18) Lord Slynn had said of words like ordinary residence and normal residence that, while they may take their precise meaning from the legislative context, the starting point is where at the relevant time the person in fact resides, in the sense of the place where (voluntarily) he eats and sleeps, regardless of the reason. In the latter the Supreme Court held that, in determining the habitual residence of a child for the purpose of the Brussels II Regulation revised and the Hague Convention, the Shah test should not be followed, the search being rather for the place which reflects some degree of integration by the child into the social and family environment, the intentions of the parents being no more than one relevant factor; in the majoritys view (Lord Hughes disagreeing on this point) physical presence was a necessary element. Against this background, Elias LJ held that, although the Secretary of State had carefully considered the facts, he had wrongly applied the Vale test as if it were a rule of law. He proceeded on the basis that section 105(6), which required the placement in South Gloucestershire to be disregarded for the purposes of the 1989 Act, applied only for the purposes of that Act, not the 1948 Act (citing by way of analogy R (Hertfordshire County Council) v Hammersmith and Fulham LBC [2011] EWCA Civ 77; [2011] PTSR 1623, 32). Accordingly, the fact that he had for a long time lived with foster parents in South Gloucestershire was a relevant factor to consider when assessing his ordinary residence at that time (para 35). He criticised the decision makers use of the term base (following Lord Denning MR in In re P (GE) (An infant) [1965] Ch 568) to describe PHs relationship to his parents home: Even if that is a helpful concept, I do not accept that Cornwall could properly be so described. It was not a place where PH had any settled residence at all; it was simply a place which he occasionally visited for holidays. His parents visited him in South Gloucestershire more frequently than he visited them in Cornwall. PHs parents' house was not, to use Lord Dennings phrase, a place from whence he goes out and to which he returns. Indeed, in so far as it is helpful to adopt the concept of his base at all, this was surely South Gloucestershire. It was there where he lived day by day; it was from there that he left on his very occasional visits to Cornwall and to which he returned; and it was there that he received the visits from his parents. (para 76) He held further that it was unnecessary to remit the matter for redetermination by the Secretary of State: Looking at the facts as at PHs 18th birthday, there was in my judgment only one conclusion properly open to the Secretary of State. PHs place of ordinary residence was South Gloucestershire. It could not be Wiltshire, because he ceased to have any connection with it at all. At that stage he had never lived in Somerset and had no connection with it. And for reasons I have given, the mere fact that his parents' place of ordinary residence was in Cornwall could not justify finding that to be PHs place of ordinary residence. (para 85) Preliminary issues Before turning to the main substantive issue, it is necessary to consider two preliminary issues raised by Mr Lock QC on behalf of Cornwall, for the first time in the court proceedings. Although no objection has been taken to this course, I would wish to reserve my position as to its appropriateness in the context of a statutory power intended to encourage co operation and lack of technicality. He submits, first, that under section 21 there is power to make provision of residential care services only if it is not otherwise available (section 21(1)(a)), and if it is not authorised or required to be made . by or under any enactment not contained in this Part of this Act. In the three years following PHs 18th birthday, so it is said, Wiltshires powers to provide assistance under section 23C of the 1989 Act were wide enough to cover all the services in fact provided for him during that period. There was therefore no place for section 21. It follows that there was at that date no question as to his ordinary residence under the Act requiring determination by the Secretary of State, and his decision was made without jurisdiction. Secondly, for good measure, he submits that Wiltshire itself had no power at all to incur expenditure under the 1948 Act, and no right to seek to recoup it from any other authority. At the time of PHs majority, he was not within their area, and there was no basis for treating him as ordinarily resident there, his only practical connection with the county through his parents having been severed some 14 years before. These arguments were rejected by Beatson J and by the Court of Appeal. Without disrespect to the persistent arguments of Mr Lock QC in this court, I have no doubt that they were right to do so. I would have been content to adopt their reasoning. But there are, in my view, two short answers. The first concerns the nature of the powers, the second timing. The argument only works if there is identity between the two sets of powers. In my view there is not. Part III of the 1948 Act provides the exclusive statutory basis for securing the long term care and accommodation which PH needs and has needed since his majority. That is not displaced by the relevant provisions of the 1989 Act, which are transitional in character. I would not wish to place artificial restrictions of the types of assistance which may be provided if necessary under section 23C. However, their purpose is, not to supplant the substantive regime, but to ease the transition (usually) to adult independence. There may of course be some overlap in some of the specific provision made from day to day, but they are serving different ultimate purposes, one temporary, the other long term. That potential overlap is not such in my view as to exclude section 21(1)(a), under its own terms or by reference to section 21(8). Secondly, and in any event, section 32 should in my view be read broadly in respect of timing. Even if the need for 1948 Act provision did not arise immediately on PHs 18th birthday, the nature of the dispute was already apparent, and needed to be resolved in the immediate future to ensure a smooth transition to the new regime. That dispute was willingly referred to the Secretary of State by the three authorities concerned. It was obviously desirable for all parties, most particularly PH, that it should be resolved without delay. I see no reason to read section 32 as confined to those disputes arising in the period after the duties under the 1948 Act have come into effect. On the contrary a purposive construction would extend it to disputes which need to be resolved in advance, so as to enable the duties under the Act to be exercised by the correct authority from the outset. As to whether Wiltshire itself should have been excluded as a potential party to the dispute, Mr Locks argument is ingenious but unrealistic. As has been seen from the decision determination, the Secretary of States starting point was a presumption that Wiltshire, as the authority responsible under the 1989 Act, should be treated as responsible also under the 1948 Act, unless and until displaced by another authority under the Shah or Vale tests. Thus Wiltshire was (and still is) in the firing line for potential liability, and it would have been irresponsible to proceed on any other basis. No amount of retrospective legal theorising by Cornwall can alter that position. Ordinary residence the law Background The 1948 Act was designed, in the words of its long title, to terminate the existing poor law, and to replace it with a new scheme for the assistance of persons in need by the new National Assistance Board and by local authorities. Miss Mountfield QC (for South Gloucestershire) has helpfully drawn our attention to the approach under the Poor Law Act 1930 to the allocation of responsibility for the old or infirm or those otherwise unable to work. The duty to relieve and maintain such persons was placed on their father, grandfather, mother, grandmother husband or child (1930 Act section 14). They were supported by the duty of the council of every county or county borough to provide such relief as may be necessary for the same group of people (section 15(1)), that duty applying generally to all persons within (their area) (section 15(2)). The adoption by the 1948 Act of ordinary residence in this context, as the basis for allocation of responsibility between local authorities, was a new departure. As will be seen, a similar approach was adopted at about the same time in relation to allocation of responsibilities between education authorities. It is noteworthy that there was no repetition of the pre 1948 statutory duty of parents or family members for maintenance of incapacitated adults, and no recognition even of their practical role in making decisions on behalf of those unable to do so for themselves. The common law could not fill the gap (see re F (Mental Patient: Sterilisation) [1990] 2 AC 1, confirming that the parent of a mentally disabled adult had no power at common law to consent to a medical operation on her behalf). Even in such cases the criterion was to be the ordinary residence of the individual, not of his parent or family, or anyone else. However, it was recognised from the outset that some modification was required in the case of those whose current residence was the result of care decisions, rather than their personal connections with the area in question. Thus section 24(5) provides where a person is being provided with residential accommodation under the Act, he is deemed for the purposes of this Act to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before the residential accommodation was provided. This formulation left open the question whether residence in such accommodation would otherwise have been regarded as ordinary residence for the purpose of section 24 a question to which I shall return. In policy terms it ensured that decisions on placements, inside or outside an authoritys area, were made solely with reference to the interests of the client, without affecting the placing authoritys continuing responsibility for his care. It is common ground that in the present context, unlike others considered in the authorities, the subject can be ordinarily resident in the area of only one local authority. Otherwise that test would not be an effective tool for allocating responsibility for services or their cost. As Beatson J observed (para 55) this factor, combined with what he called the deeming provision in section 24(5), may sometimes lead to artificial and arbitrary results. The ordinary residence test has proved resilient. In its 2010 Consultation Paper on Adult Social Care (CP 192), para 8.12, the Law Commission noted that it had been adopted in a number of care statutes but not all, and that the resulting picture was complex and inconsistent. However, it was not part of their remit to consider the meaning of the expression, nor whether it was the most effective way of determining which local authority is responsible for the provision of services. In their final report (Law Commission Report: Adult Social Care (2011) Law Com 326), they declined invitations from consultees to extend their remit to these issues, regarding them as matters for political policy and not law reform (para 10.11). Nonetheless, in their proposals for a single adult care statute they recommended that ordinary residence should continue to be the primary criterion of responsibility for all community care services (para 10.9). The Care Act 2014, which generally gives effect to their proposals, adopts the criterion of ordinary residence. The basic definition may be made subject to exceptions, to be defined by regulations, for placements in specified types of care accommodation, the effect of which is to substitute reference to the area of ordinary residence before the placement began, or the beginning of the period of consecutive placements of specified types (section 39). The authorities on ordinary residence At the time of the 1948 Act, most prior case law on the meaning of the expression ordinary residence related to income tax. Liability depended on whether a person was resident or ordinarily resident in the United Kingdom for a particular tax year. In that context it had long been established that a person could be ordinarily resident in two places. This approach was affirmed by the House of Lords in two well known cases reported in 1928: Levene v Inland Revenue Comrs [1928] AC 217 and Inland Revenue Comrs v Lysaght [1928] AC 234. In an earlier case, Cooper v Cadwalader (1904) 5 Tax Cases 101, an American resident in New York, who had taken a house in Scotland which he visited for two months each year, was held to be resident and ordinarily resident in the United Kingdom for tax purposes for each such year. It mattered not that for other purposes he might be treated as ordinarily resident in New York. As Viscount Sumner later observed Who in New York would have said of Mr Cadwalader his homes in the Highlands; his home is not here? (Lysaght at p 244). The House of Lords confirmed that approach and reached the same conclusions on the facts of the two cases in the 1928 Reports. Mr Levene lived abroad, but returned each year for about five months for the purpose of obtaining medical advice, visiting relatives and other matters. Mr Lysaght lived in Ireland, but returned to England each month for business purposes, remaining for about a week and usually staying in a hotel. In both cases the Special Commissioners had been entitled to hold that they were resident and ordinarily resident in this country. Those authorities were followed in the leading modern authority on the meaning of the expression in a statutory context. That is the speech of Lord Scarman in R v Barnet LBC, Ex p Shah [1983] AC 309. The question was whether four foreign students qualified for an education grant on the basis that they had been ordinarily resident in the United Kingdom throughout the three years preceding the first year of their course. The authorities had argued that their ordinary residence, in the sense of their real home, was elsewhere. The House disagreed. Lord Scarman, in the leading speech, treated the tax cases as authority for the natural and ordinary meaning of the expression. In particular he cited Viscount Sumners reference to ordinary residence as that part of the regular order of a man's life, adopted voluntarily and for settled purposes (Lysaght p 243). Lord Scarman echoed those words in his own statement of the natural and ordinary meaning of the term: Unless, therefore, it can be shown that the statutory framework or the legal context in which the words are used requires a different meaning, I unhesitatingly subscribe to the view that ordinarily resident refers to a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration. (p 343G H) The mind of the subject was relevant in two respects. First the residence must be voluntarily adopted, rather than for example enforced presence by reason of kidnapping or imprisonment. Secondly, there must be a degree of settled purpose: This is not to say that the (subject) intends to stay where he is indefinitely; indeed his purpose, while settled, may be for a limited period. All that is necessary is that the purpose of living where one does has a sufficient degree of continuity to be properly described as settled. (p 344D) A settled purpose did not need to be indefinite. Education, business or profession or merely love of a place could be enough. There was no justification for substituting a real home test, as the councils had argued (p 345B). Although understandably this passage has been often quoted and relied on in later cases, the weight given to the concept of a settled purpose needs to be seen in context. The focus of the passage was to explain why the undoubted residence of the claimants in this country for the necessary period, albeit for the temporary purpose of education, was sufficiently settled to qualify as ordinary under the accepted meaning. It was relevant therefore to show that it was no less settled than, for example, the residence of Mr Cadwalader during his annual visit to Scotland, or that of Mr Levene on his five month visit for medical and other reasons. Nor did it matter, it seems, that they might have had other ordinary residences in their countries of origin. As Mr Sheldon QC (for the Secretary of State) points out, Lord Scarman made reference, albeit by way of contrast, to provisions in the same legislation for allocating financial responsibility between education authorities, which are not dissimilar to those now in issue. Lord Scarman referred to provisions for allocation as between authorities in Education (Miscellaneous Provisions) Act 1953 section 7, Education Act 1962 section 1(7), and section 31 of the Education Act 1980 section 31 (see Shah pp 338F, 340B)). They had contained a formula, for recoupment of costs as between education authorities, based in part on ordinary residence, and under which disputes were to be determined by the Minister or Secretary of State. (Similar provisions can be traced back to the same time as the 1948 Act: see Education (Miscellaneous Provisions) Act 1948 section 6.) The parallel is not necessarily exact. For example, the 1962 Act contained a schedule dealing with ordinary residence (applied by 1962 Act section 1(7)), in which the primary test was linked with a discretionary power in certain circumstances for the Secretary of State to impose a different result by direction. Lord Scarman described such provisions as administrative and fiscal . in character, by contrast with the justiciable issue before the House. He noted, without expressing an opinion, the possibility that in that context ordinary residence might have a special meaning when the distribution of the fiscal burden between local education authorities is being considered as a matter for the exercise of executive decision by the Secretary of State (p 340B G). This is helpful as illustrating that the meaning of the term ordinary residence may be strongly influenced by the particular statutory context. However, it is common ground as I understand it that in the present context, once properly construed, the issue for the Secretary of State was one of factual judgement rather than executive discretion, and that his decision is justiciable, in the sense that it is reviewable by the courts on ordinary Wednesbury principles. Another authority relied on by the Secretary of State, again from a very different area of the law, is In re P (GE) (An infant) [1965] Ch 568. The Court of Appeal (applying the analogy of the law of treason) decided that the wardship jurisdiction of the Court of Chancery extended to any child ordinarily resident in this country. Lord Denning MR spoke of the ordinary residence of a child of tender years who cannot decide for himself where to live: So long as the father and mother are living together in the matrimonial home, the childs ordinary residence is the home and it is still his ordinary residence, even while he is away at boarding school. It is his base, from whence he goes out and to which he returns (p 585) This is the source of the word base, used in Vale and in the Secretary of States guidance, as indicative of ordinary residence. However, it is important again to see it in context. There is nothing to suggest that Lord Denning MR was intending to separate the idea of a base from the need for physical residence of some kind. The underlying assumption seems to have been that the child would be living at his parents home for the parts of the year when he was not at school, and would remain ordinarily so resident throughout. Shortly after the Shah judgment, in R v Waltham Forest London Borough Council, Ex p Vale (unreported, 11 February 1985), Taylor J had to consider a case much closer to the present, involving the application of the ordinary residence test under the 1948 Act to someone mentally incapable of forming a settled intention where to live. Judith, an English woman, had been in residential care in Ireland for over 20 years where her parents had been living. When her parents returned to England, it was decided that she should return to live near them. She stayed with them at their house in Waltham Forest for a few weeks while a suitable residential home was being found, and she was then placed in a home in Buckinghamshire. The shortfall in costs (so far as not borne by the Department of Health and Social Security) was sought from Waltham Forest on the grounds that she was ordinarily resident in the borough. The case was argued and decided by reference to the Shah test of ordinary residence, adapted for the case of someone lacking the power to form for herself a settled intention where to live. Taylor J adopted a two part approach suggested by counsel, but on either approach he considered that her residence with her parents could be treated as sufficiently settled to satisfy the Shah test. The result is unremarkable, but in view of the weight later given (particularly in the Secretary of States guidance) to Vale tests 1 and 2, it is right to quote the judges own words. For the first approach he made reference to Lord Denning MRs concept of a childs base: Where the (subject) . is so mentally handicapped as to be totally dependent upon a parent or guardian, the concept of her having an independent ordinary residence of her own which she has adopted voluntarily and for which she has a settled purpose does not arise. She is in the same position as a small child. Her ordinary residence is that of her parents because that is her base, to use the word applied by Lord Denning in the infant case cited. (emphasis added) The alternative approach, considering her as if she were a person of normal mental capacity, led to the same result: I cannot accept that during the relevant month Judith should be regarded as a squatter in her parents home. Her residence there had, in my judgment, all the attributes necessary to constitute ordinary residence within Lord Scarmans test, albeit for a short duration. There is no reason to quarrel with Taylor Js conclusion on the unusual facts of the case. In circumstances where her only previous residence had been in Ireland, there was obvious sense in treating her few weeks living with her parents as sufficiently settled to meet the Shah test, whether by reference to the intentions of those making decisions on her behalf, or to the attributes of the residence objectively viewed. With hindsight, it was perhaps unhelpful to elide the Shah test with the idea of a base, used by Lord Denning MR in a different context and for a different purpose. The italicised words in the first passage quoted above cannot be read as supporting any more general proposition than that Judiths ordinary residence was to be equated with that of her parents, without reference to the period of her own actual residence with them. Nor in my view should Taylor Js two approaches be treated as separate legal tests. Rather they were complementary, common sense approaches to the application of the Shah test to a person unable to make decisions for herself; that is, to the single question whether her period of actual residence with her parents was sufficiently settled to amount to ordinary residence. Most subsequent authorities on the issue of ordinary residence in the context of social services have relied on these authorities, without detailed discussion. The Court of Appeal also referred to authorities on other comparable expressions (normal residence, habitual residence) in other statutes. Without disrespect to the high authority of the statements quoted, their interpretation is a doubtful guide to the different language used in the provisions before us, and cannot in any event be considered without regard to the different statutory contexts in which they appear. As was pointed out by Lady Hale in A v A (above, at para 24) the phrase habitual residence was adopted in family legislation partly to distinguish it from ordinary residence as used in the taxation and immigration context. Ordinary residence in the present case I agree with the Court of Appeal that the decision makers reasons for selecting Cornwall cannot be supported. The writer started, not from an assessment of the duration and quality of PHs actual residence in any of the competing areas, but from an attempt to ascertain his base, by reference to his relationships with those concerned. Thus in deciding that the family home in Cornwall could properly be described as a base for [PH] notwithstanding the infrequency of his visits, the determination stated that it was necessary to consider not merely the number or frequency of visits [but] the entirety of the relationship between [PH] and his parents . There is no suggestion that his brief periods of staying with his parents at holiday times could in themselves amount to ordinary residence. Mr Sheldon seeks to support this approach by reference to the guidance and the authorities there relied on. He submits that, in the case of a person who is unable to make decisions for himself, it is necessary to determine the place which most appropriately represents at the material time, the seat of the persons decision making power given his lack of capacity to make decisions where to live, the coming to an end of a placement under the 1989 Act, and the extent to which his parents (or those in loco parentis) can and will make the relevant decisions on his behalf. Miss Mountfield QC is even more explicit, submitting that it is right in principle to look to the ordinary residence of the decision maker in deciding the ordinary residence of a person who lacks capacity. There might be force in these approaches from a policy point of view, since they would reflect the importance of the link between the responsible authority and those in practice representing the interests of the individual concerned. They are however impossible to reconcile with the language of the statute, under which it is the residence of the subject, and the nature of that residence, which provide the essential criterion. In so far as Vale is relied on to substitute an alternative test, based on the seat of (his) decision making, or otherwise on his relationship with his parents and their home, it depends on a misunderstanding of that judgment. The seat of the decision making power in relation to a mentally disabled adult is the authority making the placement (subject to any contrary determination by the Court of Protection), not the parents. For the same reason, the weight put by the decision maker on the so called Vale tests 1 and 2, both in the guidance and in the decision determination, was in my view misplaced. The more difficult issue is to make a principled choice between the two alternatives South Gloucestershire or Wiltshire. Applying the Shah tests without qualification it is easy to understand why the Court of Appeal chose the former. If one asks where was PHs ordinary residence in the period immediately before his move to Somerset, an obvious answer for many purposes would be his home with his carers. That is where he had lived happily for some fourteen years. On an objective view it might be thought sufficiently settled to meet Lord Scarmans test, regardless of whether PH himself took any part in the decision making. The Secretary of State rejected this alternative solely because he did not think that the foster parents had so far replaced the role of [PHs] parents to be treated by analogy as [his] parents under the Vale tests. For the reasons I have given this involved a misunderstanding of the reasoning in Vale. If the question is whether the residence of PH himself was sufficiently settled to satisfy the Shah test, the precise status of his foster parents was irrelevant. On this point the intentions and perceptions of his parents and his foster parents were identical. However, although the choice of South Gloucestershire may fit the language of the statute, it runs directly counter to its policy. The present residence in Somerset is ignored because there is no connection with that county other than a placement under the 1948 Act. By the same policy reasoning, South Gloucestershires case for exclusion would seem even stronger. There is no present connection of any kind with that county, the only connection being a historic placement under a statute which specifically excluded it from consideration as the place of ordinary residence for the purposes of that Act. The question therefore arises whether, despite the broad similarity and obvious underlying purpose of these provisions (namely that an authority should not be able to export its responsibility for providing the necessary accommodation by exporting the person who is in need of it), there is a hiatus in the legislation such that a person who was placed by X in the area of Y under the 1989 Act, and remained until his 18th birthday ordinarily resident in the area of X under the 1989 Act, is to be regarded on reaching that age as ordinarily resident in the area of Y for the purposes of the 1948 Act, with the result that responsibility for his care as an adult is then transferred to Y as a result of X having arranged for his accommodation as a child in the area of Y. It is highly undesirable that this should be so. It would run counter to the policy discernable in both Acts that the ordinary residence of a person provided with accommodation should not be affected for the purposes of an authoritys responsibilities by the location of that persons placement. It would also have potentially adverse consequences. For some needy children with particular disabilities the most suitable placement may be outside the boundaries of their local authority, and the people who are cared for in some specialist settings may come from all over the country. It would be highly regrettable if those who provide specialist care under the auspices of a local authority were constrained in their willingness to receive children from the area of another authority through considerations of the long term financial burden which would potentially follow. The Court of Appeal (para 35), apparently without argument to the contrary, proceeded on the basis that the deeming provision under each statute applied only for the purposes of its own Act. Elias LJ cited R (Hertfordshire County Council) v Hammersmith and Fulham LBC [2011] EWCA Civ 77; [2011] PTSR 1623, in which the court held that section 24(5) was a self contained provision. However, the court was there faced with a rather different argument, which depended on reading the Mental Health Act 1983 section 117 (in which responsibility was based on residence without any deeming provision) as though it had the same meaning as ordinary residence under section 24. The court (para 45) rejected that argument, not only because it was inconsistent with the statute, but also because it was constrained by higher authority to hold that section 117 was a free standing provision not dependent on the 1948 Act. In construing the relevant words in section 24 of the 1948 Act, the statutory context is critical. The purpose of the provision is purely administrative and fiscal, to borrow Lord Scarmans phrase in R v Barnet London Borough Council, Ex p Shah (see para 43 above). It does not affect the rights of the person concerned, but only the allocation of responsibility as between local authorities. Lord Scarman recognised the possibility that such a context might justify a different approach as compared to one directed to a persons entitlement to a benefit. In this respect the function of the relevant provisions in each Act is the same. Section 24(5) poses the question: in which authoritys area was PH ordinarily resident immediately before his placement in Somerset under the 1948 Act? In a case where the person concerned was at the relevant time living in accommodation in which he had been placed by a local authority under the 1989 Act, it would be artificial to ignore the nature of such a placement in that parallel statutory context. He was living for the time being in a place determined, not by his own settled intention, but by the responsible local authority solely for the purpose of fulfilling its statutory duties. In other words, it would be wrong to interpret section 24 of the 1948 Act so as to regard PH as having been ordinarily resident in South Gloucestershire by reason of a form of residence whose legal characteristics are to be found in the provisions of the 1989 Act. Since one of the characteristics of that placement is that it did not affect his ordinary residence under the statutory scheme, it would create an unnecessary and avoidable mismatch to treat the placement as having had that effect when it came to the transition in his care arrangements on his 18th birthday. On this analysis it follows that PHs placement in South Gloucestershire by Wiltshire is not to be regarded as bringing about a change in his ordinary residence. Throughout the period until he reached 18 he remained continuously where he was placed by Wiltshire, under an arrangement made and paid for by them. For fiscal and administrative purposes his ordinary residence continued to be in their area, regardless of where they determined that he should live. It may seem harsh to Wiltshire to have to retain indefinite responsibility for a person who left the area many years ago. But against that there are advantages for the subject in continuity of planning and financial responsibility. As between different authorities, an element of arbitrariness and swings and roundabouts may be unavoidable. For these reasons, I would allow the appeals and in the declaration made by the Court of Appeal for references to South Gloucestershire I would substitute references to Wiltshire. LORD WILSON: (dissenting) My colleagues consider that, in making his determination under section 32(3) of the National Assistance Act 1948 (the 1948 Act) of the place of PHs ordinary residence on 26 December 2004 for the purpose of section 24(1) of the same Act, the Secretary of State could lawfully have reached only one conclusion. It is, according to them, that on that date, which was the day prior to his 18th birthday, PH was ordinarily resident in a county (Wiltshire): a) in which in May 1991, ie about 13 years earlier, he had ceased to live upon his removal to live with the foster parents in South Gloucestershire; b) to which, during the following 13 years, he never returned, not even just to stay overnight; c) in which in November 1991, ie also about 13 years earlier, his parents had ceased to live upon their removal to live in Cornwall; d) in which by 1997, ie about seven years earlier, both sets of his grandparents had, in one case because of relocation and in the other because of death, ceased to live; and e) in which, from 1997 onwards until many years after 26 December 2004, no home remained available, even in principle, for his occupation. Such is a conclusion to which, with great respect to my colleagues, I do not subscribe. It is a conclusion for which no party has contended at any stage of these proceedings. A court should tread cautiously before favouring a solution devised only by itself, particularly where, as here, it has been addressed by an array of excellent counsel instructed by public authorities widely experienced in this area of the law. I agree that there was only one conclusion which the Secretary of State could lawfully have reached. But, so I consider, his conclusion should have been that on 26 December 2004 PH was ordinarily resident in South Gloucestershire. So I believe that the order of the Court of Appeal was correct. I must squarely confront the problem. There appear to be strong reasons of public policy which militate in favour of imposing upon Wiltshire, rather than upon South Gloucestershire, the obligation of making decisions about a suitable placement of PH following his 18th birthday and of funding whatever placement may thereafter be suitable for him from time to time. It would be a heavy financial burden for Wiltshire but its burden in the case of PH would be borne to the same extent by some other local authority in a reverse situation: in other words the burdens should even out. Public policy suggests: a) that it is desirable that a local authority which has exercised the decision making power (and has borne the funding burden) in relation to the placement of a mentally incapacitated minor should, in the light of its knowledge of his needs, continue to exercise that power (and bear that burden) following the attainment of his majority; and b) that it is undesirable that a local authority which is exercising the decision making power (and bearing the funding burden) in relation to the placement of an incapacitated minor should, while he remains a minor, be able to place him in a suitable facility in the area of another local authority (indeed, in the case of a private placement, without the consent of that local authority), with the result that, following the attainment of his majority, the decision making power and, in particular, the financial burden should fall upon that other local authority. In the present case, for example, the evidence suggests that Wiltshires placement of PH in 1991 with his excellent specialist foster parents did not in any way involve the local authority of South Gloucestershire, which for the following 13 years appears to have played no part in directing or securing his care. Yet, on my analysis, it is South Gloucestershire which should thereafter have begun to exercise the decision making power and, in particular, to bear the financial burden. The Secretary of State accepts that, of the young people who move from being looked after by local authorities as minors to being provided with accommodation by them as adults, those lacking capacity are only a small proportion. But he explains convincingly that, in the light of their specialised needs, the cost of maintaining them indefinitely is very high. He proceeds to identify real concerns that a few local authorities might therefore be motivated (to use the crude shorthand which, only for convenience, has been deployed in the hearing before this court) to export such a minor to the area of another local authority prior to the attainment of his majority; and equally that, were that other local authority to be the administrator of a specialist resource entirely suitable to the needs of a minor, it might nevertheless be motivated to refuse him admission to it for fear of the financial consequences following the attainment of his majority. But such is the result which in my view the law, as it stands, clearly compels. I am not a legislator. Nor, with respect, are my colleagues. When, by section 24(1) of the 1948 Act, it decided to identify the local authority responsible for making the provision specified by the Act by reference to a persons ordinary residence in its area, Parliament deployed a well known phrase. The courts confidently assume that, in deploying a phrase, Parliament understands the meaning which the courts have ascribed to it: Regina v G [2003] UKHL 50, [2004] 1 AC 1034, at p 1059 (Lord Steyn). No doubt Parliament understands that in the future the courts may refine and develop their interpretation of a phrase. Subject to that, however, Parliament in 1948 intended that the courts should construe the phrase in section 24(1) by reference to its established meaning. Furthermore, insofar as the courts might encounter any difficulty in applying every aspect of its established meaning to any person entitled to provision under the Act, for example to a mentally incapacitated person, Parliament no doubt intended that the courts should, albeit only to the necessary extent, adapt their interpretation of the phrase. To that extent the framework in which Parliament set the phrase might require the courts to ascribe to it a somewhat different meaning. In 1948 the established meaning of the phrase ordinary residence was that which the House of Lords had ascribed to it in the Levene and Lysaght cases cited by Lord Carnwath at para 39 above. In the former Viscount Cave LC had stated at p 225 that it meant residence in a place with some degree of continuity and apart from accidental and temporary absences. In the latter Viscount Sumner had stated at p 243 that the converse to ordinarily is extraordinarily and that part of the regular order of a mans life, adopted voluntarily and for settled purposes, is not extraordinary. In the Shah case, cited by Lord Carnwath at para 41 above, Lord Scarman, at p 341, quoted both these statements; and it can be seen that his classic definition of the phrase ordinary residence, set out by Lord Carnwath, was in effect no more than an amalgamation of what Viscount Cave and Viscount Sumner had said. By applying his definition, Lord Scarman and the other members of the committee decided that the four foreign students, who had pursued a course of study in the UK for the previous three years with leave to remain in the UK limited thereto, and who aspired, with the aid of grants, to pursue courses of further education, had been ordinarily resident in the UK throughout those three years and were therefore entitled to the grants under the Education Act 1962. Lord Scarman noted at pp 346 and 347 that each of the lower courts had attached importance to their belief that in 1962 Parliament would not have intended that foreign students with only limited leave to remain in the UK should be entitled to grants by which to further their education. He continued, at pp 347 and 348: My Lords, the basic error of law in the judgments below was the failure to appreciate the authoritative guidance given by this House in Levene and Lysaght as to the natural and ordinary meaning of the words ordinarily resident. They attached too much importance to the particular purpose of the residence; and too little to the evidence of a regular mode of life for a settled purpose, whatever it be, whether study, business, work or pleasure. In so doing, they were influenced by their own views of policy and by the immigration status of the students. The way in which they used policy was, in my judgment, an impermissible approach to the interpretation of statutory language. Judges may not interpret statutes in the light of their own views as to policy. [Bold type supplied] In 1948 the jurisdiction to commit a child to the care of a local authority was contained in section 62(1)(b) of the Children and Young Persons Act 1933 (the 1933 Act). No doubt Parliament could have extended the disregard in section 24(5) of the 1948 Act so as to encompass any period in which, immediately prior to the provision of residential accommodation to a person under Part III of that Act, he had been in the care of a local authority under section 62(1)(b) of the 1933 Act. But it did not do so. Equally, following the rationalisation of the provisions for taking children into care achieved by the Children Act 1989 (the 1989 Act), Parliament could have extended the disregard in section 24(5) of the 1948 Act so as to encompass any period in which, immediately prior to the provision of such accommodation, the person had been looked after by a local authority within the meaning of section 22(1) of the 1989 Act. But it did not do so. By paragraph 9 of the Schedule to the Care Act 2014 and Children and Families Act 2014 (Consequential Amendments) Order 2015, (SI 2015/914), made pursuant to section 123(2) of the Care Act 2014 (the 2014 Act), the application of the 1948 Act has now been restricted to Wales. In England accommodation for adults in need of it is now provided under the 2014 Act which, by section 39, has replaced the disregards formerly contained in section 24 of the 1948 Act with wider disregards. But, even now, Parliament has not chosen to include a requirement to disregard a period in which, as a minor, the person has been looked after by a local authority within the meaning of section 22(1) of the 1989 Act. It is instead my colleagues who have chosen to do so. Indeed the statutory disregards, limited though they are, present another difficulty. In para 59 above Lord Carnwath suggests that the legal characteristics of the residence of a minor provided with accommodation under the 1989 Act are such as to make it irrelevant to the determination of his ordinary residence for the purposes of section 24(1) of the 1948 Act. But, if so, they must make it equally irrelevant to the determination of his ordinary residence for the purposes of the 1989 Act itself, including for those of section 31(8)(a) which requires the recipient of a care order to be the local authority within whose area he is ordinarily resident. So then the question arises: why should Parliament, by section 105(6)(c) of the 1989 Act, have troubled to require that the period of provision of such accommodation be disregarded? Lord Carnwaths analysis renders the subsection redundant. More broadly the same charge can, in my view, be levelled in relation to the disregards provided by section 24(5) of the 1948 Act and now by section 39 of the 2014 Act, which provide for the disregard of periods of accommodation which has legal characteristics analogous to those of accommodation provided under the 1989 Act. The Secretary of State determined that on 26 December 2004 PH was ordinarily resident in Cornwall. I agree that his determination was unlawful. Although clearly PH had links with Cornwall which he lacked with Wiltshire, it was artificial to describe him as having had a base with his parents there; and it was unrealistic to regard them as having continued to be the decision makers in relation to him. Having summarised approaches to the issue which, so counsel suggested, favoured the identification of Cornwall as the responsible local authority under the 1948 Act, Lord Carnwath states at para 51 above: There might be force in these approaches from a policy point of view. They are however impossible to reconcile with the language of the statute, under which it is the residence of the subject, and the nature of that residence, which provide the essential criterion. I agree with Lord Carnwaths statement which, by coincidence, encapsulates the reasons for my own rejection of his conclusion that on 26 December 2004 PH was ordinarily resident in Wiltshire. But it is not only by a process of elimination that I conclude that PH was then ordinarily resident in South Gloucestershire. In A v A (Children: Habitual Residence), [2013] UKSC 60, [2014] AC 1, this court determined the proper approach to an inquiry into a childs habitual residence for the purposes of article 8 of Council Regulation (EC) 2201/2003, namely the Brussels II Revised Regulation. It ruled that, in the light of the identity of article 8 as a European regulation, the inquiry into a childs habitual residence was required to be conducted by reference to the interpretation of the phrase favoured by the Court of Justice of the European Union, namely to identify the place which reflects some degree of integration by the child in a social and family environment and that, for the purposes of article 8, such an inquiry was preferable to one determined by reference to Lord Scarmans classic definition of ordinary residence in the Shah case: see para 54(iii) and (v) of the judgment of Lady Hale. The European approach is plainly tailored so as to allow for the inability of most children to make decisions for themselves and, as such, it seems well suited to an inquiry into the ordinary residence of a mentally incapacitated person such as PH. I agree with the observation of Elias LJ in his judgment in the present case that there is much to be said in favour of a determination of PHs ordinary residence by reference to a similar approach. Were the inquiry indeed to be into the place of PHs integration in a social and family environment, that place would plainly be South Gloucestershire. But application of Lord Scarmans definition, subject to the alteration of one word required by PHs incapacity, yields the same conclusion. For on 26 December 2004 South Gloucestershire represented the abode which he had adopted for settled purposes as part of the regular order of his life for the time being. The word which requires alteration is voluntarily. PH did not adopt his abode in the foster home voluntarily. But, as the Secretary of State recorded in his determination, PH was very happy and settled in the foster home and had to leave it only because it was not possible for the foster parents to accommodate an adult under the 1948 Act while continuing to foster children under the 1989 Act. One may confidently infer that, had he had capacity, PH would have adopted his abode in the foster home voluntarily. In the light of his incapacity, however, the context requires a modest replacement of the word voluntarily with the word contentedly and, on that basis, his ordinary residence in South Gloucestershire is again plainly established. I therefore take the view that both of these appeals should be dismissed. |
This appeal concerns a planning permission granted on 29 July 2009 for a proposed three mile (4.7km) stretch of roadway to provide a rapid bus service between Fareham and Gosport in South East Hampshire. The permission was challenged on environmental grounds including not least its likely impact on several species of European protected bats inhabiting the general area around the proposed busway. The challenge having failed before Judge Bidder QC (sitting as a Deputy High Court judge) on 17 November 2009 [2009] EWHC 2940 (Admin) and before the Court of Appeal (Ward, Hughes and Patten LJJ) on 10 June 2010 [2010] EWCA Civ 608, [2010] PTSR 1882 this Court on 27 July 2010 gave the appellant limited permission to appeal so as to raise two issues of some general importance. Habitats Directive 92/43/EEC which provides that: Issue one concerns the proper interpretation of article 12 (1)(b) of the Member States shall take the requisite measures to establish a system of strict protection for the animal species listed [the protected species] in their natural range, prohibiting . (b) deliberate disturbance of these species, particularly during the period of breeding, rearing, hibernation and migration; . Issue two concerns the proper application of regulation 3(4) of the Conservation (Natural Habitats, etc) Regulations 1994 SI 1994/2716 (as amended first by the Amendment Regulations 2007 and then the Amendment Regulations 2009), by which domestic effect is given to the Directive: 3(4) . every competent authority in the exercise of any of their functions, shall have regard to the requirements of the Habitats Directive so far as they [the requirements] may be affected by the exercise of those functions. With that briefest of introductions let me turn to the essential factual context in which these issues now arise, noting as I do so that altogether fuller descriptions of the facts can be found in the judgments below. The proposed new rapid busway the first and larger phase of which is already substantially under way, applications for interlocutory relief to stay its continuance having been refused by the Court of Appeal and refused by this Court on granting leave to appeal runs along the path of an old railway line, last used in 1991. The scheme provides for buses to be able to join existing roads at various points along the route. It will create a new and efficient form of public transport to the benefit of many residents, workers and visitors to the region. Central Government has committed 20m to it. Although most of the scheme lies within a built up area, there are a number of designated nature conservation sites nearby and, unsurprisingly, once the railway line ceased to be used, the surrounding area became thickly overgrown with vegetation and an ecological corridor for various flora and fauna. Although, therefore, the scheme was widely supported, it also attracted a substantial number of objectors one of whom is Mrs Morge, the appellant, who lives close by. The respondent authority is both the local planning authority for the relevant area and also the applicant for planning permission through its agent, Transport for South Hampshire, who submitted a planning application on 31 March 2009. Taking it very shortly, on 30 April 2009 Natural England (the Governments adviser on nature conservation) objected to the planning application in part because of their concerns about the impact of the development on bats (an objection reiterated on 29 June 2009). As a result the respondent authority commissioned an Updated Bat Survey (UBS) which was submitted on 9 July 2009. On 17 July 2009, largely as a result of the UBS, Natural England withdrew their objections. There then followed a Decision Report prepared by the respondents planning officers, a further letter from Natural England dated 23 July 2009, an Addendum Decision Report from the officers, and on 29 July 2009 a three hour meeting of the respondents Regulatory Committee which concluded with the grant of planning permission for the scheme by a majority of six to five with two abstentions. The UBS is a document of some 70 pages. For present purposes, however, its main findings can be summarised as follows. No roosts were found on the site. The removal of trees and vegetation, however, would result in a loss of good quality bat foraging habitats. This would have a moderate adverse impact at local level on foraging bats for some nine years, the impact thereafter reducing, because of mitigating measures, to slight adverse/neutral. In addition the busway would sever a particular flight path followed by common pipistrelle bats, increasing their risk of collision with buses (without, however, given the proposed mitigation of this risk, a significant impact on bats at a local level). The Officers Decision Report (again a lengthy document) included these passages with regard to the bats: 3.7 Detailed ecological surveys have been undertaken across the site over the last eighteen months. A number of bat species roost and forage along the corridor . Accordingly, a strategy to mitigate the impact on these species has been developed. The main principles of the strategy [include] enhancement of the habitat of the retained embankment to provide continued habitat for displaced species. Bat surveys have also been carried out to enable appropriate measures to be implemented. 5.6 Natural England initially raised objections on the grounds that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on bats . which are [a] legally protected species. Further survey work was undertaken in response to this objection and provided to Natural England. Following receipt of this information Natural England are now satisfied that the necessary information has been provided and have withdrawn their objection. They recommend that if the council is minded to grant permission for this scheme conditions be attached requiring implementation of the mitigation and compensation measures set out in the reports. Nature Conservation Impact 8.17 . the requirements of the Habitats Regulations need to be considered. 8.19. The surveys also identified the presence of a diversity of bat species, which are protected, using the trees alongside the track for foraging. An Updated Bat Survey Method Statement and Mitigation Strategy has been submitted with measures to ensure there is no significant adverse impact to them from these proposals. Conclusion 8.24 . suitable mitigation measures are proposed for . protected species . The Addendum Report dealt specifically with the Habitat Regulations and repeated that Natural England, having initially objected to the application and required further survey information regarding protected species, were now satisfied and had withdrawn their objection. Against this essential factual background I turn now to the two main issues arising. Issue 1 the proper interpretation of article 12(1)(b) of the Habitat Directive Article 12(1)(b) must, of course, be interpreted in the light of the Directive as a whole. Included amongst the recitals in its preamble is this: Whereas, in the European territory of the member states, natural habitats are continuing to deteriorate and an increasing number of wild species are seriously threatened; whereas given that the threatened habitats and species form part of the Communitys natural heritage and the threats to them are often of a trans boundary nature, it is necessary to take measures at Community level in order to conserve them. Article 1 is the definition article and defines species of Community interest in four categories, respectively endangered, vulnerable, rare, and endemic and requiring particular attention [for various specified reasons]. The six species of protected bats affected by the proposed busway fall variously into the second, third and fourth of those categories. Article 1(i) defines conservation status of a species to mean the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its populations. It further provides: The conservation status will be taken as favourable when: population dynamics data on the species concerned indicate that it is maintaining itself on a long term basis as a viable component of its natural habitats, and the natural range of the species is neither being reduced nor is likely to be reduced for the foreseeable future, and there is, and will probably continue to be, a sufficiently large habitat to maintain its populations on a long term basis. Article 2(2) provides that: Measures taken pursuant to this Directive shall be designed to maintain or restore, at favourable conservation status, natural habitats and species of wild fauna and flora of Community Interest. There then follow articles 3 to 11 under the head Conservation of natural habitats and habitats of species. Within these provisions one should note article 6(2): Member states shall take appropriate steps to avoid, in the special areas of conversation, the deterioration of natural habitats and the habitats of species as well as disturbance of the species for which the areas have been designated, in so far as such disturbance could be significant in relation to the objectives of this Directive. Articles 12 to 16 inclusive then follow under the head Protection of species. I have already set out article 12(1)(b). Article 16 provides for derogation and so far as material provides: 16(1) Provided that that there is no satisfactory alternative and the derogation is not detrimental to the maintenance of the populations of the species concerned at a favourable conservation status in their natural range, member states may derogate from the provisions of articles 12 . : . (c) in the interests of public health and public safety, or for other imperative reasons of overriding public interest, including those of a social or economic nature and beneficial consequences of primary importance for the environment. Besides the issues now before us the Court of Appeal had to deal in addition with challenges based upon article 12(1)(d) of the Directive and upon the respondents decision not to treat the proposal as an EIA development (matters upon which this court refused leave to appeal). Ward LJ gave the only reasoned judgment, one of infinite care and thoughtfulness and, I may add, one of enormous assistance to this Court in its consideration of this further appeal. As a background to deciding the meaning of article 12(1)(b), Ward LJ necessarily had regard to the European Commissions views upon the scope of the Directive, as set out in a Guidance document issued in February 2007 which include the following: (37) Disturbance (e.g. by noise, source of light) does not necessarily directly affect the physical integrity of a species but can nevertheless have an indirect negative effect on the species (eg by forcing them to use lots of energy to flee; bats, for example, when disturbed during hibernation, heat up as a consequence and take flight, so are less likely to survive the winter due to high loss of energy resources). The intensity, duration and frequency of repetition of disturbances are important parameters when assessing their impact on a species. Different species will have different sensitivities or reactions to the same type of disturbance, which has to be taken into account in any meaningful protection system. Factors causing disturbance for one species might not create disturbance for another. Also, the sensitivity of a single species might be different depending on the season or on certain periods of its life cycle e.g. (breeding period). Article 12(1)(b) takes into account this possibility by stressing that disturbances should be prohibited particularly during the sensitive periods of breeding, rearing, hibernation and migration. Again, a species by species approach is needed to determine in detail the meaning of disturbance. (38) The disturbance under article 12(1)(b) must be deliberate . and not accidental. On the other hand, while disturbance under article 6(2) must be significant, this is not the case in article 12(1), where the legislator did not explicitly add this qualification. This does not exclude, however, some room for manoeuvre in determining what can be described as disturbance. It would also seem logical that for disturbance of a protected species to occur a certain negative impact likely to be detrimental must be involved. (39) In order to assess a disturbance, consideration must be given to its effect on the conservation status of the species at population level and biogeographic level in a member state . For instance, any disturbing activity that affects the survival chances, the breeding success or the reproductive ability of a protected species or leads to a reduction in the occupied area should be regarded as a disturbance in terms of article 12. On the other hand, sporadic disturbances without any likely negative impact on the species, such as for example scaring away a wolf from entering a sheep enclosure in order to prevent damage, should not be considered as disturbance under article 12. Once again, it has to be stressed that the case by case approach means that the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, as explained above. No problem arises as to what is meant by deliberate in article 12(1)(b). As stated by the Commission in paragraph 33 of their Guidance: Deliberate actions are to be understood as actions by a person who knows, in light of the relevant legislation that applies to the species involved, and the general information delivered to the public, that his action will most likely lead to an offence against the species, but intends this offence or, if not, consciously accepts the foreseeable results of his action. Put more simply, a deliberate disturbance is an intentional act knowing that it will or may have a particular consequence, namely disturbance of the relevant protected species. The critical, and altogether more difficult, question is what precisely in this context is meant by disturbance. Having, as I too have sought to do, thus cleared the ground and recognised that the central difficulty in the case lies in determining the level of disturbance required to fall within the prohibition, Ward LJ rejected the appellants contention that any disturbing activity save only that properly to be characterised as de minimis too negligible for the law to be concerned with constitutes disturbance within the article. As Ward LJ pointed out, the example given in paragraph 38 of the Commissions Guidance (scaring away a wolf from the sheep fold) must be an a fortiori, rather than a typical one. The judgment then continues (and I make no apology for quoting it at some length): 35 . the disturbance does not have to be significant but, as para 38 of the guidance explains, there must be some room for manoeuvre which suggests the threshold is somewhere between de minimis and significant. It must be certain, that is to say, identifiable. It must be real, not fanciful. Something above a discernible disturbance, not necessarily a significant one, is required. Given that there is a spectrum of activity, the decision maker must exercise his or her judgment consistently with the aim to be achieved. Given the broad policy objective which I explored . above [to ensure that the population of the species is maintained at a level which will ensure the species conservation so as to protect the distribution and abundance of the species in the long term], disturbing one bat, or even two or three, may or may not amount to disturbance of the species in the long term. It is a matter of fact and degree in each case. 36 [Counsel for the appellant] seizes on the words in para 38 . of the guidance, a certain negative impact likely to be detrimental must be involved and he elevates this statement into a test for establishing a disturbance. His difficulty is that that does not answer the critical question: when does the negative impact become detrimental? Para 39 seems to me to spell out the proper approach, namely to give consideration to the effect on the conservation status of the species at population level and bio geographic level. This in my judgment is an important refinement. The impact must be certain or real, it must be negative or adverse to the bats and it will be likely to be detrimental when it negatively or adversely effects the conservation status of the species. Conservation status of a species is a term of art which . means the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its population. That is why the guidance at para 39 makes the point that the disturbing activity must be such as affects the survival chances . of a protected species. Furthermore, the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, to quote the concluding sentence of para 39. The summary in the guidance . has the same emphasis: Disturbance is detrimental for a protected species eg by reducing survival chances, breeding success or reproductive ability. A species by species approach needs to be taken as different species will react differently to potentially disturbing activities. 37. Having regard to the aim and purpose of the Directive and of article 16 and having due consideration of the guidance, I am driven to conclude that for there to be disturbance within the meaning of article 12(1)(b) that disturbance must have a detrimental impact so as to affect the conservation status of the species at population level. . 39. In my judgment whether the disturbance will have a certain negative impact which is likely to be detrimental must be judged in the light of and having regard to the effect of the disturbance on the conservation status of the species, ie, how the disturbance affects the long term distribution and abundance of the population of bats. I remind myself that according to the [Commissions] guidance . , favourable conservation status could be described as a situation where a . species is doing sufficiently well in terms of quality and quantity and has good prospects of continuing to do so in the future. Whether there is a disturbance of the species must be judged in that light. Finally, in a passage in the judgment headed Overall Conclusions, Ward LJ, expressing himself satisfied that the respondents planning committee had due regard to the requirements of the Directive, said this: 73. I have been troubled by the fact that the conclusion of the bat survey upon which such reliance was placed is to the effect that no significant impacts to bats are anticipated. The disturbance does not have to be significant and this is a misdirection or misunderstanding of . [article] 12(1)(b) . of the Habitats Directive. The question for me is, therefore, whether the conclusions can be upheld. I am satisfied that the decision of the planning committee should not be quashed. 74. I reach that conclusion for these reasons. I am satisfied that the loss of foraging habitat occasioned by cutting a swathe through the vegetation does not offend article 12(1)(b) which is concerned with protection of the species not with conservation of the species natural habitats. I am satisfied that that bald statement that the bats have to travel further and expend more energy in foraging does not justify a conclusion that the conservation status of the bats is imperilled or at risk. There is no evidence which would allow the planning committee to conclude that the long term distribution and abundance of the bat population is at risk. There is no evidence that they will lose so much energy (as they might when disturbed during hibernation) that the habitat will not still provide enough sustenance for their survival, or their survival would be in jeopardy. There is no evidence that the population of the species will not maintain itself on a long term basis. There is therefore no evidence of any activity which would as a matter of law constitute a disturbance as the word has to [be] understood. 75. As I have already concluded, the risk of collision cannot amount to a disturbance and article 12(1)(b) is not engaged in that respect. Mr George QC submits that the Court of Appeal were wrong to hold that article 12(1)(b) is breached only when the activity in question goes so far as to imperil the conservation status of the species at population level i.e. that only then does the activity amount to a disturbance of the species. This, he points out (and, indeed, Ward LJ himself recognised), puts the threshold for engaging the article higher than Mr Cameron QC for the respondent put it, Mr Camerons main concern being that such a construction would sit uneasily with article 16 (1) (a provision which itself necessarily implies that article 12(1)(b) may need to be, and be capable of being, derogated from notwithstanding that this is only permissible where it is not detrimental to the maintenance of the populations of the species concerned at a favourable conservation status). The Court of Appeals construction is also, submits Mr George, inconsistent with an Additional Reasoned Opinion addressed to the UK by the Commission dated 18 September 2008 with regard inter alia to what was then the new Regulation 39(1), inserted by the 2007 Amendment Regulations, providing for an offence where someone deliberately disturbs wild animals of any species in such a way as to be likely significantly to affect (i) the ability of any significant group of animals of that species to survive, breed or rear or nurture their young . The prohibition in the Directive, the Commission pointed out in their Opinion, is not limited to significant disturbances of significant groups of animals. Article 12(1)(b) of the Directive, the Opinion later suggested, covers all disturbance of protected species. Whilst not actually conceding that the Court of Appeal approach is wrong, Mr Cameron contends now that the proper approach is to ask whether the activity in question produces a certain negative impact likely to be detrimental to the species having regard to its effect on the conservation status of the species. In my judgment certain broad considerations must clearly govern the approach to article 12(1)(b). First, that it is an article affording protection specifically to species and not to habitats, although obviously, as here, disturbance of habitats can also indirectly impact on species. Secondly, and perhaps more importantly, the prohibition encompassed in article 12(1)(b), in contrast to that in article 12(1)(a), relates to the protection of species, not the protection of specimens of these species. Thirdly, whilst it is true that the word significant is omitted from article 12(1)(b) in contrast to article 6(2) and, indeed, article 12(4) which envisages accidental capture and killing having a significant negative impact on the protected species that cannot preclude an assessment of the nature and extent of the negative impact of the activity in question upon the species and, ultimately, a judgment as to whether that is sufficient to constitute a disturbance of the species. Fourthly, it is implicit in article 12(1)(b) that activity during the period of breeding, rearing, hibernation and migration is more likely to have a sufficient negative impact on the species to constitute prohibited disturbance than activity at other times. Beyond noting these broad considerations it seems to me difficult to take the question of the proper interpretation and application of article 12(1)(b) much further than it is taken in the Commissions own Guidance document. (The Commissions suggestion in their September 2008 Additional Reasoned Opinion that article 12(1)(b) covers all disturbance of protected species in truth begs rather than answers the question as to what activity in fact constitutes such disturbance and cannot sensibly be thought to involve a departure from their 2007 Guidance.) Clearly the illustrations given in paragraph 39 of the Guidance on the one hand any disturbing activity that affects the survival chances, the breeding success or the reproductive ability of a protected species or leads to a reduction in the occupied area, on the other hand scaring away a wolf from entering a sheep enclosure represent no more than the ends of the spectrum within which the question arises as to whether any given activity constitutes a disturbance. Equally clearly, to my mind, the suggestion in paragraph 39 that consideration must be given to its effect [the effect of the activity in question] on the conservation status of the species at population level and biogeographic level does not carry with it the implication that only activity which does have an effect on the conservation status of the species (i.e. which imperils its favourable conservation status) is sufficient to constitute disturbance. I find myself, therefore, in respectful disagreement with Ward LJs conclusion (at para 37) that for there to be disturbance within the meaning of article 12(1)(b) that disturbance must have a detrimental impact so as to affect the conservation status of the species at population level. Nor can I accept his view (at para 36) that the guidance, at para 39, makes the point that the disturbing activity must be such as affects the survival chances . of a protected species. On the contrary, as I have already indicated, para 39 of the guidance uses disturbing activity of that sort merely to illustrate one end of the spectrum. Rather the guidance explains that, within the spectrum, every case has to be judged on its own merits. A species by species approach is needed and, indeed, even with regard to a single species, the position might be different depending on the season or on certain periods of its life cycle (para 37 of the guidance). As para 39 of the guidance concludes: it has to be stressed that the case by case approach means that the competent authorities will have to reflect carefully on the level of disturbance to be considered harmful, taking into account the specific characteristics of the species concerned and the situation, as explained above. Two further considerations can, I think, usefully be identified to be borne in mind by the competent authorities deciding these cases (considerations which seem to me in any event implicit in the Commissions Guidance). First (and this I take from a letter recently written to the respondent by Mr Huw Thomas, Head of the Protected and Non Native Species Policy at DEFRA, the Department responsible for policy with regard to the Directive): Consideration should . be given to the rarity and conservation status of the species in question and the impact of the disturbance on the local population of a particular protected species. Individuals of a rare species are more important to a local population than individuals of more abundant species. Similarly, disturbance to species that are declining in numbers is likely to be more harmful than disturbance to species that are increasing in numbers. Second (and this is now enshrined in Regulation 41(2) of the Conservation of Habitats and Species Regulations 2010 SI 2010/490): 41(2) . disturbance of animals includes in particular any disturbance which is likely (a) to impair their ability (i) to survive, to breed or reproduce, or to rear or nurture their young, or (ii) in the case of animals of a hibernating or migratory species, to hibernate or migrate; or (b) to affect significantly the local distribution or abundance of the species to which they belong. Note, however, that disturbing activity likely to have these identified consequences is included in particular in the prohibition; it does not follow that other activity having an adverse impact on the species may not also offend the prohibition. In summary, therefore, whilst I prefer Mr Camerons suggested approach to this article (see para 18 above) than that adopted by the Court below or that contended for by Mr George, it seems to me in the last analysis somewhat simplistic. To say that regard must be had to the effect of the activity on the conservation status of the species is not to say that it is prohibited only if it does affect that status. And the rest of the formulation is hardly illuminating. Tempting although in one sense it is to refer the whole question as to the proper interpretation and application of article 12(1)(b) to the Court of Justice of the European Union pursuant to article 267 of the Lisbon Treaty, I would not for my part do so. It seems to me unrealistic to suppose that the Court of Justice would feel able to provide any greater or different assistance than we have here sought to give. Issue Two The proper application of Regulation 3(4) of the 1994 Regulations (as amended) I can deal with this issue altogether more briefly. Article 12(1) requires member states to take the requisite measures to establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range. Wisely or otherwise, the UK chose to implement the Directive by making a breach of the article 12 prohibition a criminal offence. Regulation 39 of the 1994 Regulations (as amended) provides that: (1) a person commits an offence if he . (b) deliberately disturbs wild animals of any such species [i.e. a European protected species]. It is Natural England, we are told, who bear the primary responsibility for policing this provision. It used to be the position that the implementation of a planning permission was a defence to a regulation 39 offence. That, however, is no longer so and to my mind this is an important consideration when it comes to determining the nature and extent of the regulation 3(4) duty on a planning authority deliberating whether or not to grant a particular planning permission. Ward LJ dealt with this question in paragraph 61 of his judgment as follows: 61. The Planning Committee must grant or refuse planning permission in such a way that will establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range . If in this case the committee is satisfied that the development will not offend article 12(1)(b) or (d) it may grant permission. If satisfied that it will breach any part of article 12(1) it must then consider whether the appropriate authority, here Natural England, will permit a derogation and grant a licence under regulation 44. Natural England can only grant that licence if it concludes that (i) despite the breach of regulation 39 (and therefore of article 12) there is no satisfactory alternative; (ii) the development will not be detrimental to the maintenance of the population of bats at favourable conservation status and (iii) the development should be permitted for imperative reasons of overriding public importance. If the planning committee conclude that Natural England will not grant a licence it must refuse planning permission. If on the other hand it is likely that it will grant the licence then the planning committee may grant conditional planning permission. If it is uncertain whether or not a licence will be granted, then it must refuse planning permission. In my judgment this goes too far and puts too great a responsibility on the Planning Committee whose only obligation under regulation 3(4) is, I repeat, to have regard to the requirements of the Habitats Directive so far as [those requirements] may be affected by their decision whether or not to grant a planning permission. Obviously, in the days when the implementation of such a permission provided a defence to the regulation 39 offence of acting contrary to article 12(1), the Planning Committee, before granting a permission, would have needed to be satisfied either that the development in question would not offend article 12(1) or that a derogation from that article would be permitted and a licence granted. Now, however, I cannot see why a planning permission (and, indeed, a full planning permission save only as to conditions necessary to secure any required mitigating measures) should not ordinarily be granted save only in cases where the Planning Committee conclude that the proposed development would both (a) be likely to offend article 12(1) and (b) be unlikely to be licensed pursuant to the derogation powers. After all, even if development permission is given, the criminal sanction against any offending (and unlicensed) activity remains available and it seems to me wrong in principle, when Natural England have the primary responsibility for ensuring compliance with the Directive, also to place a substantial burden on the planning authority in effect to police the fulfilment of Natural Englands own duty. Where, as here, Natural England express themselves satisfied that a proposed development will be compliant with article 12, the planning authority are to my mind entitled to presume that that is so. The Planning Committee here plainly had regard to the requirements of the Directive: they knew from the Officers Decision Report and Addendum Report (see para 8 above and the first paragraph of the Addendum Report as set out in para 72 of Lord Kerrs judgment) not only that Natural England had withdrawn their objection to the scheme but also that necessary measures had been planned to compensate for the loss of foraging. For my part I am less troubled than Ward LJ appears to have been (see his para 73 set out at para 16 above) about the UBSs conclusions that no significant impacts to bats are anticipated and, indeed, about the Decision Reports reference to measures to ensure there is no significant adverse impact to [protected bats]. It is certainly not to be supposed that Natural England misunderstood the proper ambit of article 12(1)(b) nor does it seem to me that the planning committee were materially misled or left insufficiently informed about this matter. Having regard to the considerations outlined in para 29 above, I cannot agree with Lord Kerrs view, implicit in paras 75 and 76 of his judgment, that regulation 3(4) required the committee members to consider and decide for themselves whether the development would or would not occasion such disturbance to bats as in fact and in law to constitute a violation of article 12(1)(b) of the Directive. Even, moreover, had the Planning Committee thought it necessary or appropriate to decide the question for themselves and applied to article 12(1)(b) the less exacting test described above rather than Ward LJs test of imperilling the bats conservation status, there is no good reason to suppose that they would not have reached the same overall conclusion as expressed in paras 74 and 75 of Ward LJs judgment (see para 16 above). I would in the result dismiss this appeal. LORD WALKER For the reasons given in the judgment of Lord Brown, with which I agree, and for the further reasons given by Lady Hale and Lord Mance, I would dismiss this appeal. LADY HALE On the first issue, I have nothing to add to the judgment of Lord Brown, with which I agree. I also agree with him on the second issue, but add a few observations of my own because we are not all of the same mind. The issue is whether the Regulatory Committee of Hampshire County Council (the planning authority for this purpose) complied with their duty to have regard to the requirements of the Habitats Directive so far as they may be affected by the exercise of their planning functions (Conservation (Natural Habitats etc) Regulations 1994, reg 3(4); see also Conservation and Species and Habitats Regulations 2010, reg 9(5)). It is, of course, always important that the legal requirements are properly complied with, perhaps the more so in cases such as this, where the County Council is both the applicant for planning permission and the planning authority deciding whether it should be granted. Some may think this an unusual and even unsatisfactory situation, but it comes about because in this country planning decisions are taken by democratically elected councillors, responsible to, and sensitive to the concerns of, their local communities. As Lord Hoffmann put it in R (Alconbury Developments Ltd and others) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 69, In a democratic country, decisions about what the general interest requires are made by democratically elected bodies or persons accountable to them. Democratically elected bodies go about their decision making in a different way from courts. They have professional advisers who investigate and report to them. Those reports obviously have to be clear and full enough to enable them to understand the issues and make up their minds within the limits that the law allows them. But the courts should not impose too demanding a standard upon such reports, for otherwise their whole purpose will be defeated: the councillors either will not read them or will not have a clear enough grasp of the issues to make a decision for themselves. It is their job, and not the courts, to weigh the competing public and private interests involved. It is important to understand the chronology in this case. The planning application was dated 31 March 2009. Natural England was consulted. Their first reply is dated 30 April. In it they objected to the application on the ground that that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on legally protected species. Specifically, they were concerned about the impact upon bats and great crested newts. Reference was made to the impacts of the development and mitigation upon European Protected Species and the council were reminded of, among other things, their duty under regulation 3(4). This objection was maintained in a letter dated 29 June 2009. Further information on Great Crested Newts and the Updated Bat Survey were submitted in early July in response to this. Based on this information, Natural England wrote on 17 July 2009 withdrawing their objection, subject to recommendations about the conditions to be imposed if planning permission were granted. This letter also contained comments about common widespread reptiles and asking that these too be addressed although Natural England was not lodging an objection in relation to them. Natural England wrote again on 23 July with their final response to the proposal. This dealt, first, with the fact that the site was close to the Portsmouth Harbour Site of Special Scientific Interest, itself part of the Portsmouth Harbour Special Protection Area and Ramsar site and gave their advice on the requirements of regulation 48(1)(a) of the Habitats Regulations. Regulation 48(1)(a) imposes a specific obligation on planning authorities, among others, to make an appropriate assessment of the implications for a European protected site before granting permission for a proposal which is likely to have a significant effect upon the site. The letter advised that, provided that specified avoidance measures were fully implemented, the proposal would not be likely to have a significant effect upon the protected sites. Thus they had no objection on this score and permission could be granted. The letter went on to deal with Protected species and biodiversity under a separate heading, repeated that they had withdrawn their objection subject to the implementation of all the recommended mitigation, but reminded the council that whilst we have withdrawn our objection to the scheme in relation to European protected species, we have ongoing concerns regarding other legally protected species on site . A separate paragraph went on to deal with biodiversity. The Officers Report was prepared for the Committee meeting, which was due to take place on 29 July 2009, before receipt of the letter of 23 July. It is 31 pages long. The executive summary lists the main issues raised, including concern at the procedure because this is a County Council scheme and nature conservation impact (para 1.4). The account of the Proposals refers to the detailed ecological surveys undertaken, including the bat surveys carried out to enable appropriate measures to be implemented; but states that the impact on the designated sites would be negligible (para 3.7). The section on Consultations includes a paragraph explaining that Natural England had initially objected on the grounds that the application contains insufficient survey information to demonstrate whether or not the development would have an adverse effect on bats and great crested newts which are legally protected species but that they had withdrawn their objection after further survey work was undertaken (para 5.6). The section on Nature conservation impact deals first with the proximity to the protected sites and points out that the requirements of the Habitats Regulations needed to be considered (para 8.17). This is a reference to the specific obligation in regulation 48(1)(a). It went on to explain why it was thought that an appropriate assessment was not needed, noting that Natural England had raised no concerns about any impact on these sites (para 8.18). The report then turns to the corridor itself, referring to the Environmental Report submitted with the application, which dealt with badgers, bats, great crested newts, and reptiles; on bats, it states that An Updated Bat Survey Method Statement and Mitigation Strategy has been submitted with measures to ensure there is no significant adverse impact to them for these proposals (para 8.19). The report concludes by recommending that no appropriate assessment is required under the Habitats Regulations (para 9.2); that planning permission be granted (para 9.3); and that the proposed development accords with the Development Plan and the relevant Policies, because, among other things suitable mitigation measures are proposed for badgers and protected species (para 9.4). There is a cross reference to the annexed policy C18 on Protected Species, which states that Development which would adversely affect species, or their habitats, protected by the Habitats Regulations 1994, the Wildlife and Countryside Act 1981 or other legislation will not be permitted unless measures can be undertaken which prevent harm to the species or damage to the habitats. Where appropriate, a permission will be conditioned or a legal agreement sought to secure the protection of the species or their [habitat]. After receiving the letter from Natural England dated 23 July, an addendum to the report was prepared, dealing with three issues which had arisen since the report was finalised. Under the heading Habitats Regulations it deals first with the objections raised by Natural England requiring additional survey information concerning potential for the presence of great crested newts and bats, which are protected species. It points out that the survey work was undertaken and Natural England had withdrawn their objection. In two separate paragraphs, it goes on to explain that Natural England had now given specific advice on the requirements of regulation 48(1)(a) (thus reinforcing the recommendation made in para 9.2 of the main report). It is quite clear from all of this that separate consideration was being given both to the effect upon European protected species and to the effect upon the protected sites, that both were being considered under the Habitats Regulations, and that the applicable Policy on Protected Species, which also refers to the Habitats Regulations 1994, was being applied. It is true that the report does not expressly mention either regulation 3(4) or article 12 of the Directive. In my view, it is quite unnecessary for a report such as this to spell out in detail every single one of the legal obligations which are involved in any decision. Councillors were being advised to consider whether the proposed development would have an adverse effect on species or habitats protected by the 1994 Regulations. That in my view is enough to demonstrate that they had regard to the requirements of the Habitats Directive for the purpose of regulation 3(4). That is all they have to do in this context, whereas regulation 48(1)(a) imposes a more specific obligation to make an appropriate assessment if a proposal is likely to have a significant effect upon a European site. It is not surprising, therefore, that the report deals more specifically with that obligation than it does with the more general obligation in regulation 3(4). Furthermore, the United Kingdom has chosen to implement article 12 of the Directive by creating criminal offences. It is not the function of a planning authority to police those offences. Matters would, as Lord Brown points out, have been different if the grant of planning permission were an automatic defence. But it is so no longer. And it is the function of Natural England to enforce the Directive by prosecuting for these criminal offences (or granting licences to derogate from the requirements of the Directive). The planning authority were entitled to draw the conclusion that, having been initially concerned but having withdrawn their objection, Natural England were content that the requirements of the Regulations, and thus the Directive, were being complied with. Indeed, it seems to me that, if any complaint were to be made on this score, it should have been addressed to Natural England rather than to the planning authority. They were the people with the expertise to assess the meaning of the Updated Bat Survey and whether it did indeed meet the requirements of the Directive. The planning authority could perhaps have reached a different conclusion from Natural England but they were not required to make their own independent assessment. But if I am wrong about this, and the planning authority did have to make an independent assessment in terms of article 12(1)(b), there is absolutely no reason to think that they would have reached a different conclusion and refused planning permission on this account. They may have reached their decision by a majority of six votes to five. But the Minutes make it clear that there were a great many other problems to worry about with this scheme. While the impact on nature was among the many matters upon which members questioned officers, this was not one of their listed concerns. If this scheme was not going to get planning permission, it would be because of the local residents concerns about the impact upon them rather than because of the members concerns about the impact upon the bats. I would therefore dismiss this appeal on both issues. LORD MANCE I agree with the reasoning and conclusions of Lord Brown and Lady Hale on each of the issues. I add only a few words because the court is divided on the second. Lord Kerrs dissent on this issue is, I understand, based on the premise that (a) Natural England had not expressed a view that the proposal would not involve any breach of the Habitats Directive, and (b) if it had, the planning committee was not informed of this: see his paras 73 and 74. For the reasons given in Lord Browns and Lady Hales judgments, I cannot agree with either aspect of this premise. I add the following in relation to the suggestion that Natural England was, in its letter of 17 July 2009, preoccupied with matters that were quite separate from the question whether there would be disturbance to bats such as would be in breach of article 12 of the Directive or that the letter was principally taken up with the question of possible impact on common widespread reptiles (para 69 below). It is true that the longer part of the text of the letter of 17 July related to the latter topic, in relation to which Natural England at the end of the letter made clear it was not lodging an objection, but was only asking that further attention be given and comments supplied. But the first, and in the circumstances obviously more significant, aspect of the letter consisted in its first three paragraphs. These withdrew Natural Englands previous objection made on 30 April and reiterated on 29 June in relation to great crested newts and bats. The withdrawal was in the light of the information, including the Updated Bat Survey, which the Council had earlier in July supplied. In withdrawing their objection, Natural England emphasised the importance of the mitigation procedures outlined in section 10 of the Survey, and added the further recommendation that the Council look closely at the requirement for night working and keep any periods of such working to an absolute minimum. This confirms the attention it gave to the information supplied. When making its objection in its letter dated 30 April, Natural England had said: Our concerns relate specifically to the likely impact upon bats and Great Crested Newts. The protection afforded these species is explained in Part IV and Annex A of Circular 06/2005 biodiversity and Geological Conservation Statutory Obligations and their Impact within the Planning System. Part IV of Circular 06/2005 stated that the Habitats Regulations Conservation (Natural Habitats &c.) Regulations 1994 implemented the requirements of the Habitats Directive and that it was unlawful under regulation 39 deliberately to disturb a wild animal of a European protected species. Annex A identified all species of bats as wild animals of European protected species. It is therefore clear that Natural England was, from the outset, focusing on the protected status of all species of bats under the Directive and domestic law; and that its withdrawal of its objection on 17 July was directly relevant to the planning committees performance of its role under regulation 3(4) to have regard to the requirements of that Directive in the exercise of its functions. The planning officers first report dated 29 July summarised the position for the planning committee in accurate terms. Thereafter, as Lord Brown and Lady Hale record, Natural Englands further letter dated 23 July arrived, reiterating Natural Englands as position stated in its letter dated 17 July. This too was again accurately summarised to the committee by the planning officer in his addendum dated 29 July to his previous report. With regard to the Updated Bat Survey, there is no reason to believe that Natural England did not, when evaluating this, understand both the legal requirements and their general role and responsibilities at the stage at which they were approached by the Council. The Survey repays study as a whole, and I merely make clear that I do not share the scepticism which Lord Kerr feels about some of its statements or agree in all respects with his detailed account of its terms and their effect. The important point is, however, is that Natural England was well placed to evaluate this Survey, and, having done so, gave the advice they did. This was, in substance, accurately communicated to the planning committee, in a manner to which the committee was entitled to have, and must be assumed to have had, regard. In addition to my agreement with the other parts of Lord Browns and Lady Hales judgments, I confirm my specific agreement with Lady Hales penultimate paragraph. LORD KERR As legislative provisions go, regulation 3 (4) of the Conservation (Natural Habitats, &c.) Regulations 1994 (the Habitats Regulations) is relatively straightforward. Its terms are uncomplicated and direct. It provides: (4) every competent authority in the exercise of any of their functions, shall have regard to the requirements of the Habitats Directive so far as they may be affected by the exercise of those functions. In plain language this means that if you are an authority contemplating a decision that might have an impact on what the Directive requires, you must take its requirements into account before you reach that decision. Of course, if you know that another agency has examined the question and has concluded that none of those requirements will be affected, and if you are confident that such agency is qualified to make that judgment, this may be sufficient to meet your obligation under the regulation. What lies at the heart of this appeal is whether the regulatory committee of Hampshire County Council, when it came to make the decision whether to grant the planning permission involved in this case, either had regard itself to the requirements of the Habitats Directive or had sufficient information to allow it to conclude that some other agency, in whose judgment it could repose trust, had done so and had concluded that no violation arose. An old and currently disused railway line runs between Gosport and Fareham in South Hampshire. A section of this, between Redlands Lane, Fareham and Military Road, Gosport is some 4.7 kilometres in length. On 31 March 2009 Hampshire County Council, acting on behalf of Transport for South Hampshire, applied for planning permission to develop this section in order to create what is described as a busway. Transport for South Hampshire is a name used to describe three local authorities, Hampshire County Council, Gosport Borough Council and Fareham Borough Council. Planning permission was granted on 29 July 2009 At present there is serious congestion on the main road between Gosport and Fareham. It is planned that the busway should operate by allowing buses to join existing roads at various points along the route and that a fast, efficient and reliable public transport service will ensue. It will also be possible to cycle on the route. Local residents will be encouraged to use buses and bicycles in preference to their private vehicles and it is hoped that the congestion will thereby be relieved. The busway is to be constructed in two phases, 1A and 1B. Clearance work for the first of these is already underway and funding is available to complete this phase. The second phase does not yet have funding. Its future development is not assured. The railway line along which the busway is to be developed was closed as a result of recommendations made in the Beeching report of 1963. It appears that closure did not finally take effect until June 1991, however. In that month the last train ran along the line. Since then the area has become overgrown. It is now regarded as an ecological corridor for various flora and fauna. Several species of bats fly through and forage in the area but no bat roosts have been found on the planning application site itself. There are two bat roosts in proximity to the route, one in Savernake Close, near the southern section of Phase 1A, the other at Orange Grove which is close to the northern section of Phase 1B All bats are European Protected Species, falling within Annex IV (a) of Council Directive 92/43/EEC (the Habitats Directive). Article 12 of this Directive requires Member States to take the requisite measures to establish a system of strict protection for the animal species listed in the annex. The Conservation (Natural Habitats, &c.) Regulations 1994 were made for the purpose of implementing the Habitats Directive. The regulations prescribe a number of measures (most notably in relation to this case, Regulation 39) which seek to achieve this level of protection. Derogation from these measures is permitted to those who obtain a licence from the appropriate authority. Natural England is the nature conservation body specified in the regulations as the licensing authority in relation to European protected species. Although the issue of a licence is quite separate from the grant of planning permission, Natural England is regularly consulted on applications for development where the Habitats Directive and the regulations are likely to be in play and so it was that in April 2009 a letter was sent by the environment department of the Council seeking Natural Englands views about the proposal. On 30 April 2009, Natural England replied, objecting to the scheme and recommending that planning permission be refused. Bat surveys had been undertaken in 2008. These considered the suitability of the habitat for bats; they also examined how bats used the site and which species of bats were present. Clearly, however, the detail of the information yielded by these surveys was insufficient to satisfy Natural Englands requirements for it stated that the application contained insufficient survey information to demonstrate whether or not the development would have an adverse effect on legally protected species. The letter also recommended that the local planning authority should consider all the points made in an annex that was attached to the letter. This provided guidance on survey requirements and on how the authority should fulfil its duties on biodiversity issues under [among others] Regulation 3 (4) of The Conservation (Natural Habitats &c.) Regulations 1994 to ensure that the potential impact of the development on species and habitats of principal importance is addressed. Amendments to the scheme were undertaken but these did not allay Natural Englands concerns and their objection to the planning application was repeated in a letter of 29 June 2009. An updated bat survey (leading to the publication of a report entitled Survey Method Statement and Mitigation Strategy) was carried out on behalf of the Council. The survey identified two species of bat which had not been detected in the 2008 survey. Greater levels of foraging and commuting were also recorded along the disused railway. No roost sites were found but the presence of a common pipistrelle roost was confirmed approximately 40 metres from planned works. The report concluded that the works would result in the loss of a number of trees with low to moderate roost potential and approximately seven trees with moderate to high roost potential. Although no known roosts would be lost, because of the difficulty in identifying tree roosts, the Bat Conservation Trust recommends that it should be assumed that trees with high potential as roosts are in fact used as roosts. On this basis a number of roosts will be lost as a result of the works. Impact on commuting of bats between foraging habitats was also anticipated. It was felt that this could be restored in the longer term but, until restoration was complete, at least four species of bats that had been detected in the area would be affected. It was concluded that the removal of trees and vegetation would result in the loss of good quality habitats for foraging. Loss of foraging habitats would have an inevitable adverse impact on three species of local bats with one of these (Myotis sp) being more severely affected. This was characterised as a moderate impact at local level during the time that the vegetation was being re established, a period estimated in the survey to be at least seven years. On the issue of the long term impact of the loss of foraging habitats the report was somewhat ambivalent. At one point it suggested that there would be a long term slight adverse to neutral impact. Later, it suggested that it was probable that the re creation of good foraging habitats would result in an eventual neutral impact. The introduction of artificial lighting would affect the quality of foraging habitat by attracting insects from unlit areas. Although this would favour some species, it would adversely affect others. Moreover, increased lighting can delay the emergence of bats from roosts and so reduce foraging opportunities. Lighting also constitutes a barrier to bats gaining access to foraging areas. Although the report is silent on the duration of these effects, it must be presumed that they will be permanent. In a somewhat bland claim, however, the authors assert that with mitigation to reduce light spill and the selection of lights with a low UV output, the impact of lighting on bats is not anticipated to be significant. Increased noise levels would also have an adverse impact on some species of bats, the Brown long eared in particular. The report concludes at this point that is probable that there would be a slight adverse impact on foraging habitats from operational noise. Again, the report does not expressly state how long this would last but, since the noise source is the operation of the busway, it must be presumed to be permanent. The overall conclusion of the report was that it was probable that there would be a short term moderate adverse impact on bats. (As Lord Brown has pointed out, this short term impact is likely to continue for some nine years). If planned mitigation measures are successful, the long term impact of the works was anticipated to be slight adverse. On this basis the authors of the report concluded that no significant impacts to bats were anticipated. This general conclusion requires to be treated with some caution, in my opinion. There can be no doubt that effects which could not be described as insignificant will occur for some seven to nine years at least. Thereafter, while the long term impact may not be quantitatively substantial, it will be permanent. The bat survey, together with further information, was sent to Natural England in July 2009. In consequence, the objection to the application was withdrawn. Natural England considered that planning permission could now be granted, albeit subject to certain conditions. The letter relaying the withdrawal of the objection contained the following: Natural England has reviewed the further information submitted (Great Crested Newt Survey Method Statement and Mitigation Strategy, June 2009 and Updated Bat Survey Method Statement and Mitigation Strategy, July 2009) and can now confirm that we are able to withdraw our objection of 30 April 2009, subject to the following comments: We recommend that should the Council be minded to grant permission for this scheme, conditions be attached requiring implementation of all the mitigation/compensation detailed within these reports. Particularly at Section 10 of the Bat Report and Section 6 of the Great Crested Newt Report. We would also recommend that the Council look closely at the requirement for night time working and associated flood lighting. Natural England would not advocate night reasons of for time working disturbance/disruption to the lifecycle of nocturnal wildlife and the Council should ensure these periods are kept to an absolute minimum. The head of planning and development made a report (referred to as the officers decision report) to the regulatory committee of the Council which was to take the planning decision on 29 July 2009. The impact on nature conservation was one of the issues of concern identified in the report. Lord Brown has quoted in para 8 of his judgment many of the material parts of the report that touch on this issue and I will not repeat all of those here. It is important, however, I believe, to understand the context of the statement in para 8.17 (quoted in part by Lord Brown) that the Habitats Regulations needed to be considered. The full para reads as follows: The site is not within any designated sites of importance for nature conservation. However the site is within 30 metres, at its closest, to the Portsmouth Harbour Special Protection Area (SPA) and Portsmouth Harbour RAMSAR site. Therefore the requirements of the Habitats Regulations need to be considered. (my emphasis) As Lord Brown has pointed out, the report in para 8.19 stated that the updated bat survey report contained measures to ensure (emphasis added) there is no significant adverse impact to bats from the proposals. This appears to me to be a gloss on what had in fact been said in the report. The actual claim made (itself, in my opinion, not free from controversy) was that it was anticipated that there would be no significant impacts on bats if the mitigation measures succeeded. Two points about the decision officers report should be noted, therefore. Firstly, the enjoinder to consider the Habitats Regulations was made because of the proximity of the works to sites requiring special protection rather than in relation to the need to avoid disturbance of bats in the ecological corridor itself. Secondly, it conveyed to the members of the regulatory committee the clear message that the updated bat survey report provided assurance that there would be no significant impact on bats. No reference was made to the moderate adverse impact that would occur over the seven to nine year period that regeneration of the forage areas would take nor to the permanent, albeit slight, impact that those measures could not eliminate. Lord Brown has said that the addendum to the officers report dealt specifically with the Habitats Regulations. It did, but the context again requires to be carefully noted. In order to do this, I believe that the entire section dealing with the regulations must be set out. It is in these terms: Habitats Regulations As stated in the report Natural England initially raised a holding objection to the application, requiring additional survey information concerning potential for the presence of great crested newts and bats, which are protected species. This survey work was undertaken and sent to Natural England, who are now satisfied and subsequently withdrew their objection. As also stated in the report the application site lies close to habitats which form part of the Portsmouth Harbour Site of Special Scientific Interest (SSSI). This SSSI is part of the Portsmouth Harbour Special Protection Area (SPA) and Ramsar Site. Under the Conservation (Natural Habitats etc) Regulations 1994, as amended ('the Habitats Regulations') the County Council is the competent authority and has to make an assessment of the impacts of the proposal on this European site, therefore the second recommendation for the Committee is to agree that the proposal is unlikely to have a significant impact on the European site. It was implied that by withdrawing their objection Natural England did not consider there would be any significant impact, but they did not specifically give their advice. Since the report was finalised Natural England have now given specific advice on the requirements of Regulation 48 (1) (a) of the "Habitats Regulations". They raise no objection subject to the avoidance measures included in the application being fully implemented and advise that their view is that either alone or in combination with other plans or projects, this proposal would not be likely to have a significant effect on the European site and the permission may be granted under the terms of the Habitats Regulations. Regulation 48 (1) (a) requires a competent authority, before deciding to undertake, or give any consent, permission or other authorisation for, a plan or project which is likely to have a significant effect on a European site in Great Britain to make an appropriate assessment of the implications for the site in view of that site's conservation objectives. It has nothing to do with the need to ensure that there is no disturbance of species of bats. The addendum to the decision officers report, therefore, offered no information whatever to the regulatory committee on the vital question whether the proposal would comply with article 12 of the Habitats Directive. Indeed, it is clear from an examination of the letter from Natural England of 17 July 2009 that it was preoccupied with matters that were quite separate from the question whether there would be disturbance to bats such as would be in breach of article 12 of the Directive. The letter was principally taken up with the question of possible impact on common widespread reptiles. In so far as the letter dealt with the question of the impact on bats, its tone certainly did not convey a view that the planning committee need not consider that matter further. On the contrary, on a fair reading of the letter, Natural England was making it clear that this issue required to be addressed by the committee, not only in terms of the conditions to be applied but also as to whether night time working would be unacceptable because of disturbance to wildlife. The committee considered the report of the decision officer and the addendum to it and received an oral presentation from officers of the council. The minutes of their meeting record the following in relation to the oral presentation: In introducing the report, Officers informed Members that the proposal formed part of the strategy to improve the reliability and quality of public transport in South Hampshire and the access to Gosport and Fareham. A Traffic Regulation Order would be imposed on the bus way to allow only cycles, buses and emergency vehicles to use it. Members were advised that an Environmental Impact Assessment (EIA) was not required as the proposal was a freestanding project that did not give rise to 'significant environmental effects'. Notwithstanding that, the County Council considered that important nature conservation, amenity and traffic issues had to be properly addressed and reports on these matters had been taken into account. The addendum to the report provided reassurance that Natural England had no objection to the proposals and confirmed their view that an appropriate assessment under the Habitat Regulations was not required and provided further clarification about the application and the Issue of 'screening' under the EIA Regulations. At best, this had the potential to mislead. A committee member might well think that Natural England had concluded that there would be no violation of article 39 (1) (b) of the 1994 Regulations (which forbids the deliberate disturbance of wild animals of a European protected species) or, more particularly, article 12 of the Habitats Directive. Of course the true position was that Natural England had expressed no explicit opinion whatever on that question. At most, it might be presumed that this was its view. Even if that presumption could be made, however, it does not affect the clear indication in the letter of 17 July 2009 that this matter was still one which required the committees attention. I can find nothing in the letter which suggests that Natural England regarded this matter as closed. Nor do I believe that the letter could have been properly interpreted by the committee as relieving it of the need to consider the issue. The critical issue on this appeal, therefore, is whether there is any evidence that the regulatory committee considered at all the duty that it was required to fulfil under regulation 3 (4) of the 1994 Regulations. In addressing this question I should immediately say that I agree with Lord Brown on his analysis of the nature of the requirement in article 12 (1) (b) of the Habitats Directive. As he has observed, a number of broad considerations underlie the application of the article. It is designed to protect species (not specimens of species) and its focus is on the protection of species rather than habitats, although, naturally, if major intrusion on habitats is involved, that may have an impact on the protection of the species. Not every disturbance will constitute a breach of the article. The nature and extent of the disturbance must be assessed on a case by case basis. The European Commissions guidance document of February 2007 contains a number of wise observations as to how the application of the article should be approached. While the word significant has not been employed in article 12 (1) (b), a certain negative impact likely to be detrimental must be involved. In making any evaluation of the level of disturbance, the impact on survival chances, breeding success or reproductive ability of the affected species are all obviously relevant factors. Like Lord Brown, I am sanguine about Mr Cameron QCs formulation of the test as one involving the question whether there has been a certain negative impact likely to have been detrimental to the species, having regard to its effect on the conservation status of the species. And also like Lord Brown, I consider that the Court of Appeal pitched the test too high in saying that disturbance must have a detrimental impact on the conservation status of the species at population level or constitute a threat to the survival of the protected species. Trying to refine the test beyond the broad considerations identified by Lord Brown and those contained in the Commissions guidance document is not only difficult, it is, in my view, pointless. In particular, I do not believe that the necessary examination is assisted by recourse to such expressions as de minimis. A careful investigation of the factors outlined in Lord Browns judgment (as well as others that might bear on the question in a particular case) is required. The answer is not supplied by a pat conclusion as to whether the disturbance is more than trifling. Ultimately, however, and with regret, where I must depart from Lord Brown is on his conclusion that the regulatory committee had regard to the requirements of the Habitats Directive. True it is, as Lord Brown says, that they knew that Natural England had withdrawn its objection. But that cannot substitute, in my opinion, for a consideration of the requirements of the Habitats Directive. Regulation 3 (4) requires every competent authority to have regard to the Habitats Directive in the exercise of its functions. The regulatory committee was unquestionably a competent authority. It need scarcely be said that, in deciding whether to grant planning permission, it was performing a function. Moreover the discharge of that function clearly carried potential implications for an animal species for which the Habitats Directive requires strict protection. Neither the written material submitted to the committee nor the oral presentation made by officers of the council referred to the Habitats Directive. The reference to Natural Englands consideration of the Habitats Regulations, if it was properly understood, could only have conveyed to the committee that that consideration had been for a purpose wholly different from the need to protect bats. It could in no sense, therefore, substitute for a consideration of the Habitats Directive by the committee members whose decision might well directly contravene one of the directives central requirements. It is for that reason that I have concluded that those requirements had to be considered by the committee members themselves. It may well be that, if Natural England had unambiguously expressed the view that the proposal would not involve any breach of the Habitats Directive and the committee had been informed of that, it would not have been necessary for the committee members to go behind that view. But that had not happened. It was simply not possible for the committee to properly conclude that Natural England had said that the proposal would not be in breach of the Habitats Directive in relation to bats. Absent such a statement, they were bound to make that judgment for themselves and to consider whether, on the available evidence the exercise of their functions would have an effect on the requirements of the directive. I am afraid that I am driven to the conclusion that they plainly did not do so. As I have said, Natural England (at the time that it was considering the Habitats Regulations in July 2009) had not explicitly addressed the question whether the disturbance of bats that the proposal would unquestionably entail would give rise to a violation of the directive. The main focus of the letter of 19 July was on an entirely different question. Lord Brown may well be correct when he says that it is not to be supposed that Natural England misunderstood the proper ambit of article 12 (1) (b), but the unalterable fact is that it did not say that it had concluded that no violation would be involved, much less that the planning committee did not need to consider the question. It is, of course, tempting to reach ones own conclusion as to whether the undoubted impact on the various species of bats that will be occasioned by this development is sufficient or not to meet the requirement of disturbance within the meaning of article 12. But this is not the function of a reviewing court. Unless satisfied that, on the material evidence, the deciding authority could have reached no conclusion other than that there would not be such a disturbance, it is no part of a courts duty to speculate on what the regulatory committee would have decided if it had received the necessary information about the requirements of the Habitats Directive, much less to reach its own view as to whether those requirements had been met. Since the planning permission was granted on a vote of six in favour and five against, with two abstentions, it is, in my view, quite impossible to say what the committee would have decided if it had been armed with the necessary knowledge to allow it to fulfil its statutory obligation. Other members of the court have expressed the view that this is what the committee would have decided. Had I felt it possible to do so, I would have been glad to be able to reach that conclusion. As it is, I simply cannot. I would therefore allow the appeal and quash the planning permission. |
A person infringes a patent for a particular product if he makes, disposes of, offers to dispose of, uses or imports the product or keeps it see section 60(1)(a) of the Patents Act 1977 (the 1977 Act). The principal issue on this appeal concerns the meaning of the word makes. The other aspect of this appeal raises a number of issues arising out of section 68 of the 1977 Act. The background facts and the patent in suit Intermediate Bulk Containers An intermediate bulk container, unsurprisingly known as an IBC, is a large container, normally around 1000 litres in volume, used for the transport of liquids. Such containers face tough transport conditions. They must be capable of bearing heavy weights (as much as six tonnes, as they are often stacked four-high), of withstanding prolonged or violent vibration, and of resisting the forces caused by the liquid splashing around inside, without buckling, cracking or springing leaks. IBCs of a two-part construction, resting on a flat pallet (of wood, steel, or plastic) have been well known in the trade for many years. They consist of a metal cage into which a large plastic container (or bottle) is fitted. The bottle has to fit the cage snugly, as otherwise the cage will not provide full protection, and the walls of the bottle will not be properly supported. The general idea is shown by the prior art IBC which is illustrated in the description of the patent involved in this case: IBCs are used to transport a wide range of types of liquid. Often, the bottle cannot be reused, because it contains residues of a toxic liquid or because it has been physically damaged. While the cage also has a limited life-span, which depends on a number of factors (such as the means and conditions of transport and climatic conditions), it has a significantly longer life expectancy than a bottle; the evidence suggested that, on average, it is about five or six times as long. Reconditioning Reconditioners engage in re-bottling or cross-bottling used IBCs. In either case the old bottle is removed, any damage to the cage repaired, and a new bottle is fitted within the cage. Re-bottling involves replacing the bottle with a fresh bottle from the original manufacturer; cross-bottling involves replacing the bottle with a bottle from a different source. Opinion in the industry is divided about cross-bottling. Because the bottle is not specifically designed for the cage, the fit is not always as good as with a bottle from the original manufacturer. For instance, stabilising loops in the top of the bottle may not precisely match up with bars on the cage, or the bottle may not fit so as to drain properly without tipping. However, there appears to be a healthy market for cross-bottled IBCs. The IBC market IBCs are normally sold by a manufacturer to a filler, who then uses the IBC to send its product to an end-user. Fillers typically include large chemical companies, and end-users include fizzy drink wholesalers, cosmetic suppliers and pharmaceutical companies. Manufacturers of new IBCs often also recondition their own original IBCs, but there are many suppliers of IBCs who are solely reconditioners. Reconditioners (whether or not they are the original manufacturers) normally collect used IBCs from end-users, who have no further use for the used IBCs. The end-users are sometimes, but by no means always, paid for these used IBCs by the reconditioners. After re-bottling or cross-bottling an IBC, the reconditioner offers the reconditioned product to fillers on the market in competition with the products of original manufacturers, and of other reconditioners. Reconditioned IBCs are, predictably, generally cheaper than new IBCs. The invention and the Patent in this case European Patent (UK) 0 734 967 (the Patent) has a priority date of 30 March 1995. Claim 1 of the Patent (the Claim) is the only relevant claim for present purposes. It is in the following terms (with added sub-paragraphs): [A] Pallet container for the transporting and storing of liquids, having a flat pallet, an exchangeable inner container made of plastic material with an upper, closable filler opening and a lower emptying device and also, surrounding the inner container, one outer sleeve which consists of vertical and horizontal lattice bars made of metal which support the plastic inner container filled with liquid, [B] the lattice bars which are configured as tubes being indented at the intersection points to form trough-like, double-walled recesses extending in the longitudinal direction of the lattice bars [C] in such a manner that at each intersection point between the longitudinal edges of the recesses of two lattice bars lying perpendicularly one above the other there arise four contact points with a material accumulation respectively corresponding to the quadruple lattice bar wall thickness, and the four contact points of the two lattice bars being welded together at the intersection points, [D] characterised in that the trough-like recesses of the vertical and horizontal lattice bars have a central raised part extending across the cross-section of the recesses, [E] two lattice bars respectively lying one above the other at the intersection points are welded together at the four contact points of these raised parts and the incisions of the recesses of the lattice bars adjacent on both sides to the raised part [F] with the contact and weld points form restrictedly elastic bending points with a reduced bending resistance moment relative to the raised part for relieving the weld joints at the intersection points upon application of static and/or dynamic pressure on the lattice sleeve. Read on its own, the Claim is not immediately accessible, and it would normally be inappropriate to consider its meaning or effect without explaining its factual and technical context, including the description (i.e. the narrative preceding the claims) of the Patent, reasonably fully. However, given the issues which require consideration on this appeal, only the following points need be identified: i. Item [A] extends to a complete IBC, i.e. a pallet, a bottle (the inner container) and a cage (the outer sleeve); ii. The claimed inventiveness lies in items [D], [E], and [F], as is indicated by the introductory words characterised in that; iii. The inventiveness of the Patent lies in the idea of flexible weld joints in the cage, to increase its strength and durability; iv. More specifically, the inventiveness lies in the idea of introducing a dimple on either side of the weld and a central raised portion; v. The description of the Patent acknowledges that the bottle is exchangeable i.e. replaceable. The parties The proprietor of the Patent is Protechna S.A. (Protechna). The respondent, Schtz (U.K.) Limited (Schtz) is its exclusive licensee in this country, and is the leading manufacturer of rigid composite IBCs in the United Kingdom. Most of its sales are of new IBCs, but about 25% are rebottled IBCs, whose cages have, after any necessary repairs, been re-bottled with new Schtz bottles. The appellant, Werit UK Limited (Werit), sells bottles (Werit bottles) for IBCs to a reconditioner, Delta Containers Limited (Delta). Delta acquires discarded IBCs originally put on the market by Schtz (Schtz IBCs), and replaces the original bottles (Schtz bottles) with Werit bottles, and then offers these cross-bottled IBCs on the market. These cross-bottled IBCs are therefore in competition with the original Schtz IBCs, marketed by, or with the express authority of, Schtz. Schtz objects to its cages being used by cross-bottlers. Apart from the competitive consequences, Schtz claims to be concerned that publicity about any accident with a cross-bottled product made with one of its cages might harm its reputation. Accordingly, it objects to Deltas re-bottling activities and contends that they infringe the Patent. It is common ground that, if Delta thereby infringes the Patent, Werit does so. The legislation Section 60(1) of the 1977 Act (section 60(1)) is concerned with direct infringement, and provides in para (a) that a person infringes a patent if, where the invention is a product, he makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise, without the consent of the patentee. Section 60(2) of the 1977 Act is concerned with indirect infringement, which includes the knowing supply to a primary infringer of any of the means which enables him to carry out the infringing act. (Hence the common ground referred to at the end of the preceding paragraph). Section 125(1) of the 1977 Act (section 125(1)) provides that unless the context otherwise requires, an invention for a patent for which a patent has been granted should be taken to be that specified in a claim of the specification of the patent , as interpreted by the description and any drawings contained in that specification, and the extent of the protection conferred by a patent shall be determined accordingly. Section 130(7) of the 1977 Act states that certain specified sections of that Act, including sections 60 and 125, are so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the [European Patent Convention and the Community Patent Convention] have in the territories to which those Conventions apply. The scope of protection afforded by a European patent is defined by Article 69(1) of the European Patent Convention (the EPC), as amended in 2000, which provides that [t]he extent of the protection conferred by a European patent shall be determined by the terms of the claims. It also provides in Article 64(1) that the protection to be afforded to an EPC patentee should be the same as that afforded to a patentee under a national patent. Article 25(a) of the Community Patent Convention (the CPC) prohibits the making, offering, putting on the market, or using a product which is the subject-matter of the patent. The present litigation On 7 August 2008, Schtz issued these proceedings against Werit seeking relief on the ground that Werit infringed the Patent (as well as two earlier patents, also vested in Protechna and of which Schtz was the exclusive licensee). The proceedings were met with a denial of infringement on more than one ground, and a counterclaim for revocation of the three patents. By the time the case came on for hearing before Floyd J in March 2010, the issues concerned only two of the three patents, but there were other issues which he had to resolve. Following a seven-day hearing, he gave a full and prompt judgment - [2010] EWHC 660 (Pat), [2010] Bus LR 1244, [2010] FSR 22. The only question relevant to the present appeal which he had to consider was whether Delta infringed the Patent by mak[ing] the article claimed by the Claim, contrary to section 60(1)(a). On that question, Floyd J held, distinguishing the House of Lords decision in United Wire Ltd v Screen Repair Services (Scotland) Ltd, [2000] 4 All ER 353, [2001] RPC 24, that Deltas activity of replacing the inner container of a Schtz IBC with a Werit bottle does not amount to making the patented product. He justified this conclusion on the ground that the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim, and the inventive concept of [this claim] is wholly embodied in the Schtz cage paras 181, 197, and 206. Schtz appealed on a number of points. In a judgment given by Jacob LJ (with which Ward and Patten LJJ agreed), the Court of Appeal upheld the Judge on all other points, but reached a different conclusion on this issue. Relying on the reasoning of the Court of Appeal and House of Lords in United Wire, Jacob LJ said that it was inappropriate to determine the issue by reference to the inventive concept, and that [the] product (i.e. the IBC) ceased to exist when the bottle is removed, so [w]hat remained at that stage was merely an important component from which a new IBC could be made - [2011] EWCA Civ 303, [2011] Bus LR 1510, [2011] FSR 19, paras 69, 75, and 64. Accordingly, Werit was found to be liable to Schtz to pay damages or account for its profits, arising out of its infringement of the Patent. The Court of Appeal also had to deal with an issue relating to costs and damages, arising out of section 68 of the 1977 Act (section 68), and the fact that Schtz had failed to register its exclusive licence. This led to two decisions, which were favourable to Schtz. Accordingly, Werit had to pay the great majority of Schtzs costs of the proceedings at first instance and almost all of Schtzs costs in the Court of Appeal. Werit was granted permission to appeal both against the substantive order that it had infringed the Patent and against the costs order. I shall first consider the main issue, namely whether the Court of Appeal were right to hold that Delta did indeed make the patented article contrary to section 60(1)(a), and I shall then address certain issues arising under section 68. Infringement: the proper approach to the meaning of makes Introductory It seems clear that the effect of section 60(1)(a) is that a person infringes a patent for a product if that person makes the product, as claimed in the patent concerned. As to the making, that is the verb used in section 60(1)(a). As to the product being defined by the claim, that seems clear from section 125(1). In any event, if it is not the product as claimed in the patent, it is hard to see what else the subject matter of the making could rationally be. The word makes must, of course, be interpreted contextually. In this case, the word should, in my view, be approached bearing in mind a number of considerations (which sometimes may be apparently irreconcilable in this field, as Robert Walker LJ pointed out in Cartonneries De Thulin SA v CTP White Knight Ltd [2001] RPC 6, para 21 quoting Attorney-General v Prince Ernest Augustus Of Hanover [1957] AC 436, 461). First, the word makes must be given a meaning which, as a matter of ordinary language, it can reasonably bear. Secondly, it is not a term of art: like many English words, it does not have a precise meaning. Thirdly, it will inevitably be a matter of fact and degree in many cases whether an activity involves making an article, or whether it falls short of that. Fourthly, the word makes must be interpreted in a practical way, by reference to the facts of the particular case. Fifthly, however, there is a need for clarity and certainty for patentees and others, and for those advising them. Sixthly, it should be borne in mind that the word applies to patents for all sorts of products, from machinery to chemical compounds. Seventhly, one should bear in mind, at least as part of the background, the need to protect the patentees monopoly while not stifling reasonable competition. Eighthly, the word makes must be interpreted bearing in mind that the precise scope of a claim may be a matter almost of happenstance in the context of the question whether the alleged infringer makes the claimed product. Lord Diplock described the specification of a patent as a unilateral statement by the patentee, in words of his own choosing by which he states what he claims to be the essential features of the new product Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, 242. As Lord Hoffmann explained in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2004] UKHL 46, [2005] 1 All ER 667, [2005] RPC 169, para 21, a claim is, or at least should be drafted not only in the interest of others who need to know the area within which they will be trespassers but also in the interests of the patentee, who needs to be able to make it clear that he lays no claim to prior art or insufficiently enabled products. As Lord Hoffmann went on to explain in para 35, all sorts of factors, only some of which may appear to be rational, can influence the person drafting a claim. Ninthly, where, as here, there is a decision (United Wire) of the House of Lords or this court on the meaning of the word, it cannot be departed from save for very good reasons indeed. Finally, particularly given that section 60 (like section 125) is one of the sections mentioned in section 130(7) of the 1977 Act, the word should be interpreted bearing in mind that it is included in a provision which is intended to be part of a scheme which applies in many other jurisdictions. United Wire The decision of the House of Lords in United Wire assumed central importance in the Court of Appeal, as is clear from para 91 of Jacob LJs judgment, where he described Schtzs appeal as determined by United Wire, a proposition unsurprisingly supported by Mr Meade QC on behalf of Schtz before this court. However, while we must be careful not to cause confusion in this area, the reasoning in that case, like the reasoning of any court, was inevitably based on the facts agreed between the parties or decided by the judge, and on the arguments raised by the parties or suggested by the court. United Wire involved two patents, and the facts were summarised by Lord Hoffmann at paras 62-64 (taking the paragraph numbering from the RPC report, which includes the decision of the Court of Appeal) in these terms: 62. [B]oth patents are for a screen consisting of a frame to which two meshes of different mesh sizes are adhesively secured at the periphery so as to be at different tensions. The differences are the striking screens of the first patent and the flexible apertured [frame] of the second. . 63. The meshes quickly become torn in use. The plaintiffs therefore enjoy [the] aftermarket in selling replacement screens made in accordance with their inventions. 64. The defendants [sell] reconditioned screens made from the plaintiffs own frames. The [metal] frames weigh about 10 kilos [and look] more like a drain cover than a picture frame. They are durable in relation to the rest of the materials of the screen. The defendants acquire the frames from the plaintiffs customers and strip them down to the bare metal by sandblasting. They recoat them with adhesive polyethylene and attach the two layers of mesh, coarse below and fine above. The differences in the sizes of the mesh produces the necessary differential tensions when both are tensioned together. Heat is then used to bond the meshes to the polyethylene coating of the frame, the selvage of mesh around the frame is cut off and the edges trimmed and taped. At first instance in United Wire, the judge had been narrowly persuaded that the defendants activities amounted to repair, and therefore that the defendant did not make the article claimed under either of the two patents. The Court of Appeal took a different view. In a judgment which was expressly approved by the House of Lords, Aldous LJ held that in cases where it is claimed that the alleged infringer makes a product contrary to section 60(1)(a) the question must be whether his acts amount to manufacture of the product, namely the product of the invention see para 25. In para 27, he briefly summarised the patentees case, which he accepted, and which included the contention that the defendants activities should be contrasted with on-site repair. He then described the defendants activity as equivalent to the purchase on the open market of frames and then using them to produce an assembly para 28. In the House of Lords, Lord Bingham and Lord Hoffmann gave reasoned speeches, with which the other Law Lords agreed. Lord Bingham, at para 56, thought the issue was simply whether the defendant made the patented article, to which the answer was a question of judgment; that it was better not to ask whether the defendants work involved repair; and that the Court of Appeal had identified the right question and reached a conclusion open to them. Lord Hoffmann described the point as a very short one, and (discussing an earlier case) he said that the real issue was whether the defendants had made the patented product paras 68 and 72. He quoted (para 70) with approval a statement made by Lord Halsbury LC that you may prolong the life of a licensed article but you must not make a new one under the cover of repair, and he warned (para 71) of the dangers of asking whether the work constituted repair. Lord Hoffmann described the question raised as one of fact and degree in para 72, and, at the end of his final paragraph, para 73, he said that: [The patented] product ceased to exist when the meshes were removed and the frame stripped down to the bare metal. What remained at that stage was merely an important component, a skeleton or chassis, from which a new screen could be made. Neither Lord Bingham nor Lord Hoffman said, at least in terms, that the decision of the trial judge to the contrary effect was one which he could not have reached. What Lord Hoffmann said at para 73 was that the Court of Appeal was entitled to substitute its own evaluation because the judge did not correctly identify the patented product. Lord Bingham seems also to have justified the Court of Appeal having substituted its own decision on this ground, saying in para 56 that the judge did not concentrate his attention on whether the defendants had made the patented product. Decisions of German courts The fact that the word makes is in a section of the 1977 Act which is intended to conform with the provisions of an international convention is particularly significant where, as is the case with the EPC and the CPC, the convention contains a set of principles which are intended to apply consistently across signatory states. (The EPC is not an EU convention, whereas the CPC is; however, the CPC is not yet in force.) The House of Lords and this court have emphasised on a number of occasions the desirability of national courts following the established approach to validity of the Technical Board of Appeal of the European Patent Office (the EPO), and the German Bundesgerichtshof (the BGH) have taken the same view see, most recently, Human Genome Sciences Inc v Eli Lilly & Co [2011] UKSC 51, [2012] 1 All ER 1154, paras 84-87, and Case Xa ZR 130/07. The parties in this case have not referred to any relevant decision of the EPO, as we are here concerned with infringement. However, it is worth addressing four decisions of the BGH which consider what activities constitute making a patented article. The most recent such decision related to the German equivalent of the Patent Paletenbehlter II, Schtz v Mauser (Pallet Container II) Case X ZR 97/11, in July 2012. These are not only decisions of a highly expert, experienced and respected court on the very point which is raised in this case, but they are decisions of a court of another signatory state to the EPC (and the CPC) on a point of some significance arising under those Conventions. We should therefore accord them considerable respect, and sympathetically consider the extent to which we should adopt any points of principle or practice which they raise. However, there can be no question of the courts in this jurisdiction feeling obliged to follow the approach of the German courts, any more than the German courts could be expected to feel obliged to follow the approach of the English and Welsh courts. Unlike the EPO, both this court and the BGH are national courts. As such, while they have a great deal, including many principles, in common, they have inevitably developed somewhat different techniques and approaches in relation to many issues, including many which arise in the field of patents. While complete consistency of approach may be achieved one day, it is not a feasible or realistic possibility at the moment. Nonetheless, given the existence of the EPC (and the CPC), it is sensible for national courts at least to learn from each other and to seek to move towards, rather than away from, each others approaches. It appears that the BGH is of the same view. In Flgelradzhler (Impeller Flow Meter) Case X ZR 48/03, para 2.a, it made the point that, following the CPC, the case law on the old German patent law cannot be used automatically to interpret section 10 of the German Patent Act (equivalent to section 60 of the 1977 Act). In the same case at the end of para 3.b.ii, the BGH cited the reasoning of Lord Hoffmann in United Wire. And in Pallet Container II it considered the decision of the Court of Appeal in this case see para 47 below. In Impeller Flow Meter, the BGH referred to the distinction between a (permissible) repair and a (prohibited) remaking and observed that this could only be determined in the light of the particular nature of the subject matter of the invention and a balancing of the conflicting interests. It then said that When the interests are weighed, increasing importance can be given to whether it would be customary to expect the relevant parts to be replaced during the service life of the device . But what is also relevant is the extent to which the technical effects of the invention are reflected by the replaced parts. Therefore, the replacement of a part subject to wear and tear that is usually replaced during the expected service life of the machine - sometimes repeatedly - does not usually constitute a new manufacture. The situation can be different, however, if this part in fact embodies essential elements of the inventive concept. This approach was adopted by the BGH in Laufkranz (Wheel Tread) Case X ZR 45/05, para 17, and it was also followed in Pipettensystem (Pipette System) Case X ZR 38/06. In Pallet Container II, the BGH cited these three earlier decisions in support of the proposition that it may also be significant whether the parts [replaced] are such that one normally expects them to be replaced during the useful life of the product and to what extent the technical effects of the invention are reflected in the replaced parts para 23 (substantially repeated at para 28). It was made clear at paras 43 to 45 that, in the view of the BGH, the technical effects of the invention were not reflected in the bottle, as they were not manifested in the replaced part. However, the BGH went on to say that [i]f, according to the prevailing market opinion, the replacement of a part is seen as re-manufacturing the patented product, then as a general rule, a patent infringement cannot be denied, but if it was seen by general market opinion as a repair, the opposite conclusion would probably apply paras 29 and 41. It then observed that there was insufficient evidence available to reach a concluded view, and suggested that, if used [IBCs] which require the replacement of the inner container are viewed as practically worthless in the prevailing opinion of the purchasers of such containers, then the installation of a new inner container [w]ould be viewed as the re-manufacture of the [IBC] para 34. The BGH remitted the case for a determination as to what proportion of used IBCs were returned to Schtz or reconditioners for no consideration. In the light of the argument before us, I should make two further, perhaps connected, points about the decision in Pallet Container II. First, I do not read the BGH as suggesting that the question of whether a new article is made depends on who carries out the work involved. That would be illogical and unprincipled, and indeed contrary to what was said in para 19 of Pallet Container II. When the BGH referred to the market, it was simply looking at the difference in value between a used IBC before and after it is reconditioned. Secondly, the BGH said at para 40 that it disagreed with the Court of Appeal in this case that weight should be given to the fact that Delta described their rebottled IBCs as re-manufactured. I agree with the BGH on this point: the issue we have to determine is not how a party views or markets its products, but how those products should be characterised. Repairing and making The reasoning of Lord Bingham and Lord Hoffmann in United Wire emphasises that one must avoid basing a decision on the point at issue by simply contrasting the two concepts of making and repairing, not least because the notions of making and repair may well overlap para 71 per Lord Hoffmann. However, it was a contrast which Buckley LJ drew, and apparently found helpful, in this context in Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537, 555 (in a passage quoted and approved by Lord Hoffmann in United Wire at para 72), and which Aldous LJ appears to have approved in his judgment in United Wire at paras 21-22 and 26-27. The approach of Buckley LJ supports the notion that, subject to the overriding point that it should not obscure the central issue of whether the alleged infringer makes the patented article, it may sometimes be useful to consider whether the alleged infringer is repairing rather than making the article. I am fortified in that view by the fact that the BGH also plainly considers this distinction to be a useful one in this field. The mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves making of a new article rather than constituting a repair of the original article. Repair of an item frequently involves replacement of one or some of its constituents. If there are broken tiles on a roof, the replacement of those tiles is properly described as repairing the roof, and such replacements could not be said to involve rebuilding, or making, the roof. Indeed, replacing the whole of a deteriorated roof of a building could be regarded as repairing the building, taken as a whole, rather than reconstructing the building. There are many cases concerned with repairing obligations in leases which illustrate this point - see e.g. the discussion in Woodfall on Landlord and Tenant (October 2008), Vol 1, paras 13.32 to 13.037.12. In the more directly relevant context of chattels rather than buildings, the normal use of making and repairing demonstrates the same point. Works to a ship or a motor car, which involve removal and replacement of defective significant constituent parts, could be substantial in terms of physical extent, structural significance, and financial cost, without amounting to making a ship or motor car, as a matter of ordinary language: in such a case, they would be repair of the existing ship or motor car. Thus, in Coleborn & Sons v Blond [1951] 1 KB 43, 49-50, Denning LJ said, in a case concerned with purchase tax, that [s]peaking generally, if you replace an old engine by a new one, or an old body by a new body, you are not making a different vehicle: you are altering and improving an old one . On the facts of that case he held a new thing was made out of two parts - the old chassis and the new body [which] when assembled together make a different thing from either of them separately. The approach of Lord Hoffmann in the remarks at the end of his judgment in United Wire, quoted at the end of para 35 above, appear to me to be consistent with the approach of Denning LJ in Coleborn. On the facts of United Wire, Lord Hoffmann concluded (or said that the Court of Appeal was entitled to conclude) that the totality of the work described in his para 64 amounted to making a new article, because the removal of the meshes and the stripping down and repairing of the frame resulted merely in a component of the patented article from which a new screen could be [and was] made. Returning to the theme of the normal meaning of a word, observations about the meaning of make in a different legal or factual context from that under consideration should be approached with caution. The examples given above are referred to primarily to emphasise the somewhat slippery nature of the meaning of the word, and the very important role which context plays in determining whether a particular activity involves making an article. In general terms, in a case under section 60(1)(a) the particular contextual features are those identified in paras 26 to 29 above. Infringement: the present case The reasoning in the decisions below The first question to consider is whether either of the Courts below adopted the right approach to the question which they had to decide. In my view, they did not. In para 196 of his judgment, Floyd J said that [t]he difficult question, as it seems to me, is the case where the invention resides, or resides principally, in the part retained. This was not the case in United Wire. Mr Meade QC challenged this statement, contending that, at any rate in the case of the second of the patents in United Wire, the inventive concept in the patented article lay, at least primarily, in the frame which the defendant retained, and not in the wire meshes which it replaced. I accept that contention, although, as explained below, it does not by any means wholly invalidate the approach adopted by Floyd J. Similarly, Floyd J over-simplified the position in the following paragraph of his judgment, when he said that the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim. The notion that the issue of infringement in a case such as this is to be determined simply by answering the question which the judge formulated in that passage is attractive and simple to apply. However, it seems to me to conflict with the wording of sections 60(1)(a) and 125(1) as well as with the approach adopted by the Court of Appeal and House of Lords in United Wire. On the other hand, I consider that the Court of Appeal were too ready to accept that the outcome of this case was governed by United Wire. They do not appear to have recognised that the question of whether replacing a part of a patented article constitutes making it is a matter of fact and degree. Indeed, Jacob LJ appears to have thought that replacing any part of a patented article would involve making it. At para 70, he said that if Delta made a frame according to Claim 1 and fitted it with a Schtz bottle that must produce exactly the same outcome as the present position. Similarly, at para 64, he said that the IBC ceased to exist when the bottle is removed and [w]hat remained at that stage was merely an important component [viz the Schtz cage] from which a new IBC could be made. However, as mentioned above, it is a matter of degree, to be assessed in each case, whether replacing a worn or damaged part of a patented article amounts to making the patented article. If, very unusually, an original Schtz IBC was in such a state that the bottle could be reused but the cage could not, it would, I think, be hard to challenge the view that putting the existing bottle in a new Schtz cage would involve making the claimed article. On the other hand, if an original Schtz IBC was entirely reusable save that the detachable lid of the bottle (assuming the bottles design involved a detachable lid) was damaged, it could not be plausibly contended that the replacement of the lid constituted making the claimed article, even though the IBC would be unusable without a new lid. In other words, the replacement of a damaged essential constituent of an IBC can constitute repairing, rather than making, the article. The fact that merely replacing the damaged lid of a Schtz bottle in a Schtz cage would not infringe the Patent, cannot possibly mean that there would be no infringement if one took a lid from an IBC marketed by Schtz and fixed it to a newly made bottle in a newly made cage, which (but for the lid) would infringe the Claim. By the same token, Jacob LJ was wrong to say that, because a person who replaced a damaged original Schtz cage, while keeping the original Schtz bottle, would infringe, it must follow that a person who replaced a damaged original Schtz bottle, while keeping the original Schtz cage would infringe. The correct approach in this case Since neither the Judge nor the Court of Appeal approached the issue in this case in the right way, we must reconsider and, if possible, determine for ourselves, the central issue, namely, whether Delta makes a patented article when it removes a damaged Schtz bottle from a Schtz cage, and replaces it with a Werit bottle. As is clear from United Wire, this question requires the court to focus on the question of whether, when it replaces a component of the article (viz. the bottle) the subject of the Claim, Delta makes that article (viz. the IBC as described in the Claim). In answering that question, I consider that it is both legitimate and helpful to consider the question of whether the bottle is such a subsidiary part of the patented article that its replacement, when required, does not involve making a new article. There are undoubtedly points in favour of the view that the bottle is more than subsidiary in this sense, so that its replacement involves making the claimed article, namely an IBC. Thus, it is a necessary part, indeed an integral part, of the patented article, but so, self-evidently, is the lid of the bottle, whose replacement, when damaged, cannot, as observed in para 59 above, sensibly be said to involve making the IBC. Further, the bottle is specifically referred to in Item [A] of the Claim, but then so is the lid, albeit arguably only impliedly (an upper closable filler opening). The question, however, is one of degree. In that connection, the bottle is a much more substantial feature of the composite article described in the Claim than the lid of the bottle. Indeed, the bottle would appear to have a greater surface area than the cage (at least if one ignores the gaps between the bars). However, while undoubtedly an essential and physically large part of the patented article, it seems to me that, particularly in the context of the present issue, the bottle can fairly be said to be a relatively subsidiary part of the article, viewed as a whole. In that connection, Mr Thorley QC identified two significant features of the bottle. First, the bottle has a significantly lower life expectancy than the cage and, presumably, than the pallet. In particular, one would anticipate replacing the bottle, on average, five or six times during the life of the cage. The fact that one would expect the bottle to be replaced in this way reinforces the notion that it is a subsidiary part. Another aspect of the same point is that the bottle is also physically less substantial than the cage (or, no doubt, the pallet), since it is made of plastic (albeit tough plastic) rather than metal. Looking at the point another way, if the cage has a much greater life expectancy than the bottle, a purchaser of an IBC might well expect to be able to replace the bottle. As Lord Hatherley LC said in Betts v Willmott (1871) LR 6 Ch App 239, 245, in a passage cited by Lord Hoffmann in United Wire at para 68: When a man has purchased an article he expects to have the control of it, and there must be some clear and explicit agreement to the contrary to justify the vendor in saying that he has not given the purchaser his licence to sell the article, or to use it wherever he pleases as against himself. In principle, a purchaser of a patented article, as I see it, should be taken as entitled to make such an assumption, subject to section 60(1)(a). Accordingly, for that reason also, where the article includes a component which is physically easily replaceable and in practice relatively perishable, those features must constitute a factor (which may, of course, be outweighed by other factors) in favour of concluding that the replacement of that component does not fall foul of section 60(1)(a). Secondly, the bottle does not include any aspect of the inventive concept of the Patent. The extent to which a component of an article is a subsidiary part, so that its replacement is more likely to involve repairing than making the article, must be a matter of degree. It therefore seems to me that it must be legitimate, in the context of addressing the question whether a person makes the patented article by replacing a worn out part, to consider whether that part includes the inventive concept, or has a function which is closely connected with that concept. While, as already observed, there is nothing in the judgments in United Wire to support the notion that the inventive concept is relevant to the question raised in an appeal such as this, there is nothing inconsistent with such a notion either. What the reasoning in that case does rule out is the attractively simple use of the inventive concept in this sort of case which Floyd J suggested in his para 196. Mr Meade QC contended that the inventive concept of a patent is often a controversial issue, and that there could therefore be problems if it was treated as relevant in determining whether an alleged infringer makes the patented article. I am unconvinced by that contention. In almost all patents, the claimed inventive concept is clearly identified or identifiable from the patent, and, if it is unclear or disputed, it will often be an issue in the proceedings anyway. I note that the BGH appears to have no difficulty in accommodating the inventive concept in this exercise, and, if Mr Meade QC was right, it would be much more likely to be a problem in Germany with its bifurcated approach (where different courts deal with infringement and validity) than in England with our unitary approach (where the two issues are dealt with by the same court). Two further factors (which are connected to some extent) carry some weight with me. They can be highlighted by contrasting the facts of this case with those in United Wire. In this case, the replaced part, the bottle, is a free-standing item of property, which does not include, or relate to, the inventive concept. In United Wire, the replaced part, the wire mesh system, had no independent identity from the retained part, the frame. Hence it was much easier to say, as Lord Hoffmann did in that case, that the original product ceased to exist when the meshes were removed, whereas in this case there are, as it were, two products (disregarding the pallet, which is included in the Claim), and one of them, which is significantly longer lasting, more substantial, and the only inventive component, certainly does not cease to exist. Furthermore, there is a significant difference between the nature of Deltas operations in this case and that of the defendants operations in United Wire, as described by Lord Hoffmann at para 64 of his opinion (quoted in para 31 above). In this case, a damaged free-standing plastic bottle is simply replaced within the metal cage, which contains the inventive concept, and the metal cage is repaired if necessary. In United Wire, unlike in this case, (i) the replaced part was integrally connected to the retained part, so the work included a significant element of demolition, (ii) the replaced part was subjected to significant improvement work, (iii) the inventive concept either largely resided in the replaced part (the first patent) or was closely connected to that part (the second patent), and (iv) the work involved could undoubtedly be described as manufacture. Merely replacing a damaged plastic bottle (albeit one of considerable size) with a new plastic bottle (even allowing for the fact that the replacement has to be made) appears to me to be an exercise of a very different order. It seems to me that it would accord with the eight general principles set out in paras 26 to 28 above to take into account the various factors mentioned in the preceding eleven paragraphs, when deciding whether Delta makes the patented article. I derive comfort from the fact that they are factors which appear to carry force with the BGH when it is considering this issue. I also consider that there is nothing in the speeches of Lord Bingham or Lord Hoffmann in United Wire which suggests that it would be wrong to take these factors into account. The speeches appear to me to establish that the question to be determined in a case such as this is whether the alleged infringer makes the patented article, and that the answer to that question is often a matter of fact and degree. The speeches do not give much guidance as to what specific considerations can or cannot be taken into account when determining the question. The next issue to be addressed is whether it is also appropriate to consider the further point raised by the BGH in Pallet Container II, summarised in para 44 above. In my view, the question of whether the end-user is paid for a used IBC could have relevance to the issue which we have to determine. If an article has no value when it has been used and before it is worked on, and has substantial value after it has been worked on, that could fairly be said to be a factor in favour of the work resulting in the making of a new article, or, to put the point another way, in favour of the work involved amounting to more than repair. However, that would be just one factor, and it would have to be approached with caution. For instance, there might be considerable value to an end-user in having the used IBC collected by Delta, as it might otherwise have to be disposed of at some cost. Or a cross- bottled IBC may have a relatively small value, so that the collection by Delta represents significant cost to Delta. Further, it is possible that the value of the cage could vary significantly with the price of the metal from which it is made, and it would seem wrong that the issue whether Delta makes a new article should fluctuate with prices on the metal exchanges. In this case, as in Pallet Container II, there was no evidence which can fairly enable us to assess this factor. However, unlike the BGH in Pallet Container II, I am firmly of the view that we should not remit the case back to Floyd J, let alone another judge, so as to enable the parties to adduce evidence on the matter. A first instance hearing in this jurisdiction involves a full and detailed examination of all the issues, requiring the parties to devote considerable expense and effort, and taking up a significant amount of court time; and an appeal is normally limited to points of law. Parties are expected to adduce all their evidence and arguments before the trial judge, and are normally only permitted to adduce new evidence (whether on appeal or through a rehearing) if there was a very good reason why the evidence was not adduced at trial. In any event, on the basis of the evidence and arguments which we have heard, I think it very unlikely that any such evidence would have affected the outcome. Infringement: conclusion Weighing up the various relevant factors, I have come to the conclusion that by replacing the bottle in the IBC, Delta does not make the article identified in the Claim. Given the size of the bottle, and the fact that it is one of the two (or three, if one includes the pallet) components of that article, the issue is by no means clear. However, the combination of the factors discussed in paras 63 to 72 above persuade me that the conclusion reached by Floyd J on this point was right, albeit for somewhat more nuanced reasons. Deciding whether a particular activity involves making the patented article involves, as Lord Bingham said, an exercise in judgment, or, in Lord Hoffmanns words, it is a matter of fact and degree. In some such cases, one can say that the answer is clear; in other cases, one can identify a single clinching factor. However, in this case, it appears to me that it is a classic example of identifying the various factors which apply on the particular facts, and, after weighing them all up, concluding, as a matter of judgment, whether the alleged infringer does or does not make the patented article. In the present case, given that (a) the bottle (i) is a freestanding, replaceable component of the patented article, (ii) has no connection with the claimed inventive concept, (iii) has a much shorter life expectancy than the other, inventive, component, (iv) cannot be described as the main component of the article, and (b) apart from replacing it, Delta does no additional work to the article beyond routine repairs, I am of the view that, in carrying out this work, Delta does not make the patented article. I should add that, while ones focus in a case such as this should not be deflected from the central question of whether the alleged infringer makes the patented article, it may sometimes be a useful cross-check to consider whether its activities involve repairing the original product. As mentioned, that was a question which Buckley LJ found helpful in Solar Thompson, and which the BGH also invokes in this connection. In this case, I consider that the question does not take matters much further: for the reasons I have given for concluding that Delta does not make a new patented article, I am of the view that its cross-bottling activities involve repairing the original product. I would therefore allow Werits appeal on the main issue. That means that Werits appeal on the section 68 issue is academic. However, because the issues that the appeal raises were fully argued, and because I do not agree with some of the conclusions of the Court of Appeal, it is right to deal with that aspect also, at least to the extent that it is safe to do so. The section 68 appeal The background facts and law As mentioned above, Schtz has been granted an exclusive licence by the patentee, Protechna. Schtz was initially granted a licence (the first licence) on 24 March 1994. On 26 November 2009, the first licence was determined, and on the same day another licence (the second licence) was granted in its place. Sections 32 and 33 of the 1977 Act (sections 32 and 33) provide for a register of patents, on which not only patents themselves, but also transactions, instruments or events affecting rights in or under patents can be registered, partly for the purpose of establishing priority. The first licence was not registered until 17 July 2008, more than fourteen years after it had been granted, and just before these proceedings were started. The second licence was not registered until 15 November 2012, some two years after it had been granted and well after the decision of the Court of Appeal on infringement. Section 68, in its original and current form, is in these terms: Where by virtue of a transaction, instrument or event to which section 33 above applies a person becomes the proprietor or one of the proprietors or an exclusive licensee of a patent and the patent is subsequently infringed, the court shall not award him damages or order that he be given an account of the profits in respect of such a subsequent infringement occurring before the transaction, instrument or event is registered, in proceedings for such an infringement, the court shall not award him costs or expenses unless (a) the transaction, instrument or event is registered within the period of six months beginning with its date; or (b) the court is satisfied that it was not practicable to register the transaction, instrument or event before the end of that period and that it was registered as soon as practicable thereafter. The italicised words were in the section as enacted, but, with effect from 29 April 2006, they were repealed and replaced by the words in bold, to ensure that the section did not fall foul of Articles 13(1) and 14 of the Enforcement Directive (2004/48/EC). This was effected by regulation 2(2) of, and para 4 of Schedule 2 to, the Intellectual Property (Enforcement etc) Regulations 2006 (SI 2006/1028). The purpose of section 68 is not in dispute. People need to know who is on the register. This section is aimed at making the people who own the monopolies get on the register, as Jacob J observed in LG Electronics v NCR Financial Solutions Group Ltd [2003] FSR 24, para 18. The effect of the Court of Appeals decision that Werit infringed the Patent was, at least on the face of it, that Schtz was entitled to (i) damages or an account of profits in respect of infringements occurring on or after 7 August 2002 (being six years before the issue of these proceedings), and (ii) its costs (subject, of course, to any point which Werit could have legitimately raised). However, if section 68 applied, (i) its original provisions would have disentitled Schtz from recovering any damages or account in respect of infringements occurring before 29 April 2006, and (ii) the amended provisions would have cut down Schtzs right to recover costs. After the Court of Appeals judgment on the main issue had been made available in draft, Werit gave notice that it intended to rely on section 68. This led to two further decisions of the Court of Appeal [2011] EWCA Civ 927, [2012] FSR 2 and [2011] EWCA Civ 1337, [2012] Bus LR 746, [2012] 2 Costs LR 306. The first of those decisions gives rise to three issues, and the second decision to a fourth issue. I shall consider those issues in turn. To what extent should reliance on section 68 be pleaded? The first issue is whether Werit needed to have specifically raised its reliance on section 68 in its pleaded case before it could rely on its original restriction on damages and an account, and its subsequent restriction on costs recovery. The Court of Appeal held that the point need not be pleaded, because of the mandatory terms in which section 68 is expressed the court shall not. I do not agree. The main point of requiring a party to put forward its contentions in a statement of case or a pleading is to ensure that the other party is not taken by surprise. The mere fact that a statute is expressed in directory terms should not mean that its contents can be relied on by a party without any warning to the other party. Of course, there may be good public policy issues justifying a different view in a particular case, but, absent such a factor, I consider that clear words would be required before a party could, as of right, raise a point of this nature without fairly putting the other party on notice, which would normally be in its statement of case. This conclusion is supported by the reasoning of the Court of Appeal in Fookes v Slaytor [1978] 1 WLR 1293 in relation to section 1 of the Law Reform (Contributory Negligence) Act 1945, which provides that, in a negligence case, damages shall be reduced to take into account contributory negligence. To much the same effect is what Lord Griffiths said about the need to plead a limitation defence in Ketteman v Hansel Properties Ltd [1987] AC 189, 219. The same view is taken in Bennion on Statutory Interpretation (5th edition, 2007), p.114, and specifically in relation to section 68, by Terrell on the Law of Patents (17th edition, 2010) at para 18.89. It should be recorded that none of these authorities appears to have been cited to the Court of Appeal in this case. The policy behind section 68 is to encourage persons such as Schtz to register their licences or other interests under section 33 of the 1977 Act. Although the court should favour an interpretation which gives such a policy real effect, I do not consider that it is a policy which justifies the view that the point need not be pleaded. It would be a remarkably harsh result for a licensee who had failed to register, and would represent a potentially remarkable windfall for an infringer. Under the section as originally drafted, an infringer would be able to lie low during proceedings brought by an unregistered licensee, knowing that there was a complete defence to any financial liability for continuing infringement which the licensee could end by registering. Accordingly, Schtzs case on this point is a fortiori that of the successful parties in Fookes and Ketteman, where there was no continuing benefit for the party who had failed to plead the point. Was Werits case sufficiently pleaded to enable it to raise section 68? The second question is whether Werit did, in fact, plead its case sufficiently to enable it to rely on section 68. The Court of Appeal held that if, contrary to their view, Werit had to plead its case on section 68, it had not done so. Again I disagree. In its pleaded case, Werit not only denied that Schtz was entitled to the relief it sought, which included damages, an account, and costs, but, crucially, in my opinion, para 5 of Werits statement of case (i) put Schtz to proof as to its status as exclusive licensee, and (ii) stated that any alleged licence had not been filed for registration and it is not admitted that the said transaction, instrument or event was registered within the period of six months beginning with its date. Thus, Werits pleaded case denied Schtzs right to damages or costs, raised all the facts which were needed for a section 68 argument, and quoted the crucial words from that very section. CPR 16.5(2)(a) requires a defendant to state its reasons for denying any allegation, and para 13.3(1) of Practice Direction 16 merely entitles a party to refer to any point of law it relies on. At least in the circumstances of this case, it seems to me clear that there was a sufficient pleading for section 68 purposes. If there were any doubt about this, it would be put to rest by the fact that para 5 was in a defence to a claim brought under the 1977 Act by an exclusive licensee, whose claim form recorded that it had instructed solicitors and counsel who were acknowledged experts in the field. I should add that we were referred in this connection to evidence on behalf of Schtz as to how para 5 of Werits statement of case was understood by Schtz. I very much doubt that such evidence was admissible, but, if it was, it tends to support my conclusion. I therefore reach the same conclusion as the Court of Appeal on the procedural issue of whether it was open to Werit to rely on section 68, but for very different reasons. The Court of Appeal thought that Werit had not pleaded the point but did not need to do so; I am of the view that Werit had to plead the point, and had done so. How does the costs sanction under section 68 work? The conclusion of the Court of Appeal, supported by Mr Meade QC on behalf of Schtz, was that section 68 simply serves to disentitle a licensee from recovering costs incurred in connection with an infringement action during a period that the licence is unregistered. Werits case, as advanced by Mr Thorley QC in the Court of Appeal and before us, is that if a claim for damages or an account by the licensee of a patent relates to an infringing act prior to registration of the licence, then the claimant licensee can recover no costs. Like the Court of Appeal, I cannot accept Werits case on this point. It seems to me to produce an arbitrary and potentially penal result. It is arbitrary because the sanction would be the same whether the licensee was claiming for one weeks infringement before registration and five years after, or for five years infringement before the registration and for one weeks after. In the former case, it would also be penal. The interpretation favoured by the Court of Appeal and Schtz does not produce a penal or arbitrary result, but it leaves the section with very little bite, as an unregistered licensee could avoid its consequences simply by registering and then starting the proceedings. It also seems to me to be difficult to reconcile with the wording of the amended section 68. The expression proceedings for such an infringement must be a reference to the proceedings for infringe[ment] before the transaction is registered, not to proceedings, before the transaction is registered, for infringement. Because the section is poorly drafted, that may not have been an insuperable obstacle to Schtzs case were there not a third interpretation, which was raised in argument by Lord Mance, and which I think is right. That interpretation is that, where a licensee successfully claims damages or an account for infringement of a patent, it cannot recover its costs in so far as they are attributable to the claim for damages or an account in respect of infringements pre-dating the registration of the licence, but it can recover costs attributable to such relief in respect of infringements post-dating the registration. In my view, this is the right interpretation, as it accords with the wording of section 68, and it reflects its purpose as described in LG Electronics. Apparently, this interpretation was considered in argument in the Court of Appeal, but rejected on the ground that it would be unworkable. I do not see why. Obviously in a case where there was a claim for pre- and post-registration relief, there would have to be an apportionment, and the apportionment would normally involve an element of rough justice. But that is a familiar state of affairs when it comes to costs. The consequence of the late registration of the second licence The final issue arises from the fact that the second licence was not registered until 15 November 2012, even though it was granted on 26 November 2009. The effect of the reasoning so far is that, if Schtz had succeeded on infringement, (i) it would not have been entitled to relief in respect of infringements before 29 April 2006 (when section 68 was amended), (ii) it would have been entitled to relief in respect of infringements after that date, (iii) it would not have been entitled to costs in relation to infringements occurring between 29 April 2006 and 17 July 2008 (when the first licence was registered); (iv) it would have been entitled to costs in relation to infringements occurring between 17 July 2008 and 26 November 2009 (when the first licence was determined and the second licence was granted); (v) it would have claimed costs in relation to infringements between 26 November 2009 and 15 November 2012 (when the second licence was registered); and (vi) it would have been entitled to costs in respect of infringements after 15 November 2012. Thus, the remaining issue, which is in respect of item (v) in the preceding paragraph, would have concerned costs in respect of infringements committed between 26 November 2009 and 15 November 2012. The Court of Appeal accepted Schtzs contention that what mattered was that it had been registered as a licensee in July 2008 and had remained registered as such at all times since that date, and the fact that it had surrendered the first licence in exchange for the second licence did not require it to go through the exercise of re-registration. This conclusion is reinforced by the fact that, although the register records the date of the licence as well as the name of the licensee, and the public has a right to inspect the register, those who wish to inspect the register have no right to see, or to be told of the terms of, the licence. Werit contends, however, that the natural meaning of section 68, and in particular the word becomes, demonstrates that Schtz should have registered the second licence. Some support for that proposition may also be found in the fact that sections 32 and 33 appear to envisage registration of licences and other documents rather than of licensees and proprietors. The Court of Appeal accepted that Werits argument had force, but concluded that Article 14 of the Enforcement Directive required it to adopt what Ward LJ referred to as an artificial meaning, as opposed to the natural meaning of section 68, so as to enable Schtz to rely on the registration of the first licence, even after it had been determined and replaced by the second licence. The Court of Appeal may have been right about the natural meaning of section 68 in the absence of Article 14; certainly its conclusion derives support from the reasoning of Aldous J in Minnesota Mining & Manufacturing Co v Rennicks (UK) Ltd [1992] FSR 118, Pumfrey J in Spring Form Inc v Toy Brokers Ltd [2001] EWHC 535 (Pat);[2002] F.S.R. 17, and Peter Smith J in Finecard International Ltd v Urquhart Dyke and Lord [2005] EWHC 2481 (Ch); [2006] F.S.R. 27. However, despite these decisions, there does appear to be an argument the other way. If the Court of Appeal was right about the natural meaning of the section, then I am very dubious about its invocation of Article 14 to justify a very different meaning to the section, especially as it has not been argued that Article 14 has direct effect. This final point throws up two questions which are not straightforward and were (understandably in all the circumstances) not as fully argued as they might have been. Accordingly, it would be safer not to decide the point, although I would emphasise that the reasoning of the Court of Appeal both as to the natural reading of section 68 and as to the justification for adopting an artificial meaning, should not be regarded as necessarily correct. Conclusion on the section 68 costs issue Accordingly, I would have allowed Werits appeal against the first section 68 judgment, but not to the extent to which Werit contended, and I would leave open the question of whether it should succeed on its appeal against the second section 68 judgment. However, as I would allow Werit’s appeal on the main, infringement, issue, my conclusions on the section 68 costs issues are, strictly speaking, obiter. |
This appeal arises out of the grounding of the OCEAN VICTORY (the vessel) in the port of Kashima in Japan on 24 October 2006. She was a Capesize bulk carrier, built in China in 2005. By a demise charterparty dated 8 June 2005, the vessels owners, Ocean Victory Maritime Inc (OVM or the owners), chartered the vessel to Ocean Line Holdings Ltd (OLH), which is or was a related company, on the widely used Barecon 89 as amended. On 2 August 2006, OLH time chartered the vessel to China National Chartering Co Ltd (Sinochart) and on 13 September 2006, Sinochart in turn sub chartered her to Daiichi Chuo Kisen Kaisha (Daiichi or the charterers) for a time charter trip. The demise charterparty and both time charterparties contained an undertaking (on materially identical terms) to trade the vessel between safe ports. On 12/13 September 2006, Daiichi (and thus Sinochart) gave the vessel instructions to load at Saldanha Bay in South Africa and to discharge at Kashima. Between 19 and 21 September she loaded 170,000 tonnes of iron ore. She arrived off Kashima on 20 October and discharge began that afternoon. The port of Kashima is entered from the sea through the northern end of a specially constructed channel known as the Kashima Fairway, which runs almost due north south, and is the only route into and out of the port. The Kashima Fairway is bounded on one side (to the east) by the South Breakwater and on the other (to the west) by the land. On 24 October the vessel sought to leave the port during a storm. However, she allided with the northern end of the South Breakwater and grounded. Shortly thereafter another Capesize vessel, the ELIDA ACE, also grounded in the Kashima Fairway while attempting to leave the port. Salvors were engaged but the OCEAN VICTORY eventually broke in two. Her wreck was subsequently removed in the course of a lengthy wreck removal operation. Some two years later, on 15 October 2008, Gard Marine & Energy Ltd (Gard), one of the vessels hull insurers at the time of her loss, took assignments of the rights of OLH and OVM in respect of the grounding and total loss of the vessel. In its capacity as assignee of those rights, Gard subsequently brought a claim against Sinochart (which Sinochart passed on to Daiichi) for damages for breach of the charterers undertaking to trade only between safe ports. On 30 July 2013, Teare J (the judge) held that the casualty was caused by the unsafety of the port in breach of the safe port undertaking in the time charters. He awarded Gard substantial damages, namely the agreed value of the vessel (US$88.5m), damages in respect of liability for SCOPIC expenses (US$12m), damages for wreck removal expenses (US$34.5m) and damages for loss of hire (US$2.7m). Permission to appeal to the Court of Appeal on certain specific issues was granted. On 22 January 2015, the Court of Appeal (Longmore, Gloster and Underhill LJJ) allowed the appeal and set aside the judgment of the judge on the grounds that the conditions which affected Kashima were an abnormal occurrence and that there was no breach of the safe port undertaking on the part of the charterers. The Court of Appeal also held that, in the light of the insurance provisions of the demise charterparty, OVM and OLH (and Gard as their assignee) were not entitled to claim in respect of losses covered by the hull insurers. On 20 May 2015 Gard were granted permission to appeal to this Court. Issues in the appeal The parties agreed the issues in this appeal as follows. 1. Was there a breach of the safe port undertaking? In particular the following specific questions were agreed: (1) was the port unsafe within the meaning of the safe port undertaking, so that the charterers were in breach; or (2) was there an abnormal occurrence within the context of the safe port undertaking, which was no breach of the undertaking? If there was a breach of the safe port undertaking, do the provisions 2. for joint insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterer for breach of an express safe port undertaking. If there was a breach of the safe port undertaking, is Daiichi entitled 3. to limit its liability for Gards losses or any (and, if so, which) of them as against Sinochart (and Sinochart in turn against Gard) pursuant to section 185 and Schedule 7 article 2(1) of the Merchant Shipping Act 1995? It was agreed that in the event that the appeal succeeds (that is that the answer to issue 1(1) is yes), issues of time bar and causation should be remitted to the Court of Appeal. In this judgment I will focus first on the safe port issue. Safe port the facts The events which led to the grounding and subsequent loss of the vessel are summarised in paras 127 and 128 of the judges judgment as follows: 127. The danger facing OCEAN VICTORY was one which was related to the prevailing characteristics of Kashima. The danger flowed from two characteristics of the port, the vulnerability of the Raw Materials Quay to long swell and the vulnerability of the Kashima Fairway to northerly gales caused by a local depression. It may well be a rare event for these two events to occur at the same time but nobody at the port could, I consider, be surprised if they did. There is no meteorological reason why they should not occur at the same time. Long waves were clearly a feature of the port (as they must be of any port facing the Pacific) and low pressure systems generating gale force winds cannot, in my judgment, be regarded as abnormal. I do not consider that the juxtaposition of long waves and a low pressure system generating gale force winds from the north amounts to an abnormal occurrence unrelated to the characteristics of Kashima. Long waves may give rise to a need for a vessel to leave the port. It may be a matter of chance whether at that time there is also a low pressure system generating gale force winds from the north but I am unable to accept that such winds are so rare that they cannot be said to be a feature of the port. It is not without significance that the Guide to Port Entry notes that during periods of northerly swell the entry channel is fully exposed and that vessels at low speed generally have difficulty in steering. 128. It may be that the storm which affected the port on 24 October 2006 was one of the most severe storms to have affected Kashima in terms of severity, speed of deterioration and duration as suggested by Mr Lynaghs analysis of its characteristics. But the relevant characteristics are those which give rise to the danger, namely the occurrence of long waves and northerly gales. Neither long waves nor northerly gales can be described as rare. Even if the concurrent occurrence of those events is a rare event in the history of the port such an event flows from characteristics or features of the port. The principles abnormal occurrence In the Court of Appeal Longmore LJ (giving the judgment of the court) noted in para 14 that it was common ground between the parties that, if the damage sustained by the vessel at Kashima on 24 October 2006 was caused by an abnormal occurrence, then the charterers would not have been in breach of the safe port warranty. That common ground was based on the classic dictum of Sellers LJ in The Eastern City [1958] 2 Lloyds Rep 127, 131 that: A port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship . Longmore LJ added in para 15 that what was in dispute between the parties on the appeal in relation to this issue was (i) what, as a matter of law, was the correct test for an abnormal occurrence; (ii) in particular, was the judge correct to hold (in paras 110, 127 128, 132 and 134 of his judgment) that the combination of two weather conditions on the casualty date (namely the phenomenon of swell from long waves, which might have forced the vessel to leave the berth, and a very severe northerly gale which meant that the vessel could not safely exit the port) was not to be characterised as an abnormal occurrence, notwithstanding that the coincidence of the two conditions was rare, because both conditions were physical characteristics or attributes of the port; and (iii) on the facts as found by, or undisputed before, the judge, did the weather conditions on the casualty date amount to an abnormal occurrence? It is important to note that it was not submitted that the relevant test could or should be other than that described by Sellers LJ in The Eastern City. In any event that test has stood the test of time. The question is what is meant by an abnormal occurrence. The Court of Appeal summarised the charterers case in para 44 of their judgment as follows: (i) There was no breach of the safe port undertaking. By the safe port undertaking, the charterers did not assume responsibility for loss from every foreseeable risk at the port to which the ship was ordered. They assumed responsibility only for risks which were sufficiently regular or sufficiently foreseeable to amount to an attribute or feature of the port. (ii) The prospective nature of the undertaking was material to the test, because the right way to approach this test was to imagine a charterer with full knowledge of the port giving the order on the relevant day. He had to ask himself: will the port be safe for the ship to reach, use and depart from? If he could say yes, then, barring some abnormal occurrence, there was no breach. So a charterer did not assume the risk of loss from an unusual event which was not characteristic of the port at the time when the ship should be there. The obligation to give indemnity for loss from such unusual events lay properly and legally with the owners hull insurers. (iii) The phrase abnormal occurrence was not a term of article An occurrence was just an event something that happened on a particular time at a particular place in a particular way. Abnormal was something well removed from the normal. It was out of the ordinary course and unexpected. It was something which the notional charterer would not have in mind. (iv) A rare event could not be an attribute of a port. It was, in the language of the cases, an abnormal occurrence and so outside the undertaking. The judge erred in law in holding that a rare event was a feature of the port. (v) The judge erroneously held that it did not matter if the event was rare or unexpected, provided it arose from the combined occurrence of two or more characteristics or attributes of the port. (vi) Words such as characteristic or attributes of the port were tools to help identify what arose in the ordinary course. They were not intended to bring events well out of the ordinary course into the scope of the charterers undertaking. (vii) The judge went wrong by breaking down the question into components instead of asking one unitary question, namely: would it be an unexpected event for Capesize vessels calling at Kashima to find it necessary to leave the berth due to danger from a long wave swell at the very time when it was dangerous to transit the Fairway? The judges approach was to consider whether long waves and strong northerly winds from low pressure storms affecting navigation in the Kashima Fairway were respectively attributes of the port. Having reached the conclusion that they were attributes, he wrongly assumed that it did not matter how rare their combination was. (viii) On the facts, the combination of the two weather events (namely long waves and strong northerly winds from low pressure storms) had never apparently happened in the previous 35 years preceding the instruction to proceed to Kashima. Accordingly the conditions on 24 October were an abnormal occurrence for which the charterers were not liable. It was not in dispute that the question whether the port was unsafe must be tested as at the moment that the charterers instructed the owners to proceed to it. It was submitted on behalf of the charterers that the appropriate test was whether a reasonable shipowner trading the ship for his own account and knowing the relevant facts would decline to proceed to the nominated port. That is essentially the test set out in the Court of Appeals summary of the charterers case in sub para 44(ii) above. To my mind the key points in this appeal are to be found in sub paras 44(i), (ii), (iii) and (iv). It is important to note that the test is not whether the events which caused the loss were reasonably foreseeable. Reasonable foreseeability is a well known test in some parts of the law of tort, notably negligence and remoteness of damage. The courts could well have adopted such a test but they have not done so. Instead they have asked whether the relevant event was an abnormal occurrence. What then is meant by abnormal occurrence? The question is whether it has the meaning proposed by the charterers and set out in para 44(iii) quoted above or the meaning proposed by Gard in para 66 of its case as follows: The phrase abnormal occurrence in the Court of Appeals judgment took on its own momentum as a term of art or something to be construed as if in a statute. It is not. The phrase is not something that appears in the words of the charter. It is a qualification derived from the authorities intended to assist the court, and the parties, to work out whether the port was safe within the contractual clause. It is a description for an occurrence which does not result from the set up or characteristics of the port; the set up and characteristics of the port (tested at the time the order is given) being the concern of the safe port undertaking. In other words, an abnormal occurrence is in contradistinction to an occurrence which results from the set up or characteristics of the port. The result of the Court of Appeals approach is to widen the category of abnormal occurrences, so as to include occurrences which do result from the set up of the port, and in turn to narrow the circumstances in which a port will be regarded as unsafe (despite the obligation being a strict one). I would accept the charterers submission recorded in sub para 44(iii) that an abnormal occurrence has its ordinary meaning. It is not a term of article As stated in that sub paragraph, [a]n occurrence was just an event something that happened on a particular time at a particular place in a particular way. Abnormal was something well removed from the normal. It was out of the ordinary course and unexpected. It was something which the notional charterer would not have in mind. We were referred to a number of cases which seem to me to support that conclusion. Sellers LJs famous dictum quoted above was taken from the judgment of Morris LJ in The Stork [1955] 2 QB 68, 105, which was a time charterparty case. See also Reardon Smith Line Ltd v Australian Wheat Board (The Houston City) [1956] AC 266, which was a voyage charterparty case to which essentially the same principles were applied. In Kodros Shipping Corpn v Empresa Cubana de Fletes (The Evia) (No 2) [1983] 1 AC 736, which was another time charterparty case, Lord Diplock said at p 749 that he regarded the nature of the contractual promise by the charterer in what he called the safe port clause as having been well settled for a quarter of a century at the very least. He referred specifically to the expression abnormal occurrence used by Sellers LJ in The Eastern City which he said reflected the previous statement of Morris LJ in The Stork. At p 749H, Lord Diplock referred to the distinction between damage sustained by a particular vessel in a particular port on a particular occasion caused by an abnormal occurrence and damage resulting from some normal characteristic of the particular port at the particular time of year. He added that there were dangers that judges of first instance sometimes omitted important qualifications. He was referring (at p 750A B) to what he called the heresy that, in the previous decade or so, had been embraced by judges in the commercial court culminating in that of Mustill J in Transoceanic Petroleum Carriers v Cook Industries Inc (The Mary Lou) [1981] 2 Lloyds Rep 272, 277. Lord Diplock agreed with the judgment of Lord Roskill which had been prepared with the assistance of Lord Brandon. The heresy to which Lord Diplock referred was that identified by Lord Roskill at p 757. It arose in the construction of what he described as these eight words in clause 2 of the relevant time charterparty: The vessel to be employed between safe ports Those were essentially the same words as in the charterparties in the instant case. The heresy identified by Lord Diplock was the conclusion of Mustill J in The Mary Lou and, indeed, of Robert Goff J in The Evia (No 2) that there was an absolute continuing contractual promise that at no time during her chartered service would the ship find herself in any port which was or had been unsafe for her: see Lord Roskill at p 756G. On p 757 Lord Roskill gave his reasons for rejecting that approach as a matter of construction of the charterparty. In particular, he said at p 757D that a charterer will exercise his contractual right to require the shipowner to carry out his contractual obligations by giving the shipowner orders to go to a particular port or place of loading or discharge. He added that it was clearly at the point of time when that order is given that the contractual promise to the charterer regarding the safety of that intended port or place must be fulfilled. Lord Roskill then said this at p 757E: The charterers contractual promise must, I think, relate to the characteristics of the port or place in question and in my view means that when the order is given that port or place is prospectively safe for the ship to get to, stay at, so far as necessary, and in due course, leave. But if those characteristics are such as to make that port or place prospectively safe in this way, I cannot think that if, in spite of them, some unexpected and abnormal event thereafter suddenly occurs which creates conditions of unsafety where conditions of safety had previously existed and as a result the ship is delayed, damaged or destroyed, that contractual promise extends to making the charterer liable for any resulting loss or damage, physical or financial. So to hold would make the charterer the insurer of such unexpected and abnormal risks which in my view should properly fall upon the ships insurers under the policies of insurance the effecting of which is the owners responsibility under clause 3 unless, of course, the owner chooses to be his own insurer in these respects. Having expressed those views as a matter of construction of the charterparty, Lord Roskill analysed the cases and concluded that they strongly supported the views he had expressed. The cases included Ogden v Graham (1861) 1 B & S 773 and GW Grace and Co Ltd v General Steam Navigation Co Ltd (The Sussex Oak) [1950] 2 KB 383 in addition to The Stork, The Houston City and The Eastern City. He noted in particular the dissenting judgment of Sir Owen Dixon CJ in the High Court of Australia in The Houston City which was accepted as correct by the Privy Council. Lord Roskill paid particular attention at p 760 to the reference to some abnormal occurrence by Morris LJ in The Stork, which, as he put it, was the foundation of the similar view of Sellers LJ in The Eastern City as described above. Like Lord Diplock, Lord Roskill emphatically adopted that approach as correct. As I read the remainder of his judgment, in which he refers to a number of other cases, they are all to substantially the same effect. In all these circumstances, I would accept these three submissions made on behalf of the charterers arising out of the cases referred to above and, in particular The Evia (No 2) in the House of Lords. First, the date for judging breach of the safe port promise is the date of nomination of the port. A safe port promise is not a continuing warranty. Second, the promise is a prediction about safety when the ship arrives in the future. These propositions are not in dispute. As I see it, such a promise necessarily assumes normality; given all of the characteristics, features, systems and states of affairs which are normal at the port at the particular time when the vessel should arrive, the question is whether the port is prospectively safe for this particular ship. If the answer is yes unless there is an abnormal occurrence, the promise is fulfilled. As Robert Goff J said at first instance in The Evia (No 2) [1981] 2 Lloyds Rep 613, 621, the formulation of a test whether the port is unsafe must assume normality, and must therefore exclude danger caused by some abnormal occurrence. I would further accept the third submission made on behalf of the charterers that on the authorities to which I have referred, safe port disputes should be reasonably straightforward. Was the danger alleged an abnormal occurrence, that is something rare and unexpected, or was it something which was normal for the particular port for the particular ships visit at the particular time of the year? I would also accept the submission that this approach, that is the approach in The Eastern City as elaborated by Lord Roskill and Lord Diplock in The Evia (No 2), provides a coherent allocation of risk between the various interests as follows. The owners are responsible for loss caused by a danger which is avoidable by ordinary good navigation and seamanship by their master and crew. The charterers are responsible for loss caused by a danger which was or should have been predictable as normal for the particular ship at the particular time when the ship would be at the nominated port and was not avoidable by ordinary good seamanship. The owners (and ultimately their hull insurers) are responsible for loss caused by a danger due to an abnormal occurrence. As Lord Roskill put it at p 757E quoted above, charterers are not insurers of unexpected and abnormal risks. On the contrary, the charterparty terms require owners to take out hull insurance (as they will invariably do) which is their protection against rare and unexpected events. On the charterers case on the facts, the characteristics of the port were such that the ship was prospectively safe, but they unexpectedly combined in a critical way such as to create an exceptional, and apparently unprecedented danger. This was within the letter and spirit of Lord Roskills description of an unexpected and abnormal risk. It is to my mind important to note the emphasis in the cases upon the meaning of the expression abnormal occurrence. I would accept the charterers submission in para 44(iii) of the Court of Appeals judgment that abnormal is something well removed from the normal. It is out of the ordinary course and unexpected. It is something which the notional charterer or owner would not have in mind. In short, I would accept the charterers submission that the first question is whether a reasonable shipowner in the position of the particular shipowner trading the ship for his own account and knowing the relevant facts would proceed to the nominated port. If the answer is yes unless there is an abnormal occurrence, the port is prospectively safe for the particular ship and the promise is fulfilled. In a case where the vessel suffers loss or damage, a second question arises, namely whether there was damage caused by an abnormal occurrence as defined above. Contrast between the approaches of the judge and of the Court of Appeal This contrast can be seen in the judgment of the Court of Appeal. Having summarised the essential facts at para 48, in para 49 the Court of Appeal described the core of the judges reasoning at paras 127 129 of his judgment thus: On analysis his approach appears to have been that, in deciding whether the casualty resulted from an abnormal occurrence: he did not need to consider the evidence relating (i) to how rare the critical combination of the two component dangers was, although, without analysing the evidence in any detail, he was prepared to hold that it may well be a rare event for these two events to occur at the same time; (ii) he did not need to consider whether the critical combination was rare, because [e]ven if the concurrent occurrence of those events is a rare event in the history of the port, what mattered was that: (a) separately the two component features of the critical combination were characteristics or attributes of the port; looked at separately, neither of the two b) component features could be said to occur rarely; long waves and northerly gale winds were at least foreseeable in Kashima; (c) there was no meteorological reason why the two component features should not occur at the same time; despite the fact that the storm which affected Kashima on 24 October 2006 may have been exceptional in terms of its rapid development, its duration and its severity, there was a clear risk of gale force winds from the northerly quadrant in the Kashima Fairway at the same time as long waves were affecting the Raw Materials Quay; (d) therefore, it was necessarily foreseeable that at some stage the critical combination would occur and nobody could be surprised if it did; and (e) the critical combination was accordingly an event which flow[ed] from the characteristics or features of the port; (iii) accordingly, in those circumstances the critical combination could not be said to be an abnormal occurrence; in the language of Mustill J (as he then was) in The Mary Lou , the critical combination was not something which could be said, if the whole history of the port were regarded, to have been out of the ordinary; again, adopting Mustill Js words, long waves and northerly gale winds were events of the type and magnitude in question [which were] sufficiently regular or at least foreseeable to say that their occurrence is an attribute or characteristic of the port, so as not to amount to an abnormal occurrence; the critical combination flowed from those characteristics and therefore could not be an abnormal occurrence. In paras 50ff the Court of Appeal embarked upon a critique of the judges approach. In para 50 they set out their conclusion that the judges approach was flawed. They then referred in detail to the speeches of Lord Diplock and Lord Roskill in The Evia (No 2). In the speech of Lord Roskill they highlighted in bold the passage at p 757E which I quoted at para 21 above. It is to my mind important that that passage includes the proposition that where the characteristics of a port make the port prospectively safe, Lord Roskill did not think that if some unexpected and abnormal event thereafter suddenly occurs which creates conditions of unsafety where conditions of safety had previously existed and as a result the ship is delayed, damaged or destroyed, that contractual promise extends to making the charterer liable for any resulting loss or damage, physical or financial. He added that so to hold would make the charterer the insurer of such unexpected and abnormal risks which should properly fall on the ships insurers. Immediately after quoting an extensive passage from the speech of Lord Roskill in The Evia (No 2), most of which is quoted above, in para 52 the Court of Appeal said that its import was clear. They said that charterers do not assume responsibility for unexpected and abnormal events which occur suddenly and which create conditions of unsafety after they have given the order to proceed to the relevant port. They are the responsibility of the ships hull insurers (if owners have insured) or of owners themselves. The Court of Appeal further noted in para 52 that the concept of safety is necessarily not an absolute one. They did so by reference to the decision of the Court of Appeal in The Saga Cob [1992] 2 Lloyds Rep 545, 551, where, in the context of political risks, Parker LJ, giving the judgment of the court, said this: In the latter [the safe port warranty case] one is considering whether the port should be regarded as unsafe by owners, charterers, or masters of vessels. It is accepted that this does not mean that it is unsafe unless shown to be absolutely safe. It will not, in circumstances such as the present, be regarded as unsafe unless the political risk is sufficient for a reasonable shipowner or master to decline to send or sail his vessel there. In the instant case the Court of Appeal, in my opinion correctly, held (at para 53) that a similarly realistic approach should be adopted to the determination of what it called the essentially factual question whether the event giving rise to the particular casualty is to be characterised as an abnormal occurrence or as resulting from some normal characteristic of the particular port at the particular time of year. The Court of Appeal, emphasised the word normal in the term normal characteristic, noting that it was used by Lord Diplock when he observed in The Evia (No 2) at p 749 that: it is not surprising that disputes should arise as to whether damage sustained by a particular vessel in a particular port on a particular occasion was caused by an abnormal occurrence rather than resulting from some normal characteristic of the particular port at the particular time of year. Importantly in the instant case, the Court of Appeal further observed (also at para 53) that, in what they described as an illuminating passage, in The Saga Cob the Court of Appeal at pp 550 551 emphasised that the fact that an event (in that case a guerrilla attack) was theoretically foreseeable did not make it a normal characteristic of the port. They noted that on the facts in The Saga Cob the event relied upon could not be regarded as other than an abnormal and unexpected event. This approach underlines the fact that foreseeability is not the test of the normality of an event. The cases show that an abnormal occurrence or event is something that is unexpected when the vessel arrives at and remains in the port: see eg The Evia (No 2) per Lord Roskill quoted at paras 21 and 30 above. In para 54 the Court of Appeal placed reliance upon the approach of Mustill J in The Mary Lou at p 278. They noted that in his description of what constitutes an abnormal occurrence, Mustill J implicitly recognised the need to approach the identification of an abnormal occurrence realistically and having regard to whether the event had occurred sufficiently frequently so as to become a characteristic of the port. At the end of the same paragraph, having recognised the difficulty of finding an appropriate turn of phrase, Mustill J said this: It may be said that the loss is not recoverable unless events of the type and magnitude are sufficiently regular or at least foreseeable to say that the risk of their occurrence is an attribute or characteristic of the port. Or it may be said that abnormal or casual events do not found a claim. The Court of Appeal identified a number of respects in which they concluded that the judge went wrong. They summarised them in para 55 of their judgment: First of all he failed to formulate the critical and unitary question which he had to answer: namely, whether the simultaneous coincidence of the two critical features, viz (a) such severe swell from long waves that it was dangerous for a vessel to remain at her berth at the Raw Materials Quay (because of the risk of damage or mooring break out) and (b) conditions in the Kashima Fairway being so severe because of gale force winds from the northerly/north easterly quadrant), as to make navigation of the Fairway dangerous or impossible for Capesize vessels, was an abnormal occurrence or a normal characteristic of the port of Kashima? Or put even more simply, was it an abnormal occurrence or a normal characteristic of the port that a vessel might be in danger at her berth at the Raw Materials Quay but unable at the same time safely to leave because of navigation dangers in the Kashima Fairway arising from the combination of long waves and gale force northerly winds which, in fact, occurred? The Court of Appeal added in para 56 that, instead of asking the unitary question directed at establishing the correct characterisation of the critical combination (abnormal occurrence or normal characteristic of the port), the judge merely addressed the respective constituent elements of the combination (swell from long waves making it dangerous for a vessel to remain at the Raw Materials Quay and gale force winds from the northerly/north easterly quadrant making navigation of the Fairway dangerous or impossible for Capesize vessels) separately. He looked at each component and decided that, viewed on its own, neither could be said to be rare and both were attributes or characteristics of the port. The Court of Appeal concluded that that was the wrong approach; what mattered was not the nature of the individual component dangers that gave rise to the events on 24 October, but the nature of the event (namely the critical combination of the two) which gave rise, on the judges findings, to the vessel effectively being trapped in port. The Court of Appeal further held in para 57 that the judge was also wrong to hold that, even if the critical combination was rare, nonetheless it was a characteristic of the port, for two reasons. The first (as stated in his para 127) was because, although it might well be rare for these two events to occur at the same time, nobody at the port could be surprised if they did, and there was no meteorological reason why they should not occur at the same time. The second (as stated in his para 128) was because, even if the concurrent occurrence of those events was a rare event in the history of the port, such an event flowed from the characteristics or features of the port. The Court of Appeal concluded that both reasons were fallacious. In my opinion they were correct so to hold. As to the first, the Court of Appeal noted in para 58 that the conclusion that nobody at the port could be surprised that both the above events occurred at the same time appears to have been based on the idea that, provided an event is theoretically foreseeable as possibly occurring at the relevant port, because of the ports location, then that is enough to qualify the event as a characteristic of the port. The Court of Appeal correctly said at para 58 that the judge appears to have derived that test from dicta in the judgment of Mustill J in The Mary Lou at p 278, where (in the passage quoted at para 33 above) he referred to long waves and northerly gale winds as being at least foreseeable. However the Court of Appeal, in my opinion correctly, held that satisfaction of the test of mere foreseeability was per se clearly not sufficient to turn what the judge himself described as a rare event in the history of the port into a normal characteristic or attribute of the port. They held that the error made by the judge was to pick up on the words at least foreseeable in his citation from Mustill Js judgment, and to use minimum foreseeability, without more, as some sort of litmus test for establishing whether an event was a characteristic of a port, without having any regard to significant factors such as the actual evidence relating to the past history of the port, the frequency (if any) of the event, the degree of foreseeability of the critical combination and the very severe nature of the storm on the casualty date. The Court of Appeal further held that in doing so the judge departed from the orthodox and practical approach of Mustill J in his judgment in The Mary Lou at p 278 and of Lords Diplock and Roskill in The Evia (No 2), to the question of whether an event was abnormal. Such an approach necessarily includes an examination of the past history of the port and of whether, in that evidential context, the event was unexpected. I agree. The Court of Appeal also noted in para 58 that he took the phrase at least foreseeable as used by Mustill J out of context. I agree with the Court of Appeal that it is clear that, when the passage is read in context, Mustill J was certainly not suggesting that mere, theoretical, foreseeability on its own was sufficient. He was not setting up some sort of alternate test which excluded considerations of questions such as the frequency of past occurrences of the particular event, or the degree of likelihood that the event was to occur in the future. Moreover, the Court of Appeal noted at para 59 that, as the Court of Appeal emphasised in The Saga Cob in the passage cited at para 32 above, one has to look at the reality of the particular situation in the context of all the evidence, to ascertain whether the particular event was sufficiently likely to occur to have become an attribute of the port. Otherwise the consequences of a mere foreseeability test lead to wholly unreal and impractical results. The Court of Appeal focused on these examples in the instant case: does the mere fact that it is foreseeable from the location of San Francisco that earthquakes may occur in its vicinity, or from the location of Syracuse, beneath Mount Etna, that there may be volcanic explosions in its vicinity, predicate that any damage caused to vessels in those ports from such events, were they to occur in the future, would flow from the normal characteristics or attributes of those ports, and therefore necessarily involve a breach of any safe port warranty? The answer given by the Court of Appeal was obviously not; whether, in such circumstances, there would be a breach of the safe port warranty, or the event would be a characterised as an abnormal occurrence, would necessarily depend on an evidential evaluation of the particular event giving rise to the damage and the relevant history of the port. The Court of Appeal was particularly struck (at para 60) by the fact, as they put it, that the judge provides no evidential basis for his apparent factual conclusion that nobody at the port could, I consider, be surprised if the crucial combination occurred, or for the conclusion reached earlier in para 110 of the judgment that there must have been a clear risk of gale force winds from the northerly quadrant in the Kashima Fairway at the same time as long waves were affecting the Raw Materials Quay. The final conclusion of the Court of Appeals on the first reason advanced by the judge and referred to by the Court of Appeal in para 57 was set out in para 61 of their judgment (which must be read in the context of para 60) as follows: 61. In the light of the evidence to the effect that no vessel in the ports history had been dangerously trapped at the Raw Materials Quay, with a risk of damage or mooring break out, at the same time as the Kashima Channel was not navigable because of gale force winds, it is difficult to see how he reached this conclusion. This may be because he did not adequately focus evidentially on the particular situation which he had to consider, namely one where a vessel was effectively trapped, because the swell from long waves affecting vessels berthed at the Raw Materials Quay was so severe that it was dangerous for a vessel to remain there (as opposed to merely a situation where long waves caused swell and a vessel decided to leave the Raw Materials Quay) and the Kashima Channel not being navigable because of gale force winds. It may also be because he did not give adequate weight to the evidence of Mr Lynagh (which he gives no cogent reason for rejecting) that the storm which occurred on 24 October was exceptional in terms of its rapid development, its duration and its severity (see para 48(ix) above). As to the second reason advanced by the judge, the Court of Appeal responded in this way in para 62: 62. The second reason given by the judge (Even if the concurrent occurrence of those events is a rare event in the history of the port such an event flows from characteristics or features of the port) is, in our view, equally flawed. As we have already stated in paras 55 and 56 above, what the judge had to decide was whether the concurrent occurrence of those events (ie the critical combination) was itself a normal characteristic of the port or an abnormal occurrence. That was the relevant event which the judge had to characterise. It simply did not follow, logically or otherwise, from the fact that that event arose from (or, as the judge said, flow[ed] from) the combination of two individual dangers, which he had held were normal characteristics or attributes of the port, that the concurrent occurrence of those events was also a normal characteristic or attribute of the port. By way of postscript, I note that on behalf of the owners significant stress was placed upon the failure of the Kashima port authority to carry out a risk assessment and put in place a proper safety system to deal with the risk of the two types of weather conditions referred to by the judge occurring at the same time. However, while it may be relevant in some cases, the question remains whether the event (or in this case the combination of natural events) which led to this casualty was an abnormal and unexpected occurrence or not. For the reasons I have given I conclude that the Court of Appeal were entitled to reach the decision which they did. The ultimate conclusion of the Court of Appeal was set out in paras 63 and 64 as follows: 63. In deciding whether the critical combination was itself a normal characteristic of the port or an abnormal occurrence, what the judge should have done was to evaluate the evidence relating to the past frequency of such an event occurring and the likelihood of it occurring again. He should have also, in our view, have taken into account what appears to have been the unchallenged evidence of Mr Lynagh referred to above relating to the exceptional nature of the storm that affected Kashima on 24 October 2006 in terms of its rapid development, its duration and its severity. Had he done so, then, on the basis of his own finding that the concurrent occurrence of those events was rare, and on the basis of the evidence which we have summarised above, there would, in our view, have been only one conclusion which he could have reached namely that the event which occurred on 24 October 2006 was indeed an abnormal occurrence. 64. For the above reasons we conclude that the conditions which affected Kashima on 24 October 2006 were an abnormal occurrence, that there was no breach by the charterers of the safe port obligation, and accordingly that the appeal should be allowed on this ground. I agree with the Court of Appeal. Conclusion on the safe port issue In my opinion, the Court of Appeal reached the correct conclusions for the reasons they gave. I initially questioned whether the Court of Appeal should have interfered with the decision of the judge at first instance. However, in the light of the submissions made on both sides, I have concluded that this was one of those rare cases in which the correct conclusion is that the casualty was caused by an abnormal occurrence as that expression is explained in the cases. I accept the reasoning of the Court of Appeal and prefer their approach to that of the judge. I would accordingly dismiss the appeal on the safe port issue. I would answer the questions raised on that issue by the parties and set out in para 8.1(1) and (2) as follows. The port was not unsafe within the meaning of the safe port undertaking so that the charterers were not in breach of it. The conditions at the port amounted to an abnormal occurrence as that expression is understood in the cases. Joint insurance Issue 2 summarised in para 8 above assumes (contrary to my view) that there was a breach of the safe port undertaking and asks whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking. The judge held that the owners and hull insurers were entitled to recover notwithstanding clause 12, whereas the Court of Appeal held that they were not. Lord Sumption agrees with the judge whereas Lord Toulson agrees with the Court of Appeal. I agree with the judge and Lord Sumption, essentially for the reasons they give. Lord Sumption has set out clauses 12 and 13, which I will not repeat. I have been particularly struck by these considerations. I agree with the judge (at para 185) that the demise charterparty must be given the meaning which, having regard to the background known to both parties, it would reasonably be understood to bear and that, in circumstances where, in clause 29, the demise charterparty contains a clear safe port warranty, one would expect any exemption of the demise charterers from liability in damages for breach of the safe port warranty to be clearly expressed. In para 190 the judge observed that the charterers relied upon the The Evia (No 2), in which the question arose whether (as Lord Roskill put it at p 766) the war risks clause cast upon the owners and their insurers all war risks and thus freed the charterers from liability for them pursuant to the safe port clause. It was held that the charterers were freed from any liability that they might otherwise have. Lord Roskill identified the relevant question as being whether the war risks clause was a complete code exhaustive of the owners rights, which depended upon the construction of the time charterparty as a whole. As the judge noted at para 191, the charterers adopted that reasoning here and said that it was applicable to the demise charterparty and, indeed, that it was a stronger case because, not only did the demise charterers pay for the cost of hull insurance, but they were also named as joint assureds and, generally speaking, an insurer cannot exercise rights of subrogation to pursue a claim in the name of one co assured against another. The judge rejected that submission in these terms: 192. Cases decided after The Evia (No 2) have emphasised that the decision in that case depended upon there being a clause which, on its true construction, provided an exhaustive code of the rights and liabilities of the parties; see The Concordia Fjord [1984] 1 Lloyds Reports 385 and The Chemical Venture [1993] 1 Lloyds Reports 508. 193. In The Concordia Fjord the arbitrator, Mr MacCrindle QC, said that he was not aware of any principle exempting the Charterers from liability for their breaches of contract merely on the ground that they have directly or indirectly provided the funds whereby the Owners insured themselves against such damages. Bingham J agreed; see pp 387 388. Thus the mere fact that the charterer pays for the hull insurance is not enough to exempt him from liability for breach of his obligations under the charterparty. There has to be an intention to create an exhaustive code which determines the parties rights and liabilities by reference to a claim on the insurance policy. 194. If clause 12 of the demise charterparty were such a code it would apply, not just to a particular issue such as war risks as was the case in The Evia (No 2), but to all hull, war and P&I risks. The charterparty contains a clear and express safe port warranty. If clause 12 were to be construed as an exhaustive code that clause would be rendered nugatory with regard to insured risks. It would in effect exempt the demise charterer from liability for breach of the safe port warranty in exchange for paying for the hull insurance. For that to be the intention of the parties there would have to be clear words. Counsel for Gard emphasised the rule of construction that clear words are necessary before the court will hold that a contract has taken away rights or remedies which one of the parties would otherwise have had; see Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689. This rule of construction is usually expressed with regard to rights which a party would have at common law but it must also apply to valuable rights given by other parts of a contract. Counsel submitted that there are no such words in clause 12 of the demise charterparty. The sentences of clause 12(a) and 12(c) on which particular reliance is placed by Daiichi do not expressly remove the right to damages for breach of the safe port warranty. They merely give the demise charterer certain rights with regard to proceeds of the insurance policy for which they have paid. I entirely agree with the judge. It follows from the fact that clause 12 contains no such express exclusion that any such exemption can only arise by necessary implication. In short, there is nothing in clause 12 which provides that the demise charterers have no liability for breach of clause 29 and I see no basis for such a necessary implication, essentially for the reasons given by the judge and by Lord Sumption. In particular, it seems to me to be striking that, as the judge observed in para 195, clause 13, which contained an alternative insurance and repairs clause which not only provided that hull insurance would be paid for by the registered owner but also expressly stated that the registered owners and/or insurers would not have any rights of recovery or subrogation against the demise charterers in respect of insured losses, was deleted from the printed form. Thus the demise charterers chose not to be bound by clause 13. After a detailed analysis (between paras 196 and the first part of para 198), the judge said that he did not consider that clause 12 codified the rights and liabilities of the parties with regard to insured risks. He noted that it provides for the provision of insurance and who is to pay for it, for the demise charterers to be responsible for insured repairs and to reimburse themselves from the proceeds of the insurance policy, for the demise charterers to be responsible for other repairs and for the claims on a total loss to be paid to the mortgagee for distribution to the registered owners and demise charterers in accordance with their respective interests. I agree with the judge that this does not in the required sense codify the rights and liabilities of the parties with regard to breach of the safe port warranty where the casualty caused by the breach has given rise to a claim on the insurance. It is true that, as the judge put it in para 199, what clause 12 has, which neither the clause in The Evia (No 2) nor the clause in The Concordia Fjord (as expressly noted by Mr MacCrindle QC) had, is a provision that the owners and demise charterers were to be co assureds, thereby, on the face of it, bringing into play the principle that, generally, an insurer cannot exercise rights of subrogation to pursue a claim in the name of one co assured against another. After referring (in para 200) to the decision and reasoning of Rix LJ in Tyco Fire and Integrated Solutions (UK) Ltd v Rolls Royce Motor Cars Ltd [2008] 2 All ER (Comm) 584, the judge concluded in para 201 as follows: In the present case there was an express safe port warranty by the demise charterers, there was no code of rights and obligations in clause 12 with regard to insured losses caused by a breach of the safe port warranty and there was no express ouster of the right of subrogation in clause 12. Those features of the demise charterparty suggest to me that, construing the charter as a whole, it was intended that the demise charterer would be liable to the owner for breach of the safe port warranty, notwithstanding that they were joint assured and could take the benefit of the insurance in the manner set out in clause 12. I agree. For these reasons and those given by Lord Sumption, I would have answered the question or issue 2 summarised in para 8 above, namely whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking, in the negative. I am not persuaded by the judgments of Lord Mance and Lord Toulson (with whom Lord Hodge agrees) to reach a different conclusion. Limitation of liability Introduction Question or issue 3 summarised in para 8 above assumes (contrary to my view) that there was a breach of the safe port undertaking and asks whether Daiichi is entitled to limit its liability for Gards losses or any (and, if so, which) of them as against Sinochart (and Sinochart in turn against Gard) pursuant to section 185 and Schedule 7 article 2(1) of the Merchant Shipping Act 1995, which gave the force of law to the Convention on Limitation of Liability for Maritime Claims 1976 (the 1976 Convention). Like the joint insurance issue, this issue does not arise in the light of our decision on the safe port issue. However it raises a point of some potential importance and was fully argued before us. Neither of the courts below considered it because it was accepted that they were both bound by the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460. In that case Longmore LJ gave the only substantive judgment, with which Waller and Neuberger LJJ agreed. As formulated on behalf of Daiichi, who were time charterers, the question at issue is whether Daiichi (hereinafter the charterers) can limit their liability for the loss of the vessel and consequential losses arising out of the loss of the vessel. The answer to that question depends largely upon whether The CMA Djakarta was correctly decided in the Court of Appeal. The limitation issue is a short but important one. It concerns the correct interpretation of the 1976 Convention. The Convention provides, so far as relevant, as follows: Article 1. Persons entitled to limit liability Shipowners and salvors, as hereinafter defined, may 1. limit their liability in accordance with the rules of this Convention for claims set out in article 2. 2. The term shipowner shall mean the owner, charterer, manager or operator of a seagoing ship. 3. 4. If any claims set out in article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention. 5. In this Convention the liability of a shipowner shall include liability in an action brought against the vessel herself. Article 2. Claims subject to limitation Subject to articles 3 and 4 the following claims, 1. whatever the basis of liability may be, shall be subject to limitation of liability: (a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation) occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom; (b) (c) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connexion with the operation of the ship or salvage operations; (d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship; (e) the rendering harmless of the cargo of the ship; (f) claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures. claims in respect of the removal, destruction or 2. Claims set out in paragraph 1 shall be subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise. However, claims set out under paragraph 1(d), (e) and (f) shall not be subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable. Article 3. Claims excepted from limitation The rules of this Convention shall not apply to: (a) claims for salvage or contribution in general average Both parties rely principally upon article 2.1(a) quoted above. However, as appears below, reliance is also placed upon articles 6 and 9 11. Although I have included the references to salvors in the above quotation, it is common ground that those references are irrelevant to the issues in this appeal. They were included in the Convention in order to depart from the decision of the House of Lords in The Tojo Maru [1972] AC 242. The critical question for present purposes is whether The CMA Djakarta was correctly decided in the Court of Appeal. Gard say that it was. They rely upon the fact that it has not been criticised in any case since it was decided. They thus rely upon the reasoning of the Court of Appeal in The CMA Djakarta. They also rely upon some at least of the reasoning of David Steel J at first instance in that case, reported at [2003] 2 Lloyds Rep 50 and of Thomas J in The Aegean Sea [1998] 2 Lloyds Rep 39. By contrast, the charterers say that both cases were wrongly decided. I have reached the clear conclusion that the Court of Appeal were correct, essentially for the reasons they gave. History of limitation The 1976 Convention had of course been preceded by earlier Conventions, which David Steel J referred to as part of his historical analysis of the right to limit liability set out in detail in his judgment at first instance reported in [2003] 2 Lloyds Rep 50. I entirely agree with his analysis (at pp 51 53) and will not repeat it here, save to note some key points. He referred to the first relevant limitation statute, which was the Responsibility of Shipowners Act 1733 and then to the Merchant Shipping Act 1854, the Merchant Shipping Acts Amendment Act 1862 and the Merchant Shipping Act 1894, which consolidated the earlier legislation. As David Steel J put it, section 503 of the 1894 Act furnished a limit to an owners liability in respect of certain categories of occurrence in these terms: 503.(1) The owners of a ship, British or foreign, shall not, where all or any of the following occurrences take place without their actual fault or privity; (that is to say,) (b) Where any damage or loss is caused to any goods, merchandise, or other things whatsoever on board the ship; (d) Where any loss or damage is caused to any other vessel, or to any goods, merchandise, or other things whatsoever on board any other vessel, by reason of the improper navigation of the ship; be liable to damages beyond the following amounts David Steel J added that section 71 of the Merchant Shipping Act 1906 provided that the expression owner would be deemed to include any charterer to whom the ship is demised. He further noted that, even prior to that Act, owner was construed as being inclusive of a demise charterer: The Hopper No 66 [1908] AC 126. The two Conventions to which David Steel J then specifically referred were the two Conventions for the Unification of Certain Rules relating to the Limitation of Liability of Seagoing Vessels in 1924 and 1957 (the 1924 Convention and the 1957 Convention respectively). Although the United Kingdom signed the 1924 Convention, it never became part of English law and was replaced by the 1957 Convention as between states that ratified the 1924 Convention. In para 20 David Steel J noted that the right of limitation was still afforded to owners for certain occurrences but the categories of occurrence were enlarged by article 1(1) to include (a) loss of, or damage to, any property on board the ship; and (b) loss of, or damage to any other property or infringement of any rights caused by the act, neglect or default of any person on board the ship for whose act, neglect or default the owner is responsible or any person not on board the ship for whose act, neglect or default the owner is responsible: provided however that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo In para 21 he added that the range of those entitled to limitation was also enlarged by article 6(2), which provided: the provisions of this Convention shall apply to the charterer, manager and operator of the ship, and to the master, members of the crew and other servants of the owner, charterer, manager or operator acting in the course of their employment, in the same way as they apply to an owner himself: provided that the total limits of liability of the owner and all such other persons in respect of personal claims and property claims arising on a distinct occasion, shall not exceed the amounts determined in accordance with article 3 of this Convention. The impact of the 1957 Convention was enacted in the form of the Merchant Shipping (Liability of Shipowners and Others) Act 1958 (the 1958 Act) by way of amendment to the 1894 Act. In purported compliance with article 1(1)(b), section 2 prescribed that a new subsection (d) should be substituted in subsection 1 of section 503 of the 1894 Act as follows: (d) Where any loss or damage is caused to any property (other than any property mentioned in paragraph (b) of this subsection) or any rights are infringed through the act or omission of any person (whether on board the ship or not) in the navigation or management of the ship, or in the loading, carriage, or discharge of its cargo or through any other act or omission of any person on board the ship Further, in purported compliance with article 6(2), section 3 of the 1958 Act provided: (1) The persons whose liability in connection with a ship is excluded or limited by Part VIII of the Merchant Shipping Act 1894 shall include any charterer and any person interested in or in possession of the ship, and, in particular, any manager or operator of the ship. The Convention At first instance in The CMA Djakarta David Steel J noted at para 25 that the Convention introduced radical changes as regards to both the size of the fund and the circumstances in which the entitlement to limit might be lost. As he put it, in short, the Convention made available a significantly enhanced fund at what he said was perceived to be the maximum insurable level, but the entitlement to which could only be challenged in quite exceptional circumstances: see The Leerort [2001] 2 Lloyds Rep 291. He said in para 26 that it was notable that the Convention left largely untouched the range of persons entitled to limit, although it expressed the category in somewhat different terms. David Steel J identified the rival contentions of the parties succinctly in paras 28 and 29. It was the charterers case, first that, as charterers, they fell squarely within the category of persons enabled to limit their liability as prescribed by article 1, and secondly that the entire claim for damages arising out of the casualty fell equally squarely within the category of qualifying claims under article 2. By contrast, it was the owners case that it was clear from the overall context, having regard to the object and purpose of the Convention, that the entitlement to limit was restricted to those persons identified in article 1(2) whose liability for the qualifying claim arose qua owner and not otherwise. On the facts, limitation was not available since it was common ground that no part of the claim arose from the role of the appellant charterers qua owners. David Steel J essentially accepted the submissions made on behalf of the charterers and, in doing so, followed the decision and reasoning of Thomas J in The Aegean Sea. General approach of the Court of Appeal in the CMA Djarkta Longmore LJ set out his general approach to the Convention in paras 9 11. He first identified what he concluded were errors made by David Steel and Thomas JJ. In particular, he did not agree with them that, in order to succeed in limiting their liability, it was necessary for charterers claims to arise from their role qua owners. I agree that Longmore LJs conclusions in that regard were correct for the reasons he gave and do not need to revisit them. Longmore LJ then cited a number of cases which support the proposition that, given that the Convention is in its own words incorporated into English law, the task of the court is to construe the Convention as it stands without any English law preconceptions. As he put it, the interpretation of international conventions must not be controlled by domestic principles but by reference to broad and general principles of construction. He cited a number of well known cases: Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328, 350, James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152D E, Fothergill v Monarch Airlines Ltd [1981] AC 251, 272E, 282A and 293C, and Morris v KLM Royal Dutch Airlines [2002] 2 AC 628, 656 at para 78. He added in para 10 that, while it may be difficult to know what are broad and acceptable principles, some principles are enshrined in articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969), which was ratified by the United Kingdom in 1971 and came into force in 1980. Those articles provide: ARTICLE 31 General rule of interpretation 1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. ARTICLE 32 Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) (b) unreasonable. leaves the meaning ambiguous or obscure; or leads to a result which is manifestly absurd or Longmore LJ summarised his conclusions derived from articles 31 and 32 in this way. The duty of a court is to ascertain the ordinary meaning of the words used, not just in their context but also in the light of the evident object and purpose of the Convention. The court may then, in order to confirm that ordinary meaning, have recourse to the travaux prparatoires and the circumstances of the conclusion of the Convention. The 1957 Convention was signed by the United Kingdom. Like Longmore LJ in para 10, I would regard the existence and terms of a previous international convention (even if not made between all the same parties) as one of the circumstances which are part of a conclusion of a new convention but recourse to such earlier convention can only be made once the ordinary meaning has been ascertained. Such recourse may confirm that ordinary meaning. It may also sometimes determine that meaning but only when the ordinary meaning makes the convention ambiguous or obscure or when such ordinary meaning leads to a manifestly absurd or unreasonable result. Context, object and purpose In para 11 Longmore LJ set out the object and purpose of the 1976 Convention as agreed between the parties as follows (omitting the reference to the Tojo Maru). First, the general purpose of owners, charterers, managers and operators being able to limit their liability was to encourage the provision of international trade by way of sea carriage. Second, the main object and purpose of the Convention was to provide for limits which were higher than those previously available in return for making it more difficult to break the limit. Under the 1894 Act an owner was entitled to limit his liability if he showed that the casualty occurred without his actual fault or privity. Under the 1976 Convention (and the 1995 Act) the (now higher) limit is to apply unless it can be shown that the loss resulted from the personal act or omission of the party relying on the limit committed with intent to cause such loss or recklessly with the knowledge that such loss would probably result. It is thus particularly difficult to break the limit, but the amount available for compensation is higher than it was previously. Longmore LJ added that it was not possible to ascertain with certainty any object or purpose beyond that common ground. He therefore turned to the ordinary meaning of the Convention, beginning at the beginning. Ordinary meaning Leaving the position of salvors on one side, at para 13 Longmore LJ noted in the context of article 1 that the word shipowner was defined as the owner, charterer, manager or operator of a seagoing ship. He then rejected the opinion of David Steel J and Thomas J that a charterer could only limit his liability if he was acting in the management or operation of the vessel. In particular he expressed the view that the mere fact that charterer is part of the definition of the word shipowner cannot of itself mean that a charterer, which was an expression otherwise unqualified, has to be acting as if he were a shipowner (ie qua shipowner) before he can limit his liability. He added: To my mind the ordinary meaning of the word charterer connotes a charterer acting in his capacity as such, not a charterer acting in some other capacity. Longmore LJ then said in para 13 that there were two difficulties in the argument to the contrary. I do not think that it is necessary for me to discuss them in any detail, since they were not relied upon on behalf of the charterers here. In para 18, to my mind correctly, Longmore LJ said that he would not give any gloss to the word charterer in article 1(2) and that he would give it what seemed to him to be its ordinary meaning. I agree with that approach. Longmore LJ noted at para 21 that the issue was not resolved by a consideration of article 1 of the Convention because it was still necessary to ascertain whether a claim for damage to the ship by reference to which a charterer seeks to limit his liability is a claim which falls within article 2. In paras 22 24 he considered loss or damage to the ship under article 2(1)(a), which he correctly held extends the right to limit, inter alia, to claims in respect of loss of or damage to property occurring on board, which is not apposite to include loss of or damage to the ship itself since neither the loss of a ship nor damage to a ship can be said to be loss or damage to property on board. Property on board means something on the ship and not the ship itself. The question then arises whether this is a claim in respect of loss of or damage to property occurring in direct connexion with the operation of the ship. Longmore LJ held in para 23 that the most obvious reason for including this category of claim is to cater for cases of collision with another ship. Loss or damage to that other ship (or its cargo) is not loss of or damage to property occurring on board but is loss of or damage to property occurring in direct connexion with the operation of the ship. The critical part of his reasoning is to my mind in the next part of para 23, where he said that that wording was not apt to cater for a case where the very ship, by reference to the tonnage of which limitation is to be calculated, is lost or damaged because the loss envisaged is loss to something other than that ship herself. He added at para 24 that it was not without interest that in order to describe this category of claim the framers had used the phrase occurring in direct connexion with the operation of the ship. That was, he said, virtually the same phrase as that used by David Steel J to define what he meant by qua owner. If one were to postulate the case of the vessel being in berth when the dangerous cargo exploded and damaged parts of the harbour, the harbour authority could sue for that damage but one would expect that the shipowners would be able to limit any liability for that claim. In order to do so, however, they would have to assert that the loss or damage occurred in direct connexion with the operation of the ship. The fact that dangerous cargo had with their permission been loaded on the ship would, one thinks, be enough for that purpose. But if it would be sufficient for that purpose, it would be odd that a charterer pursuant to article 1 could not say of his own act in permitting such cargo to be loaded that it was an act in direct connexion with the operation of the ship. Articles 9 to 11 of the Convention Longmore LJ treated these provisions as of some importance in reaching his conclusion. In my opinion he was correct to do so. In para 25 he noted that Thomas J set them out in detail in The Aegean Sea and summarised them broadly in this way. Article 9(1) provides for the claims against (a) the persons mentioned in article 1(2) (viz owner, charterer, manager or operator) to be aggregated if they arose on distinct occasions; likewise for claims against (b) the owner of a ship rendering salvage services and a salvor operating from that ship and (c) a salvor not operating from a ship. Article 9(2) then deals with passenger claims. Article 10 provides that liability can be limited without the creation of a fund. Article 11 then provides for the constitution of a limitation fund when that is, in fact, done; it provides for separate funds for the shipowner category of those entitled to limit and the salvor categories (and for passenger claims) by providing: A fund constituted by one of the persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 of article 9 or his insurer shall be deemed constituted by all persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 respectively. Thus through the references to article 9(1)(a) all those persons designated as shipowners in article 1(2) of the Convention are brought together as a single unit for the constitution of the fund. Thomas J said this (p 49): In my view the combined effect of these articles is important. As there is provision for a fund for those categorized as shipowners and that fund is to cover both charterers and owners, it is difficult to see how charterers can claim the benefit of limitation through that fund where a claim is brought against them by owners. Owners are entitled to the benefit of limitation for a claim by charterers as that claim is being brought by charterers not when performing a role in the operations of the ship or when undertaking the responsibility of a shipowner, but in a different capacity, usually through their interest in the cargo being carried. While I entirely agree with this passage from The Aegean Sea, the considerations advanced by the judge to my mind more effectively support a conclusion that the claims in respect of which an owner or a charterer can limit do not include claims for loss or damage to the ship relied on to calculate the limit rather than a conclusion that a charterer can only limit in respect of operations he does qua owner. Further, at para 26 Longmore LJ approved Thomas Js view that, if he was wrong in his general conclusion that the charterers could only limit when the loss (a total loss in that case) was caused by an act normally performed by the shipowner, the claim for the loss of the vessel did not fall within article 2(1)(a) because the loss of the ship was not loss of property occurring in direct connection with the operation of the ship. This in turn was because, as Thomas J put it at (p 51): it is the operation of the very ship that must cause the loss of property; the ship cannot be the object of the wrong. Longmore LJ added that, similarly in The CMA Djakarta, which was a case of extensive repair rather than total loss, David Steel J upheld the shipowners argument that the vessel cannot be both the victim and the perpetrator and that the property envisaged in the article must be the property of a third party either on board the vessel (eg cargo) or external to the vessel, for example an SBM. David Steel J said (at para 52): The property damaged cannot be the very same thing as the operation of which caused the damage. I agree with both Thomas J and David Steel J in this respect and conclude that the ordinary meaning of article 2(1)(a) does not extend the right to limit to a claim for damage to the vessel by reference to the tonnage of which limitation is to be calculated. Confirmation of the ordinary meaning of article 2(1)(a) In para 27 Longmore LJ gave a further reason for his earlier conclusion based on the ordinary meaning of article 2(1)(a), with which I also agree. I agree that the effect of giving the words their ordinary meaning is not absurd or unreasonable, nor is there ambiguity or obscurity. As Longmore LJ pointed out, David Steel J considered the wording of the 1957 Convention and held that his conclusion derived support from article 1 of that Convention, which drew an express distinction between the ship and other property. Longmore LJ held that it was, if anything, even clearer than the 1976 Convention on this point. He held that that served to confirm the proposition since any intention to change the previous agreement so that damage to the ship itself would be subject to limitation would have been made much more explicitly. I agree, although I do not regard this point as of any great significance. I should add that, in my opinion, in agreement with David Steel J and the Court of Appeal in The CMA Djakarta, there is nothing in the travaux prparatoires which supports any other conclusion. Some reliance was placed upon article 4(1)(iv) of the Liens and Mortgages Convention (1967), which provides: The following claims shall be secured by maritime liens on the vessel . (iv) claims against the owner, based on tort and not capable of being based on contract, in respect of loss of or damage to property occurring, whether on land or on water, in direct connection with the operation of the vessel . No one suggested that loss or damage to property could include loss of or damage to the very vessel on which the maritime lien was secured. I would accept the submission made on behalf of Gard that, when similar wording was exported to the 1976 Convention, the expression loss of or damage to property in direct connection with the operation of the ship was not intended to include loss of or damage to the very vessel on the basis of whose tonnage limitation was calculated. Conclusion on limitation For the reasons I have given, which are essentially the same as those of the Court of Appeal in The CMA Djakarta, I would hold that, if there were a breach of the safe port warranty, the charterers would not be entitled to limit their liability under the Convention in accordance with the limitation fund calculated by reference to the vessel. CONCLUSIONS On the safe port issue (question 1), I would hold that the port was not unsafe within the meaning of the safe port undertaking so that the charterers were not in breach of it. The conditions in the port amounted to an abnormal occurrence as that expression is understood in the cases. On the joint insurance issue, if (contrary to para 88 above) there were a breach of the safe port undertaking, I would have answered question or issue 2 summarised in para 8 above, namely whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking, in the negative. However I recognise that this is a minority view. On the limitation issue (question 3), again assuming that there were a breach of the safe port undertaking, I would hold that the charterers were not entitled to limit their liability in accordance with a limitation fund calculated by reference to the vessel. It may be appropriate for declarations to be made reflecting the above. The parties are invited to make submissions on the form of order and on costs within 21 days of the handing down of the judgments. LORD SUMPTION: I agree that there was no breach of the safe port warranty in this case, for the reasons given by Lord Clarke, which substantially correspond to those of the Court of Appeal. On that footing, it was strictly speaking unnecessary for the Court of Appeal to decide whether, if there had been a breach, there would have been any liability in damages. For the same reason, it is unnecessary for us to deal with it. Nonetheless, I propose to do so, because the question is of some general importance and I am not persuaded that the Court of Appeal answered it correctly. They held that the demise charterers suffered no loss by the destruction of the ship because, although there was a corresponding safe port warranty in the demise charter of which they were (on this hypothesis) in breach, they would have had no liability to pay damages representing the value of the ship. This is said to be the result of clause 12 of the demise charter, which provided for the demise charterers to procure insurance for the vessel at their own expense against marine, war and protection and indemnity risks, for the joint interests of themselves and the head owners. From this, and from the provisions of clause 12 relating to the distribution of the insurance proceeds upon a total loss, it is said to follow that the head owners were obliged to look exclusively to the insurance proceeds and not to the demise charterer to recover the value of their ship. Therefore the demise charterers had no liability to pass on to the time charterers as damages for breach of the safe port warranty, and the insurers, as their assignees, had no greater right. The same would, on this analysis, have been true if the insurers had brought a subrogated claim against the time charterers in the name of the demise charterers. It is accepted that this argument applies only to that part of the loss which represents the value of the ship. It does not apply to the claim for SCOPIC expenses (essentially salvage), wreck removal costs or loss of hire, which together accounted for rather more than a third of the claim. It is necessary to draw attention at the outset to the limited basis on which this issue comes before the court. There are three possible bases on which a demise charterer might be in a position to claim damages from a subcharterer for the loss of a ship of which he is the bailee but not the owner: (1) on the basis that he is himself liable to the head owner under the demise charter; (2) on the basis that as a bailee he has a possessory title which entitles him to recover in his own name, accounting to the head owner for any recovery exceeding his actual loss: Waters v Monarch Fire and Life Assurance Co (1856) 5 El & Bl 870; The Winkfield [1902] P 42; and (3) under what has sometimes been called the principle of transferred loss, which may permit a contracting party to recover substantial damages for breach of contract where the loss is foreseeably suffered by a third party and the latter has no direct claim against the wrongdoer: Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518. The recovery in such a case is held on trust for the third party. For reasons which it is unnecessary to explore, the insurers have confined their case to basis (1). The claim was argued on that basis in the courts below, and before us their counsel (Mark Howard QC) confirmed that the appeal would be argued on that basis alone. The demise charter was on the Barecon 89 form. The form was originally drafted in 1974 by the Documentary Committee of the Baltic and International Maritime Council, and revised in 1989. It is said to have become, in one or other of its variants, the most commonly used form of bareboat charter world wide. Under clause 9 of the form, the demise charterers have the usual obligation to maintain the vessel in good repair and efficient operating condition and to take immediate steps to have any necessary repairs carried out. The form as printed contains no trading limits other than clause 5, which simply requires the vessel to be employed in conformity with the terms of its insurances, including any insurance warranties, unless the agreement of the insurers is obtained. The insurances are governed by either clause 12 or clause 13, one of which must be selected. Clause 12, which was selected in this case, provides (so far as relevant): 12. lnsurance and Repairs (a) During the Charter period the Vessel shall be kept insured by the Charterers at their expense against marine, war and Protection and indemnity risks in such form as the Owners shall in writing approve, which approval shall not be unreasonably withheld. Such marine, war and P & I insurances shall be arranged by the Charterers to protect the interests of both the Owners and the Charterers and mortgagees (if any), and the Charterers shall be at liberty to protect under such insurances the interests of any managers they may appoint. All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear. If the Charterers fail to arrange and keep any of the insurances provided for under the provisions of sub clause (a) above in the manner described therein, the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers. The Charterers shall, subject to the approval of the Owners and the Underwriters, effect all insured repairs and shall undertake settlement of all costs in connection with such repairs as well as insured charges, expenses and liabilities (reimbursement to be secured by the Charterers from the Underwriters) to the extent of coverage under the insurances herein provided for. The Charterers also to remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances. (b) If the conditions of the above insurances permit additional insurance to be placed by the parties, such cover shall be limited to the amount for each party set out in Box 28 and Box 29, respectively. The Owners or the Charterers as the case may be shall immediately furnish the other party with particulars of any additional insurance effected, including copies of any cover notes or policies and the written consent of the insurers of any such required insurance in any case where the consent of such insurers is necessary. (c) Should the Vessel become an actual, constructive, compromised or agreed total loss under the insurances required under sub clause (a) of clause 12, all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the Owners and the Charterers according to their respective interests. The Charterers undertake to notify the Owners and the Mortgagee, if any, of any occurrences in consequence of which the Vessel is likely to become a Total Loss as defined in this clause. (d) If the Vessel becomes an actual, constructive, compromised or agreed total loss under the insurances arranged by the Charterers in accordance with subclause (a) of this Clause, this Charter shall terminate as of the date of such loss. (e) (f) For the purpose of insurance coverage against marine and war risks under the provisions of sub clause (a) of this clause, the value of the vessel is the sum indicated in Box 27. The alternative insurance clause, clause 13, was intended for short term demise charters and envisaged that the demise charterer would become entitled under existing insurance arrangements made by the head owner. It accordingly provided for the vessel to be kept insured against marine and war risks by the owner at their expense under a policy in joint names, and against P & I risks by the charterers at their expense. For present purposes, however, the most significant difference between the two clauses consists in the addition in clause 13(a) of an express provision dealing with the relationship between the liability of insurers and that of demise charterers. It provided: The Owners and/or insurers shall not have any right of recovery or subrogation against the Charterers on account of loss of or any damage to the vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance. In the present case, the Barecon 89 form was amended by deleting the trading limits clause (clause 5) and adding at clause 29 a safe port warranty in the following terms: 29. Trading Exclusions Vessel to be employed in lawful trades for the carriage of lawful merchandises only between good and safe berths, ports or areas where vessel can safely lie always afloat, always accessible within IWL except NAABSA in River Plate where it is customary for similar size or similar dimension vessels to safely lie aground, specially excluding Abkhazia, Albania, Angola, Bosnia Herzegovina, CLS Pacific ports, Democratic Republic of Congo (formerly Zaire), Eritrea, Israel, North Korea, Lebanon, Liberia, Libya, Sierra Leone, Somalia, Sri Lanka, Federal Republic of Yugoslavia, Zimbabwe, in Arabian Gulf and adjacent waters including the Gulf of Oman North of 24 deg North, any United Nation embargo countries/ports. Charterers have right to send vessel to the war/warlike zone or other zones for which additional insurance are levied by vessels war risk insurers. In such event, Charterers are fully responsible to pay for all additional war risk premium upon demand by vessels underwriters and/or P+I club with all risks/consequences to be for Charterers account. Charterers shall have right to break IWL in which case Charterers are fully responsible to pay for all additional premium upon demand by vessels underwriters and/or P+I Club for breaching IWL with all risks/consequences to be for Charterers account. Any ice affected port(s) and/or place(s). No direct sailing between PRC and Taiwan or vice versa. It is not disputed that if Kashima was an unsafe port there was a breach of clause 29. The provisions which are said to exclude a right to recover the value of the ship as damages for breach of clause 29 are clauses 12(a) and (c). Clause 12(a) requires insurance to be in place for the parties joint account. Clause 12(c) provides that all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the owners and the charterers according to their respective interests. The argument is that the clause as a whole is a complete code governing financial liability for loss or damage to the ship, and that the words quoted provide for the relief, and the only relief, available as between the head owner and the demise charterer for a total loss. To address this argument, I propose to deal first with the law relating to rights as between co insured. I shall then consider how, if at all, it applies to this demise charter. The starting point is the general rule that insurance recoveries are ignored in the assessment of damages arising from a breach of duty: Bradburn v Great Western Railway Co (1874) LR 10 Ex 1; Parry v Cleaver [1970] AC 1. This can conveniently be called the collateral payments exception. It is a departure from the general principle that collateral benefits are brought into account, and is probably best regarded as being based on public policy. Insurance recoveries are a benefit which the injured party has bought in consideration of his premiums, which are intended to inure to his benefit alone, not that of third party wrongdoers. Moreover, the courts have traditionally been concerned to preserve the subrogation rights of insurers against those who are legally responsible for the loss, which are an important part of the economics of insurance. The effect of the collateral payments exception is that as between the insured and the wrongdoer who has caused the loss, they are not treated as making good the formers loss or as discharging the latters liability. The assumption underlying it is that as far as the wrongdoer is concerned, insurance is res inter alios acta, ie, loosely translated, none of his business. The rule thus stated falls to be modified in a case where insurance manifestly is the wrongdoers business because, for example, he is a co insured and/or the insurance is taken out for his benefit. The business context in which this has most commonly arisen is the co insurance of employer, contractor and subcontractors under standard forms of building contract. It is well established, and common ground between the present parties, that where it is agreed that the insurance shall inure to the benefit of both parties to the contract, they cannot claim against each other in respect of an insured loss. Co insurance is the paradigm case. The principle first appears in the United States, but was successively adopted in early editions of MacGillivray on Insurance Law, by the Supreme Court of Canada in Commonwealth Construction Co Ltd v Imperial Oil Ltd [1978] 1 SCR 317 and by the English courts in a line of cases beginning with the decision of Lloyd J in Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127. What is less clear is its juridical basis. Lloyd J was inclined to think that it was based on the rule against circuity of action, which is difficult to accept given that the insurer will not be a party to any litigation between the co insureds. The better view, which was endorsed by the House of Lords in Co operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419, paras 61 65 (Lord Hope), is that it is an implied term of the contract of insurance and/or of the underlying contract between the co insureds pursuant to which their interests were insured. The implication is necessary because if the co insureds are both insured against the relevant loss, the possibility of claims between them is financially irrelevant. It would be absurd for the insurer to bring a subrogated claim against a co insured whom he would be liable to indemnify against having to meet it. It should be noted that this reasoning is relevant only to the position as between the co insureds. In all of the English cases before this one the question arose between the co insureds and their insurer. None of them raised the question how the principle about co insurance affects claims against a third party wrongdoer who is not himself a co insured and is not party to the arrangements between them. There is no necessity to exclude a claim against him and indeed no reason why either of the co insureds or their insurer should wish to do so. It is impossible to identify any contract whose business efficacy depends upon that result being achieved. As between a co insured (or his insurer) and a third party wrongdoer, a different question arises which none of the existing English authorities purports to answer. The question is this: when we say that one co insured cannot claim damages against another for an insured loss, is that because the liability to pay damages is excluded by the terms of the contract, or is it because as between the co insureds the insurers payment makes good any loss and thereby satisfies any liability to pay damages? The significance of this question may be illustrated by a hypothetical case. Suppose that A and B are engaged in some contractual venture, involving the use of As property. The property is insured in their joint names. It is damaged in breach of some contractual duty owed to A by B, but the cause of the damage is some act of Bs agent, X. If the effect of the co insurance is that Bs liability to pay damages to A is excluded, then B never had a relevant liability and has suffered no loss which he can claim over against X. But if its effect is that payment by the insurer makes good As loss as between A and B and thereby satisfies any liability of B, the result is different. The effect is to exclude the collateral payments exception, so as between A and B the receipt of the insurance proceeds must be taken into account. However, the fact that the insurers payment has made good the loss as between A and B does not mean that it has done so as between B and the stranger, X. As between B and X the insurance is res inter alios acta. Indeed, its normal consequence is that the claim will survive to be pursued by the subrogated insurers. Either analysis will achieve the object of the implication, namely to prevent claims between co insureds. But they have radically different consequences for claims against third parties. Which is the correct analysis must depend on the particular terms of the particular contract. The answer will not necessarily be the same in every case. I therefore return to the contractual arrangements between the head owners and demise charterers of the OCEAN VICTORY. We have not seen the actual policy. What matters, however, is not the actual policy but the policy envisaged in clause 12 of the demise charter. The relevant insurance is the insurance against marine risks which is required by clause 12(a). That is an insurance on property. As far as the demise charterer is concerned, although it is not a liability insurance, he is treated as having an insured interest in the property as such, because his potential liability to the head owner as a bailee and time charterer means that he stands in [a] legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof: see Marine Insurance Act 1906, section 5(2) (emphasis supplied); cf Arnould, Law of Marine Insurance and Average, 18th ed (2013), para 11.37 11.38. If the ship is lost or damaged, the measure of any liability of the demise charterer will be the same as the measure of the owners loss, namely the diminution, partial or total, in the value of the ship. There is no other basis on which he could be entitled to insure on the same basis as the owner. When the OCEAN VICTORY was lost, the insurers were bound under clause 12(c) to pay its insured value to the head owner or, rather, to the mortgagee for the account of the head owner. But the natural legal inference from (i) the fact that the demise charterer is insured for his interest in the ship, (ii) the implied prohibition of claims for damages between the co insured for loss of or damage to the ship, and (iii) the avoidance of double recovery, is that the insurers payment to the head owner makes good the head owners loss not just as between the insurer and the head owner but as between both of them and the demise charterer. The demise charterers liability under the demise charter for the loss of the ship has not been excluded. It has been satisfied. It follows that the demise charterer may claim over against a time charterer who is not party to the insurance or any of the contractual arrangements connected with it. This may be tested by asking what would happen if the insurer did not pay, for some reason which did not involve a breach of duty by either co insured, for example because the insurer became insolvent after the casualty. The demise charterers obligation to insure ceases upon the termination of the demise charter: see clause 12(a). And the demise charter terminates upon the total loss of the ship: see clause 12(d). The result is that there is no effective insurance, no default of the demise charterer in there being no effective insurance, and no basis on which the head owner can be supposed to look exclusively to its proceeds to make good a loss arising from a breach of the safe port warranty. The demise charterer would be bound to pay damages, not because he was responsible for the lack of insurance but because he was liable for the destruction of the ship in breach of his contract. This can only be because it is the payment of the insurance proceeds which discharges the liability of the demise charterer by making good the head owners loss. In the absence of payment, there is no discharge and no bar to a claim between the co insureds. This does mean that if the insurer, being solvent, delays in paying the claim, the head owner can require the demise charterer to pay the loss at once. But I do not regard that as undermining what I consider to be the way that clause 12 works. Quite apart from the consideration that the contract must be construed on the assumption that the insurer will perform his obligations, an obligation to pay damages upon a breach of contract is a routine consequence of the chartered service. It is no more unthinkable in the case of the demise charter than it is in the case of the time charter, where no question of co insurance arises. This analysis derives strong support from a number of other features of this particular demise charter: In the Barecon 89 form as printed, the demise charterers sole (1) obligation in relation to the physical condition of the ship was the maintenance and repairing obligation in clause 9. Breach of that obligation would not give rise to an insured loss. The only trading warranty was in clause 5. This did not give rise to an insured loss either, because it did no more than prohibit the trading of the vessel to places where she would not be insured. Under the unamended Barecon 89 form, therefore, it is difficult to envisage circumstances in which an insured loss could arise from a breach of contract by the demise charterers. The present issue simply could not arise. The parties are therefore unlikely to have intended to address it. The present issue arises only because the printed form has been modified by adding in clause 29 a contractual obligation not to trade the vessel to unsafe ports where she may suffer an insured loss. In adding clause 29 to the printed form, the parties must have intended that in relation to loss or damage arising from the unsafeness of ports, the liability of the charterers and the insurers would coexist. If, as the Court of Appeal thought, the liability of the charterers did not extend to damages, the parties must be taken to have included an elaborate trading warranty which is almost entirely redundant. Its only effect, on this view of the matter, was to entitle the head owners to protest if they happened to learn in advance of the demise charterers intention to visit an unsafe port. If the demise charterers persisted (as they were in a position to do since they were in operational control of the ship and employed the master and crew), and the ship was damaged or lost, there would be no consequences in damages. This is not a realistic intention to impute to commercial parties in the absence of express words to that effect. (2) The only words of clause 12 which are said to have this effect are the words of clause 12(c) which deal with the distribution of the insurance proceeds upon a total loss. They seem to me to be irrelevant to the present issue. They deal with the mechanics of payment of the insurance proceeds and not the substantive rights of the parties. The proceeds are to be paid in the first instance to the mortgagee bank, and thereafter to the head owner and demise charterer according to their respective interests. This provision does not exclude a right to damages for breach of contract. Its purpose appears to be (i) to protect the position of the mortgagee, and (ii) to distinguish the position where there is a partial loss (see the fourth paragraph of clause 12(a)) when the insurance proceeds will go to the demise charterer by way of indemnity against the cost of repairs. (3) It is right to add that in relation to war risks clause 29 expressly provides that all risks / consequences of breach are to be for charterers account, notwithstanding the obligation under clause 12 to maintain war risks insurance. (4) If clause 12(c) contains the decisive language, as the time charterers have suggested, then it becomes necessary to distinguish between insurance payments under the hull policy in respect of the loss of the ship and insurance payments under the P & I insurance representing other elements of the claim such as SCOPIC and wreck raising expenses. The latter will be recoverable as damages in the ordinary way, as well as under the express indemnities at clauses 17 and 18 of the demise charter. Logically, it also requires a distinction to be made between the insured value of the ship (in this case, $70m) and its market value (in this case $88.5m), the difference being recoverable as damages, as the time charterers accepted before Teare J. It is very difficult to see why, if the principle underlying clause 12 was that the parties were to look exclusively to the insurance proceeds for compensation for a breach of clause 29, they should have intended this arbitrary distinction between different elements of the loss. (5) Finally, there are the terms of clause 13(a), which expressly exclude any right to recover damages in respect of insured loss of or damage to the ship. If that option is chosen, the result for which the time charterers contend is achieved by the express words of the contract. I recognise that clause 13 is designed for a very different kind of chartered service. It is nonetheless a striking fact that when the draftsman of this contract wished to deal with the overlap between the liability of the insurers and that of the demise charterers, he did so in express terms, using language which finds no equivalent in clause 12. (6) Lord Clarke has made some further observations at paras 49 to 57 of his judgment, with which I agree. In my judgment the Court of Appeal was wrong to hold that the demise charterers were relieved by the terms of the demise charter of the obligation to pay damages for the consequences of an order to an unsafe port. I would therefore have allowed the appeal on this point if it had arisen. On the limitation issue, I agree with Lord Clarke. LORD MANCE: I agree with the judgment prepared by Lord Clarke on the first and third issues and with the judgment of Lord Toulson on the second issue in this appeal. In what follows, I set out some supplementary reasons of my own for agreeing with Lord Toulson on the second issue. Clauses 12 and 13 are standard clauses of the Barecon 89 Standard Bareboat Charter issued by the Baltic and International Maritime Council (BIMCO). It is relevant to consider how the scheme introduced by clause 12 (or, where used, clause 13) operates in circumstances where there is no clause 29. A demise charter involves a bailment on whatever terms may be agreed. Clauses 9 and 12 impose on charterers strict responsibility for having all necessary repairs done. But a demise dharterer may well cause total loss of the demised vessel in circumstances constituting a breach of duty or of an express or implied contract term. Printed clause 5, which was replaced in the present charter by clauses 29 and 30, could itself involve such a breach. Its first and third paragraphs include, for example, various obligations relating to lawful trading and the carriage of suitable lawful merchandise. Clause 12 (or, where used, 13) contains a scheme designed to address the possibility of the vessel requiring repairs or suffering a total loss. First, and fundamentally, these clauses provide who is to take out marine, war risks and protection and indemnity (P&I) insurance. Clause 12 deals with circumstances where the charterers are to do both, clause 13 with circumstances in which owners are to maintain marine and war risks insurance while demise charterers have to maintain P&I insurance. Secondly, they provide for the nature of the insurance which is to be maintained. Under clause 12 all the insurances are to be in such form as the owners shall in writing approve, which approval shall not be unreasonably withheld, whereas clause 13 provides for marine and war risks insurance under the form of policy attached hereto, while the P&I insurance to be arranged by charterers has again to be in such form as the owners shall in writing approve, which approval shall not be unreasonably withheld. Under both clauses 12 and 13, the value of the vessel for marine and war risks insurance purposes is to be that stated in box 27 (here USD 70m), while boxes 28 and 29 are to specify whether either or both parties may take out additional insurance and if so for how much (each being, under the present charter, prohibited from so doing). Thirdly, under clause 12 all the insurances are to be arranged to protect both the Owners and the Charterers and mortgagees (if any)and to be in the joint names of the Owners and the Charterers as their interests may appear. Under clause 13, the marine and war risks insurances are likewise to be in the joint names of the Owners and the Charterers as their interests may appear, but there is also an express provision that: The Owners and/or insurers shall not have any right of subrogation against the Charterers on account of loss of or any damage to the Vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance. Fourthly, both clauses 12 and 13 make the demise charterers responsible for effecting any repairs, securing reimbursement from underwriters to the extent of the insurance coverage, but remaining responsible for all repairs not covered by the insurance and/or falling within any possible insurance franchise or deductibles. Fifthly, both clauses 12 and 13 address the possibility of the vessel becoming an actual, constructive, compromised or agreed total loss. Clause 12(c) provides that in this event the marine or war risks insurance payments for such loss shall be paid to the Mortgagee (if any), who shall distribute the moneys between themselves, the owners and the charterers according to their respective interests. Clause 13(h) provides that they shall be paid to the Owners, who shall distribute the moneys between themselves and the Charterers according to their respective interests. The scheme of clause 12 (and 13) is clearly intended to be comprehensive. Whatever the causes, both repairs and total losses fall to be dealt with in accordance with its terms, rather than by litigation to establish who might otherwise be responsible for undertaking them, for bearing the risk of their occurrence or for making them good. This is reinforced by the provisions for marine and war risks insurances to be taken out to protect the interests of owners, charterers and any mortgagees, and to be in the joint names of owners and charterers, as their interests may appear. It is well established, as Lord Sumption and Lord Toulson both acknowledge, that, where it is agreed that insurance shall inure to the benefit of both parties to a venture, the parties cannot claim against each other in respect of an insured loss. This principle is now best viewed as resting on the natural interpretation of or implication from the contractual arrangements giving rise to such co insurance: Co operative Retail Services Ltd v Taylor Young Partnership Ltd (CRS) [2001] Lloyds Ins Law Rep 122 (CA), [2002] 1 WLR 1419, per Lord Bingham, para 7 (favouring the rationale suggested by Brooke LJ in the Court of Appeal at para 72) and Lord Hope, paras 61 to 65. It is merely reinforced where, as here, the principal co insureds, owners and charterers, are in the same group and ultimate beneficial ownership. Hull insurance covers losses whether or not it is due to the fault of any party, and it is, rightly, not suggested that the principle in CRS is subject to any exception where the loss is due to fault: see also on this point Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211, 232G 233B, per Kerr LJ. Repairs were to be undertaken by charterers, regardless whether their cost was fully covered by insurance. But the scheme of both clauses 12 and 13 was for marine and war risks insurances in agreed form to be taken out in a fixed amount, and for no more unless otherwise specifically agreed. At the date of her total loss the OCEAN VICTORY is said to have been worth some USD 15m more than the amount for which she was valued for insurance under the demise charter. It is in my opinion implausible to suggest that, having developed this careful scheme for specific protection of their respective interests, it should have been intended that owners should as against charterers, a company in the same group and beneficial ownership, be able to reopen the scheme by claims of breach, exposing charterers to paying damages for the hull loss based on a different alleged value to that which owners and charterers had agreed between themselves. Just as parties must, for better or worse, accept a valuation agreed under a marine insurance (Marine Insurance Act 1906, sections 27(1) and (2)), so here the parties to this charter must be taken to have accepted the value they agreed for insurance purposes as conclusive as between themselves. In this respect, the schemes of clauses 12 and 13 are in my opinion effectively mirror images of each other. Clause 13 has an express exclusion of any right of recovery or subrogation on the part of owners and/or insurers against charterers. That is explicable in the context of a clause dealing with insurance taken out by owners. BIMCO in their observations on the Barecon 89 form explain the optional clause 13 on the basis that It has been felt that it may be useful to cover also the possibility which is believed may arise from time to time, that a vessel is bareboat chartered for a short period, say, four to six months. BIMCO give the example of passenger vessels. They continue: It is believed that it is normal practice that the Owners carry on with the insurances for their own account. BIMCO also confirm that: The main difference between Clause 12 and Clause 13 is that in Clause 13 the responsibility for arranging and keeping the marine and war risks insurances has been shifted back to the Owners. There is no suggestion by BIMCO that the responsibilities for repairs and total loss differ in any other respect as between clauses 12 and 13. There is no reason to think that clauses 12 and 13 were devised as anything other than two routes to the same substantive allocation of responsibilities for repairs and total loss, irrespective of fault. I conclude that the express exclusion of a right of recovery or subrogation in clause 13 was simply belt and braces in the context of insurances taken out by owners, and that the reason why no such express term appears in clause 12 was that it never occurred that there could be such claims in the context of insurances arranged by charterers to cover their own as well as owners interests. It is inconceivable that the parties intended fundamentally to alter the incidence of risk by permitting or excluding breach based claims as between themselves in respect of a hull loss, depending upon whether it happened to be convenient to continue to use hull insurances taken out by owners or to rely on fresh insurances taken out by charterers. The judges speculation (para 202) that the risk of insurers insolvency might have motivated such a distinction is unconvincing, where not only is such risk most unlikely to have been in the forefront of the parties minds, but the decision which party should be responsible for hull insurances has no connection with any such risk or with the question whether or not breach based liability should exist. I do not consider that the substitution of printed clause 5 by typed clause 29 can have been intended to, or did, alter this basic scheme. In many respects clause 29 simply makes different provision for the same subject matter as clause 5. Clause 29 overlaps with clause 5, in so far as it requires employment in lawful trades. It specifies (not entirely felicitously, in so far as it refers to Zimbabwe) certain trading limits. Clause 5 contemplates that trading limits would be found in Box 19, but adds that the charterers must furthermore employ the vessel in conformity with the terms of her insurances. Both clause 29 and clause 5 address additional insurance premiums, which a vessels trading might in some circumstances require to be paid. Clause 29 has the provision for employment only between good and safe berths, ports or areas where vessel can safely lie always afloat on which Gard relies. Owners could no doubt object if they learned of intended or actual trading contrary to clause 29, and a breach by charterers in this respect might have consequences outside the scope of hull insurance and so outside the scheme of clauses 12 and 13. But it is, in my opinion, most unlikely that the safe port provision in clause 29 can have been meant to give rise to a system of recourse for loss of the hull, by way of damages for breach of contract, separate from and potentially counteracting the no fault scheme of responsibility and insurance recovery for a hull loss introduced by clause 12. Teare J held that the owners, although indemnified by the insurers, had a subrogated right to claim against the demise charterers damages for breach of clause 29: judgment, paras 203 204. That makes no sense in the context of a co insurance such as this, as Mr Recorder Jackson QC pointed out in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyds Rep 448, 458, in a passage approved by Lord Hope in CRS at para 65. It would mean treating the present co insurance as if it involved two separate and severable insurances, leaving charterers exposed, without liability cover, to claims for breach of charter or duty brought by owners in respect of loss of the hull. That is obviously not what anyone contemplated by clause 12 or clause 13. It is no answer that demise charterers might in turn have a back to back claim for damages against sub charterers. They might equally well not have, eg if they were trading the vessel on their own account, so there was no sub charter, or the sub charter was on different terms or the sub charterer was not worth powder and shot. I add, though no one suggested this as a correct analysis, that it is inconceivable that anyone contemplated that the co insurance to be arranged could give rise to successive payments of the same sum to different parties, with the second of such payments going to reimburse insurers for the first. In these circumstances, Gard suggests an alternative basis for its claim, that liability exists in the first instance for any total loss attributable to a breach of the safe port warranty, but is then discharged to the extent of any recovery under the marine or war risks insurance taken out under clause 12. This analysis has the twin results, that (i) owners could after a total loss call upon charterers to pay the value of the vessels hull, even though an insurance claim was on foot, but had not yet been paid, and (ii) owners could look to charterers in damages for any amount by which the vessels actual value at the date of loss exceeded her insured value, both before and after insurers had paid the insured value. Both results are in my view inconsistent with the scheme of clause 12 (or 13), or with any sensible understanding of its evident purpose to cater comprehensively for responsibility for repairs and total loss. Still more fundamentally, in the context of the present claim by Gard as assignees of demise charterers, there is no basis for treating payment of the vessels value under her marine or war risks insurance as discharging pro tanto any liability existing between owners and demise charterers. Both the ordinary marine and the war risks insurances are property insurances on the vessels hull. Payments made under them go to owners (or their mortgagees) and charterers for their respective interests in the hull. They cannot be treated as satisfying, at one and the same time, any liability (if there were any) which charterers had to owners. The contrary analysis involves the proposition that the parties were prepared to treat the hull insurance moneys as going in the first instance to charterers, not to the owners or their mortgagees, and then being passed up to owners. That is clearly not what happened or would ever happen in fact, and it is only in a counter factual world and by contradicting the clear intent of clause 12 that it could be treated as if it had happened. In my opinion, the reason why owners have no claim against charterers for damages for loss of the hull is not that such a claim exists under clause 29 but is at some point discharged. It is that, under a co insurance scheme like the present, it is understood implicitly that there will be no such claim. This understanding applies, in my opinion, whether or not the insurance moneys have yet been paid. But, even if (contrary to my opinion) one were to treat this understanding as biting only upon payment of the insurance moneys, it still would not arise from or involve the proposition that some liability of the charterers to owners was discharged in the sense of paid or satisfied by the insurance moneys. The understanding would simply be that, upon payment of the hull insurance proceeds to those interested in the hull for their respective interests, no further liability would exist inter se. On that basis, charterers would still be unable to show that they had or had discharged any liability to owners, on the basis of which they could pursue a back to back claim against sub charterers. But, as I have made clear, in my opinion the implied understanding arising from the co insurance scheme is that there would be no liability for the hull value in the event of a total loss, whether or not the insured value had yet been disbursed. Lord Sumption raises the question what would happen if an insurer became insolvent after a loss. This is in my view a remote eventuality which cannot be a guide to the meaning of clause 12 (or 13). It also raises different considerations of risk and implications to any which require determination on this appeal. Two views might be taken. One is that, under a scheme where both parties have agreed to the particular form of policy, presumably by particular insurers, the risk lies where it falls. It is to be noted that the risk could impact either party in different circumstances. It could impact charterers, who undertake an absolute responsibility for repairs, irrespective of fault, and would be unable to recoup themselves from the hull insurance as contemplated by clause 12 or 13. It could impact owners and charterers for their respective interests, in the event of a total loss occurring without fault. There is no reason to think that the parties intended any different result in the event of a loss which might be attributed to a breach of clause 29 or any other clause. But another view might be that the risk lies by implication on the party responsible for maintaining the insurance during the charter period, even though clauses 12 and 13 provide that the charter terminates as of the date of any total loss. The former seems the more likely position, but it is unnecessary on this appeal to decide which applies, since the point cannot assist to determine the present, quite different issue as to the implications of the insurance scheme when it is effective, which is no doubt what the parties, and BIMCO, had in mind when using and devising it. Finally, it is submitted that charterers must have some liability towards owners under clause 29, because otherwise there can be no back to back claim down the line under the equivalent clause in the sub charter between demise charterers and Sinochart, who in turn cannot pass on liability under the equivalent clause in the sub sub charter between Sinochart and Daiichi, who were and should be ultimately responsible. The difficulty with this submission is that it has not been tested and I, for my part, regard it as entirely open. Gards case before the Supreme Court has been put exclusively on the basis that charterers had a liability to owners, which in turn enables charterers to claim damages down the line. Mr Howard QC, who did not appear for Gard below, very frankly acknowledged that it had occurred to him, when he came into the case, that there could have been other bases on which the claim could have been presented, but that it had been concluded that Gard was confined to the way in which the case had been argued on its behalf below. Those other bases are (i) that the charterers possessory title gave them a sufficient interest to be able to maintain a claim for the hull loss: compare the principle in The Winkfield [1902] P 42, whereby a bailee can claim in tort in his own name, without showing that he has any liability to the head owner, but accounting to the head owner for any loss exceeding his own loss, and/or (ii) that there are circumstances in contract where a contracting party can claim substantial damages for loss of or damage to property, when another person has actually borne such loss or damage: Dunlop v Lambert (1839) 6 Cl & F 600, The Albazero [1977] AC 774, 846G 847F. More recently, this latter possibility has been more widely recognised, by giving special treatment to contracts relating to property where loss due to a breach of the contract will be suffered by a holder of the property other than the contracting party: see Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd and St Martins Property Corp Ltd v Sir Robert McAlpine Ltd (St Martins) [1994] 1 AC 85 where it was in the contemplation of the parties when the contract was made that the property, the subject of the contract and the breach, would be transferred to or occupied by a third party, who would in consequence suffer the loss arising from its breach: see also Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68 and the narrow ground of decision expressed by Lord Browne Wilkinson at p 114G H in St Martins, in which all members of the House joined. In such a situation, the claimant is seen as suing on behalf of and for the benefit of the injured third party and is bound to account accordingly: see St Martins, per Lord Browne Wilkinson at p 115A B and McAlpine Construction Ltd v Panatown Ltd (Panatown) [2001] 1 AC 518, per Lord Clyde, at pp 530E F and 532D E. (An even broader principle was also suggested by Lord Griffiths in St Martins, at p 96F 97D and reviewed inconclusively by Lord Browne Wilkinson at pp 111F 112F as well as by the members of the House in Panatown, to the effect that a contracting party might itself have an interest in performance enabling it to claim damages without proving actual loss.) In the absence of argument, it is not appropriate to reach any conclusion as to whether or how far either of these principles might have assisted Gard, had it been open to Gard to rely on them now. Suffice it to say that, since their application has not been tested, I am not prepared to proceed on the basis that charterers must be recognised as having had liability to owners, in order to be able to claim down the line against Sinochart and so for Sinochart against Daiichi. If the absence of such a liability is fatal to a claim by charterers down the line, it must be because neither alternative basis of claim identified in para 125 is available, and, if neither proved to be available, that would, presumably, be because the law did not regard this situation as one where considerations of justice comparable to those reflected in the reasoning in those cases militated in favour of recognising a right on the part of the charterers to claim down the line. LORD HODGE: I also agree with Lord Clarkes judgment on the first and third issues in this appeal. On the second issue I agree with the judgments of Lord Toulson and Lord Mance. LORD TOULSON: I agree with the judgments of Lord Clarke and the Court of Appeal on the issue whether there was a breach of the safe port warranty, and I would therefore dismiss the appeal. I agree also with Lord Clarke on the issue of limitation of liability and would affirm the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460. On the issue as to the effect of the charters joint insurance provisions, I agree with the reasoning and conclusion of the Court of Appeal and disagree with Lord Clarke and Lord Sumption for reasons explained in the rest of this judgment. It is a curious feature of this appeal that permission to appeal on the joint insurance issue was sought on the basis that the Baltic and International Maritime Council (BIMCO) form of bareboat charter codenamed Barecon 89 is a standard form of contract in common use and the effect of clause 12 is therefore a matter of general importance, but the argument turned on the relationship between that clause and clause 29, which is not part of the standard form. It is nevertheless sensible to begin by considering the effect of clause 12 in the unamended version of Barecon 89. It is important to understand its basic structure. The standard terms, set out in Part II of the policy, contain nothing about safe ports. Clause 5, headed Trading Limits, stipulates that the vessel is to be employed in lawful trades for the carriage of suitable lawful merchandise within trading limits which may be specified in the schedule which forms Part I of the policy, and that the vessel is not to be employed otherwise than in accordance with the terms of the insurance which is required to be maintained. The insurance requirements are set out in clause 12 or its alternative, clause 13. Clause 12 is headed Insurance and Repairs. It provides: (a) During the Charter period the Vessel shall be kept insured by the Charterers at their expense against marine, war and Protection and Indemnity risks in such form as the Owners shall in writing approve, which approval shall not be unreasonably withheld. Such marine, war and P and I insurances shall be arranged by the Charterers to protect the interests of both the Owners and the Charterers and mortgagees (if any), and the Charterers shall be at liberty to protect under such insurances the interests of any managers they may appoint. All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear. If the Charterers fail to arrange and keep any of the insurances provided for under the provisions of sub clause (a) above in the manner described therein, the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers. The Charterers shall, subject to the approval of the Owners and the Underwriters, effect all insured repairs and shall undertake settlement of all costs in connection with such repairs as well as insured charges, expenses and liabilities (reimbursement to be secured by the Charterers from the Underwriters) to the extent of coverage under the insurances herein provided for. The Charterers also to remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances. All time used for repairs under the provisions of sub clause (a) of this Clause and for repairs of latent defects according to Clause 2 above including any deviation shall count as time on hire and shall form part of the Charter period. (b) If the conditions of the above insurances permit additional insurance to be placed by the parties, such cover shall be limited to the amount for each party set out in Box 28 and Box 29 respectively. The Owners or the Charterers as the case may be shall immediately furnish the other party with particulars of any additional insurance effected, including copies of any cover notes or policies and the written consent of the Insurers of any such required insurance in any case where the consent of such insurers is necessary. (c) Should the vessel become an actual, constructive, compromised or agreed total loss under the insurances required under sub clause (a) of clause 12, all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the Owners and the Charterers according to their respective interests. The Charterers undertake to notify the Owners and the Mortgagee, if any, of any occurrences in consequence of which the Vessel is likely to become a Total Loss as defined in this Clause. If the Vessel becomes an actual, constructive, (d) compromised or agreed total loss under the insurances arranged by the Charterers in accordance with sub clause (a) of this Clause, this Charter shall terminate as of the date of such loss. (e) The Owners shall upon the request of the Charterers, promptly execute such documents as may be required to enable the Charterers to abandon the Vessel to insurers and claim a constructive total loss. (f) For the purposes of insurance coverage against marine and war risks under the provisions of sub clause (a) of this Clause, the value of the Vessel is the sum indicated in Box 27. Clause 13 applies in place of clause 12 if the parties so choose in part I of the policy. In relation to P and I risks during the charter, clause 13 follows the provisions of clause 12, but in relation to marine and war risks clause 13(a) puts the responsibility for maintaining cover on the owner. It provides: During the Charter period the Vessel shall be kept insured by the Owners at their expense against marine and war risks under the form of policy or policies attached hereto. The Owners and/or insurers shall not have any right of recovery or subrogation against the Charterers on account of loss of or any damage to the Vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance. All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear. The significant feature of bareboat chartering, or chartering by demise, is that during the period of the charter (in the words of BIMCOs explanatory notes to Barecon 89) the vessel comes in the full possession, at the absolute disposal, and under the complete control of the bareboat charterers. The notes add that bareboat chartering is therefore entirely different from ordinary time chartering when it comes to the allocation of costs, liabilities and responsibilities. Clause 12 in the unamended form deals comprehensively with the risks of loss or damage to the vessel and what is to happen in such an event. In summary, the demise charterer is responsible for arranging and maintaining insurance, in a form approved by the owner, in the names of both parties for an agreed value; the charterer is responsible for effecting all insured repairs; the charterer is responsible for repairs not covered by the insurance, for example, due to deductibles under the terms of the insurance (or, for that matter, due to use of the vessel outside the terms of the insurance); and in the case of a total loss covered by the insurance, the clause provides for the processing of the insurance moneys. BIMCOs explanation for the optional alternative of clause 13 was that sometimes a vessel is bareboat chartered for only a short period and it may make sense for the owners to carry on with the insurances which they are likely to have in place. Clause 13 therefore provides that the vessel is to be kept insured by the owners against marine and war risks, and that the owners and their insurers are to have no right of recovery or subrogation against the charterers on account of loss or damage covered by such insurance. It would be unnecessary to include equivalent words in clause 12. It cannot have been the parties intention that the charterers exposure to liability should be greater under clause 13, where cover against marine and war risks was to be maintained at the owners expense than under clause 12, where it was to be maintained at the charterers expense. Longmore LJ put the point pithily when he described the exclusion of rights of recovery or subrogation in clause 13 as a confirmation rather than a negation of such exclusion in the more usually adopted clause 12 for the longer term charters when it is the charterers who pay the premium (para 88). The critical question then arises as to the effect, in relation to the operation of clause 12, of the substitution of clause 5 by clause 29, which provides that the vessel is to be employed in lawful trades for the carriage of lawful merchandises only between good and safe berths, ports or areas where the [vessel] can safely lie always afloat, etc. On the hypothesis that Kashima was not prospectively a safe port for the OCEAN VICTORY when Daiichi gave instructions for her to discharge there, Daiichi was thereby in breach of the safe port undertaking in the time sub charter between itself and Sinochart, which in turn was in breach of the equivalent undertaking in the time charter between itself and the demise charterer, OLH, which in turn was in breach of clause 29 of the demise charter between itself and the owners, OVM. The consequence of that breach was that the vessel was lost, but the demise charterer and the owners were co insured (as required by clause 12) and the insurers paid its insured value. One of the insurers, Gard, claims to be entitled to recover that sum from the time charterers as assignee of the rights of the demise charterer. The claim therefore depends on the demise charterer being liable to the owners for that sum by way of damages for breach of clause 29, and thus entitled to recover the same sum from the time charterer as loss suffered by the demise charterer. Gards case is that the breach of clause 29 caused the loss of the vessel; therefore the demise charterer was liable to the owners for the vessels value, and the fact that the owners were paid that amount by the insurers is res inter alios acta as between the demise charterer and the time charterer. The critical question is whether the contractual scheme between the owners and the demise charterer precluded any claim by the former against the latter for the insured loss of the vessel. This is a matter of construction. It has become a common practice in various industries for the parties to provide for specified loss or damage to be covered by insurance for their mutual benefit, whether caused by one partys fault or not, thus avoiding potential litigation between them. The question in each case is whether the parties are to be taken to have intended to create an insurance fund which would be the sole avenue for making good the relevant loss or damage, or whether the existence of the fund co exists with an independent right of action for breach of a term of the contract which has caused that loss. Like all questions of construction, it depends on the provisions of the particular contract: see, for example, Co operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419. In that case a building owner entered into a standard form of building contract for the construction of office premises. Under its terms the contractor was required to take out and maintain a policy in the names of the owner, the contractor and specialist electrical subcontractors, Hall, for all risks insurance covering loss or damage to the works from specified perils including fire. Hall entered into a collateral contract with the owner warranting that it had exercised and would exercise all reasonable care and skill in the design and execution of the sub contract works. A fire occurred causing extensive damage. The owners sued their architects and mechanical and engineering consultants, who brought third party proceedings against Hall. This raised the question whether Hall was liable to the owners in respect of the fire damage, alleged by the third party claimants to have been caused by Halls negligence and breach of warranty. The House of Lords, upholding a decision by the first instance judge and the Court of Appeal, held that it cannot have been the parties intention that parties who were jointly insured under a contractors all risks policy could make claims against one another in respect of damage covered by the insurance, or that the insurers could make a subrogated claim in the name of the owners against Hall, and that the court would if necessary hold that there was an implied term to such effect (which I infer in relation to Hall must logically have taken effect as an implied term of the collateral contract between itself and the owners). In so holding the House of Lords approved and applied the reasoning of Mr Recorder Jackson QC, as he then was, in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyds Rep 448, 458, where he described it as nonsensical if those parties who were jointly insured under a contractors all risks policy would make claims against one another in respect of damage to the contract works. The implied term presupposes, of course, that the party relying on it has not by his own conduct prevented recovery of the loss under the policy a point made by Jackson J (as he had by then become) in Board of Trustees of the Tate Gallery v Duffy Construction Ltd [2007] BLR 216. In the present case the Court of Appeal followed the same reasoning in holding that the proper construction of clause 12 was that there was to be an insurance funded result in the event of loss or damage to the vessel by marine risks and that, if the demise charterers had been in breach of the safe port clause, they would have been under no liability to the owners for the amount of the insured loss because they had made provision for looking to the insurance proceeds for compensation. It did not consider that the introduction of clause 29 was intended to alter the way in which clause 12 was to operate. I agree with the Court of Appeal. The demise charter allowed for a sub demise with the owners consent, which was not to be unreasonably withheld. The risk existed that the vessel might be directed to an unsafe port, not necessarily by negligence on anyones part, so causing peril to the vessel, but the risk of consequential damage to the vessel was catered for by the insurance required to be maintained by the demise charterer in the joint names of itself and the owners. The commercial purpose of maintaining joint insurance in such circumstances is not only to provide a fund to make good the loss but to avoid litigation between them, or the bringing of a subrogation claim in the name of one against the other. I do not accept that by substituting clause 29 for clause 5 the parties intended to subvert that purpose. If anything, the present case is stronger in this regard than Co operative Retail Services Ltd v Taylor Young Partnership Ltd, because in that case Halls obligation to use skill and care was in a separate contract from the contract between the owner and the contractor which contained the provisions about insurance whereas in the present case clauses 12 and 29 are part of a single contract. Gards submission that clause 29 becomes pointless if clause 12 has the effect held by the Court of Appeal is fallacious. It sets limits on the use of the vessel, breach of which may give rise to loss, but clause 12 deals with the consequences of loss or damage to the vessel, regardless of whether it resulted from negligence or other fault of the demise charterer (or a sub charterer). Mr Mark Howard QC argued that this interpretation misapprehends the purpose of clause 12, which in a case of loss caused by a breach of contract by the charterer does no more than to ensure that the owners right to recover damages is backed by an available fund. This in substance was the argument advanced unsuccessfully against Hall in Co operative Retail Services Ltd v Taylor Young Partnership Ltd. Lord Hope (paras 39 and 40) distinguished between a provision for insurance which curtails the means of recovering loss whether or not it was caused by a contracting co insureds default, and a provision which backs the other partys other obligations with an insuring obligation but leaves the other obligations enforceable against the other party by other means. He agreed with the judges conclusion that the contractual insurance arrangements meant that if a fire occurred, the owners were to look to the joint insurance policy to provide the fund for the cost of restoring and repairing the fire damage rather than, in the judges words, indulge in litigation with each other. In the present case, if one were to ask whether it would have accorded with the parties intentions that on the morning after the loss the owners would have been entitled to demand immediate payment from the demise charterers, rather than make a claim on the insurers and wait for it to be settled, my answer would be that they intended no such thing. The insurance arrangements under clause 12 provided not only a fund but the avoidance of commercially unnecessary and undesirable disputes between the co insured. It does not follow that the demise charterers (or their insurers in their shoes) necessarily had no available remedy against the time charterers. The court was told that at one stage the insurers intimated a claim analogous to the claim which a bailee may bring under The Winkfield [1902] P 42. However, the matter was not pursued, and it would be inappropriate to express a positive view about the likelihood of success of such a claim (or any alternative), about which the court has heard no argument. For those reasons I would have upheld the decision of the Court of Appeal on the recoverability issue, if the demise charterers had been in breach of the safe port clause. I have had the benefit of reading Lord Mances additional reasons, with which I agree. Like him, I do not think it is necessary to reach a final conclusion about the position in the case of an insolvent insurer, which it is not reasonable to suppose was in the minds of the BIMCO drafters of Barecon 89 and ought not to affect its core interpretation. |
This appeal is concerned with the entitlement of a taxpayer to deduct input VAT and claim repayment of surplus input VAT. It concerns the interpretation of articles 167 and 168(1) of Council Directive (EC) 2006/112/EC of 28 November 2006 on the common system of value added tax (the Principal VAT Directive or the PVD) and the case law of the Court of Justice of the European Union (CJEU) relating to those articles. In short, the question is whether a taxpayer can deduct as input tax the VAT which it has incurred in purchasing entitlements to an EU farm subsidy, the Single Farm Payment (SFP). The taxpayer has used those entitlements to annual subsidies over several years and intends to use money resulting from the receipt of those subsidies to fund its current and future business activities, which currently involve only taxable supplies. The factual background to this appeal involves an interesting business model. Frank A Smart & Son Ltd (FASL) is a Scottish company which carries on a farming business in Aberdeenshire. FASL is wholly owned by Mr Frank Smart, who is its sole director. Mr Smart and his wife are the partners in a partnership which owns Tolmauds Farm, a farm of about 200 hectares which the partnership leases to FASL for a rent of 30,000 per year. FASL produces beef cattle and certain crops at Tolmauds Farm. FASLs whole output from its business was and is taxable under the VAT regime. FASL received SFPs from the Scottish Government. SFPs were agricultural subsidies which between 2005 and 2014 were paid to farmers who had eligible land at their disposal on 15 May of each year and who met the requirements of ensuring plant and animal health and maintaining the land in question in Good Agricultural and Environmental Condition (GAEC). The farmer did not have to cultivate the land or stock it with animals in order to meet the GAEC requirement. When the scheme was initiated in 2005, farmers in the United Kingdom were allocated initial units of entitlement to single farm payments (SFPEs) for no consideration. The SFPEs were tradeable and a market in them developed over time. FASL took advantage of the market in SFPE units to accumulate a fund for the development of its business. With the assistance of bank funding, it spent about 7.7m between 2007 and 2012 on purchasing 34,477 SFPE units in addition to its initial allocation of 194.98 units for Tolmauds Farm. In this period FASL paid VAT on the SFPE units which it purchased and it has sought to deduct that VAT as input tax. In order to receive the SFPs to which the purchased SFPE units entitled it, FASL leased a further 35,150 hectares of land under seasonal lets. FASL did not cultivate or stock this land. The leases were typically qualified by an agreement, entered into after the lease, which allowed the landlord to stock the land or cultivate it himself, provided that the ground was kept in GAEC. This was done to preserve FASLs entitlement to SFPs. The rent payable for the seasonal lets was generally about 1 per acre but could be up to 10 per acre. The result of this business model was that between 2010 and 2013 (in each case FASLs financial year ending on 30 September) FASLs income from subsidies, which were principally SFPs, dwarfed its income from cattle sales from Tolmauds Farm. FASL received SFPs of 1,166,290 in 2010, 1,761,205 in 2011, 2,488,949 in 2012 and 3,285,650 in 2013. The parties presented the court with agreed figures derived from the profit and loss accounts of FASL in those financial years: Cattle Sales Cattle subsidies (incl SFPs) Costs of Sales SFP Amortisation Net Profits 2010 99,284 1,202,908 2011 48,601 1,795,589 2012 2013 97,530 280,997 2,515,057 3,312,597 (53,925) (1,141,159) (38,666) (111,885) (1,766,118) (1,835,693) (275,389) (917,840) (37,079) 534,910 2,499,085 (41,812) During the years 2010 to 2013, Mr Frank Smart was paid no directors salary or bonus but FASL paid him dividends of 20,000 in each of 2010 and 2012 and of 15,000 in each of 2011 and 2013. None of the SFPs have been withdrawn from FASLs bank account for Mr Smarts personal use or for his benefit. The First tier Tribunal (FTT), to whom FASL appealed against HMRCs refusal to allow it to deduct VAT of 1,054,852.28 in its quarterly VAT returns between December 2008 and June 2012, made important findings of fact (in para 38 of its decision) which have a bearing on the outcome of this appeal. The FTT found that when it purchased the SFPE units, FASL intended to apply the income which it received from the SFPs to pay off its overdraft and to develop its business operations. The SFPs were accumulated in FASLs bank account and have been used to pay off its overdraft. Tolmauds Farm was worked during the relevant period by Mr Smart and one of his sons, Roderick, on a full time basis and another son assisted for part of that period. FASL had no other employees. During the relevant period FASL did not increase its stock numbers on the farm significantly. But FASL had been contemplating three principal developments of its business. First, from about 2011, FASL was considering establishing a windfarm. It spent over 119,000 on preliminary investigations, including technical information and costings, on investigating community responses and on a planning application and enquiries. Secondly, other proposed developments have included the construction of further farm buildings, including cattle courts and a Dutch barn. FASL has undertaken site preparation works for an additional cattle court and has made the needed planning applications. Thirdly, FASL has been considering the purchase of neighbouring farms, which were expected to come on to the market for sale. Based on those findings of fact, the FTT concluded (para 39) that the acquisition of the SFPE units was a funding exercise which related to FASLs business overheads in its farming enterprise. FASL had raised finance for its future economic activities as a whole. There was a direct and immediate link between the expenditure and FASLs future taxable supplies. The FTT stated the conclusion based on its findings of primary fact that the funding opportunity afforded by the purchase of the SFPE units did not form a separate business activity of FASL but was a wholly integrated feature of the farming enterprise and not a separate enterprise (para 42). The FTT therefore allowed FASLs appeal. HMRC appealed to the Upper Tribunal (Lord Tyre), which confirmed the FTTs findings of fact, which were by then uncontroversial, and refused the appeal, finding that the FTT had not erred in law. HMRC then appealed with the permission of the Upper Tribunal to the Inner House of the Court of Session. An Extra Division of the Inner House (Lord Menzies, Lord Brodie and Lord Drummond Young) in a judgment delivered by Lord Drummond Young dated 8 December 2017 ([2017] CSIH 77) dismissed HMRCs appeal. HMRC now appeals to this court with its permission. The VAT system Before setting out HMRCs challenge it may be useful to discuss the basic structure of the VAT system so far as relevant. In order to understand the case law, which I will discuss, it is necessary also to set out relevant provisions of the PVD as they show the central importance to the question of deductibility, which arises in this appeal, of the connection between input expenditure and the economic activity which a taxable person is carrying on or intends to carry on. Article 2(1) of the PVD imposes VAT on: the supply of goods for consideration within the territory (a) of a member state by a taxable person acting as such (c) the supply of services for consideration within the territory of a member state by a taxable person acting as such; Article 9(1) of the PVD defines taxable person and economic activity: 1. Taxable person shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity. Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as economic activity. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity. In the provision of goods or services for consideration there is often a chain of production or supply from raw material to finished product. At its simplest, VAT is a tax on the value added by a supplier of goods to its purchases of raw materials or goods upon sale of the product. The same principle extends to the supply of services. Under the common system of VAT in the United Kingdom and throughout the European Union, the taxation of the value so added by the particular supplier is achieved by calculating the tax due on the output of the supplier at the specified rate (output tax) and deducting from that sum the VAT which that supplier has paid on the components of that output or on general overheads of the business which are cost components of its taxable outputs (input tax). The principle is articulated in article 1(2) of the PVD which provides: The principle of the common system of VAT entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, however many transactions take place in the production and distribution process before the stage at which the tax is charged. On each transaction, VAT, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of VAT borne directly by the various cost components. The mechanism, by which the deductions mentioned in article 1(2) are effected, is set out, so far as relevant, in articles 167 and 168, which provide: Article 167 A right of deduction shall arise at the time the deductible tax becomes chargeable. Article 168 In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the member state in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay: (a) the VAT due or paid in that member state in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person If a taxable person uses goods and services, on which it has paid VAT, both for its own transactions in respect of which VAT is deductible and for its own transactions in respect of which VAT is not deductible, article 173 provides that only the proportion of the VAT that is attributable to the former transactions may be deducted. The PVD and its predecessor directives have been implemented in the United Kingdom by the Value Added Tax Act 1994, which in section 1(1) charges VAT on the supply of goods and services in the United Kingdom. Section 4 provides: (1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. (2) A taxable supply is a supply of goods or services in the United Kingdom other than an exempt supply. Sections 24 to 26 implement the regime for deduction of input tax which is now set out in the PVD. Section 24 provides: (1) Subject to the following provisions of this section, input tax, in relation to a taxable person, means the following tax, that is to say (a) VAT on the supply to him of any goods or services; being goods or services used or to be used for the purpose of any business carried on or to be carried on by him. (2) output tax, in relation to a taxable person, means VAT on supplies which he makes (5) Where goods or services supplied to a taxable person are used or to be used partly for the purposes of a business carried on or to be carried on by him and partly for other purposes (a) VAT on supplies shall be apportioned so that only so much as is referable to the taxable persons business purposes is counted as that persons input tax Section 25(2) empowers the taxable person to take credit at the end of each prescribed accounting period for the input tax which is allowable under section 26 and to deduct that amount from any output tax due from it. The prescribed accounting periods are quarterly. Section 26 provides: (1) The amount of input tax on which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for that period (that is input tax on supplies, acquisitions and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below. (2) The supplies within this subsection are the following supplies made by the taxable person in the course or furtherance of his business taxable supplies (a) Accordingly, the VAT legislation provides for the taxable person to make taxable supplies, the cost components of which may give rise to input tax which is deductible from the output tax due on those taxable supplies. The taxable person may also make exempt supplies, defined in section 31 and Schedule 9, which do not give rise to a right to deduct input tax. Further, the taxable person may engage in activities which are not economic activities under article 9 of the PVD and are outside the scope of the VAT regime. VAT incurred by the taxable person on supplies which are used as components of such non economic activities are not deductible. With that introduction, I turn to HMRCs challenge. HMRCs challenge HMRC submit that the Inner House erred in law because, on a proper analysis, FASL acquired the SFPE units to generate the receipt of SFPs, which was a form of investment income outside the scope of VAT. The receipt of the SFPs was a non economic activity. Input tax incurred in acquiring the SFPE units was not recoverable because there was a direct and immediate link between the expenditure on those units and the receipt of the SFPs. There was no direct and immediate link between the acquisition of the SFPE units and a taxable output transaction by FASL. Secondly, HMRC submit that the Inner House erred in treating the VAT incurred on the purchase of the SFPE units as deductible on the basis that it was a general overhead of FASLs business. This is again because the expenditure was directly and immediately related to the receipt of the SFPs, which was outside the scope of the VAT system. Thirdly, HMRC submit that the FTT, the Upper Tribunal and the Inner House each erred in taking into account an irrelevant consideration, namely the evidence of Mr Smarts intention, as the director of FASL, to use the funds generated by the receipt of the SFPs to fund the development of FASLs business which would involve the making of taxable supplies in future. Mr Kieron Beal QC, who presented the case for HMRC skilfully, makes two central submissions. First, he relies on the judgment of the CJEU in BLP Group plc v Customs and Excise Comrs (Case C 4/94) [1996] 1 WLR 174 (BLP) in support of the proposition that VAT which a taxable person has paid on costs incurred directly and immediately in relation to an exempt supply cannot be reclaimed as input VAT even if the outcome of the expenditure is to produce funds which are used or will be used to subsidise the taxable persons downstream taxable activities. Secondly, he submits that there is no reason in fact or law for reaching a different conclusion in relation to costs incurred directly and immediately in relation to a transaction which is outside the scope of VAT. If there is any doubt on this matter, HMRC invite the court to refer a question or questions to the CJEU under article 267 of the Treaty on the Functioning of the European Union (the TFEU). FASLs response Mr David Small, advocate, in a succinct and skilful submission, founds on the principle of neutrality: the VAT system gives fully taxable traders, in other words people, such as FASL, who make only taxable supplies, a right to recover all input tax incurred in raising finance for their business so long as (i) the finance which they raise is spent on funding the business which goes on to make further taxable supplies and (ii) the financing exercise itself remains outside the scope of VAT because it does not involve the taxable person in making any taxable or exempt supplies. FASL does not dispute that if it were in the future to use part of the funds, which it has obtained through the receipt of SFPs and kept in its bank account, on downstream activities which were outside the scope of VAT, that use would restrict the input tax to which it had been entitled and might give rise to an obligation to repay a proportionate part of any deduction which it had made or any repayment of VAT which it had received from HMRC. Disagreeing with HMRC, FASL submits that the case law of the CJEU is clear and supports its position. Discussion (i) Overview I am persuaded that Mr Small is correct in his submission that FASL is entitled to deduct input VAT incurred in its acquisition of the SFPE units and that the tribunals and the Inner House did not err in law in so concluding. Because the answer to the question lies in an analysis of the jurisprudence of the CJEU in relevant cases, and because HMRC submit that the matter is not acte clair, it is necessary to examine the relevant cases with care. Before turning to the cases about which there is a dispute, it is necessary to set the scene by considering Mohr v Finanzamt Bad Segeberg (Case C 215/94) [1996] ECR I 959; [1996] STC 328, in which the CJEU held that an undertaking by a farmer to discontinue milk production, for which he received compensation, did not constitute a supply of services by him to the EC institutions or the competent national authorities with the result that the compensation was not subject to VAT. The CJEU in its judgment (paras 19 23) observed that VAT was a tax on consumption, and that the authorities on payment of compensation obtained no goods or services for their own use from the farmer but acted in the common interest of promoting the proper functioning of the Communitys milk market. It is not contested in this appeal that the sales on the market of the SFPE units to FASL were transactions which fell to be treated as taxable supplies. It is also not contested that a farmers actions to qualify himself to receive SFPs did not amount to the provision of a service to the relevant authorities and that the receipt of SFPs was outside the scope of VAT. The central question in the appeal therefore is whether the receipt of the SFPs, which were transactions outside the scope of VAT, prevented FASL from deducting the VAT which it has paid on the purchase of the SFPE units. (ii) The disputed case law In BLP a management holding company sold shares in a subsidiary company and sought to recover as input tax the VAT which it had paid on invoices for professional services connected to the sale. The share sale was an exempt transaction. But BLP argued that it was entitled to deduct the VAT as input tax because the purpose of the sale was to raise funds to pay off debts which had arisen as a result of its taxable transactions. The legal question turned on the interpretation of the predecessors of articles 1(2), 168 and 173 of the PVD, namely article 2(2) of EC Council Directive 67/227 (the First Directive) and article 17(2) and (5) of the EC Council Directive 77/388 (the Sixth Directive) and in particular the words goods and services are used for the purposes of his taxable transactions in article 17(2), which remain in article 168 of the PVD (para 15 above). The CJEU held in para 19 of its judgment: The use [in article 17(5)] of the words for transactions shows that to give the right to deduct under [article 17(2)], the goods or services in question must have a direct and immediate link with the taxable transactions, and that the ultimate aim pursued by the taxable person is irrelevant in that respect. The CJEU went on to point out that the Sixth Directive provided a right to deduct VAT on goods and services used for exempt transactions only by way of exception. It recognised (para 25) that if BLP had taken out a bank loan, instead of selling shares, it would have been able to deduct VAT on accountants professional services required for that purpose because the costs of those services would form part of the companys overheads and hence of the cost components of its products. Thus it held (in para 28): article 2 of the First Directive and article 17 of the Sixth Directive are to be interpreted as meaning that, except in the cases expressly provided for by those Directives, where a taxable person supplies services to another taxable person who uses them for an exempt transaction, the latter person is not entitled to deduct the input VAT paid, even if the ultimate purpose of the transaction is the carrying out of a taxable transaction. It is clear that this ruling in terms relates only to the use of services on exempt transactions. But as HMRC set great store by this case and submit that its reasoning extends to services used on a form of fund raising which is outside the scope of VAT, it is necessary also to cite para 24 of the CJEUs judgment in BLP, which suggests that policy considerations might point to a wider exclusion of the right to deduct: Moreover, if BLPs interpretation were accepted, the authorities, when confronted with supplies which, as in the present case, are not objectively linked to taxable transactions, would have to carry out inquiries to determine the intention of the taxable person. Such an obligation would be contrary to the VAT systems objectives of ensuring certainty and facilitating application of the tax by having regard, save in exceptional cases, to the objective character of the transaction in question. In BLP, the objective character of the transactions was that the services were used for an exempt transaction, namely the sale of shares in a subsidiary by a holding management company. When addressing the subsequent case law of the CJEU I will have to consider how, when a taxable person legitimately claims that costs of services are part of its overheads, the tax authorities are to ascertain that those costs are eventually cost components of its products or activities in taxable transactions. In Midland Bank plc v Customs and Excise Comrs (Case C 98/98) [2000] 1 WLR 2080, the bank was the representative member of a group of companies, one of which, Samuel Montagu & Co Ltd, provided taxable services to one of its clients in relation to a proposed corporate takeover and engaged a firm of solicitors to provide legal services in that connection. To simplify matters I will present Samuel Montagu & Co Ltd as the bank because the group was treated as a single person for the purposes of VAT. In a dispute in relation to the proposed takeover, the bank was sued for damages for negligence and the bank engaged the same firm of solicitors to represent it in the legal proceedings. The bank then sought to deduct as input tax the whole of the VAT which it paid in respect of its legal fees on the ground that it was to be attributed to its taxable supplies to its client in the takeover. The Customs and Excise Commissioners (CEC) argued that the VAT incurred on the legal fees relating to the claim for damages was attributable to the banks business generally and, as the bank made both taxable and exempt supplies, fell to be apportioned in accordance with article 17(5) of the Sixth Directive (now article 173 of the PVD). The dispute gave rise to questions (i) whether there needed to be a direct and immediate link between a particular input transaction and particular output transactions in order to entitle the taxable person to deduct VAT as input tax and (ii) if so, what was the nature of that link. In relation to the first question the CJEU applied BLP but (in paras 22 and 23) confirmed, as an exception to the rule in BLP, that: entitlement to deduct, once it has arisen, is retained even if the economic activity envisaged does not give rise to taxed transactions or the taxable person has been unable to use the goods or services which gave rise to the deduction in the context of taxable transactions by reason of circumstances beyond his control. In support of that exception it cited Intercommunale voor Zeewaterontzilting (INZO) v Belgian State (Case C 110/94) [1996] ECR I 857, paras 20 and 21 and Belgian State v Ghent Coal Terminal NV (Case C 37/95) [1998] ECR I 1, para 24. It held (in para 24 and dispositif (1) of its judgment) that: in principle, the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to entitlement to deduct is necessary before the taxable person is entitled to deduct input VAT and in order to determine the extent of such entitlement. In relation to the second question the CJEU declined to define what amounted to a direct and immediate link because of the diversity of professional and commercial transactions and left it to national courts to apply the test to the facts of the individual case. But it stated (para 33 and dispositif 2) that a taxable person which carries out taxable and non taxable transactions could deduct the entirety of VAT as input tax only if it could show by objective evidence that the expenditure involved in the acquisition of the services was part of the various cost components of the taxable output transaction. In Abbey National plc v Customs and Excise Comrs (Case C 408/98) [2001] 1 WLR 769, a life assurance company, Scottish Mutual Assurance plc (SM), in addition to its life assurance business, carried on business leasing premises for professional and commercial use. SM opted to charge VAT on the rent received from its commercial tenants. SM later sold a property in Aberdeen to a third party in a transaction which CEC, in accordance with domestic legislation, treated as a transfer as a going concern so that no supply of goods or services had taken place. As a result, the transfer was not a taxable transaction. SM sought to deduct as input tax the whole of the VAT which it had paid on professional services relating to the sale, while CEC took the view that only part of the tax was deductible and sought to apportion the VAT in accordance with article 17(5) of the Sixth Directive. The case is important because, like the present appeal, it concerns a claim to deduct as input tax VAT incurred on a transaction outside the scope of VAT. In his opinion Advocate General Jacobs contrasted the CJEUs approach in BLP in relation to an exempt transaction with other case law which recognised a right to deduct as input tax VAT incurred as part of the overheads of a taxable persons business. In his view, what mattered was whether the taxed supply was a cost component of a taxable output, and not whether the most closely linked transaction was itself taxable. It was inherent in an exempt transaction that it broke the chain between a supply and the taxable persons taxable economic activities. As a result, VAT incurred on supplies used by the taxable person for an exempt transaction could not be deducted from VAT paid on a subsequent output supply by that person (para 35). Where no supply of goods or services had taken place in a transaction outside the scope of VAT, the chain between a supply to the taxable person and that persons subsequent taxable economic activity was not broken. One was required to look beyond the immediate transaction to see whether the supply, in respect of which a claim to deduct VAT was made, formed a cost component of some other taxable transaction, including in the form of general overheads (paras 38, 42 and 46). I will consider below whether Mr Small is correct in his contention that the CJEU has in its later case law adopted the reasoning of the Advocate General. To simplify the later discussion of the case law concerning fund raising transactions, I will refer to the transaction on which the supply was used, such as the sale of the subsidiary in BLP, the transfer of the office in Abbey National, and the purchase of SFPEs and the steps taken to obtain the SFPs in this case as the initial transaction and, adopting the phrase which Mr Small derived from later CJEU case law, will call the taxable persons subsequent transaction or transactions, of which he asserts the relevant supply is a cost component, as the downstream transaction. It is, admittedly, a simplification to speak of subsequent transactions because, as the Advocate General recognised, there may not always be such a chronological sequence in economic reality or inherent in the VAT system (para 41). But it is nonetheless the norm. The CJEU in its judgment did not expressly adopt the Advocate Generals distinction between the chain breaking effect of the use of a supply in an initial transaction which is an exempt transaction and the absence of that break in an initial transaction outside the scope of VAT. But the CJEUs reasoning in this case is not only consistent with the Advocate Generals approach but also difficult to reconcile with its reasoning in BLP unless it was accepting his approach. In particular, the court rejected the principal position of the United Kingdom Government (para 20) that, since the costs incurred to effect the transfer were used for the purposes of an initial transaction which was not taxable, there was no right to deduct the input VAT paid on those costs. The CJEUs reasoning started (para 24) with the principle of neutrality, namely that the deduction system is meant to relieve the taxable person entirely of the burden of the VAT payable or paid in the course of all his economic activities (ie his activities that are themselves subject in principle to VAT paid by the recipient of his goods or services and accounted to the tax authorities by the taxable person). Referring to BLP and Midland Bank, the CJEU held (para 28) that the right to deduct VAT borne by goods and services presupposed that the expenditure incurred in acquiring them was part of the cost components of taxable output transactions (ie including taxable downstream transactions). The CJEU found no direct and immediate link between the professional services and one or more taxable outputs because it rejected Abbey Nationals arguments, including that the transfer of the property should be treated as if it were a taxable transaction. But that was not the end of the matter as the CJEU held that the costs of the professional services formed part of the taxable persons overheads and as such were cost components of the products of a business. The services used by SM for the purposes of the transfer thus had a direct and immediate link with the whole economic activity of that taxable person (para 36). As the taxable person effected downstream transactions which were subject to VAT and exempt transactions, it could only deduct (under article 17(5) of the Sixth Directive) the proportion of the VAT which was attributable to the taxable transactions (para 42 and dispositif). The CJEU thus looked through the initial transaction and recognised a right to deduct by reference to such downstream transactions as were economic activities. In Kretztechnik AG v Finanzamt Linz (Case C 465/03) [2005] 1 WLR 3755; [2005] ECR I 4357, an Austrian company, which developed and distributed medical equipment, raised capital by a share issue on the Frankfurt Stock Exchange. The Austrian tax authority disallowed a deduction of input tax which Kretztechnik had paid on the supply to it of services linked to the share issue, which the national tax authority treated as exempt from VAT. The company challenged the assessment to tax and this gave rise to questions whether the share issue was within the scope of In his opinion Advocate General Jacobs repeated the analysis which he had VAT and, if not, whether there was a right to deduct input tax on the ground that the services in respect of which the deduction of input tax was claimed were used for the purposes of the companys downstream taxable transactions. As I will show, the CJEU treated the share issue as being outside the scope of VAT and supported the right to deduct the VAT charged on the expenses incurred for the supplies acquired in connection with a share issue. adopted in his opinion in Abbey National (paras 35 and 46). He stated: 73. if a trader uses the services of a broker or valuator when acquiring a commodity, the cost of those services may be said to be directly, immediately and exclusively linked to the acquisition. That does not however determine whether the VAT on the services is deductible. The right to deduct must be determined by the output transactions for the purposes of which the services are used. The transactions in question will usually be the onward supply of the commodity or the goods or services for which it is used or in which it is incorporated. The right to deduct will depend on whether that supply is taxed or not. 74. Thus, if the transaction with which the input is most closely linked is one which falls entirely outside the scope of VAT because it is in any event not a supply of goods or services, it is irrelevant for the purpose of determining deductibility. What matters is the link, if any, with such output supplies, and whether they are taxed or exempt 75. The question to be asked in [Kretztechniks] case is therefore whether the capital raised by the share issue was used for the purposes of one or more taxed output transactions. The CJEUs judgment on the deductibility of VAT on the services provided to Kretztechnik is wholly consistent with the Advocate Generals approach in its disregard for an initial transaction which is outside the scope of the VAT system. The court stated: 34. The deduction system is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures complete neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT: see, to that effect Rompelman v Minister van Financin (Case C 268/83) [1985] ECR 655 para 19; Belgian State v Ghent Coal Terminal NV para 15; Gabalfrisa [SL v Agencia Estatal de Administracin Tributaria] (Joined Cases C 110/98 to C 147/98) [2000] ECR I 1577, para 44; the Midland Bank case [2000] 1 WLR 2080, 2097 2098, para 19, and the Abbey National case [2001] 1 WLR 769, 785, para 24. 35. It is clear from the last mentioned condition that, for VAT to be deductible, the input transactions must have a direct and immediate link with the output transactions giving rise to a right of deduction. Thus, the right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see the Midland Bank case, para 30, and the Abbey National case, para 28, and also Cibo Participations SA v Directeur regional des impts du Nord Pas de Calais (Case C 16/00) [2001] ECR I 6663, para 31). In this case, regard being had to the fact that, first, a 36. share issue is an operation not falling within the scope of the Sixth Directive and, second, that operation was carried out by [Kretztechnik] in order to increase its capital for the benefit of its economic activity in general, it must be considered that the costs of the supplies acquired by that company in connection with the operation concerned form part of its overheads and are therefore, as such, component parts of the price of its products. Those supplies have a direct and immediate link with the whole economic activity of the taxable person (see the BLP Group case para 25; the Midland Bank case, para 31; the Abbey National case, paras 35 and 36, and the Cibo Participations case, para 33). The CJEU, disregarding the share issue itself, held that article 17(1) and (2) of the Sixth Directive conferred the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions (para 38 and dispositif 2). The next relevant case in chronological sequence was Investrand BV v Staatssecretaris van Financin (Case C 435/05) [2007] ECR I 1315 which concerned the sale by a company in 1989 of a substantial shareholding in another company (company A). The CJEU decided the case without the assistance of an opinion from the Advocate General and followed its decisions in Midland Bank, Abbey National and Kretztechnik. The sale of the shares was treated as an activity outside the scope of VAT and the central question was whether the relevant costs were overheads related to the taxpayer companys economic activity as a whole (para 24). It is nonetheless of interest because in my view it casts light on later judgments of the CJEU and I will return to the case in this judgment. The consideration for the 1989 sale was a fixed sum and a further sum which depended upon the profits earned by company A between 1989 and 1992. At the time of the sale and until 1 January 1993 the taxpayer company was a passive holding company which took no part in the management of the companies in which it invested. From 1 January 1993 the taxpayer company provided management services to company A. A dispute arose between the taxpayer company and the purchaser of company A over the calculation of the sum due by reference to company As profits. The taxpayer company incurred professional costs in an arbitration on that matter and sought to deduct the VAT which it paid on those costs in the financial year 1996, which was at a time that it was carrying on economic activity. The CJEU rejected the taxpayers claim in essence because the taxpayer company would have incurred the professional costs whether or not it had commenced economic activity after 1 January 1993 (paras 32 33). It distinguished Kretztechnik on the basis that in that case the costs were incurred in relation to a share issue intended to increase the taxable persons capital for the benefit of its economic activity (paras 35 37). Accordingly, the CJEU held (para 38 and dispositif): the costs for advisory services which a taxable person obtains with a view to establishing the amount of a claim forming part of his companys assets and relating to a sale of shares prior to his becoming liable to VAT do not, in the absence of evidence establishing that the exclusive reason for those services is to be found in the economic activity, within the meaning of [the Sixth] Directive, carried out by the taxable person, have a direct and immediate link with that activity and, consequently, do not give rise to a right to deduct the VAT charged on them. In other words, the VAT on inputs which were incurred in relation to a companys non economic activity and which had no link to its subsequent economic activities would not be deductible. The CJEU returned to the issue of deductibility of VAT in the context of fund raising by a taxable person in Securenta Gttinger Immobilienanlagen und Vermgensmanagement AG v Finanzamt Gttingen (Case C 437/06) [2008] ECR I 4177; [2008] STC 3473. In this case the taxpayer company, Securenta, carried out both economic and non economic activities. It acquired capital for its business by the issue of shares and atypical silent partnerships and sought to deduct the input tax which it had paid for services relating to its raising of capital in this way. A dispute about the extent of its entitlement to deduct resulted in a reference to the CJEU. The relevant question, as reformulated by the court, was how the right to deduct input tax was to be determined in the case of a taxpayer who carries out both economic and non economic activities. The CJEU observed (para 26) that Securenta carried on three downstream activities, namely (i) non economic activities outside the scope of VAT, (ii) economic activities which were within the scope of the Sixth Directive but were exempt and (iii) taxed economic activities. The court repeated its ruling (in Abbey National para 28 and other cited cases) that in order for the input VAT to give rise to a right to deduct the expenditure incurred on the fund raising must be a component of the cost of the output transactions that gave rise to the right to deduct (para 27). If Securentas downstream activities had been solely economic activities, the supplies of services would have had a direct and immediate link with those economic activities, but part of Securentas downstream activities were non economic (para 29). The CJEU therefore held (para 31 and dispositif 1): where a taxpayer simultaneously carries out economic activities, taxed or exempt, and non economic activities outside the scope of the Sixth Directive, deduction of the VAT relating to expenditure connected with the issue of shares and atypical silent partnerships is allowed only to the extent that that expenditure is attributable to the taxpayers economic activity within the meaning of article 2(1) of that Directive. More recently, the CJEU has called into question its ruling in BLP in the light of its developing jurisprudence attributing input expenditure on the raising of capital to the general overheads of an undertaking. In Skatteverket v AB SKF (Case C 29/08) [2009] ECR I 10413; [2010] STC 419 (SKF), the parent company which managed an industrial group proposed to sell a wholly owned subsidiary and a minority stake in another company, which had formerly been a wholly owned subsidiary, to obtain funds to finance other activities of the group. It proposed to engage professional services in the sale and sought a ruling from the Swedish Revenue Law Commission on whether it would be entitled to deduct input VAT paid on those services. The tax authority challenged the affirmative answer given by the Commission and the Swedish Court made a reference to the CJEU. In his opinion, Advocate General Mengozzi endorsed the distinction which Advocate General Jacobs made in Abbey National between the chain breaking effect of an exempt transaction and the absence of such an effect where the fund raising transaction is outside the scope of VAT (paras 69 and 79). He opined (para 89(3)) that where the taxable person acquires supplies of services in order to carry out a share disposal which is an exempt transaction, he does not have the right to deduct input VAT on those services, even when the disposal of shares is a transaction which contributes to the restructuring of the taxable persons industrial activities. The CJEU disagreed with his conclusion in relation to an exempt transaction involving a sale of shares in circumstances which were analogous to the facts of the case and held (para 73) that there was a right to deduct input VAT paid on services acquired for the purposes of a disposal of shares if there is a direct and immediate link between the costs associated with the input services and the overall economic activities of the taxable person. It held that the referring court should take account of all the circumstances surrounding the transactions to determine whether the costs incurred were likely to be incorporated in the price of the shares sold or whether they were among only the cost components of transactions within the scope of the taxable persons economic activities. The CJEUs reasoning, based on prior case law, on the way to this conclusion is instructive. It reasoned: i) The right of deduction is an integral part of the VAT scheme and is necessary to achieve neutrality of taxation of all economic activities (paras 55 56); ii) In principle there needs to be a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to an entitlement to deduct before a taxable person is entitled to deduct input VAT to determine the extent of that entitlement: the expenditure incurred in acquiring the supplies must be a component of the cost of the output transactions that gave rise to the right to deduct (para 57); iii) But, absent that link between an input transaction and specific output transactions, the taxable person has a right to deduct where the costs of the services in question are part of his general costs and, as such, components of the price of the goods or services which he supplies, there thus being a direct and immediate link between the costs and the persons economic activity as a whole (para 58); iv) On the other hand, where the taxable person acquires goods or services and uses them for the purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (para 59). The CJEU stated (para 60): It follows that whether there is a right to deduct is determined by the nature of the output transactions to which the input transactions are assigned. Accordingly, there is a right to deduct when the input transaction subject to VAT has a direct and immediate link with one of more output transactions giving rise to the right to deduct. If that is not the case, it is necessary to examine whether the costs incurred to acquire the input goods or services are part of the general costs linked to the taxable persons overall economic activity. In either case, whether there is a direct and immediate link is based on the premise that the cost of the input services is incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his economic activities. Applying this reasoning to the circumstances of SKFs proposed transaction, the CJEU advised that the referring court would have to ascertain whether the costs incurred were likely to be incorporated in the price of the shares which SFK intended to sell or whether they were only among the cost components of SKFs products (para 62). It referred to the cases which I have discussed (Midland Bank, Abbey National, Kretztechnik and Securenta), acknowledging that they concerned financial output transactions which were outside the scope of VAT. But it went on to observe that the main difference between an exempt share sale and a share sale which was outside the scope of VAT was whether the taxable company was or was not involved in the management of the companies whose shares were being sold. There was therefore a risk of infringement of the principle of fiscal neutrality through treating objectively similar transactions differently for tax purposes. It held (para 68) that if the costs relating to the disposals of shareholdings are considered to form part of a taxable persons general costs in cases where the disposal itself is outside the scope of VAT, the same tax treatment must be allowed where the disposal is classified as an exempt transaction. In my view it is implicit in the CJEUs reasoning that it accepted the distinction which Advocate General Jacobs made in his opinions in Abbey National and Kretztechnik but recognised the need to modify the result for the purpose of VAT of an exempt initial transaction in order to avoid discriminatory fiscal treatment. It is important to consider further the statement in para 59 of the judgment, summarised in para 44(iv) above. It was that in contrast to the circumstance where the costs of services are part of a taxable persons general costs and components of the price of the goods and services which he supplies (para 58). where goods and services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (para 59) In order to be consistent with the CJEUs reasoning outlined above, that statement, when applied in the context of a fund raising transaction such as a sale of shares, must be a reference to the downstream transactions of which the input costs form a cost component, and not the initial fundraising transaction, unless the cost of the inputs was a component of the price of the shares in the initial transaction. It is also noteworthy that the cases to which the CJEU referred in para 59 of its judgment as vouching its proposition of law did not involve an initial fund raising transaction and a downstream transaction. Proceedings brought by Uudenkaupungin kaupunki (Case C 184/04) [2006] ECR I 3039; [2008] STC 2329 concerned the costs of a building which was initially used in a non taxable activity but later was used in a taxable activity. The relevant questions concerned the meaning of article 20 of the Sixth Directive and, in particular, whether during the adjustment period for which it provided the taxable person could seek to deduct input tax, when there was no entitlement to deduct at the outset. In Hausgemeinschaft Jrg und Stephanie Wollny v Finanzamt Landshut (Case C 72/05) [2006] ECR I 8297; [2008] STC 1617, a household business had constructed a building as a business asset and made private use of rooms within the building. The business had deducted as input tax the VAT it had paid on its construction and the dispute with the German tax authorities was over the mechanism for calculating the liability to VAT for the private use under articles 6(2)(a) and 11A(1)(c) of the Sixth Directive. Vereniging Noordelijke Land en Tuinbouw Organisatie v Staatssecretaris van Financin (Case C 515/07) [2009] ECR I 839; [2009] STC 935 concerned an organisation which promoted the interest of the agricultural sector, a non taxable activity, and provided taxable services to its members. The case concerned the extent to which VAT relating to the goods and services which the organisation acquired could be deducted from the VAT which it paid on its taxable services. In my view, it is clear that in SFK the CJEU has not extended the reasoning of BLP to apply it to fund raising transactions which are outside the scope of VAT. On the contrary, in order to avoid discriminatory treatment of taxable persons, it has extended the reasoning in the cases about share disposals that are outside the scope of VAT to share disposals which are exempt, by requiring an examination as to whether the costs associated with the input services are incorporated in the price of the shares sold in the initial transaction or in the prices of the taxable persons products in downstream transactions. If the latter, the costs would be among only the cost components of transactions within the scope of the taxable persons economic activities. The next case which I have to consider is also important because it vouches the direct and immediate link between an input incurred in the context of an initial transaction, which is not an economic activity, and the taxable persons general economic activity in downstream transactions. It also confirms the CJEUs approach to that link where there is a significant time lapse between the input transaction and the downstream activity. In Sveda UAB v VMI (Case C 126/14) EU:C:2015:712; [2016] STC 447, a Lithuanian company, Sveda, entered into an agreement with the Lithuanian Ministry of Agriculture in which it undertook to construct a Baltic mythology recreational and discovery path and to offer it to the public free of charge. The Ministry undertook to pay 90% of the construction costs and Sveda was to pay the balance. Sveda undertook to provide the path to the public free of charge for five years. Sveda sought to deduct as input tax VAT which it paid on the acquisition or production of capital goods for the construction of the path. The Lithuanian tax authorities refused to allow the deduction and Sveda appealed that decision. On appeal the Supreme Administrative Court found that Sveda intended to carry out economic activities in the future as it would sell food or souvenirs to visitors to the recreational path. It referred to the CJEU the question (as re formulated by the CJEU) whether article 168 of the PVD must be interpreted as granting a taxable person the right to deduct input VAT paid for the production or acquisition of capital goods, for the purposes of a planned economic activity related to rural and recreational tourism, which (i) are directly intended for use by the public free of charge, and (ii) may be a means of carrying out taxed transactions. The CJEU answered the question in the affirmative, provided that a direct and immediate link is established between the expenses associated with the input transactions and an output transaction or transactions giving rise to the right to deduct or with the taxable persons economic activity as a whole and stated that this was a matter for the referring court to determine on the basis of objective evidence (para 37 and dispositif). In reaching this conclusion, the CJEU stated (para 19) that a taxable person may be acting for the purposes of an economic activity within the meaning of article 9(1) of the PVD when it acquires goods for the purposes of an economic activity even if the goods are not used immediately for that economic activity. If the taxable person is so acting, the right to deduct arises immediately when the goods or services are delivered (para 20), but their use in an economic activity may occur some time later. The CJEU continued (para 21): Whether a taxable person acts as such for the purposes of an economic activity is a question of fact which must be assessed in the light of all the circumstances of the case, including the nature of the asset concerned and the period between the acquisition of the asset and its use for the purposes of the taxable persons economic activity (see inter alia, to that effect, the judgment in Klub OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 153/11), paras 40 and 41 and the case law cited). It is for the referring court to make that assessment. The CJEU held that the court has to determine whether there is a direct and immediate link between the particular input transaction and either (i) a particular output transaction or transactions, or (ii) the taxable persons economic activity as a whole because the expenditure incurred on the input transaction is part of its general costs and as such is a component of the price of the goods or services which it supplies in a downstream transaction. In so doing, the court must consider all the circumstances and take account only of transactions that are objectively linked to the taxable persons economic activity (paras 27 29). See also Finanzamt Kln Nord v Becker (Case C 104/12) EU:C:2013:99 (21 February 2013, unreported), paras 22, 23, 33 and 35. The CJEU (para 23) concluded from the Lithuanian courts findings of fact that Sveda acquired or produced capital goods for the recreational path with the intention, confirmed by objective evidence, of carrying out an economic activity and did, consequently, act as a taxable person within the meaning of article 9(1) of the Directive. It also recorded (para 30) the finding of fact by the Lithuanian court that Svedas expenditure incurred on the construction of the recreational path would come partly within the price of the goods and services which it would provide in the context of its planned economic activity. The CJEU went on to comment on the doubts of the referring court whether there was a direct link between the input transactions and the planned economic activity as a whole because the path was intended to be used by the public free of charge. It stated: 32. In that regard, the case law of the court makes it clear that, where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (judgment in Eon Aset Menidjmunt OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 118/11) EU:C:2012:97, para 44 and the case law cited). In both cases, the direct and immediate link between the input expenditure incurred and the economic activities subsequently carried out by the taxable person is severed. 33. First, in no way does it follow from the order for reference that the making available of the recreational path to the public is covered by any exemption under the VAT Directive. Second, given that the expenditure incurred by Sveda in creating that path can be linked, as is apparent from para 23 of this judgment, to the economic activity planned by the taxable person, that expenditure does not relate to activities that are outside the scope of VAT. 34. Therefore, immediate use of capital goods free of charge does not, in circumstances such as those in the main proceedings, affect the existence of the direct and immediate link between input and output transactions or with the taxable persons economic activities as a whole and, consequently, that use has no effect on whether a right to deduct VAT exists. 35. Thus, there does appear to be a direct and immediate link between the expenditure incurred by Sveda and its planned economic activity as a whole, which is, however, a matter for the referring court to determine. I observe that in para 32 the CJEU repeated the interpretation, which it gave in SKF at para 59, which I have discussed in paras 47 and 48 above and to which I return below. The CJEU also recognised that a taxable person having obtained a deduction might later use the goods or services acquired in the input transaction for purposes other than its economic activity. If that were shown to have occurred, the taxable person would have to repay the relevant input VAT to the tax authorities (para 36). The final case which I must consider is Direktor na Direktsia Obzhalvane i danacho osiguritelna praktica Sofia v Iberdrola Inmobiliaria Real Estate Investments EOOD (Case C 132/16) EU:C:2017:683; [2017] BVC 39 (Iberdrola). In this case the property developer, Iberdrola, which wished to construct 300 apartments in a holiday village, entered into an undertaking with the municipality to reconstruct a wastewater pump station, which the municipality owned, to serve both its proposed development and the wider holiday village. Without that reconstruction, Iberdrola would not have been able to connect its development to the pump station. A dispute arose with the Bulgarian tax authorities as to whether Iberdrola could deduct as input tax the VAT which it incurred on paying a third party construction company for the works on the pump station. The CJEU held that a taxable person has the right to deduct input VAT in respect of a supply of services consisting of the construction or improvement of a property owned by a third party when that third party enjoys the results of those services free of charge and when those services are used both by the taxable person and the third party in the context of their economic activity, in so far as those services do not exceed that which is necessary to allow that taxable person to carry out the taxable output transactions and where their costs are included in the price of those transactions (para 40 and dispositif). In so holding, the CJEU followed its reasoning in SKF and Sveda in recognising that there could be a direct and immediate link between an input and either (i) particular output transactions or (ii) the taxable persons economic activity as a whole. This link would exist if the cost of the input was in the first case a cost component of the particular transactions and in the second case if it was a cost component of the price of goods and services which it supplies (paras 27 32). In this review of the CJEUs case law I have sought to set out the development of the jurisprudence and have focussed attention on the proposition recorded in SKF (para 59) and Sveda (para 32) that where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted. This is because Mr Beal invites the court to make a reference to the CJEU under article 267 of the TFEU if it disagrees with his submission which I have recorded in paras 21 and 22 above. He supports that invitation by referring to the judgment of the Court of Appeal of England and Wales in Revenue and Customs Comrs v Chancellor, Masters and Scholars of the University of Cambridge [2018] EWCA Civ 568; [2018] STC 848, in which the court decided to make a reference to the CJEU because it concluded that the correct approach to be taken to the issue of attribution in that case was not acte clair. I am satisfied that there is no need for a reference in the present appeal. This is because, as I will seek to show, there are findings of fact that entitled the FTT to conclude that FASL when it acquired the SPFEs was acting as a taxable person because of its aim of accumulating sums to develop its taxable business through capital expenditure on assets which it would use to generate taxable output transactions. The statements in para 59 of SKF and para 32 of Sveda are wholly consistent with the principle of the neutrality of VAT enshrined in article 2(2) of the PVD. Thus in Investrand, which I discussed in para 39 above, the expenditure on the arbitration related to a financial claim arising out of a transaction carried out while Investrand was not a taxable person and the fact that the costs relating to the arbitration were incurred after it had become a taxable person was irrelevant because the expenditure had no connection with Investrands activities as a taxable person. Similarly, on the facts in Uudenkaupungin kaupunki (para 48 above), absent the arrangements under article 20 of the Sixth Directive, the intention to use and initial use of the building for a non taxable activity would have prevented the recovery as input tax of VAT incurred on its construction notwithstanding the later decision to use it for a taxable activity because when the costs were incurred they were not incurred by a taxable person acting as such. Similarly, in Wellcome Trust Ltd v Customs and Excise Comrs (Case C 155/94) [1996] ECR I 3013; [1996] STC 945, it was because the purchase and sale of shares by a charitable trust was not an economic activity that the VAT paid on the fees for professional services relating to those transactions were not recoverable; there was no downstream economic activity to which the costs could be linked. Since the hearing in this appeal and the preparation of this judgment in draft, the Eighth Chamber of the CJEU has issued its judgment on the Court of Appeals reference in the University of Cambridge case on 3 July 2019 (Case C 316/18) EU:C:2019:559. As the CJEU records (para 9) the university is a not for profit educational institution whose principal activity is the provision of educational services, which are VAT exempt, but which also makes taxable supplies including commercial research, the sale of publications, etc. The universitys activities are financed in part by charitable donations and endowments, which it places in a fund and invests. The university has claimed a right to deduct input VAT relating to fees which it has paid to third party managers of the fund on the basis that the income generated by the fund has been used to finance the whole range of its activities. The CJEU (para 19) interpreted the questions of the Court of Appeal in the reference as asking, in essence: whether article 168(a) of the VAT Directive must be interpreted as meaning that a taxable person that (i) is carrying out both taxable and exempt activities, (ii) invests the donations and endowments that it receives by placing them in a fund, and (iii) uses the income generated by that fund to cover the costs of all of those activities is entitled to deduct, as an overhead, input VAT paid in respect of the costs associated with that investment. The CJEU answered that question in the negative. Its reasoning is as follows. First, the collection of donations and endowments is not an economic activity and is outside the scope of the PVD. VAT paid in respect of costs incurred in connection with such collection is not deductible, regardless of the reason for the receipt (para 29). Secondly, the activity of collection and the activity of the investment of the collected funds are treated for VAT purposes as one non economic activity as the investment is merely a direct continuation of the non economic activity of collection. Accordingly, input VAT paid in respect of costs associated with the investment is also non deductible (para 30). Thirdly, and in my view critically, the CJEU distinguished the case on its facts from the line of authority which I have discussed and of which Kretztechnik is a part. It stated (para 31): It is true that the fact that costs are incurred in the acquisition of a service in the context of a non economic activity does not, in itself, preclude those costs giving rise to a right to deduct in the context of the taxable persons economic activity, if they are incorporated into the price of particular output transactions or into the price of goods and services provided by the taxable person in the context of that economic activity (see, to that effect, judgment of 26 May 2005, Kretztechnik, C 465/03, EU:C:2005:320, para 36). But, referring to the documents before the court, it concluded that the costs of management of the funds were not incorporated into the price of a particular output transaction. It also concluded, by reference to those documents, that the costs were incurred to generate resources to finance all of the universitys output transactions, thereby allowing the price of its goods and services to be reduced. The costs therefore were not components of the price of goods and services provided by the university and could not form part of its overheads. The VAT therefore was not deductible (para 32). In my view, the ruling that the income was used to reduce all of the costs of the universitys goods and services prevented the fund managers fees from being a component of the costs of those goods and services and thus part of the universitys overheads, which is the second alternative in Kretztechnik. The University of Cambridge judgment, which the CJEU has delivered without requiring an opinion from an Advocate General, is therefore an application of established CJEU jurisprudence which I have discussed above and summarise below. (iii) Summary of the case law case law: I derive the following propositions which are relevant to this appeal from the i) As VAT is a tax on the value added by the taxable person, the VAT system relieves the taxable person of the burden of VAT payable or paid in the course of that persons economic activity and thus avoids double taxation. This is the principle of deduction set out in article 1(2) and operated in article 168 of the PVD and vouched, for example, in Rompelman v Minister van Financien (Case C 268/83) [1985] ECR 655, para 19; Abbey National, para 24; Kretztechnik, para 34 and SKF, paras 55 56. ii) There must be a direct and immediate link between the goods and services which the taxable person has acquired (in other words the particular input transaction) and the taxable supplies which that person makes (in other words its particular output transaction or transactions). This link gives rise to the right to deduct. The needed link exists if the acquired goods and services are part of the cost components of that persons taxable transactions which utilise those goods and services: see for example Midland Bank, paras 24 and 30; Abbey National, para 28; Kretztechnik, para 35; Securenta, para 27; SFK, para 57 and HMRC v University of Cambridge, para 31. iii) Alternatively, there must be a direct and immediate link between those acquired goods and services and the whole of the taxable persons economic activity because their cost forms part of that businesss overheads and thus a component part of the price of its products: see for example BLP, para 25; Midland Bank, para 31; Abbey National, paras 35 and 36; Kretztechnik, para 36; SKF, para 58 and HMRC v University of Cambridge, para 31. iv) Where the taxable person acquires professional services for an initial fund raising transaction which is outside the scope of VAT, that use of the services does not prevent it from deducting the VAT payable on those services as input tax and retaining that deduction if its purpose in fund raising, objectively ascertained, was to fund its economic activity and it later uses the funds raised to develop its business of providing taxable supplies. See, for example, Abbey National, paras 34 36; Kretztechnik, paras 36 38; Securenta, paras 27 29 and SKF, para 64. The same may apply if an analogous transaction involving the sale of shares is classified as an exempt transaction: SKF, para 68. v) Where the cost of the acquired services, including services relating to fund raising, are a cost component of downstream activities of the taxable person which are either exempt transactions or transactions outside the scope of VAT, the VAT paid on such services is not deductible as input tax. See for example Securenta, paras 29 and 31; SKF, paras 58 60 and Sveda, para 32. Where the taxable person carries on taxable transactions, exempt transactions and transactions outside the scope of VAT, the VAT paid on the services it has acquired has to be apportioned under article 173 of the PVD. vi) The right to deduct VAT as input tax arises immediately when the deductible tax becomes chargeable: article 167 of the PVD, Securenta, paras 24 and 30 and SKF, para 55. As a result, there may be a time lapse between the deduction of the input tax and the use of the acquired goods or services in an output transaction, as occurred in Sveda. Further, if the taxable person acquired the goods and services for its economic activity but, as a result of circumstances beyond its control, it is unable to use them in the context of taxable transactions, the taxable person retains its entitlement to deduct: Midland Bank, paras 22 and 23. vii) The purpose of the taxable person in carrying out the fund raising is a question of fact which the court determines by having regard to objective evidence. The CJEU states that the existence of a link between the fund raising transaction and the persons taxable activity is to be assessed in the light of the objective content of the transaction: Sveda, para 29; Iberdrola, para 31. The ultimate question is whether the taxable person is acting as such for the purposes of an economic activity. This is a question of fact which must be assessed in the light of all the circumstances of the case, including the nature of the asset concerned and the period between its acquisition and its use for the purposes of the taxable persons economic activity: Eon Aset Menidjmunt OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 118/11) EU:C:2012:97; [2012] STC 982, para 58; Klub OOD v Direktor na Direktsia Obzhalvane I upravlenie na izpalnenieto Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Case C 153/11) EU:C:2012:163; [2012] STC 1129, paras 40 41 and Sveda, para 21. Application to the facts of this case I have set out the factual background in paras 2 7 above. There was objective evidence that FASL when carrying out its fund raising activity was carrying out a taxable business and was contemplating using the funds raised on three principal developments a windfarm, the construction of further farm buildings and the acquisition of neighbouring farmland. I do not detect in the jurisprudence of the CJEU any basis for distinguishing expenditure incurred in a fund raising exercise which takes the form of a sale of shares from a fund raising exercise that involves the receipt of a subsidy over several years. The fact that the subsidies were included in FASLs profit and loss account and counted as the businesss income for income tax purposes is not a basis for distinguishing the share sale cases such as Kretztechnik and Securenta. I do not view the annual payment of the subsidies under the SFP scheme as a separate transaction from the acquisition of the entitlement to those subsidies which is capable of breaking the link between the purchase of the SFPE units and the deployment of the net proceeds of the subsidies in FASLs subsequent economic activities. In any event the FTT was not bound to hold that the acquisition of the SFPE units and the receipt of the subsidies were separate transactions. On the FTTs findings of fact, the purchase of the SFPE units was part of an exercise raising funds for FASLs economic activities. The underlying principle is the principle of neutrality which relieves the taxable person of the burden of VAT payable and paid in the course of all its economic activities: Rompelman, para 19; Belgian State v Ghent Coal Terminal NV, para 15; Gabalfrisa SL v Agencia Estatal de Administracin Tributaria (Cases C 110/98 to C 147/98) EU:C:2000:145; [2000] ECR I 1577; [2002] STC 535, para 44. While it is not clear from the FTTs findings when any of FASLs projects will come to fruition, I am persuaded that the FTT was entitled to conclude that FASL when it incurred the costs of the purchase of the SFPE units was acting as a taxable person because it was acquiring assets in support of its current and planned economic activities, namely farming and the windfarm. On that basis FASL was entitled to an immediate right of deduction of the VAT paid on the purchase of the SFPE units and is entitled to retain that deduction or repayment so long as it uses the SFPs which it received as cost components of its economic activities. A start up business can acquire goods and services to support its future taxable supplies and claim VAT paid on those acquisitions as input tax; so too in principle can an existing business which proposes to expand its economic activity. On the facts found, FASL does not carry out and does not propose to carry out downstream non economic activities or exempt transactions. Therefore, no question of apportionment under article 173 of the PVD arises. The task for HMRC I recognise that a claim for deduction which depends on the future behaviour of the taxable person, such as the claim in this case, may create practical difficulties for HMRC in administering the VAT system fairly and, in particular, in avoiding unwarranted repayments of VAT. But it is an established part of the VAT system that a taxable person is entitled to an immediate deduction of the VAT which it has paid (para 60(vi) above). It is also well established that a taxable person can claim to deduct as input tax VAT which it has paid on the acquisition of goods or services although it will not use those goods and services as components of taxable transactions immediately: Rompelman, para 22; Lennartz v Finanzamt Mnchen III (Case C 97/90) [1991] ECR I 3795, paras 13 16 and Sveda, para 20. The recognition that fund raising costs may, where the evidence permits, be treated as general overheads of a taxable persons business means that the taxable person must be able to provide objective evidence to support the connection between the fund raising transaction and its proposed economic activities. The taxpayer also needs to maintain adequate banking arrangements and records to vouch the later use of the funds so raised to demonstrate its entitlement to deduct and to retain the deduction, if investigated. As the CJEU recorded in Sveda (para 36) the taxpayer will have to repay input VAT if it does not use the input goods or services for the purposes of its economic activity. HMRC has power to charge VAT under regulation 3 of the Value Added Tax (Supply of Services) Order 1993 (SI 1993/1507), where a taxable person uses services supplied to it for its business for a purpose other than a business use, by treating that use as a supply of services in the course of its business. This may involve HMRC in more investigations than the CJEU envisaged in BLP (para 24). But this supervision of the subsequent use of the raised funds, with which the services were associated, seems to me to be an inevitable consequence of the CJEUs interpretation of the PVD. Conclusion I would dismiss the appeal. |
Until 2006, pension schemes could be approved by the Inland Revenue (subsequently HM Revenue and Customs). Approved status carried with it advantages in the tax treatment of contributions to the scheme and investments within it, but it also imported restrictions on the form in which benefits were taken. In particular, until recently, benefits had to be taken as income, for example by applying the capital to the purchase of an annuity. The Finance Act 1991 amended the Income and Corporation Taxes Act 1988 so as to provide for the cessation of approval if a scheme ceased to qualify. A practice grew up by which small schemes (typically for the controlling directors of private companies) would contrive a loss of approval with a view to allowing the accumulated fund to be applied free of the restrictions on the form of benefits. To deal with this practice, section 61 of the Finance Act 1995 introduced a tax charge of 40% of the value of the assets of the scheme immediately before the cessation of approval. The question at issue on this appeal is whether, when approval is withdrawn by a decision of Revenue, the tax charge falls to be assessed in the tax year with effect from which the approval ceased or in the tax year when the Revenues decision to withdraw approval was notified to the administrator of the scheme. The John Mander Ltd Directors Pension Scheme was approved by the Revenue on 24 September 1987. Its beneficiaries were Mr Mander and his wife. On 5 November 1996 the funds of the scheme were transferred to a new scheme, whose rules were subsequently changed so as to provide for the trustees to make advances to beneficiaries which were not permitted for an approved scheme. On 19 April 2000 the Revenue notified the administrator of the scheme that approval was withdrawn under section 591B(1) of the Income and Corporation Taxes Act 1988 with effect from 5 November 1996. On 27 July 2000, the then administrator was assessed under section 591C of the Act for the current tax year, 2000 2001. Following a change of administrator, a fresh assessment in the same terms was raised against the new administrator on 22 January 2007. The taxpayer appealed against both assessments on the ground that the tax should have been assessed for the tax year 1996 1997 when the scheme ceased to be eligible and when the withdrawal of approval took effect under the terms of the Revenues notice. This contention was rejected by the First tier Tribunal (Tax Chamber). Their decision was upheld by the Upper Tribunal (Vos J) [2013] UKUT 51 (TCC); [2013] STC 1453 and subsequently by the Court of Appeal (Moses, Patten and Beatson LJJ) [2013] EWCA Civ 1683; [2014] 1 WLR 2209. They all considered that the tax charge fell to be assessed for the year 2000 2001 when the withdrawal was notified. The point is of greater significance than this rather technical statement of the issue might suggest. If the taxpayer is right, it may now be too late for the Revenue to raise a fresh assessment for 1996 1997. In some cases, although not this one, it will already have been too late by the time that the revenue learn of the facts leading to the withdrawal of approval. A substantial number of other schemes is affected. This is the lead case of a number of appeals awaiting decision in the First tier Tribunal. The statutory framework Section 590 of the Income and Corporation Taxes Act 1988 laid down a number of conditions for the approval of a pension scheme. Section 591 conferred a discretion on the Revenue to approve schemes satisfying certain criteria even if it did not qualify under section 590, but subject to regulations which the Board was empowered to make by section 591(6). At the relevant times, approval could cease in any of three ways: (1) Section 591A was in effect a transitional provision relating to schemes which had received discretionary approval under section 591 but ceased to qualify as a result of restrictions subsequently introduced by regulations under section 591(6). Their approval ceased automatically 36 months after the introduction of the regulations if the scheme still failed to comply with them. (2) Section 591B(1), which was the basis on which the approval of the Mander scheme was withdrawn, provided: If in the opinion of the Board the facts concerning any approved scheme or its administration cease to warrant the continuance of their approval of the scheme, they may at any time by notice to the administrator, withdraw their approval on such grounds, and from such date (which shall not be earlier than the date when those facts first ceased to warrant the continuance of their approval or 17 March 1987, whichever is the later), as maybe specified in the notice. (3) Section 591B(2) provided that where an alteration had been made to a scheme which was neither specifically approved by the Revenue nor generally authorised by regulations, no approval given by the Board as regards the scheme before the alteration shall apply after the date of the alteration It should be noted that in each case, the approval is lost with effect from a date established by reference to the time when the scheme ceased to qualify for approval. In cases (1) and (3), this is clear from the express terms of the relevant provisions. Where approval is lost under section 591A, it ceases with effect from a date 36 months after regulations came into force under which it no longer qualified for discretionary approval. The period of grace is intended to allow the trustees to modify the scheme so as to qualify under the new regime. Approval is lost only if they fail to do so. Where approval ceases under section 591B(2), it ceases on the date of the alteration to the scheme which caused it no longer to qualify for approval. The relationship between the date when the scheme ceases to qualify and the date when approval ceases is less clear in cases governed by section 591B(1). This is the only case in which the cessation of approval requires any action on the part of the Revenue, as opposed to occurring automatically when the statutory conditions for cessation are satisfied. A notice of withdrawal is required, which will specify an effective date for the withdrawal not earlier than the time when the facts cease to warrant approval. It is, however, clear that the Revenue do not have an unfettered choice of effective date. They must select one which bears a rational relationship to the facts to which they are responding. That will normally be the date when the scheme ceased to qualify for approval. But it may be after that date if in the judgment of the Revenue the circumstances in which the scheme ceased to qualify justify an interval before the withdrawal takes effect. This might happen, for example, if the loss of approval was inadvertent on the part of the trustees or administrator and there was a period of time during which they might reasonably have been expected to rectify the position. Other examples could no doubt be cited. When approval is lost in any of the three ways contemplated by sections 591A or 591B, a charge to tax is imposed by sections 591C. This provides, so far as relevant: 591C Cessation of approval: tax on certain schemes (l) Where an approval of a scheme to which this section applies ceases to have effect . , tax shall be charged in accordance with this section. (2) The tax shall be charged under Case VI of Schedule D at the rate of 40% on an amount equal to the value of the assets which immediately before the date of the cessation of the approval of the scheme are held for the purposes of the scheme (taking that value as it stands immediately before that date). (3) Subject to section 591D(4), the person liable for the tax shall be the administrator of the scheme. Section 591D contains supplementary provisions. For present purposes, only subsection (7) is relevant: (7) The reference in section 591C(l) to an approval of a scheme ceasing to have effect is a reference to the scheme ceasing to be an approved scheme by virtue (a) of section 591A(2); (b) section 591B(l); (c) of section 591B(2); the approval of the scheme being withdrawn under the approval of the scheme no longer applying by virtue and any reference in section 591C to the date of the cessation of the approval of the scheme shall be construed accordingly. In respect of what year does the charge to tax arise? Section 591C does not in terms specify a date at which the tax is chargeable. In principle, it is the date when approval is lost since that is the occasion for the tax charge. But in a case where approval is withdrawn retrospectively, does that mean the date on which it is withdrawn or the date with effect from which it is withdrawn? The Revenues argument is, in substance, that until the moment when a notice of withdrawal is issued, the scheme remains technically an approved scheme, notwithstanding that it was not entitled to be, and notwithstanding that when approval was withdrawn it was withdrawn retrospectively. In my opinion, however, the correct answer is that the tax charge falls to be assessed for the chargeable period in which the withdrawal of approval took effect in accordance with the terms of the statutory notice. The starting point is to ask what the tax is being charged upon. That depends on the charging provision. Before us there was an issue about which parts of section 591C should be regarded as the relevant charging provision. The Court of Appeal considered that it was only subsection (1). I should myself have regarded at least the first three sub sections as constituting the charging provision, but the issue is a sterile one, because even if subsection (1) is to be regarded as the charging provision, its ambit and effect depend on the remaining sub sections and indeed on the supplementary provisions of section 591D. These provisions have to be read as a whole. In those circumstances, the critical point is that although the charge is in reality a levy on the capital value of the fund, section 591C(2) imposed it as a charge to income tax under Case VI of Schedule D. That is therefore necessarily its legal characterisation. Case VI of Schedule D charged tax in respect of any annual profits or gains not falling under any other Case of Schedule D and not charged by virtue of Schedule A, B, C or E. Under section 69(1) of the Income and Corporation Taxes Act 1988, tax chargeable under Case VI of Schedule D was computed on the full amount of the profits or gains arising in the year of assessment. For this purpose, the relevant year of assessment is the year in which the relevant profit of gain arose: see Income and Corporation Taxes Act 1988, section 832(1). Reading section 591C(2) together with Case VI of Schedule D, their combined effect is that the administrator of the scheme is treated for tax purposes as having received an annual profit or gain in an amount equal to the value of the assets which immediately before the cessation of the approval of the scheme are held for the purposes of the scheme. Income tax at 40% is then charged on that profit or gain. It follows that the tax must be assessed on a notional profit or gain accruing immediately before the cessation of approval. Subject to section 591D(7), to which I shall return, the cessation of approval in section 591C(2) must refer back to the opening words of subsection (1) which identify the condition on which the charge to tax arises (Where an approval ceases to have effect ). As a matter of ordinary language, that means the time with effect from which the previous approval of the scheme no longer had effect. As I have pointed out, this is obvious in a case falling within section 591A or 591B(2). In a case like the present one falling under section 591B(1), it means the date specified in the Revenues notice from which approval is withdrawn, which is the functional equivalent. Not only is this the natural result of the language of these provisions, but on any other view the tax charge under section 591C would fall to be assessed in a later tax year where approval was lost under section 591B(1) than it would have been if approval had been lost under section 591A or 591B(2). Given the common purpose of the three provisions, I can see no rational basis for such a difference. The same point may be made about the conditions for liability to the tax charge in section 591C(4) (6A). These conditions relate to the number of members of the scheme immediately before the date of the cessation of the approval of the scheme, to their relationship with the company contributing to the scheme within the period of one year ending with the date of the cessation of the approval of the scheme, and to the contributions made by any person to the scheme within the period of three years ending with the date of the cessation of the approval of the scheme. These provisions make sense only on the footing that the cessation of the approval of the scheme is the effective date of the withdrawal of approval, and not the date of the Revenues notice of withdrawal. This analysis derives support from the terms of section 61 of the Finance Act 1995, which introduced sections 591C and 591D into the Income and Corporation Taxes Act 1988. Section 61(3) provided: (3) This section shall apply in relation to any approval of a retirement benefits scheme which ceases to have effect on or after 2 November 1994 other than an approval ceasing to have effect by virtue of a notice given before that day under section 591B(1)of the Taxes Act 1988. 2 November 1994 was the date when the Revenue announced its intention to promote legislation imposing a tax charge on the assets of schemes ceasing to qualify for approval. The purpose of section 61(3) is to ensure that the tax charge introduced by section 591C does not apply unless both the cessation of approval and the giving of notice of withdrawal of approval under section 591B(1) occurred after that date. It presupposes that the date when an approval ceases to have effect is not the same as the date when notice is given to that effect. I now return to section 591D(7), which I have already set out. The Revenue argue that the effect of this subsection, as applied to schemes like this one whose approval is withdrawn under section 591B(1), is that approval of the scheme is treated as having been withdrawn when the Revenue gives notice of withdrawal: see para (b). The Court of Appeal accepted this submission, but I do not think that section 591D(7) will bear that construction. It does not refer to the Revenues notice of withdrawal. It refers only to the approval of the scheme being withdrawn under section 591B(1). In themselves, these words beg the question whether approval is withdrawn under section 591B(1) when notice of withdrawal of approval is given or when it takes effect according to its terms. But read in the context of the sub section as a whole, the inference is that it is when the withdrawal of approval takes effect. On the face of it, the draftsman is equating approval of the scheme being withdrawn with its ceasing to have effect and with the cessation of approval. What then was the purpose of section 591D(7)? In my view there were two purposes. The first was to identify the three statutory bases on which an approval may cease to have effect for the purpose of section 591C(1). This was evidently thought necessary because none of the three provisions for the cessation of approval uses the expression ceases to have effect which appears in section 591C(1). The second purpose of the provision was to stipulate the date as at which the assets fall to be valued under section 591C(2) for the purpose of computing the charge. It is the date when the schemes approval ceases to have effect under each of the three provisions. It follows that the tax falls to be assessed in the chargeable period with effect from which the approval ceased to have effect in accordance with the notice of withdrawal. Alleged anomalies As is traditional, each side pointed to a chamber of horrors which would be opened up were the other sides submissions to be accepted. In general, this contributed little to the debate. But I should deal with two points made on behalf of HMRC, partly because they influenced the Court of Appeal, and partly because they raise questions of some wider legal significance. One was that Parliament cannot have intended to empower the Revenue to impose a charge to tax retrospectively, with the result that although the tax would not actually be payable until the prescribed interval after the assessment (30 days), the taxpayer would be liable for interest from a date well before the assessment. The other was that unless the Revenue was entitled to assess the taxpayer under section 591C in the year of the notice of withdrawal, they would in many cases be unable to do so at all because of the long interval which can elapse before the facts justifying withdrawal come to their attention. Retroactivity If the relevant chargeable period is the year of assessment with effect from which the approval was withdrawn, it is undeniable that the result is to expose the taxpayer to an assessment which is retrospective in the sense that it relates to a charging period up to six years earlier. It is correct that this will generally have adverse consequences for his liability to interest. However, I cannot regard this as anomalous or share the Court of Appeals dismay at the prospect. It is inherent in the process of assessment that a taxpayer may be assessed to tax on profits or gains that arose in a charging period earlier than that in which the assessment was raised. This occurs whenever tax is assessed in arrears. The period of retrospectivity may be considerable if profits or gains for an earlier period were previously overlooked or wrongly thought not to be chargeable to tax. But it may also occur when something happens which makes it necessary to recharacterise the taxpayers financial affairs in an earlier period. Before this state of affairs can be regarded as anomalous, we need to ask ourselves what the recharacterisation involves. It would be surprising if the law allowed a tax to be charged in an earlier period by reference to criteria which did not apply until a later one. On the other hand, it may involve no more than a recognition of facts which always existed. A good example of the latter situation is provided by the Scottish case of Spence v Inland Revenue Comrs (1941) 24 TC 311. The facts were that the taxpayer sold shares to a third party in 1933 under a contract which he subsequently alleged to have been induced by fraud. In 1939 he obtained a judgment reducing the contract (anglice setting it aside) with effect from the date that it was made, together with orders that the shares be retransferred to him and a sum paid to him representing the dividends which the purchaser had received while he was registered as the shareholder. After the judgment, the Revenue repaid the surtax assessed on the dividends in the hands of the fraudulent purchaser and assessed the taxpayer instead. The years of assessment were those in which the dividends had been paid by the company. The assessment was upheld in the Inner House of the Court of Session. Lord President Normand said, at p 317: In this case the contract was not void; it was merely voidable on the ground that it had been induced by fraudulent misrepresentations. When a contract has been induced by fraudulent misrepresentations, it is open to the party defrauded either to sue for rescission of the contract or to sue for damages. In this case the party sued for rescission and in the end of the day he obtained a decree of reduction. The effect of that reduction was to restore things to their position at the date of the transaction reduced, with the result that as at that date and afterwards the successful pursuer in the action fell to be treated as having been the person in titulo of the shares which he had sold to the defender and therefore to have been in right of the dividends. No doubt it is true that in the interval the dividends had to be paid and were paid to the defender because his name stood in the register as the proprietor of the shares and no doubt also they were for the time being treated by the Inland Revenue as his income and while matters stood entire no other person had any right to the shares or to the dividends except the defender, Mr Crawford. But from the moment the reduction took place Mr Spence fell to be treated as having been throughout the proprietor of the shares and equally the person properly entitled to receive the dividends. On the other hand the Inland Revenue repaid to Mr Crawford the surtax attributable to the dividends actually paid to him by the company on the footing that he had never been in titulo to receive them. The critical feature of this case was that although the assessment arose out of the order for reduction, and operated ab initio, its effect was to restore the parties to the situation in which they would have been in 1933 but for the fraud. This may be contrasted with the decision in Morley Clarke v Jones (Inspector of Taxes) [1986] Ch 311. In 1969 an order had been made in divorce proceedings for the payment by the husband to the wife of a sum by way of maintenance for their child. In 1979 the order was varied with effect from the date of the original order, so as to make the sum payable directly to the child, because this would be more tax efficient. It was certainly more tax efficient for the future, because the child had no other income. But the Revenue assessed the wife to income tax on maintenance received by her between 1969 and 1979 without regard to the retrospective variation. Upholding the assessments, the Court of Appeal distinguished Spence on the ground that the 1979 order purported to alter the effect of what had gone before as opposed to merely recognising it. Oliver LJ, delivering the leading judgment, observed at pp 331 332: A retrospective order cannot, any more than a retrospective agreement, undo the past and convert something that has already happened, and to which legal consequences have already attached, into something which never in fact did happen. [In Spence] the restitutio in integrum represented by the court order obtained some years later did not so much reconstruct history as recognise and declare that which had all along been the legal position, although until the order the parties were in a state of some uncertainty as to what their rights were. The Revenue can issue a notice of withdrawal of approval under section 591B(1) only if the facts cease to warrant the continuance of approval. Where the effective date stated in the notice is the date when those facts first ceased to warrant the continuance of their approval, as it generally will be, the relevant facts will be those in existence in the earlier charging period. The retrospective character of the withdrawal of approval simply recognises the facts as they were at the earlier stage. If interest accrues on the tax assessed with effect from the earlier charging period, that does no more than reflect the fact that throughout the intervening period the scheme has enjoyed tax advantages to which it was not entitled and has deferred a tax charge under section 591C which would have been assessed as soon as the facts warranted if the Revenue had known them. Difficulties of enforcement At the relevant time the right to assess the taxpayer to income tax ordinarily ceased six years after the end of the chargeable period when the relevant profit or gain arose: Taxes Management Act 1970, sections 34. The submission of HMRC is that in many cases this will not be long enough to enable the Revenue to learn of the facts and respond with a notice withdrawing approval from the scheme in time to assess the charge under section 591C. Therefore, it is said, they must be entitled to assess the tax in the chargeable period when they give the notice, if the tax charge is to be effective. The information before us does not enable me to say how serious a problem this is, but I shall proceed on the footing that it is significant. Even so, I reject the argument. In the first place, the Revenue had ample powers to make regulations requiring information relating to any approved scheme to be furnished to them without prior request. At the relevant time, the powers were conferred by section 605(1A) (1D) of the Income and Corporation Taxes Act 1988 (inserted by section 105 of the Finance Act 1994). The regulations in force at the relevant time were the Retirement Benefits Schemes (Information Powers) Regulations (SI 1995/3103). These did not require the reporting of transactions of the kind which caused the Mander pension scheme no longer to qualify for approval. But they could have done, and in fact did with effect from 2003 when they were amended: see Retirement Benefits Schemes (Information Powers) (Amendment) Regulations (SI 2002/3006). Secondly, there is an extended period of 20 years for assessment in cases of fraud or negligence, under section 36 of the Taxes Management Act 1970 (as amended). The Revenues argument must therefore be tested by assuming a taxpayer acting carefully and in good faith. On that assumption, there is no reason in principle why the legislation should be interpreted in a way which exposes the taxpayer to an assessment after the normal time limit has expired. Thirdly, the cure which HMRC proposes for dealing with this problem, if it is one, seems to me to be a great deal worse than the disease. If the charge to tax were to be treated as arising at the date of assessment, it would follow that the chargeable period would be wholly at the discretion of the Revenue. That result, surprising enough in itself, would lead to the even more surprising conclusion that a charge to tax could be imposed without limitation any number of years after the facts which justified it. Conclusion I would allow the appeal and declare that the Inland Revenue were not entitled to assess the administrator of the John Mander Pension Scheme to tax under section 591C of the Income and Corporation Taxes Act 1988 for the year 2000 2001. LORD NEUBERGER: The relevant facts and applicable statutory provisions are set out in paras 56 64 of Lord Hodges judgment and paras 1 7 of Lord Sumptions judgment. In a nutshell, the issue on this appeal is whether, in a case where the Revenues approval is withdrawn by a notice (a Notice) under section 591B(1) of the Income and Corporation Taxes Act 1988, tax under section 591C is chargeable by reference to the tax year which includes (i) the date with effect from which the approval is specified to have been withdrawn (ie the date stated in the Notice), or (ii) the date on which the approval is actually withdrawn (ie the date of the Notice). The appellant taxpayer, John Mander Pension Trustees Ltd, contends that it is the former date (the earlier date), whereas HM Commissioners for Revenue and Customs (HMRC), with whom the First tier Tribunal, the Upper Tribunal and the Court of Appeal agreed, argues for the latter date (the later date). As the judgments of Lord Hodge and Lord Sumption demonstrate, there are powerful arguments both ways, and I will briefly explain why, in disagreement with the courts below and with the minority in this court, I agree with Lord Sumption and Lord Reed that the earlier date is the correct answer. Section 591B(1) entitles HMRC, in certain circumstances (which it is conceded for present purposes arise here), to withdraw by a Notice their approval, given under section 590 to a pension scheme, from such date as may be specified in the notice (subject to certain restrictions). Section 591C(1) provides that where an approval ceases to have effect tax shall be charged in accordance with this section. Section 591C(2) states that such tax is to be paid by reference to the value of the assets immediately before the date of the cessation of the approval. Two points can be noted about those two consecutive subsections at this stage. First, two different expressions are used in the two subsections an approval [ceasing] to have effect and the cessation of the approval. Those two expressions could be synonyms or they could have different meanings. As a general proposition, in the absence of any indication to the contrary, one would presume that different expressions were intended to have different meanings. In this case in particular, one expression could mean the earlier date and the other could mean the later date. Secondly, it was common ground in the Court of Appeal, and accepted by Moses LJ that the meaning of the cessation of approval is the earlier date see [2013] EWCA Civ 1683, [2014] 1 WLR 2209, para 17. Next, there are subsections (5), (6) and (6A) of section 591C, which set out certain conditions, one or more of which, according to subsection (3), must be satisfied if the charge to tax under subsections (1) and (2) arises. These subsections appear to me to make it clear that the date of cessation of approval means the earlier date. Accordingly, they confirm the second point mentioned in para 28 above. One then turns to section 591D(7). This states that, for the purpose of section 591C(1), an approval ceasing to have effect means, in a case such as the present, the approval of the scheme being withdrawn, and it also states that any reference in section 591C to the date of the cessation of the approval shall be construed accordingly. To my mind, the natural meaning of this provision is that, for the purposes of these sections, (i) approval ceases to have effect in section 591C(1) when approval of the scheme is withdrawn, and (ii) the date of cessation of approval in the other subsections of section 591C has the same meaning. Point (i) is self evident. As to point (ii), I find it hard to see how the closing words of section 591D(7) could have any other meaning. If they do not state that the two expressions used in section 591C(1) and in section 591C(2) have the same meaning, they would be very curious. They would have no effect, because they would take the question of what the expression the date of cessation of approval means no further, and that would be particularly surprising given that they were plainly included to give guidance as to what that expression means. Accordingly, the presumption I refer to in para 28 above is rebutted by section 591D(7). In the light of this analysis, it seems to me that the appeal should succeed, and the relevant tax year is that which includes the earlier date, rather the later date. In summary, it appears to me that (i) the expressions an approval [ceasing] to have effect and the date of the cessation of the approval have the same meaning, in the light of section 591D(7), (ii) the date of the cessation of the approval means the earlier date, in the light of section 591C(4) (6A), so (iii) both subsections (1) and (2) of section 591C are linked to the earlier date and not the later date, and therefore (iv) it is the earlier date which governs the taxing year. I accept that this conclusion is contrary to the presumption against retroactivity, which is discussed in para 70 of Lord Hodges judgment. It also seems to me that the force of that presumption is somewhat reinforced in the present case by the fact that HMRC can, albeit within express and public law limits, choose the date by reference to which tax would be charged. On the other hand, it is only a presumption. In this case, it seems to me that the presumption against retroactivity is rebutted for the reason I have given, and that in any event the presumption does not have particularly compelling force. It is specifically contemplated in section 591B(1) that a Notice will normally have retroactive effect, so that retroactivity can be said to be inherent in a case where a Notice is served under section 591B(1). More specifically, the valuation exercise prescribed by section 591C(2) requires the assets to be valued at the earlier date: not only is that an example of retroactivity, but it seems to me that, if the assets are to be valued as at the earlier date, there is a degree of consistency in assessing the tax as at that day too. The conclusion which I favour receives significant support from section 61 of the Finance Act 1995, which introduced sections 591C and 591D into the 1988 Act. Section 61(3) is set out and explained in para 12 of Lord Sumptions judgment and para 77 of Lord Hodges judgment. It is a transitional provision, which clearly envisages that the date when approval ceases to have effect is not the same as the date on which Notice is given. In my view, it is clearly permissible, indeed appropriate, when interpreting new sections inserted into an Act, to take into account transitional provisions contained in the section of the later Act which introduced the new sections. The transitional provisions are plainly in pari materia with the new sections. It is true that section 61(3) is puzzling in that it assumes that a Notice under section 591B(1) can be prospective, which is hard to understand, but that does not undermine the centrally important point that the drafter of the statute plainly considered that the date when approval ceases to have effect was not the same as the date of the Notice. I shall deal very briefly with the other arguments discussed by Lord Hodge and Lord Sumption. The reference to Case VI of Schedule D in section 591C(2), referred to by Lord Sumption at para 9 underlines the point he makes in his para 17 and which I make in para 32 above. I see some force in Lord Sumptions point in his para 10 that the conclusion which he and I have reached is consistent with the other two circumstances dealt with in section 591D(7)(a) and (c), but the point is of limited (but not negligible) force in my view for the reasons given by Lord Hodge in para 77. So far as the alleged anomalies are concerned, it seems to me that none of them is particularly striking, and there is a degree of anomaly either way. On the view I have formed, there would be a liability for interest retrospectively. While that is inherently unattractive, it is consistent with the retroactive effect of a Notice, and with the notion that the pension fund should have been taxed at the date specified in the Notice. Also on the view I have formed, HMRC would lose the right to claim tax pursuant to section 591B(1) after six years (absent fraud or wilful default), but there is nothing particularly surprising about that, given that one is assuming a taxpayer who has acted in good faith. If I am wrong in my view, there would be no time limit on HMRCs entitlement to recover tax under section 591C, which would be a little surprising, although there would be a limited degree of protection for a taxpayer in those circumstances through public law if HMRC unreasonably delayed. Nonetheless, this would be an anomaly if HMRCs case was correct, and I am unimpressed with the answer that the purpose of this tax was to discourage abusive arrangements, because that can equally well be used to support the retrospective effect of the legislation if the appellants case is correct. For these reasons, I would allow this appeal. LORD REED: During the period with which this appeal is concerned, taxpayers who paid contributions into approved pension schemes received relief from income tax on their contributions. Until 1997, the investments held in the fund administered by the scheme also benefited from favourable tax treatment. The consequence of these tax privileges was that, as the fund accumulated, a substantial proportion of it represented tax which would otherwise have been paid, either by the contributors or by the administrators. These tax privileges were granted on the basis that benefits would be taken from the scheme only in accordance with the rules governing approved pension schemes. This normally meant that benefits would be taken only at retirement (or on death, if earlier), when the fund would be used to purchase an annuity. The tax privileges were therefore enjoyed in anticipation of the use to which the fund would be put, usually many years later. A practice however developed of small schemes obtaining approval, the contributors benefiting from the consequent tax privileges (typically by saving higher rate tax at 40%), and then the schemes being managed in such a way as to lose their approval. The accumulated fund, including the tax savings made over the years, could then be enjoyed free of restrictions. This abusive practice depended on the schemes failure to fulfil the expectation on the basis of which the tax privileges had been granted. Before looking at how Parliament responded to this situation, it may be useful to consider what one might reasonably expect it to have done. In the first place, one might expect provision to be made for the Revenue to withdraw approval from a scheme as from the date when it ceased to comply with the conditions for approval. Contributions into the scheme would then cease to qualify for tax relief as from that date, and the investments of the fund would cease to receive favourable treatment. Turning to the legislation which was actually enacted by Parliament, it is consistent with the approach which I have described. Sections 591A(2), 591B(1) and 591B(2) of the Income and Corporation Taxes Act 1988 (the Taxes Act) provide for approval to cease in three situations: (1) where the scheme fails to comply with regulations, 36 months after the introduction of the regulations (section 591A(2)); (2) where the facts concerning the scheme cease to warrant the continuance of approval (section 591B(1)); and (3) where an unapproved and unauthorised alteration is made to the scheme (section 591B(2)). The first of these is a transitional provision, as Lord Sumption has explained. The second and third address the type of problem which I have discussed. In the first and third of these situations, approval is withdrawn automatically: under section 591A, 36 months after the introduction of the regulations, and under section 591B(2), with effect from the date of the alteration. In the second situation, with which we are concerned in this appeal, section 591B(1) permits the Revenue to withdraw their approval from such date (which shall not be earlier than the date when those facts first ceased to warrant the continuance of their approval . ), as may be specified in the notice [withdrawing their approval]. Approval can therefore be withdrawn retrospectively, as it was in the present case, and as it is likely to be in most if not all cases. The withdrawal of approval has the effect of exposing those who previously benefited from the privileges flowing from approval to the ordinary tax regime which applies in its absence. The latter regime inevitably applies from the date as from which approval is withdrawn, since the scheme lacks approval as from that date. In a case under section 591B(1), the date in question is the date specified in the notice. In consequence, the issuing of a notice may trigger tax liabilities in respect of income and capital gains arising between the date specified in the notice and the date when the notice is issued. The withdrawal of approval does not however deal with the tax savings accumulated and invested since the inception of the scheme, which could be seen in retrospect to have been unmerited. In order to address that issue, one might expect provision to be made for the portion of the fund representing those benefits to be paid as tax. Given the difficulty of calculating the precise proportion, a broad rule of thumb might be adopted. Turning to the legislation, one again finds that Parliament has acted as one would have expected. Section 591C provides for a portion of the fund to be paid as tax: (l) Where an approval of a scheme to which this section applies ceases to have effect . tax shall be charged in accordance with this section. (2) The tax shall be charged under Case VI of Schedule D at the rate of 40% on an amount equal to the value of the assets which immediately before the date of the cessation of the approval of the scheme are held for the purposes of the scheme (taking that value as it stands immediately before that date). (3) Subject to section 591D(4), the person liable for the tax shall be the administrator of the scheme. Tax is to therefore to be charged where an approval ceases to have effect. The portion of the fund which is to be paid in tax is 40%: a figure corresponding to the higher rate tax relief which will in most cases have been granted to the contributors to the scheme. Two questions remain. First, in a case where approval is withdrawn under section 591B(1), is the date of cessation of the approval of the scheme, immediately before which the fund is to be valued for the purpose of calculating the tax due, the date specified in the notice, or the date when the notice is issued? Secondly, is the year of assessment the year during which the date falls as at which the fund is to be valued, or the year during which the notice is issued? In relation to the first question, it is common ground that the relevant date is the date with effect from which the approval is withdrawn, ie the date specified in the notice. I am in no doubt that that is correct. In the first place, that is the date most naturally described as the date of the cessation of the approval. Secondly, and more importantly, the appropriate point in time as at which to calculate the tax payable is, in principle, immediately before the date when the fund ceased to qualify for approval. That is so for two reasons. First, the withdrawal of approval with effect from that date, under section 591B(1), means that any tax savings which may have been obtained subsequently are already recoverable by assessment on ordinary principles. To require a proportion of the fund which included those post withdrawal tax savings to be paid to the Revenue under a further assessment would effectively involve double taxation. Secondly, the fund will not necessarily remain intact after it ceases to qualify for approval (particularly, it might be thought, if the amount of the tax charge were to depend on the size of the fund when the Revenue discovered the abuse and issued a notice). I have not so far referred to section 591D(7): (7) The reference in section 591C(1) to an approval of a scheme ceasing to have effect is a reference to (a) the scheme ceasing to be an approved scheme by virtue of section 591A(2); (b) the approval of the scheme being withdrawn under section 591B(l); (c) the approval of the scheme no longer applying by virtue of section 591B(2); and any reference in section 591C to the date of the cessation of the approval of the scheme shall be construed accordingly. It appears from section 591D(7)(b) that, in a case where approval is withdrawn under section 591B(1), the reference in section 591C(1) to an approval ceasing to have effect is a reference to the approval being withdrawn. Considering that provision in isolation, there might perhaps be room for argument as to whether approval was withdrawn when the notice was sent or when the withdrawal of approval took effect. It has however to be read in its context. Section 591D7(a) and (c) make it clear that, in all other circumstances where approval is lost, the relevant date is the date when the scheme ceases to qualify for approval. The functionally equivalent date in a case where a notice was issued is the date specified in the notice. Furthermore, the final words of section 591D(7) make it clear the date of an approval ceasing to have effect is the same as the date of the cessation of the approval of the scheme, as indeed one would expect as a matter of ordinary language. As explained in para 48, there is no doubt (and no dispute) that the date of the cessation of the approval is the date specified in the notice. If, then, the tax charge is to be calculated as 40% of the value of the fund immediately before the date specified in the notice, the question remains whether the year of assessment is the year during which the date falls as at which the fund is to be valued, or the year during which the notice is issued. The correct answer must be the former. That is the year during which the occasion for the tax charge falls, in terms of section 591C(1) (where an approval of a scheme . ceases to have effect), as I have interpreted it. It is also the year during which the value of the fund, and therefore the amount of the tax charge, is to be computed, as I have explained. If it is objected that an assessment on this basis is retrospective, the answer is that it is only in retrospect that it can be seen that the scheme and its contributors have benefited from unmerited tax savings. Securing the restoration of that benefit does not in substance involve the imposition of retrospective taxation, but rather the recovery of tax which was foregone at an earlier date in reliance upon an expectation as to the future management of the scheme which was induced but not subsequently fulfilled. An analogy can be drawn with restitution on the basis of a failure of consideration. If it is objected that interest should not be payable to the Revenue on tax which is assessed retrospectively, the answer is that the taxpayer has enjoyed the unmerited use of the money, which in hindsight ought to have been in the hands of the Revenue during the intervening period. The correctness of this construction of the provisions is confirmed by section 239A of the Taxation of Chargeable Gains Act 1992. Under that provision, the assets of the scheme are deemed to have been acquired immediately before the date specified in the notice withdrawing approval, at their then value. The provision thus resets the base cost of the assets for the purpose of calculating the gain or loss on any disposal subsequent to the date specified in the notice. The reason why gains or losses accruing prior to the date specified in the notice are not taken into account is that the scheme is then liable to the 40% charge imposed by section 591C of the Taxes Act. For these reasons, and those given by Lord Sumption and Lord Neuberger, I would allow the appeal. LORD HODGE: (dissenting with whom Lord Carnwath agrees) Revenue approved pension schemes have had significant tax advantages. But the misuse of those advantages by the diversion of funds, which had received tax benefits, from the funding of pension income, which had justified those benefits, gave rise to anti avoidance legislation. This appeal concerns a tax avoidance scheme and an attempt by the Inland Revenue, now HM Revenue and Customs (HMRC), to impose a tax charge on the pension trustees as a result. It raises a question of statutory interpretation about the correct year of assessment of the tax charge arising from the withdrawal of Revenue approval. It is relevant to many other cases which have arisen out of events which occurred before 2006, when the Finance Act 2004 changed the tax regime. The statutory framework Section 590 of the Income and Corporation Taxes Act 1988 (the TA) set out conditions for the approval by HMRC of retirement benefit schemes. The Finance Act 1991 introduced sections into the TA to provide for Revenue approval of pension schemes to be lost in three circumstances: (i) Approval ceased automatically if, by the end of 36 months after regulations made under section 591 had come into force, a retirement benefits scheme contained a provision that the regulations prohibited or did not contain a provision that the regulations required (section 591A(2)). (ii) Section 591B(1), which is relevant in this appeal, provided: If in the opinion of the Board the facts concerning any approved scheme or its administration cease to warrant the continuance of their approval of the scheme, they may at any time by notice to the administrator, withdraw their approval on such grounds, and from such date (which shall not be earlier than the date when those facts first ceased to warrant the continuance of their approval or 17 March 1987, whichever is the later), as may be specified in the notice. (iii) Approval also ceased automatically whenever the terms of a retirement benefits scheme were altered without obtaining the approval of HMRC (section 591B(2)). Further measures followed. Section 61 of the Finance Act 1995 imposed a tax charge where approval of a scheme ceased to have effect, in any of the three circumstances which I have mentioned, by introducing sections 591C and 591D into the TA. Section 591C(1) (3) provided: (1) Where an approval of a scheme to which this section applies ceases to have effect , tax shall be charged in accordance with this section. (2) The tax shall be charged under Case VI of Schedule D at the rate of 40% on an amount equal to the value of the assets which immediately before the date of the cessation of the approval of the scheme are held for the purposes of the scheme (taking that value as it stands immediately before that date). (3) Subject to section 591D(4), the person liable for the tax shall be the administrator of the scheme. Section 591D(7) provided further guidance on the meaning of section 591C(1) as follows: The reference in section 591C(1) to an approval of a scheme ceasing to have effect is a reference to the scheme ceasing to be an approved scheme by virtue (a) of section 591A(2); (b) section 591B(1); or (c) of section 591B(2); the approval of the scheme being withdrawn under the approval of the scheme no longer applying by virtue and any reference in section 591C to the date of the cessation of the approval of the scheme shall be construed accordingly. The factual background Mr and Mrs John Mander were the shareholders of John Mander Ltd. They were also its directors. On 24 September 1987 they created the John Mander Ltd Directors Pension Scheme (the JM Scheme). They were the beneficiaries of the JM Scheme and they and a Mr Alexander Jackson, who was the Revenue approved pensioneer trustee, were its original trustees. On 9 September 1994 Mr Jackson resigned as a trustee of the JM Scheme and DJT Trustees Ltd (DJT) were appointed in his place. On 5 November 1996 a series of events occurred which HMRC later treated as amounting to a tax avoidance device. First, Mr and Mrs Mander resigned as trustees of the JM Scheme and a Guernsey based company, Louvre Trust Co Ltd (Louvre), was appointed a trustee. Secondly the new trustee (Louvre) authorised the transfer of funds from the JM Scheme to the Vesuvius Shipping Ltd Pension Scheme (the Vesuvius Scheme), an insured executive pension plan of which Mr and Mrs Mander were also members. Mr Mander, as agent of the JM Scheme trustees, signed a cheque for 1,188,000 in favour of the trustees of the Vesuvius Scheme and the cheque was given to them. Thirdly, the trustee and administrator of the Vesuvius Scheme were replaced by offshore trustees. At the time of the transfer of funds the Vesuvius Scheme was a Revenue approved scheme, but its rules were subsequently changed to enable loans to be made which would not be permitted under an approved scheme. DJT, after discovering what had occurred, resigned as pensioneer trustee of the JM Scheme on 18 March 1997. On 20 June 1997 TM Trustees Ltd and Mrs Mander were appointed trustees of the JM Scheme and Louvre resigned as trustee. On 26 February 1998 Louvre Trustees Ltd, a Guernsey based company, was appointed a trustee of JM Scheme and Mrs Mander resigned as trustee. HMRC wrote to the administrators of the JM Scheme on 9 December 1997, suggesting that there had been a tax avoidance scheme and proposing to withdraw approval of the Scheme with effect from 5 November 1996. Lengthy correspondence followed. On 19 April 2000 HMRC gave notice of withdrawal of approval of the JM Scheme with effect from 5 November 1996, under section 591B(1) of the TA. On 27 July 2000, in the year of assessment 2000 2001, HMRC made an assessment in the sum of 475,200 on Louvre Trustees Ltd as administrator of the JM Scheme. On 11 April 2001 Sullivan J refused an application by Mr Mander for permission to apply for judicial review of HMRCs decision to withdraw approval from the JM Scheme. On 22 January 2007 HMRC issued an assessment for the year 2000 2001 for 475,200 on the then current administrators of the JM Scheme. The administrators appealed against the assessment, arguing that the tax should have been assessed in the tax year 1996 1997. They claimed that the 2000 2001 assessment was invalid and that HMRC were out of time to assess in the tax year 1996 1997.The appeal gave rise to the legal proceedings of which this appeal is part. The legal proceedings The First tier Tribunal (Tax Chamber) designated the appeal as the lead case and in a decision (by Judge Mosedale and Mr N Collard) dated 28 October 2011 dismissed the appeal against the assessment, holding that the tax charge arose in the year ending 5 April 2001. On 28 January 2013 Vos J sitting in the Upper Tribunal (Tax and Chancery Chamber) upheld that decision and held that the current trustee of the JM Scheme was liable for the tax assessed by the 27 July 2000 assessment. On 19 December 2013 the Court of Appeal (Moses, Patten and Beatson LJJ) dismissed the trustees appeal. The trustee appeals with permission to this court. Discussion Which was the correct year of assessment? Was it 1996 1997 as the appellant submits or 2000 2001 as HMRC submit? This is a question of statutory interpretation and in particular of sections 591B(1), 591C(1) and (2) and 591D(7) of the TA. Section 591B(1) provided for the withdrawal of approval by notice. In that respect it differed from the other methods of the cessation of approval which happened automatically on the occurrence of events without any intervention by HMRC. Under section 591B, until HMRC served a notice, the pension scheme enjoyed Revenue approval. But the section allowed HMRC to specify in the notice the date from which approval had ceased and that date could be earlier than the date of the notice. It was thus retrospective at least in the sense that it looked to the past and changed the future legal consequences of the transaction or transactions which gave rise to the withdrawal of approval. The appellants argue that the tax charge imposed by section 591C(1) was also retrospective in the more radical sense that it was retroactive, coming into force not at the date of the HMRC notice but at the earlier date of cessation of approval which was specified in the notice. This would have the effect of exposing trustees to claims for interest on unpaid tax from a date before they received notice of the withdrawal of approval. HMRC on the other hand submit that the tax charge arises only in the tax year in which the notice of withdrawal was served. The interest incurred may be very substantial. While the tax charge was in form a tax on income, using the residual charge to tax of Case VI of Schedule D (section 18 of the TA), it was in substance a charge not on actual annual profits or gains but of 40% of the capital value of the scheme assets. It was designed to recoup the tax advantages that the funds conferred when contributed to and kept in an approved scheme. Both parties pray in aid of their cases the provisions of section 591D(7), which is not a straightforward provision. The appellants submit that the first part of the subsection merely identified the relevant statutory provisions in the three listed provisions and that the second part of the section was directed to the timing of the cessation of approval, including for the purposes of section 591C(1). In the case of a section 591B(1) notice, that is the date from which the notice took effect. HMRC on the other hand submit that the reference in the first part of the subsection to the three methods of cessation performed the substantive role of distinguishing their effect. Thus on HMRCs case, section 591D(7) had the effect that the reference in section 591C(1) to the approval ceasing to have effect under circumstances (a) and (c) (ie sections 591A(2) and 591B(2)) was a reference to the automatic ending of the approval under those sections, whereas in circumstance (b) it was a reference to the withdrawal by notice under section 591B(1). The tax charge under section 591C(1) therefore occurred in the tax year in which the event occurred under section 591A(2) and 591B(2) or in the tax year in which the section 591B(1) notice is served. The date of the cessation, which is an expression used in section 591C(2), (5), (6) and (6A) but not in section 591C(1), was construed accordingly by reference to the date specified in the three listed subsections, which in the case of the section 591B(1) notice was the date specified in that notice. It is not disputed that in all circumstances the date of the cessation was the date from which HMRC approval ceased. While in this case it suits the appellants to submit that the year of assessment is 1996 1997 rather than 2000 2001, the effect of their submission would be that section 591C imposed a retroactive tax, potentially giving rise to a liability for substantial sums in interest on the charge from the date of the cessation of the approval, during a period in which the trustees of a scheme might otherwise have believed that they had a continuing HMRC approval. There is a strong common law presumption against retrospective tax legislation. In Greenberg v Inland Revenue Comrs [1972] AC 109, 143 Lord Morris of Borth y Gest stated: Very clear words are necessary to overturn the presumption against the retroactive operation of a taxing provision. A provision designed to have retroactive operation would have to be enacted in clear and positive terms. While legislation to counter tax avoidance strategies may as a matter of sound policy involve retrospective provisions with retroactive effect, that policy does not remove the requirement for clear words. This accords with the general principle which Lord Wilberforce set out in W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300, at p 323: A subject is only entitled to be taxed upon clear words, not upon intendment or upon the equity of an Act. Any taxing Act of Parliament is to be construed in accordance with this principle. What are clear words is to be ascertained upon normal principles: these do not confine the courts to literal interpretation. There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded. Section 591B(1) is retrospective and has the potential for a limited retroactive effect in that it allows the withdrawal of approval from a date earlier than the notice of withdrawal. But, importantly, the retroactive withdrawal of approval does not of itself give rise to any tax charge, retroactive or otherwise. In this case section 591C(1) provided that tax shall be charged where an approval of a scheme ceases to have effect. I agree with Judge Mosedale (para 121) that synonyms of where are the word whenever or the phrase if at any time. Where the approval did not cease automatically but required the service of a notice by HMRC, the subsection did not deem tax to have been charged at a date earlier than the date on which the notice was served. Like Lord Carnwath I interpret the subsection as looking to the future, consistently with but independently of the presumption that legislation speaks only as to the future: West v Gwynne [1911] 2 Ch 1, 12 per Buckley LJ. In my view, by itself section 591C(1) pointed to a charge to tax in the tax year in which a section 591B(1) notice was issued. Subsection (2), which imposed the capital charge, specified the rate of the charge by reference to the value of the assets immediately before the cessation of the approval of the scheme but made no statement as to the tax year in which that charge was to fall. The other relevant provision is section 591D(7). While it is possible to construe the subsection as the appellants urge, I am not persuaded by that interpretation. In particular, I am not satisfied that the subsection contains clear and positive words to give retroactive effect to the section 591C tax charge in the circumstances of a section 591B(1) notice. Like Moses LJ (at paras 18 22 of his judgment), I consider that it is no accident that different wording was adopted in section 591D(7), defining on the one hand approval of a scheme ceasing to have effect (the phrase used in section 591C(1)) and on the other the date of the cessation of the approval. In relation to the former expression the subsection looked to the process by which withdrawal occurred; in the context of section 591D(7)(b) it referred to the notice of withdrawal of approval. The service of the notice withdrew the approval. I see no ambiguity there. There is also no doubt that the latter expression referred to the date from which approval ceased to have effect. That is the date which HMRC specified in its section 591B(1) notice, or the date when a scheme ceased to be an approved scheme automatically either under section 591A(2) on the expiry of time after the commencement of the section 591 Regulations or on an unauthorised alteration of a scheme under section 591B(2). In each case the concluding phrase of section 591D(7) invited the reader to turn to whichever of the three enumerated statutory provisions was relevant to ascertain the date of cessation: the date was construed according to sections 591A(2), 591B(1) or 591B(2) as the case may be. Where there was a section 591B(1) notice, it is the date of cessation specified in that notice. This interpretation of the relevant provisions avoids a retroactive tax charge where there are no clear words imposing such a charge. It is consistent with that of the First tier Tribunal, which Vos J in the Upper Tribunal and the Court of Appeal upheld. Their unanimity strongly suggests that the clarity needed for a retroactive provision is lacking. The presumption against retrospective tax charges is an important principle of statutory interpretation which in my view justifies the dismissal of this appeal. There is also a good reason why the tax charge arising from withdrawal of approval under section 591B(1) is treated differently from the charge that arises out of the automatic cessation of approval in sections 591A(2) and 591B(2). Parliament has not enacted that any circumstance justifying cessation of approval automatically results in that cessation, as in the latter provisions. It required HMRC to give notice of withdrawal of approval when they were aware of facts which merited that withdrawal. Where Parliament provided for automatic cessation of approval, the trustees of a relevant scheme were in a position to inform themselves as to the requirements of the regulations and to make sure that their scheme complied with them (section 591A(2)) and they would also know if they altered the terms of the scheme without HMRC approval (section 591B(2)). By contrast, the trustees of a scheme might be unaware of circumstances which later caused HMRC to withdraw the approval of their scheme, for example, as occurred in this case, where the transactions which ultimately caused the removal of the approval were carried out by trustees of another scheme into which funds had been transferred. To impose on the trustees a liability in interest for unpaid tax arising from circumstances of which they were unaware would be to tax retroactively. Other arguments have been aired which I have not found persuasive. I summarise them briefly. First, the appellants derived support from section 61 of the Finance Act 1995, which, as I have said, introduced sections 591C and 591D into the TA. Section 61(3) provided: This section shall apply in relation to any approval of a retirement benefits scheme which ceases to have effect on or after 2 November 1994 other than an approval ceasing to have effect by virtue of a notice given before that day under section 591B(1) of the Taxes Act 1988. This transitional provision was designed to make sure that the tax charge under section 591C did not apply unless both the cessation of approval and the giving of the section 591B(1) notice occurred after 2 November 1994. Mr Thornhill for the appellants was correct in his submission that the draftsman of this provision must have thought that the date of an approval ceasing to have effect was not the same as the date of the section 591B notice. But, to my mind dubiously, the provision appears to assume that a section 591B notice could be made prospectively. In my view that understanding in a transitional provision, which did not become part of the corpus of the TA, does not provide the needed clarity to construe the substantive tax provision, section 591C, as a retroactive tax charge. Secondly, I was initially impressed by the respondents argument that, if the correct year of assessment when HMRC issued a section 591B(1) notice were the year of the date of cessation, it might be impracticable for HMRC to obtain the needed knowledge of offending transactions within the ordinary time limits under sections 34 and 36 of the Taxes Management Act 1970. Those provisions require HMRC to make an assessment to tax within six years after the end of the chargeable period to which the assessment relates unless any form of fraud or wilful default has been committed. But after the parties provided further information, at the courts request, on the matters which administrators have to report to HMRC, the argument lost much of its force. The Retirement Benefits Schemes (Information Powers) Regulations 1995 (SI 1995/3103) required the administrator to report certain payments or transfers of scheme funds. At the time of the transfer to the Vesuvius scheme the regulations did not require the reporting of a transfer from a small self administered scheme to an executive pension plan. The tax avoidance scheme in this case exploited that loophole, which was later closed by the Retirement Benefits Schemes (Information Powers) (Amendment) Regulations 2002 (SI 2002/3006). It appears that the administrator of the Vesuvius Scheme had no statutory duty to report and did not report the change of rules which permitted it to make loans. But the relevant regulations could have been amended to require the reporting of events which might lead to the withdrawal of approval. Thirdly and conversely, I am not swayed by Mr Thornhills observation that the interpretation that has found favour in the Court of Appeal and tribunals below would enable HMRC to impose a tax charge under section 591C which circumvented those ordinary time limits under sections 34 and 36 of the Taxes Management Act 1970. He is correct. But the tax charge was enacted to discourage abusive arrangements and thus differs from normal charges to tax. Further, I do not accept his submission that HMRC could impose such a charge at any time: HMRC would be subject to a judicial review challenge if they acted capriciously or delayed unreasonably in their withdrawal of approval and imposition of the tax charge. Finally, I do not derive assistance from the Scottish tax case of Spence v Inland Revenue Comrs (1941) TC 311. It concerned an assessment to surtax which a taxpayer had to pay after he had rescinded a contract for the sale of shares on the ground that it had been induced by fraudulent misrepresentation. The dividends had been paid to the purchaser in the interim, but the taxpayer achieved restitutio in integrum through the setting aside of the sale, the retransfer of the shares and the payment of a sum representing the dividends. The Revenue repaid the surtax assessed on the dividends to the fraudulent purchaser and assessed the taxpayer instead. In my view it is unsurprising that the Inner House upheld the assessments of the taxpayer in the years of assessment in which the dividends had been paid by the company, as the setting aside of the sale of the shares restored the taxpayer to the position that he had been in ab initio. The case involved no imposition of a retroactive tax charge by parliamentary legislation but only the application of normal tax rules to circumstances which the general law had reinstated. Conclusion I am with respect unable to agree with the majority as I consider that their views give insufficient weight to the statutory language in the light of the important presumption against retroactive taxation. I would dismiss the appeal. LORD CARNWATH: (who agrees with Lord Hodge) appeal should be dismissed for the reasons given by Lord Hodge. The principal difficulty I see with the alternative view is that it is inconsistent with the language of the statute, in particular of the charging provision. Section 591C(1) is expressed in unequivocal terms. It is directed to the future: tax shall be charged . Similarly, the occasion of the charge is fixed by reference to the future not the past: where an approval ceases to have effect, defined (by section 591D(7)(b)) as a reference to the approval being withdrawn under section 591B(1). That sub section in turn makes clear that the approval is withdrawn by notice to the administrator, although it will take effect from an earlier date determined by the Board as specified in the notice. Taken together, to my mind, those provisions indicate unambiguously that the charge arises in the year when the notice is served, not some earlier year. I do not see how the majoritys interpretation can be achieved without reading into section 591C(1) words which are not there. That view is reinforced by the strong presumption against retroactivity, to which Lord Hodge has referred. In respectful disagreement with the majority, I would have held that the accordingly might be thought to point to the date of cessation of the approval being the same as the date of withdrawal under paragraph (b). That is not a problem which we need to resolve, since it is common ground that it refers to the date from which the withdrawal takes effect, as specified in the notice. This seems to me at least a possible interpretation (on either view of the charging provision), and it is one clearly justified by a purposive approach to the use of the expression cessation of the approval where it occurs in section 591C. However, it has no direct relevance to section 591C(1), which does not use that expression. I can see no principled basis for using that possible difficulty as an excuse for rewriting the otherwise clear words of the charging provision. The main argument to the contrary turns on the last words of section 591D(7), which as all agree is not clearly drafted. At first sight, the words shall be construed |
This case concerns the use in a criminal trial of evidence obtained by members of the public acting as so called paedophile hunter (PH) groups, and whether this is compatible with the accused persons rights under article 8 of the European Convention on Human Rights (the ECHR). PH groups impersonate children online to lure persons into making inappropriate or sexualised communications with them over the internet, and then provide the material generated by such contact to the police. Article 8 provides: 1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. An adult member of a PH group, acting as a decoy, created a fake profile on the Grindr dating application using a photograph of a boy aged about 13 years old as a lure to attract communications from persons with a sexual interest in children. The appellant entered into communication with the decoy, who stated in the course of exchanges first on Grindr and continued on the WhatsApp messaging platform that he was 13 years old. In the belief that the decoy was a child, the appellant sent him a picture of his erect penis. The appellant also sent him messages to arrange a meeting. When the appellant arrived for the meeting, he was confronted by members of the decoys PH group who remained with him until the police arrived. Copies of the appellants communications with the decoy were provided to the police. The respondent, as public prosecutor, charged the appellant with offences related to sexually motivated communications with a child: (i) an offence of attempting to cause an older child (ie a child who has attained the age of 13 years, but has not yet attained the age of 16 years) to look at a sexual image, for the purposes of obtaining sexual gratification (contrary to section 33 of the Sexual Offences (Scotland) Act 2009 the 2009 Act); (ii) an offence of attempting to communicate indecently with an older child (contrary to section 34 of the 2009 Act); and (iii) an offence of attempting to meet with a child for the purpose of engaging in unlawful sexual activity (contrary to section 1 of the Protection of Children and the Prevention of Sexual Offences (Scotland) Act 2005 the 2005 Act). I will refer to these together as the charges. In each case, the charge was put in terms of an attempt to commit the offence, because the appellant believed the decoy was a child whereas he was in fact an adult. After indictment on the charges in Glasgow Sheriff Court, the appellant lodged a preliminary minute objecting to the admissibility of the evidence sought to be relied upon by the respondent on the basis that it had been obtained by covert means without authorisation under the Regulation of Investigatory Powers (Scotland) Act 2000 (RIPSA). The appellant also lodged a minute objecting to the admissibility of the evidence provided by the PH group on the basis that it was obtained covertly without authorisation or reasonable suspicion of criminality in violation of his rights under article 8. By a ruling dated 30 July 2018, after a hearing conducted on the basis of agreed facts (as set out below), the Sheriff repelled the appellants objections to the admissibility of the evidence provided by the PH group. Later, at a trial on 29 and 30 August 2018, the respondent led evidence from the decoy and two police officers. The appellant did not lead any evidence. He was convicted on each of the charges. At a later hearing, the appellant was sentenced to 12 months imprisonment on each charge, to be served consecutively. He was also made subject to the notification requirements of section 92(2) of the Sexual Offences Act 2003 for a period of ten years. The appellant appealed against his conviction to the High Court of Justiciary (the High Court). He contended that the Sheriff should have found that the evidence provided by the PH group was obtained in breach of the requirements of RIPSA, that his rights under article 8 in relation to respect for his private life and correspondence were violated by admission of that evidence and that the Sheriff should have excluded it. The appellants appeal was heard in conjunction with the appeal in another case, which is not relevant for present purposes. By an interlocutor dated 20 September 2019 the High Court (the Lord Justice General, Lord Brodie and Lord Malcolm) refused both appeals. It granted the appellant permission to appeal to this court in relation to certain compatibility issues. The appeal on the compatibility issues Article 8 is a Convention right for the purposes of the Human Rights Act 1998 (the HRA). Section 6(1) of the HRA provides that [i]t is unlawful for a public authority to act in a way which is incompatible with a Convention right (this is subject to certain exceptions which are not relevant in this case). A prosecuting authority is a public authority. A court also is a public authority for these purposes: section 6(3)(a) of the HRA. The case comes before this court by way of an appeal on compatibility issues pursuant to section 288AA of the Criminal Procedure (Scotland) Act 1995. So far as is relevant for present purposes, a compatibility issue means a question, arising in criminal proceedings, as to whether a public authority has acted in a way which is made unlawful by section 6(1) of the HRA: see section 288AA(4), read with section 288ZA(2). On an appeal under section 288AA, the powers of the Supreme Court are exercisable only for the purpose of determining the compatibility issue (subsection (2)(a)); when it has determined the compatibility issue the Supreme Court must remit the proceedings to the High Court (subsection (3)). An appeal under section 288AA may be brought only with permission given by the High Court or by the Supreme Court (subsection (5)). In this case, the High Court has granted permission to appeal in relation to its determination in the criminal proceedings against the appellant of two compatibility issues, as follows: 1. whether, in respect of the type of communications used by the appellant and the PH group, article 8 rights may be interfered with by their use as evidence in a public prosecution of the appellant for a relevant offence; and 2. the extent to which the obligation on the state, to provide adequate protection for article 8 rights, is incompatible with the use by a public prosecutor of material supplied by PH groups in investigating and prosecuting crime. As should be clear, this is not a full appeal, but an appeal limited to these compatibility issues. Factual background and the judgment of the High Court In his ruling on 30 July 2018 the Sheriff set out the agreed facts as follows: 2. The Crown witness, Paul Devine, is a volunteer with Groom Resisters Scotland, an organisation which aims to protect children by catching online predators. The organisation consists of decoys and hunters. Decoys create fake online personas with a general appearance of being under the age of 16. They remain in character as someone aged less than 16 in all communications with the public. In the event of a member of the public having apparently engaged in a sexual conversation with a decoy, a face to face meeting will be arranged at which a hunter or hunters will be present, who will then record and film the member of the public, while confronting them regarding the persons prior communication with the decoy persona. This recording may also be made available on the internet live, so that interested parties can see the confrontation take place. The video will also be uploaded onto various websites in order that it may be viewed by others. The organisation makes contact with the police at or after the time of the confrontation. The sexual communications between the decoy and the member of the public concerned, as well as the recording/film, of that persons confrontation with the hunters or extracts therefrom, are disclosed to the police for investigation. 3. Groom Resisters Scotland is one of several organisations deploying similar operating methods which operate in Scotland and other parts of the United Kingdom. The police are aware that there are a number of hunter organisations operating in Scotland and across the United Kingdom, and evidence obtained from those organisations has led to a number of criminal investigations and prosecutions. In the present case the crown witness Devine, acted as a 4. decoy. Groom Resisters Scotland provided him with photographs of a boy aged approximately 13 years old and he created an online profile on an App named Grindr, a forum through which males apparently can arrange to meet one another, inter alia, for sexual purposes. The terms and conditions of that App specify that users must be aged 18 or over. There was communication between the witness Devine, as the decoy and the minuter [the appellant], wherein sexual images and sexual written communications were sent by the minuter to the decoy. The decoy shared fake personal details with the minuter, staying in character as a 13 year old boy. During the course of communications with the minuter, the decoys Grindr account was blocked and could no longer be used. There was further communication between the decoy and the minuter on WhatsApp and ultimately, arrangements were made between the minuter and the decoy for them to meet in person. The decoy advised two of the hunters in Groom Resisters Scotland, namely Crown witnesses Carling and Constable of these arrangements. The Witnesses Carling and Constable then attended the meeting place at the arranged time and confronted the minuter, broadcasting the confrontation live on Facebook. Film of the confrontation has since been posted onto social media. During the confrontation the police were contacted by Groom Resisters Scotland. Police officers attended during the ongoing confrontation between the minuter and the hunters and Groom Resisters Scotland subsequently provided the police with extracts of the communications between the minuter and the decoy and the minuter and the hunters. The High Court, in its judgment, referred to exchanges taking place in online chat rooms; but the parties agree that this was a slip. All the relevant exchanges took place in communications between the appellant and the decoy which were not shared with others. The exchanges using the WhatsApp messaging platform were protected by end to end encryption. The evidence led at trial confirmed the account given above. The appellant initially contacted the decoy on Grindr on 18 January 2018. The record of the communications between them provided by the PH group showed that from the initial point of contact by the appellant, sexually explicit questions and statements were sent by the appellant to the decoy, as were sexually explicit photographs, including, at the outset, a photograph of the appellant holding his erect penis, to which the decoy responded stating that he was 13. Over the period to 31 January, when the meeting which was arranged by the appellant took place, sexual communications continued to be sent by the appellant to the decoy. During that period the decoy remained in character as a 13 year old boy. All sexual communications came from the appellant. The decoy responded to the appellants messages, including answering questions posed of him about his sexuality. The appellant asked the decoy to delete the messages which the decoy agreed to do. After some time, the appellant asked the decoy to move the conversation to WhatsApp and they swapped telephone numbers to enable this to happen. Entrapment was not in issue in the case, so no examination of the law in relation to that topic is needed. The appellant complained that the circumstances of the case were such that authorisation was required to be obtained under RIPSA for the decoy to act as a covert human intelligence source within the meaning of that Act; that no such authorisation had been obtained; and that as a result the evidence of the decoy had been obtained unlawfully. However, the Sheriff and the High Court held that RIPSA had no application in the circumstances of this case, since the decoy acted on his own initiative and not at the instigation of the police (paras 52 53 of the High Courts judgment). This part of the High Courts judgment is not a matter which affects the compatibility issues which this court has to decide. The Dean of Faculty, Mr Gordon Jackson QC, for the appellant, sought to raise the RIPSA issue at the hearing before us in order to develop an argument that the acquisition and use of the evidence of the communications between the appellant and the decoy were not in accordance with the law, as is required by article 8(2) where there is an interference with rights under article 8(1). However, the compatibility issues to which the appeal relates do not turn on the application of article 8(2), but on the prior question of the extent and effect of the rights conferred by article 8(1). There was also some debate at the hearing in this court as to whether the appellant thought that the decoy was a child at the time he sent his first message to him. The Dean of Faculty claimed that the appellant only learned this later in the course of their exchanges. He emphasised that according to Grindrs terms a person can only have a profile on the site if they are 18 or over, and observed that people putting up profiles on dating sites do not always use true photographs of themselves. The Solicitor General for Scotland, Ms Alison Di Rollo QC, for the respondent, did not accept the Dean of Facultys claim. She pointed out that the profile photograph used by the decoy appeared to be of a child, that the standard terms of dating websites regarding age are not always observed by persons using those sites, and that the appellant was told by the decoy that he was 13 years old very early in the exchanges and expressed no surprise and was in no way deterred from continuing to send sexualized messages. This court is not in a position to resolve this issue of fact and it is not necessary to do so for the purposes of this appeal. The charges in the indictment related to communications across the period from 18 to 31 January 2018, without dividing up the communications more precisely in respect of their timing. The trial was conducted on that basis, without any need for findings to be made as to the appellants precise state of belief as to the age of the person with whom he was communicating at the outset of that period. The appellant did not give evidence about that. Nor did he make any submissions in the Sheriff Court or the High Court about this point, or suggest that it was a significant matter in relation to what are now the compatibility issues before this court. Accordingly, it is appropriate to proceed on the footing that throughout the whole or substantially the whole of the course of the relevant communications between the appellant and the decoy, the appellant believed the decoy to be a child aged 13. The High Court noted that the ECHR, and article 8 in particular, is primarily concerned with the protection of the rights of individuals from interference by the state. However, the High Court also observed (para 47) that, in addition to its prohibitive aspect, article 8 imposes a positive obligation on the state to provide a suitable framework within which an individuals article 8(1) rights are protected from interference by other private individuals, including employers, citing Kpke v Germany (2011) 53 EHRR SE 26 (p 249), para 41, and the judgment of the Third Section of the ECtHR in Ribalda v Spain CE:ECHR:2018:0109JUD000187413, para 54 (there is now a Grand Chamber judgment in this case, dated 17 October 2019, to which I refer below). The High Court held (para 48) that since the decoy acted on his own behalf as a private citizen and not at the instigation of the police or any other public authority, the gathering of the evidence of the communications by him was not a case of interference by the state with the appellants correspondence. The appellant had sent his messages to the decoy, who had received them and passed them on to the police: There was no surveillance or interception (AD v The Netherlands, European Commission on Human Rights [CE:ECHR:1994:0111DEC002196293] THE LAW at para 2 citing G, S and M v Austria (App no 9614/81), unreported, European Commission on Human Rights, 12 October 1983). [The appellant was] fully participating in the communications and [was] aware that they were reaching the intended recipient []. The messages had reached their destination and in due course they were handed to the police for the purposes of prosecuting a crime. As regards the appellants private life, the High Court was prepared to accept (para 49) that, at a general level, a persons internet chats fall within the broad ambit of article 8(1) (Garamukanwa v United Kingdom [2019] IRLR 853, ECtHR, para 22), but went on to say that given the lack of any longstanding pre existing relationship between the appellant and the person with whom he thought he was communicating, he had no reasonable expectation that the communications would remain confidential or private (Halford v United Kingdom (1997) 24 EHRR 523, para 45; Ribalda v Spain, judgment of the Third Section, para 57; Garamukanwa v United Kingdom, para 23). The appellant had voluntarily engaged in his communications on Grindr and WhatsApp with a person he believed to be a child, for sexual purposes. By the time the police were informed, the criminal activity had already been carried out. The court said (para 50) that even if there had been a reasonable expectation of privacy or confidentiality on the part of the appellant, the interference with the appellants right to respect for his private life would have been justified under article 8(2). There was no involvement of the state prior to the evidence of the communications being obtained; the evidence was delivered to the police for the purposes of prosecuting significant criminal activities; and the admission of the evidence of the communications to proof at trial would be subject to the common law rules of fairness. The activities of the decoy were subject to general legal constraints applicable to him as a private individual at common law and under the criminal law, and his actions were justifiable as being for legitimate purposes of the prevention of crime and the protection of the rights and freedoms of others. The court further observed (para 51) that even if there had been a violation of the appellants article 8 right to private life, it would not necessarily follow that the evidence of the communications provided by the decoy should have been excluded from admission to proof at trial. The question of exclusion or not of evidence gathered in breach of a persons rights under article 8 would depend upon whether it was possible to have a fair trial, on application of article 6 of the ECHR (right to a fair trial) and domestic law rules to safeguard the fairness of criminal proceedings. In the courts view, given the protections available under both these regimes, there was no unfairness in the criminal proceedings against the appellant arising from the admission of the evidence provided by the decoy. Discussion Issue (1): were article 8 rights interfered with by the use of the communications provided by the PH group as evidence in the public prosecution of the appellant? This issue is directed to consideration of the rights of the appellant under article 8(1) which are said to be relevant in the context of the circumstances of this case. In line with the submissions made on behalf of the appellant in the courts below, the Dean of Faculty submits that there was an interference with the appellants rights to respect for his private life and for his correspondence under article 8(1). On the basis that there was an interference with those rights, the High Court should have held that the respondent was required to show that such interference was justified under article 8(2). In general terms, article 8 reflects two fundamental values. These were summarised by Baroness Hale of Richmond in R (Countryside Alliance) v Attorney General [2007] UKHL 52; [2008] 1 AC 719, para 116, as the inviolability of the home and personal communications from official snooping, entry and interference without a very good reason and the inviolability of the personal and psychological space within which each individual develops his or her own sense of self and relationships with other people. The right to respect for private life and correspondence in article 8(1) may be engaged with reference to the first of these values even where the conduct engaged in by an individual is not in itself worthy of respect in accordance with the scheme of the ECHR: see, eg, Benedik v Slovenia, CE:ECHR:2018:0424JUD006235714, in which the ECtHR found there was an interference with the right of respect for private life in relation to a police investigation into the downloading and copying of child pornography by the applicant via the internet. In light of the history and objects of the ECHR, state surveillance of private communications is a matter of special concern and state authorities have a particular responsibility to respect a persons private life and correspondence. In the present case, however, as the High Court emphasised, the evidence of the communications between the appellant and the decoy was gathered by a private individual acting on his own behalf, and not by means of surveillance by state authorities, nor by a private individual acting on behalf of or at the instigation of a public authority (the type of situation addressed in MM v The Netherlands (2004) 39 EHRR 19). Therefore, it is not necessary to say more in this judgment about the first value referred to by Baroness Hale in Countryside Alliance. For reasons which reflect those given by the High Court, in the circumstances of this case I do not accept the Dean of Facultys submission that there was any interference with the appellants rights under article 8(1). In my view, there was no interference with those rights at any stage, whether by reason of (a) the actions of the decoy in attracting then recording and passing on evidence of the relevant communications; (b) the actions of the police in taking investigative action based on that evidence and passing it on to the respondent; (c) the actions of the respondent in presenting charges against the appellant based on that evidence and then relying upon it at trial; or (d) the actions of the Sheriff Court in admitting the evidence at trial and convicting the appellant on the basis of it. The compatibility issue on this appeal relates particularly to (c). However, it is relevant to keep in mind the other stages as well, as they are connected with each other in the sense that they are all relevant to bringing the appellants conduct to the attention of the public authorities with responsibility for ensuring that the criminal justice system was brought into proper operation in relation to that conduct. The position is essentially the same in this case in relation to both the right to respect for private life and the right to respect for correspondence under article 8(1), so they can be considered together. In my judgment, there are two reasons why the appellants rights under article 8(1) in relation to respect for private life and respect for his correspondence were not interfered with in the circumstances of this case: (i) the nature of the communications from the appellant to the decoy, whom he believed to be a child, was not such as was capable of making them worthy of respect for the purposes of the application of the ECHR; and (ii) the appellant had no reasonable expectation of privacy in relation to the communications, with the result that he enjoyed no relevant protection under article 8(1) as regards their disclosure to and use by the respondent and the other public authorities referred to above. I develop these points below. (i) The nature of the communications by the appellant An individuals rights under article 8(1), so far as relevant here, are to respect for his private life and his correspondence. In my view, it is implicit in this formulation that the features of his private life and his correspondence for which protection is claimed under article 8(1) should be capable of respect within the scheme of values which the ECHR exists to protect and promote. Part of that scheme is the second fundamental value protected by article 8 identified by Baroness Hale in Countryside Alliance, referred to above. In relation to that aspect of article 8, states party to the ECHR have a special responsibility to protect children against sexual exploitation by adults. In X and Y v The Netherlands (1986) 8 EHRR 235, a mentally handicapped girl aged 16, Miss Y, was forced into sexual intercourse by an adult. This behaviour did not constitute a criminal offence under Dutch law at the time. The European Court of Human Rights (ECtHR) held that by reason of this lacuna in the criminal law, the Netherlands had violated the right of Miss Y to respect for her private life under article 8(1); this was stated to be a concept which covers the physical and moral integrity of the person, including his or her sexual life (para 22). At para 23, the ECtHR recalled, with reference to the case of Airey v Ireland (1979 1980) 2 EHRR 305, para 32, that: although the object of article 8 is essentially that of protecting the individual against arbitrary interference by the public authorities, it does not merely compel the state to abstain from such interference: in addition to this primarily negative undertaking, there may be positive obligations inherent in an effective respect for private or family life. These obligations may involve the adoption of measures designed to secure respect for private life even in the sphere of the relations of individuals between themselves. At para 24 the ECtHR observed that the choice of the means calculated to secure compliance with article 8 in the sphere of the relations of individuals between themselves is in principle a matter that falls within the contracting states margin of appreciation; and there are different ways of ensuring respect for private life, and the nature of the states obligation will depend on the particular aspect of private life that is at issue. However, although recourse to the criminal law was not necessarily the only answer in every case, and Miss Y had relevant rights under civil law to claim damages or injunctive relief, the ECtHR said this at para 27: The court finds that the protection afforded by the civil law in the case of wrongdoing of the kind inflicted on Miss Y is insufficient. This is a case where fundamental values and essential aspects of private life are at stake. Effective deterrence is indispensable in this area and it can be achieved only by criminal law provisions; indeed, it is by such provisions that the matter is normally regulated. The Dutch criminal code failed to provide Miss Y with practical and effective protection (para 30), with the result that her rights under article 8 had been violated. See also MC v Bulgaria (2005) 40 EHRR 20, para 150: the positive obligations on the state inherent in the right to effective respect for private life under article 8 include that effective deterrence against grave acts such as rape, where fundamental values and essential aspects of private life are at stake, requires efficient criminal law provisions. Children and other vulnerable individuals, in particular, are entitled to effective protection. In KU v Finland (2009) 48 EHRR 52 an unknown person placed an advert of a sexual nature on an internet dating site, ostensibly on behalf of the applicant, a 12 year old boy, without his knowledge or consent, which suggested that he was looking for an intimate relationship with a boy of his own age or older. The applicant was contacted by an older man. The applicants father requested that the police take action to identify the person who had placed the advert, but the internet service provider refused to provide details to identify him and the Finnish courts, applying national privacy laws, refused to order it to do so. The ECtHR held that in these circumstances there had been a violation of the applicants right to respect for his private life under article 8, by reason of the lack of effective criminal sanctions against the perpetrator. The ECtHR again highlighted, at para 41, that the concept of private life in article 8(1) covers the physical and moral integrity of the person, and in that regard referred to the potential threat to the applicants physical and mental welfare brought about by the impugned situation and to his vulnerability in view of his young age. At paras 42 43 the ECtHR reiterated that there may be positive obligations inherent in an effective respect for private life, and that while the choice of means to comply with such obligations will generally be a matter falling within a contracting states margin of appreciation, effective deterrence against grave acts, where fundamental values and essential aspects of private life are at stake, requires efficient criminal law provisions. At paras 45 46 and 49, the ECtHR said this (omitting footnotes): 45. The Court considers that, while this case might not attain the seriousness of [X and Y v The Netherlands (1986) 8 EHRR 235], where a breach of article 8 arose from the lack of an effective criminal sanction for the rape of a handicapped girl, it cannot be treated as trivial. The act was criminal, involved a minor and made him a target for approaches by paedophiles. 46. The Government conceded that at the time the operator of the server could not be ordered to provide information identifying the offender. It argued that protection was provided by the mere existence of the criminal offence of calumny and by the possibility of bringing criminal charges or an action for damages against the server operator. As to the former, the court notes that the existence of an offence has limited deterrent effects if there is no means to identify the actual offender and to bring him to justice. Here, the court notes that it has not excluded the possibility that the states positive obligations under article 8 to safeguard the individuals physical or moral integrity may extend to questions relating to the effectiveness of a criminal investigation even where the criminal liability of agents of the state is not at issue. For the court, states have a positive obligation inherent in article 8 of the Convention to criminalise offences against the person including attempts and to reinforce the deterrent effect of criminalisation by applying criminal law provisions in practice through effective investigation and prosecution. Where the physical and moral welfare of a child is threatened such injunction assumes even greater importance. The court recalls in this connection that sexual abuse is unquestionably an abhorrent type of wrongdoing, with debilitating effects on its victims. Children and other vulnerable individuals are entitled to state protection, in the form of effective deterrence, from such grave types of interference with essential aspects of their private lives. 49. The court considers that practical and effective protection of the applicant required that effective steps be taken to identify and prosecute the perpetrator, that is, the person who placed the advertisement. In the instant case such protection was not afforded. An effective investigation could never be launched because of an overriding requirement of confidentiality. Although freedom of expression and confidentiality of communications are primary considerations and users of telecommunications and internet services must have a guarantee that their own privacy and freedom of expression will be respected, such guarantee cannot be absolute and must yield on occasion to other legitimate imperatives, such as the prevention of disorder or crime or the protection of the rights and freedoms of others. Without prejudice to the question whether the conduct of the person who placed the offending advertisement on the internet can attract the protection of articles 8 and 10, having regard to its reprehensible nature, it is nonetheless the task of the legislator to provide the framework for reconciling the various claims which compete for protection in this context. Such framework was not however in place at the material time, with the result that Finlands positive obligation with respect to the applicant could not be discharged. In the present case, it is an open question whether the United Kingdom had a positive obligation under article 8 which required it to legislate in the way it did in sections 33 and 34 of the 2009 Act and in section 1 of the 2005 Act, or whether it could, under its margin of appreciation, have chosen not to criminalise the conduct set out in those provisions. In the absence of legislation to create those particular offences, there would still have been other criminal offences which offered a measure of protection for the moral and physical integrity of children against the predations of paedophiles. However, it is clear that these provisions in the 2009 Act and the 2005 Act were enacted to enhance the protection for children in relation to grave types of interference with essential aspects of their private lives (to use the language of the ECtHR in KU v Finland). The assessment of the Scottish Parliament is that having such offences on the statute book is a necessary element in the fabric of protection afforded to children. Whilst, as in KU v Finland, the conduct which is criminalised by these provisions is not as serious as that in X and Y v The Netherlands, in each case it involves direct sexualised communication with a child, including (in the case of section 1 of the 2005 Act) as a prelude to sexual contact between a paedophile and a child. The offences in question provide protection for children against conduct involving them directly, by contrast with the more indirect form of protection at issue in KU v Finland, and they are at least as important as the provisions of criminal law in that case. In my view, the Scottish Parliament having enacted such protection for children by way of the criminal law, it is an aspect of the positive obligation of the state under article 8 to ensure that there can be effective enforcement of the law as contained in these provisions, in much the same way as in KU v Finland. In KU v Finland, the ECtHR, at para 49, put to one side the question whether the conduct of the person who placed the offending advertisement on the internet could attract the protection of article 8 (and also the right to freedom of expression under article 10 of the ECHR), having regard to its reprehensible nature. In the present case, however, as noted above, the conduct which is made the subject of the criminal offences that are in issue involves direct, sexually motivated contact between a paedophile and a child. In my view, in the absence of any question of state surveillance or interception of communications, and where all that is in issue is the balance of the interests of a person engaging in such conduct and of the children who are the recipients (or intended recipients) of the relevant communications, the reprehensible nature of the communications is such that they do not attract protection under article 8(1). They do not involve the expression of an aspect of private life or an aspect of correspondence which is capable of respect within the scheme of values inherent in the ECHR. This view is supported by three matters. First, the conduct in question involves contact between a paedophile and a child which is criminal in nature and is capable of affecting the child more immediately and in a more directly damaging way than the conduct in issue in KU v Finland. Secondly, as observed above, the state has a positive obligation under article 8, owed to children, to enforce these provisions of the criminal law effectively. That obligation reflects the protection which article 8 requires to be accorded to fundamental values and essential aspects of private life in relation to children, who are recognised to be vulnerable individuals. Accordingly it is clear that, under the scheme of the ECHR and for the purposes of article 8, the interests of children in this field have priority over any interest a paedophile could have in being allowed to engage in the conduct which has been criminalised by these provisions. Thirdly, article 17 of the ECHR (prohibition of abuse of rights) supports the conclusion that the criminal conduct at issue in this case is not such as is capable of respect for the purposes of article 8(1). Article 17 is included in Schedule 1 to the HRA. It provides: Nothing in this Convention may be interpreted as implying for any state, group or person any right to engage in any activity or perform any act aimed at the destruction of any of the rights and freedoms set forth herein or at their limitation to a greater extent than is provided for in the Convention. The actions of the appellant were aimed at the destruction or limitation of the rights and freedoms of a child under article 8 which are the subject of positive obligations owed to children by the state under that provision, in a context in which those positive obligations outweighed any legitimate interest the appellant could have under article 8(1) to protection for his actions. In R v G (Secretary of State for the Home Department intervening) [2008] UKHL 37; [2009] AC 92, a boy of 15 had sexual intercourse with a girl of 12. He was charged with an offence of rape of a child under 13, contrary to section 5 of the Sexual Offences Act 2003. The girls initial complaint had been that the intercourse had not been consensual. After the charge was brought, the boy indicated that he was willing to plead guilty on the basis that the girl had told him that she too was aged 15 and the intercourse had in fact been consensual. The prosecution was prepared to proceed on that basis. Section 5 is an offence of strict liability, in the sense that the consent of the girl provides no defence and there is no defence of reasonable belief that the girl is aged 13 years or above. The boy pleaded guilty to the offence and was sentenced. Later, in addition to a complaint based on article 6, he complained that in light of the basis of plea accepted by the prosecution, the charge against him should have been changed to a lesser charge of unlawful sexual intercourse with a girl under 13, contrary to section 13 of the 2003 Act, and that it had been a breach of his rights under article 8 for the prosecution to proceed against him with the charge of rape under section 5. The boys appeal based on article 6 was dismissed unanimously by the House of Lords and his appeal based on article 8 was dismissed by a majority of three to two. In the majority, Lord Hoffmann considered that the decision to proceed under section 5 rather than section 13 gave rise to no interference with rights under article 8 (paras 7 10); Lord Mance considered that the decision to proceed under section 5 could not be regarded as unjustified or disproportionate (para 72; ie, by implication, under article 8(2)); and Baroness Hale considered that the decision to proceed under section 5 involved no interference with the boys rights under article 8(1) (para 54), but even if it did it was justified under article 8(2) (para 55). In the minority, Lord Hope of Craighead (with whom Lord Carswell agreed) considered that there was an interference with the boys right to respect for his private life under article 8(1), which could not be justified as a proportionate interference under article 8(2) (paras 37 39). Lord Hope emphasised at para 37 that, as set out in the basis of plea, the sexual intercourse was consensual intercourse between children (and, it may be added, in circumstances where the boy believed the girl to be 15, the same age as himself and just one year below the age of consent). rights under article 8(1), Baroness Hale said this at para 54: In addressing the question whether there was an interference with the boys In effect, the real complaint is that the defendant has been convicted of an offence bearing the label rape. Parliament has very recently decided that this is the correct label to apply to this activity. In my view this does not engage the article 8 rights of the defendant at all, but if it does, it is entirely justified. The concept of private life covers the physical and moral integrity of the person, including his or her sexual life: X and Y v The Netherlands 8 EHRR 235, para 22. This does not mean that every sexual relationship, however brief or unsymmetrical, is worthy of respect, nor is every sexual act which a person wishes to perform. It does mean that the physical and moral integrity of the complainant, vulnerable by reason of her age if nothing else, was worthy of respect. The state would have been open to criticism if it did not provide her with adequate protection. This it attempts to do by a clear rule that children under 13 are incapable of giving any sort of consent to sexual activity and treating penile penetration as a most serious form of such activity. This does not in my view amount to a lack of respect for the private life of the penetrating male. In my view, this statement by Baroness Hale accurately reflects the position that, for the purposes of considering whether there is an interference with the rights of an individual to respect for his private life (and, in the present case, for his correspondence) under article 8(1), it is necessary that the activity of the individual should be capable of respect within the scheme of values which the ECHR exists to protect and promote. See also In re JR38 [2015] UKSC 42; [2016] AC 1131, para 100: it is relevant to understand the nature of the activity in which the appellant was involved in considering whether the scope of article 8 extends to his claim, and it did not extend to protect the claimant in relation to police publication of photographs of him participating in a riot (per Lord Toulson, with whom Lord Hodge agreed; see also para 98: the publication of a photograph of a young person acting in a criminal manner for the purpose of enabling the police to discover his identity may not fall within the scope of the protection of personal autonomy which is the purpose of article 8 ); and para 112 (Lord Clarke of Stone Cum Ebony, with whom Lord Hodge also agreed): on the facts here the criminal nature of what the appellant was doing was not an aspect of his private life that he was entitled to keep private. The judgment of the ECtHR in Benedik v Slovenia illustrates the same analytical approach to article 8. At paras 107 110 the court examined the nature of the applicants interest involved in the case, concluding at para 110 that since the case involved investigations by public authorities it concerned privacy issues capable of engaging the protection of article 8 of the Convention; then at paras 115 118 the court examined the question whether the applicant had a reasonable expectation of privacy in relation to his use of the internet, and concluded that he did (see further below). As a result of the examination of these two matters the ECtHR concluded that there had been an interference with the applicants right to respect for his privacy under article 8(1), so that it was necessary to consider whether that interference was justified under article 8(2). The appellant in R v G made an application to the ECtHR, relying on his rights under article 6 and article 8. The ECtHR dismissed his application at the admissibility stage: (2011) 53 EHRR SE25. It held that the complaint based on article 8 was manifestly without foundation. However, in doing so the ECtHR made this observation at para 35 of its decision: The court notes that at the time of the events in question, the applicant was 15 years old and the complainant was 12. The applicant was convicted and sentenced on the basis that both parties had consented to sexual intercourse and that the applicant had reasonably believed the complainant to be the same age as him. In these circumstances, the court is prepared to accept that the sexual activities at issue fell within the meaning of private life (see, mutatis mutandis, SL v Austria (2003) 37 EHRR 39). The court therefore concludes that the criminal proceedings against the applicant, which resulted in his conviction and sentence, constituted an interference by a public authority with his right to respect for private life. [In the case of SL v Austria, a violation of the rights of a 15 year old homosexual boy under article 14 of the ECHR, read with article 8, was found in relation to a law which criminalised consensual homosexual relations between the applicant and men aged 19 and above, but not relations with other adolescents in the 14 to 18 age bracket.] The ECtHR in G v United Kingdom considered that, even on the basis that there had been an interference with the boys right to respect for his private life under article 8(1), the interference was justified under article 8(2). The Dean of Faculty sought to rely on para 35 of the decision in G v United Kingdom in support of his submission that there was an interference with the appellants rights to respect for his private life and correspondence in the present case. However, I do not consider that it assists him. That case was concerned with precocious sexual activity between children, between a boy aged 15 and a girl believed to be 15. This involved an aspect of the boys own personal development and experimentation in relation to intimate relationships at a stage of his own life which attracts particular protective concern under the scheme of the ECHR. The present case is very different. The appellant is an adult, not a child or adolescent at a developmental stage. Indeed, I think that the emphasis in the observations of the ECtHR upon the particular facts of the case in G v United Kingdom serves to support the view that in the appellants case there was no interference with his rights under article 8(1). The appellant had no legitimate interest under the scheme of the ECHR, as against the decoy, to assert or maintain privacy in the communications he sent the decoy. The sending of those communications constituted criminal offences, and the decoy was entitled to provide to the police evidence about them which he had in his knowledge and in his possession. That action by the decoy involved no interference with the appellants rights under article 8(1). Once the decoy had provided information to the police, they had in their possession evidence of the commission of criminal offences and the appellant had no legitimate interest under the scheme of the ECHR to prevent the police from acting on that evidence, or to prevent the police from passing it on to the respondent with a view to its use in a prosecution of the appellant. Likewise, once the police passed the evidence to the respondent, the appellant had no legitimate interest under the scheme of the ECHR to prevent the respondent from making use of that evidence in criminal proceedings against him. The police and the respondent, as relevant public authorities, had a responsibility, under the scheme of values in the ECHR, to take effective action to protect children, to the extent that the information provided by the decoy indicated that the appellant represented a risk to them. (ii) No reasonable expectation of privacy According to the Strasbourg case law, an important indication whether the right to respect for private life and correspondence is engaged in relation to an individuals communications is whether the individual had a reasonable expectation of privacy in relation to them: see eg Halford v United Kingdom (1997) 24 EHRR 523, para 45; Garamukanwa v United Kingdom, paras 22 and 29; Benedik v Slovenia, paras 98, 101 and 115 116; and Ribalda v Spain, CE:ECHR:2019: 1017JUD000187413, GC, paras 89 90 and 93. In Campbell v MGN Ltd [2004] UKHL 22; [2004] 2 AC 457, para 21, Lord Nicholls of Birkenhead observed that essentially the touchstone of private life is whether in respect of the disclosed facts the person in question had a reasonable expectation of privacy. This observation was the subject of debate in this court in In re JR38 [2015] UKSC 42; [2016] AC 1131. In that case, with a view to identifying persons who had participated in a riot, the police released photographs showing the claimant, a boy of 14, participating in the violence. The claimant complained that in doing so, the police had breached his right under article 8 to respect for his private life. This court held, by a majority, that there had been no interference with the claimants right under article 8(1) and affirmed that the touchstone for the engagement of article 8(1) is whether, on the facts, the individual had a reasonable expectation of privacy in relation to the subject matter of his complaint: see paras 87 98 (Lord Toulson, with whom Lord Hodge agreed), and 107 and 110 112 (Lord Clarke, with whom Lord Hodge agreed). The court was unanimous that, if article 8(1) was engaged, the interference with the claimants rights would have been justified under article 8(2). However, dissenting on the question of the application of article 8(1), Lord Kerr of Tonaghmore (with whom Lord Wilson agreed) said that, although whether there is a reasonable expectation of privacy will often be a factor of considerable weight, it is not necessarily decisive and has to be weighed alongside other factors relating to the context, including in particular in that case the age of the claimant: paras 56 and 59. principles to be derived from its case law, saying this at paras 100 101: 100. The Court reiterates that private life is a broad term not susceptible to exhaustive definition. Article 8 protects, inter alia, the right to identity and personal development, and the right to establish and develop relationships with other human beings and the outside world. There is, therefore, a zone of interaction of a person with others, even in a public context, which may fall within the scope of private life (see Uzun v Germany [CE:ECHR:2010:0902JUD003562305], para 43). 101. There are a number of elements relevant to the consideration of whether a persons private life is concerned by measures affected outside his or her home or private premises. In order to ascertain whether the notions of private life and correspondence are applicable, the Court has on several occasions examined whether individuals had a reasonable expectation that their privacy would be respected and protected (see Brbulescu v Romania [[2017] IRLR 2032, GC], para 73, and Copland v United Kingdom, [(2007) 45 EHRR 37], paras 41 42). In that context, it has stated that a reasonable In Benedik v Slovenia, at paras 100 106 the ECtHR recapitulated the relevant expectation of privacy is a significant though not necessarily conclusive factor (see Brbulescu, cited above, para 73). At para 106, the ECtHR referred to the judgment of the Grand Chamber in Delfi AS v Estonia (2016) 62 EHRR 6, at para 148, in which it was noted that different degrees of anonymity are possible on the internet: an internet user may be anonymous to the wider public, while their identity is known to their internet service provider. The ECtHR held that the applicant in the Benedik case had a reasonable expectation of privacy, notwithstanding that he used a computer connected to the internet via an internet service provider which had details of the identity of the subscriber (in that case, the applicants father): paras 115 118. On that basis, the ECtHR found that there had been an interference with the applicants right to respect for his privacy under article 8(1) and held that it was not justified under article 8(2). That was because the legal regime governing the circumstances in which the police could obtain details of the identity of the subscriber and hence could learn the identity of the applicant was not clear, so the interference was not in accordance with the law for the purposes of article 8(2). As the phraseology indicates, whether a reasonable expectation of privacy exists in relation to a particular matter is an objective question: Benedik v Slovenia, para 116; In re JR38, paras 98 (Lord Toulson) and 109 (Lord Clarke). In the present case, by contrast with the situation in Benedik v Slovenia, the appellants communications were sent directly to the decoy, a private individual believed by the appellant to be a child of 13. Their contents were not a matter in relation to which the recipient could be thought to owe the appellant any obligation of confidentiality. There was no prior relationship between the appellant and the recipient from which an expectation of privacy might be said to arise between them (contrast the position in Ribalda v Spain, in which the applicants had a reasonable expectation that they would not be subjected to covert video surveillance by their employer; and contrast the position which might arise in relation to intimate letters sent in the course of an established romantic relationship between adults). The appellants contact with the decoy came out of the blue and exhortations by the appellant in messages sent to the decoy that he should keep their communications private did not establish a relationship of confidentiality. Furthermore, the appellant believed that he was communicating with a 13 year old, a child of an age in relation to whom it was foreseeable that he might well share any worrying communications he received with an adult. The present case is, therefore, analogous to the situation posited by Lord Toulson in In re JR38 at para 100, where he said: When the authorities speak of a protected zone of interaction between a person and others, they are not referring to interaction in the form of public riot. That is not the kind of activity which article 8 exists to protect. In this respect the case is on all fours with Kinloch v HM Advocate [2013] 2 AC 93. Lord Hope DPSCs words, at para 21, are equally applicable to the appellant: The criminal nature of what he was doing, if that was what it was found to be, was not an aspect of his private life that he was entitled to keep private. If, for example, members of the public gave descriptions of a rioter from which an artist prepared an identikit, would its use by the police for the purpose of his identification be an infringement of his right to privacy? I consider not. In the present case, the decoy was a member of the public who provided the police with evidence in his possession pertaining to the commission of criminal offences by the appellant. As the ECtHR observed in Delfi AS v Estonia, at para 148, and Benedik v Slovenia, at para 106, there may be different expectations of confidentiality in relation to use of the internet, depending on the person with respect to whom the question is asked. In the present context, the appellant may have enjoyed a reasonable expectation of privacy in relation to his communications for the purposes of article 8(1) so far as concerned the possibility of police surveillance or intrusion by the wider public, but he had no reasonable expectation of privacy in relation to the recipient of his messages. He could not reasonably expect that, where his messages constituted evidence of criminal conduct on his part, the recipient would not pass them on to the police. Once evidence of the messages had been passed to the police by the decoy, the appellant had no reasonable expectation that the police should treat them as confidential, so that they should not make use of that evidence to investigate whether a crime had been committed. Under the scheme of the ECHR, they were bound to do so in order to safeguard children. Nor did the appellant have any reasonable expectation that the respondent should treat the messages as confidential, so that they should not make use of that evidence in bringing a prosecution in respect of his criminal activity. Again, under the scheme of the ECHR, the possibility of effective prosecution of serious crimes committed in relation to children is part of the regime of deterrence which a state is required to have in place to protect them. Open justice is an important principle in domestic law and under the ECHR, so a defendant in the position of the appellant can have no reasonable expectation that a prosecution in which reliance is placed on material of this kind will take place in anything other than a public forum. There is also an area of overlap between the issue of reasonable expectation of privacy and the issue of the nature of the communications by the appellant, addressed above. The majority judgments in In re JR38 indicate that the nature of the information in question is relevant as part of the context in which an assessment whether a reasonable expectation of privacy exists is to be made. As Lord Toulson said at para 97: In considering whether, in a particular set of circumstances, a person had a reasonable expectation of privacy (or legitimate expectation of protection), it is necessary to focus both on the circumstances and on the underlying value or collection of values which article 8 is designed to protect. See also para 112 (Lord Clarke). I have found it helpful in this case to separate out these issues and subject them to distinct examination, as the ECtHR did in Benedik v Slovenia. However, it can also be said that the discussion above regarding the nature of the communications provides further reasons why, for the purposes of article 8(1), the appellant could have no reasonable expectation of privacy in relation to them. Even on the approach of Lord Kerr in In re JR38, there has been no interference with the appellants rights under article 8(1). Unlike the claimant in that case, there is no special feature of the appellants circumstances, such as his being a child deserving of protection under the scheme of the ECHR, which could support a conclusion that his rights under article 8(1) were interfered with, in the absence of his having a reasonable expectation of privacy. Conclusion on compatibility issue (1) For the reasons set out above, I consider that the High Court was right to hold that there was no interference with the appellants rights under article 8(1) in the circumstances of this case. Issue (2): the extent to which the obligation on the state, to provide adequate protection for article 8 rights, is incompatible with the use by a public prosecutor of material supplied by PH groups in investigating and prosecuting crime. I can be short in addressing this issue, focusing on the circumstances of the appellants case. I have already concluded in relation to the first compatibility issue that there was no interference with the appellants rights under article 8(1) associated with the collection by the decoy of evidence about the communications or with the use of that evidence by the relevant public authorities. Clearly, therefore, in this case the state had no supervening positive obligation arising from article 8 to protect the appellants interests which would impede the respondent in any way in making use of the evidence about his communications with the decoy to investigate or prosecute in respect of the crimes he was alleged to have committed. On the contrary, in so far as positive obligations under article 8 were engaged, the relevant positive obligation on the respondent, as a public authority, was to ensure that the criminal law could be applied effectively so as to deter sexual offences against children. Contrary to the appellants argument, article 8 has the effect that the respondent should be entitled to, and indeed might be obliged to, make use of the evidence of the communications with the decoy in bringing a prosecution against him. In Ribalda v Spain, the employer of the applicants, a private company, gathered evidence by covert video surveillance of their behaviour at work on which it relied to dismiss the applicants for theft. The national courts held that the dismissals were justified and lawful. The applicants complained to the ECtHR that the Spanish state had interfered with their right to respect for private life under article 8 by reason of the national courts accepting and relying on the evidence derived from the covert surveillance by the employer. The Grand Chamber of the ECtHR held, first, that the applicants had a sufficient reasonable expectation of privacy such that article 8 was applicable (paras 92 95). The Grand Chamber then addressed compliance with article 8, summarising the applicable principles regarding positive obligations at paras 109 116 of its judgment, including the following: 109. The court observes that, in the present case, the video surveillance measure complained of by the applicants was imposed by their employer, a private company, and cannot therefore be analysed as an interference, by a state authority, with the exercise of Convention rights. The applicants nevertheless took the view that, by confirming their dismissals on the basis of that video surveillance, the domestic courts had not effectively protected their right to respect for their private life. 110. The court reiterates that although the object of article 8 is essentially that of protecting the individual against arbitrary interference by the public authorities, it does not merely compel the state to abstain from such interference: in addition to this primarily negative undertaking, there may be positive obligations inherent in effective respect for private or family life. These obligations may necessitate the adoption of measures designed to secure respect for private life even in the sphere of the relations of individuals between themselves (see Sderman v Sweden [CE:ECHR:2013:1112JUD000578608, GC], para 78 and Von Hannover v Germany (No 2) [ECHR:2012:0207JUD004066008, GC], para 98). The responsibility of the state may thus be engaged if the facts complained of stemmed from a failure on its part to secure to those concerned the enjoyment of a right enshrined in article 8 of the Convention (see Brbulescu v Romania [[2017] IRLR 1032, GC], para 110, and Schth v Germany [CE:ECHR:2010: 0923JUD000162003], paras 54 and 57). 111. Accordingly, in line with the approach it has followed in similar cases, the court takes the view that the complaint should be examined from the standpoint of the states positive obligations under article 8 of the Convention (see Brbulescu, cited above, para 110; Kpke [v Germany (2010) 53 EHRR SE 26]; and De La Flor Cabrera [v Spain CE:ECHR:2014:0527 JUD001076409], para 32). While the boundaries between the states positive and negative obligations under the Convention do not lend themselves to precise definition, the applicable principles are nonetheless similar. In both contexts regard must be had in particular to the fair balance that has to be struck between the competing private and public interests, subject in any event to the margin of appreciation enjoyed by the state (see Palomo Snchez v Spain [CE:ECHR:2011:0912JUD 002895506, GC], para 62, and Brbulescu, cited above, para 112). The margin of appreciation goes hand in hand with European supervision, embracing both the legislation and the decisions applying it, even those given by independent courts. In exercising its supervisory function, the court does not have to take the place of the national courts but to review, in the light of the case as a whole, whether their decisions were compatible with the provisions of the Convention relied upon (see Peck [v United Kingdom, CE:ECHR:2003:0128JUD004464798], para 77, and Von Hannover (No 2), cited above, para 105). Applying these principles, having regard to the states margin of appreciation and the fair balance to be maintained between the interests of the applicants and their employer, the Grand Chamber held that there had been no violation of any positive obligations owed to the applicants under article 8. As is evident from this recent judgment of the Grand Chamber, positive obligations under article 8 only arise where article 8 is applicable in a claimants case in the first place. In the present case, however, as set out above, article 8 is not applicable in relation to the appellants complaint. Further, even where article 8 is applicable, a contracting state has a margin of appreciation as to how to strike a fair balance between the competing interests which are in issue. Since, in the present context, the state has a positive obligation to operate an effective criminal law regime to deter and punish persons who threaten to harm young children, there is no doubt that the use by the respondent of the evidence provided by the decoy for the purposes of the prosecution of the appellant under that regime involved no breach of any positive obligation owed to the appellant. In that regard, it is relevant that the appellant rightly accepts that the offences with which he was charged under the 2009 Act and the 2005 Act were, in themselves, compatible with article 8. In SXH v Crown Prosecution Service (United Nations High Commissioner for Refugees intervening) [2017] UKSC 30; [2017] 1 WLR 1401, this court addressed the question whether the rights of an individual under article 8(1) were interfered with when the prosecution service in England and Wales decided to bring a prosecution for an offence under a statutory provision which, as here, was agreed to be compatible with the rights of the accused under article 8. Lord Toulson (with whose judgment Lord Mance, Lord Reed and Lord Hughes agreed) observed (para 34) that it was difficult to envisage circumstances in which the initiation of a prosecution against a person reasonably suspected of committing such a criminal offence could itself be an interference with that persons rights under article 8(1). There might be rare and exceptional circumstances in which that could happen: see para 23, setting out the view of the Court of Appeal to that effect, with which Lord Toulson agreed at para 35; and the members of the appellate committee in R v G, apart from Lord Hoffmann, contemplated that there might be such a case. However, there are no exceptional circumstances which apply in the present case. The Scottish Parliament has enacted the criminal law provisions in sections 33 and 34 of the 2009 Act and section 1 of the 2005 Act to protect the rights of children, and it was clearly within the states margin of appreciation under article 8 and that of the respondent as the prosecuting authority to deploy the evidence provided by the decoy in support of a prosecution brought under those provisions. Other issues in the High Court In light of the way in which the compatibility issues have been framed by the High Court, other aspects of the High Courts judgment do not arise for consideration in this court. However, I think it is appropriate to observe that, even if the appellant had been able to show that there had been an interference with his rights under article 8(1), he would still have faced fundamental difficulties in challenging the overall conclusion of the High Court that his appeal against his conviction should be refused. First, the High Court concluded that, even if there had been an interference with the appellants rights under article 8(1) arising from the use of the evidence provided by the decoy in the police investigation and prosecution of the appellant, it would have been justified under article 8(2) as being in accordance with the law and necessary in a democratic society, as a measure proportionate to promoting the legitimate objectives of the prevention of disorder or crime and the protection of the rights and freedoms of others. Although the issue of justification under article 8(2) does not arise under the compatibility issues before this court, I can see no reason to think that the High Court was in error in this part of its judgment. Secondly, even if the appellant had been able to establish that there had been a breach of his rights under article 8 by reason of the use of the evidence provided by the decoy in the investigation and in the prosecution, it would not follow that his conviction should be quashed, as the High Court rightly pointed out. Generally, evidence obtained in breach of article 8 may be relied on in criminal proceedings, provided that there is no violation of the right under article 6 of the ECHR to have a fair trial and no breach of any rules of domestic law regarding the fairness of criminal proceedings: see eg Kinloch v HM Advocate [2012] UKSC 62; [2013] 2 AC 93, paras 15 17 (Lord Hope of Craighead). The High Court considered that there was no unfairness in the proceedings against the appellant (para 51). Again, I see no reason to disagree with their assessment. Conclusion For the reasons given above, I would dismiss the appeal. In relation to the first compatibility issue, I would answer that in this case there was no interference with the appellants right to respect for his private life and correspondence under article 8(1) by reason of the use by the respondent of the evidence obtained from the decoy in the public prosecution of the appellant. In relation to the second compatibility issue, I would answer that there was no incompatibility between the obligation on the state to protect rights arising under article 8 and the use by the respondent in this case of the evidence provided by the decoy in support of the prosecution of the appellant. |
These two appeals raise questions of some significance arising out of the interrelationship of the statutory schemes relating to the protection of employees pensions and to corporate insolvency. The background to the two appeals is, in very summary terms, as follows: i. Many UK registered members of the Lehman group of companies, and all the UK registered members of the Nortel group of companies, have gone into insolvent administration; (a) One of those Lehman group companies entered into service ii. contracts with, and ran a pension scheme for the benefit of, employees who worked for other group members; (b) The Nortel group included a company which had a pension scheme, and which was insufficiently resourced to fund that scheme; iii. The pension scheme (the Scheme) in each case was a final salary scheme, which appears to be, and to have been for some time, in substantial deficit; iv. The Pensions Regulator subsequently initiated machinery under the Pensions Act 2004 to require certain other group members (the Target companies) to provide financial support for the Scheme; vs That machinery has been held up so it can be decided whether the liability under such a requirement would rank (a) as an expense of the Target companies administrations, (b) pari passu with the Target companies other unsecured creditors, or (c) as neither; vi. Under option (a) the liability would rank ahead of the unsecured creditors, and may well be paid in full; under option (b) it would rank equally with those creditors; under option (c) it would rank behind them, and would probably be worthless; vii. Briggs J and the Court of Appeal (in a judgment given by Lloyd LJ) concluded that option (b) was not open to them, and preferred option (a) to option (c); viii. The issue now comes before the Supreme Court. This judgment starts by explaining the relevant statutory provisions relating to pensions, which are mostly in the Pensions Act 2004 (the 2004 Act), in a description largely based on the exposition in the judgment of Briggs J, [2010] EWHC 3010 (Ch), [2011] Bus LR 766, paras 7 41. It then deals with the statutory provisions and rules relating to insolvency, in the Insolvency Act 1986 (the 1986 Act) and the Insolvency Rules 1986 (SI 1986/1925) (the Insolvency Rules), largely drawing on what Lloyd LJ said in the Court of Appeal, [2011] EWCA Civ 1124, [2012] Bus LR 818, paras 20 23 and 39. Next, it will explain the facts, in a summary reflecting what Briggs J said at paras 47 54 of his judgment. After a short discussion, the judgment will then turn to consider whether the liabilities in the present cases would rank pari passu with the unsecured creditors of the Target companies. It will then consider whether those liabilities rank as expenses of the administration. Finally, it will address the power of the court under the 1986 Act and the Insolvency Rules to vary the priority of the liabilities. The relevant statutory provisions relating to pensions In order to protect employees from the adverse consequences of an under funded occupational pension scheme, (i) the Social Security Act 1990 introduced a statutory debt regime by amending the Social Security and Pensions Act 1975, and (ii) the Pensions Act 1995 (the 1995 Act) introduced a minimum funding requirement regime. These were perceived to be inadequate in some respects, and the 2004 Act introduced a financial support direction (FSD) regime. The regimes under these Acts were introduced against the backdrop of European Directives, which require member states to take measures to protect the interests of employees or ex employees in relation to pension rights in the event of their employers insolvency. Section 75 of the 1995 Act Although it is the FSD regime under the 2004 Act which is of central importance on these appeals, section 75 of the 1995 Act is highly relevant. It provides that upon the happening of various events, which include an insolvency event, an amount equivalent to any shortfall in the assets of an occupational pension scheme (a scheme) as against its liabilities, which exists immediately prior to the relevant event, is to be a debt, known as a section 75 debt, due from the employer to the trustees of the scheme (the trustees). Under the section as originally drafted, an insolvency event was limited to the employer going into insolvent liquidation, but the 2004 Act extended the expression to include going into administration. In this judgment I shall similarly use the expression to cover going into administration or going into insolvent liquidation. Section 75(8) provides that a section 75 debt is not to be regarded as a preferential debt for the purposes of the 1986 Act. Section 75(4A) states that a section 75 debt is to be taken, for the purposes of an employers insolvency, to arise immediately before the occurrence of the insolvency event. The 2004 Act: the Regulator and the PPF The 2004 Act introduced both the Pensions Regulator (the Regulator) and the Pension Protection Fund (the PPF). The Regulator is a body corporate established by section 1, and, by section 4, it is given wide regulatory functions. When exercising any of those functions, the Regulator is required by section 100 to have regard to: 2(a) the interests of the generality of the members of the scheme to which the exercise of the function relates, and (b) the interests of such persons as appear to the Regulator to be directly affected by the exercise. Section 5(1) defines the Regulators main objectives, which include protecting the benefits of members of schemes, and reducing the risk of compensation having to be paid by the PPF. The PPF is financed from levies upon schemes. It operates by assuming the assets and liabilities of a deficient scheme, and then paying its members compensation at a prescribed rate (generally less than the full rate promised under the relevant scheme), using the industry wide levies for the purposes of meeting the shortfall between the deficient schemes assets and the prescribed level of compensation. The 2004 Act: the FSD regime and FSDs It was perceived that the creation of the PPF might encourage some employers to arrange their affairs so as to throw the burden of pension scheme deficiencies upon the PPF, which would unfairly burden other schemes by increasing the amount of the levies. An example of such an arrangement is where a group of companies uses a single company (a service company) to employ people who then work for other group companies. In such a case, the employees pension rights could be regarded as unfairly prejudiced if, by comparison with the resources of other group companies, the service company had very limited resources to meet a section 75 debt. The FSD regime was designed to mitigate such problems. In a nutshell, it enables the Regulator in specified circumstances (i) to impose, by the issue of a FSD to some or all of the other group companies (known as targets), an obligation to provide reasonable financial support to the under funded scheme of the service company or insufficiently resourced employer, and (ii) to deal with non compliance with that obligation by imposing, through a Contribution Notice (a CN), a specific monetary liability payable by a target to the trustees. The detailed provisions of the FSD regime are contained in sections 43 to 51 of the 2004 Act, and in the Pensions Regulator (Financial Support Directions etc) Regulations 2005 (SI 2005/2188) (the FSD Regulations). Section 43 is of central importance. Subsection (1) explains that the FSD regime extends to all occupational pension schemes other than money purchase schemes and certain other prescribed schemes. Section 43(2) contains the so called employer condition, and provides as follows: The Regulator may issue a [FSD] in relation to such a scheme if the Regulator is of the opinion that the employer in relation to the scheme (a) is a service company, or (b) is insufficiently resourced, at a time determined by the Regulator which falls within subsection (9) (the relevant time). Section 43(9) and the FSD Regulations define the relevant time as any time within a period of two years before the date of the determination of the Regulator to issue the FSD in question. It is known as the look back date. Service company is defined in section 44(2) as being a company within a group of companies which, by reference to its turnover, can be seen to be principally engaged in providing the services of its employees to other member companies in the group. Section 44(3) to (5) and the FSD Regulations explain that an employer is insufficiently resourced if two tests are satisfied. The first is that the value of its resources is less than 50% of the estimated section 75 debt in relation to a scheme, the amount of the shortfall being the relevant deficit. Secondly (limiting the situation to those involving companies), there must be a company which has (or two or more companies which between them have) resources not less than the relevant deficit, and which is (or are), inter alia, a company which is (or companies which are) connected with, or an associate of the employer (section 43(6)(c)). The 2004 Act and the FSD Regulations contain detailed provisions as to the manner in which a persons resources are to be assessed. Whereas the resources of an employer are incapable of being defined as having a negative value, the resources of persons associated or connected with the employer may be so defined. The formula for determining whether the insufficiently resourced condition is satisfied is known as the rich man/poor man test. The employer condition operates entirely by reference to the look back date chosen by the Regulator, rather than at the time when the FSD is issued (the issue date). Accordingly, the fact that, as at the date the FSD is issued, an employer may have ceased to be a service company, or the rich man/poor man test is not met, would not preclude a FSD. As to the target, section 43(4) provides that a FSD in relation to a scheme may be issued to one or more persons, but subsection (5)(a) limits the issue of a FSD to persons falling within subsection (6) at the relevant time (i.e. the look back date). Section 43(6)(a) and (c) respectively limit that class to the employer itself and, for present purposes, to a person who is connected with or an associate of the employer at the look back date. It is therefore irrelevant that, by the issue date, one or more targets which had the requisite net worth to satisfy the rich man part of the rich man/poor man test as at the look back date may no longer be solvent. Further, section 43(5)(a) does not limit the range of potential targets to those which satisfy the rich man part of the rich man / poor man test at the look back date. Section 43(5)(b) states that a FSD can only be issued to a particular target if the Regulator is of the opinion that it is reasonable to impose the requirements of the direction on that person; this is often called the reasonableness condition. Section 43(3) states that a FSD should: [require] the person or persons to whom it is issued to secure (a) that financial support for the scheme is put in place within the period specified in the direction, (b) that thereafter that financial support or other financial support remains in place while the scheme is in existence, and (c) that the Regulator is notified in writing of prescribed events in respect of the financial support as soon as reasonably practicable after the event occurs. Prescribed events include an insolvency event affecting the employer and any target, and any failure to comply with the requirements of the FSD. Section 45(1) and (2) define financial support as one or more of the following arrangements: (a) an arrangement whereby all the members of the group are jointly and severally liable for the whole or part of the employers pension liabilities in relation to the scheme; (b) [a legally binding] arrangement whereby a company which meets [certain] requirements and is the holding company of the group is liable for the whole or part of the employers pension liabilities in relation to the scheme; (c) an arrangement which meets [certain] requirements and whereby additional financial resources are provided to the scheme ; (d) such other arrangements as may be prescribed. Subsection 45(3) states that the Regulator may only approve any arrangement if satisfied that it is reasonable in the circumstances. Subsection 45(4) explains that the employers pension liabilities include, but are not limited to, the employers section 75 debt. A FSD will not itself either contain or be accompanied by a specification of what would constitute reasonable arrangements. It will simply require that the target secures that financial support for the scheme is put in place. It is for the target (alone or in conjunction with other targets) to propose reasonable arrangements for written approval by the Regulator. What the FSD must specify, pursuant to subsection 43(3)(a), is the period within which financial support for the scheme is to be put in place. By contrast, the period during which that support is to remain in place is, by reference to subsections 43(3)(b) and (10), the whole of the period until the scheme is wound up. Section 43(7) provides that, when deciding whether it is reasonable to impose the requirements of a FSD, the Regulator is to have regard to such matters as the Regulator considers relevant including, where relevant, the following matters: (a) the relationship which the person has or has had with the employer (including whether the person has or has had control of the employer ), (b) in the case of a person falling within [section 43(6)(c)], the value of any benefits received by that person from the employer, (c) any connection or involvement which the person has or has had with the scheme, (d) the financial circumstances of the person, . The FSD regime is capable of applying to almost any company within a group which has a service company, or a potentially insufficiently resourced employing company, with a potentially under funded scheme. Accordingly, the consequential contingent liabilities it creates could undermine the financial stability of potential targets. Section 46(2) attempts to mitigate this problem by providing for applications to the Regulator to determine that: (a) the employer in relation to the scheme would not be a service company for the purposes of section 43, (b) the employer in relation to the scheme would not be insufficiently resourced for the purposes of that section, or (c) it would not be reasonable to impose the requirements of a financial support direction, in relation to the scheme, on the applicant. Once issued, such a clearance statement binds the Regulator in relation to the power to issue a FSD unless there has been a relevant change of circumstances from those described in the application. The 2004 Act: the FSD regime and CNs The Regulator can issue a CN where there has been non compliance with a FSD. Whereas a single FSD can be issued in relation to a scheme (albeit to one or more targets), CNs are only to be issued on a target by target basis. Thus, section 47(4)(d) expressly contemplates that a CN may be issued to one target, where others have proposed arrangements in response to a FSD which have received the Regulator's approval. Section 47(3) imposes a reasonableness condition upon the issue of a CN to a particular target. Potentially relevant considerations are listed in subsection (4). In addition to those listed in section 43(7) in relation to FSDs, there are two further considerations, namely: (a) whether the person has taken reasonable steps to secure compliance with the financial support direction [and] (d) the relationship which the person has or has had with the parties to any arrangements put in place in accordance with the direction (including, where any of those parties is a company within the meaning of subsection (11) of section 435 of the Insolvency Act 1986, whether the person has or has had control of that company within the meaning of subsection (10) of that section). By contrast with a FSD, a CN is required to be specific as to the amount payable by the target. By section 47(2) the notice must state that the target is under a liability to pay the scheme trustees or managers a specified sum. By section 48, that sum is to be either the whole or a specified part of the amount which the Regulator estimates to be the amount of the section 75 debt at the time of non compliance with the FSD section 75 debt (if by then crystallised) or (if not crystallised) the Regulators estimate of what such debt would be if it had crystallised at that date. Section 49(3) provides that [t]he sum specified in the notice is to be treated as a debt due from the person to the trustees or managers of the scheme. Provision is also made for the Regulator (or, in specified circumstances, the Board of the PPF) to exercise any powers of the trustees or managers to recover the debt. CNs can be issued to two or more targets, and to create joint and several liability for a specified amount. Section 50 enables the Regulator to restrain the trustees or managers of the scheme from pursuing recovery of the section 75 debt while, at the same time, a CN is being enforced. Section 50(6) ensures that any payments under a CN are treated as reducing the amount of the section 75 debt. Finally, section 50(9) enables the Regulator to reduce the amount specified in a CN where, for example, there have in the meantime been payments of part of the section 75 debt. The 2004 Act: Procedure The 2004 Act and the FSD Regulations lay down a fairly elaborate procedural code for the implementation of functions of the Regulator, including the FSD regime. The functions of the Regulator are divided between regulatory functions, which are exercisable by its executive arm, and reserved regulatory functions, which must be exercised by its Determinations Panel (the DP). Decisions to issue a FSD and a CN are reserved functions, whereas the decision whether to give written approval to proposed arrangements under section 45 is not. Although the Regulator has a degree of discretion as to its procedure, in relation to the FSD regime it must comply with what is called in section 96 the standard procedure, which involves, as a minimum: 2(a) the giving of notice to such persons as it appears to the Regulator would be directly affected by the regulatory action under consideration (a warning notice), (b) those persons to have an opportunity to make representations, (c) the consideration of any such representations and the determination whether to take the regulatory action under consideration, (d) the giving of notice of the determination to such persons as appear to the Regulator to be directly affected by it (a determination notice), (e) the determination notice to contain details of the right of referral to the Tribunal . The issue of a FSD and a CN must each be subject to this procedure. The Tribunal is now the Upper Tribunal (Tax and Chancery Chamber), from which an appeal lies to the Court of Appeal. By section 103(4) the Tribunal must, on a reference, determine what (if any) is the appropriate action for the Regulator to take in relation to the matter referred to it. The Tribunal must therefore approach the issue before it afresh rather than by way of reviewing the decision of the Regulator or the DP. It is worth briefly summarising the timescale involved in these procedures. Before implementing the standard procedure, the Regulator must identify a pension fund which appears to be at risk, and investigate whether the conditions for the implementation of the FSD regime are satisfied; it must then address all matters relevant to the exercise, including the reasonableness condition for the issue of a FSD to each potential target. The ensuing standard procedure potentially involves six stages at which the target and others can make representations, namely (i) after a warning notice, (ii) following a determination (before the Tribunal), (iii) following a FSD, (iv) after a warning notice that a CN may be issued, (v) upon a determination that it should be issued (before the Tribunal), (vi) even after the issue of a CN, an adjustment may be asked for in the light of payments by others. At every stage, the Regulator or the Tribunal is required to have regard to the interests of the target as a person directly affected. The Insolvency legislation Administration and liquidation For present purposes, there are two relevant types of corporate insolvency procedure, administration and liquidation. Liquidation, or winding up, has always been a feature of company law, and it can be invoked whether or not a company is insolvent, although insolvent liquidations are more common. Administration was first introduced by the 1986 Act. At that time, it did not allow for distributions to creditors of the company within the administration. If the administration did not succeed in rescuing the company, it was expected that a winding up would follow, and the available assets would be distributed to creditors within the liquidation. The Enterprise Act 2002 (the 2002 Act) rendered it possible for assets to be distributed to creditors by administrators, so that a winding up can be avoided. (Conversely, a company which is in liquidation may now come out of it and go into administration.) There may be companies which go into liquidation without having been in administration, but most of those companies with which the present cases are concerned (apart from one which is not insolvent) are in administration, and may or may not eventually go into liquidation (and two of the Lehman group companies are neither in administration nor in liquidation). In general, the unsecured debts of a company after an insolvency event are payable pari passu to the relevant creditors, who claim payment by proving for their debts. There has to be a cut off date to determine the class of creditors who are to participate in the distribution of the company's available net assets. As the law stood as regards the companies with which these appeals are concerned, the cut off date for claims in a liquidation is the date on which the company goes into liquidation, whether or not the liquidation was immediately preceded by an administration. The cut off date for claims in an administration is the date on which the company entered administration. Under this regime, if an administration is followed immediately by a liquidation, the debts provable in the liquidation would include any which arise during the administration, although debts provable in the administration would be limited to those arising before the administration. Before turning to the relevant statutory provisions, two points may be worth noting in passing. First, the position described in para 35 above has now changed. The cut off date for claims in a liquidation, which follows an administration started after 5 April 2010, is the date when the administration began. The same issue as arises in these appeals can still arise. However, there will no longer be an artificial distinction between the positions where the company proceeds from administration to winding up and where it does not. The change will tend to increase the importance of the dispute as to the correct treatment for insolvency purposes of the liabilities arising under a FSD or a CN. Secondly, in relation to the companies in the present cases, it is common ground that if a liability of such a company arises during the administration, and a winding up were to follow later, that liability can be the subject of proof in the liquidation. The relevant provisions of the 1986 Act and the Insolvency Rules In a liquidation of a company and in an administration (where there is no question of trying to save the company or its business), the effect of insolvency legislation (currently the 1986 Act and the Insolvency Rules, and, in particular, sections 107, 115, 143, 175, 176ZA, and 189 of, and paras 65 and 99 of Schedule B1 to, the 1986 Act, and rules 2.67, 2.88, 4.181 and 4.218 of the Insolvency Rules), as interpreted and extended by the courts, is that the order of priority for payment out of the companys assets is, in summary terms, as follows: (1) Fixed charge creditors; (2) Expenses of the insolvency proceedings; (3) Preferential creditors; (4) Floating charge creditors; (5) Unsecured provable debts; (6) Statutory interest; (7) Non provable liabilities; and (8) Shareholders. So far as expenses of an insolvency are concerned, rule 12.2 of the Insolvency Rules (rule 12.2) states that: (1) All fees, costs, charges and other expenses incurred in the course of winding up, administration or bankruptcy proceedings are to be regarded as expenses of the winding up or the administration or, as the case may be, of the bankruptcy. As to expenses in a liquidation, rule 4.218 (rule 4.218) provides: (1) All fees, costs, charges and other expenses incurred in the course of the liquidation are to be regarded as expenses of the liquidation. (3) [T]he expenses are payable in the following order of priority (a) expenses properly chargeable or incurred by the official receiver or the liquidator in preserving, realising or getting in any of the assets of the company or otherwise in the preparation or conduct of any legal proceedings . or in the preparation or conduct of any negotiations; (e) the cost of any security provided by a liquidator; (m) any necessary disbursements by the liquidator in the course of his administration ; (n) the remuneration or emoluments of any person who has been employed by the liquidator to perform any services for the company ; (o) the remuneration of the liquidator ; (p) the amount of any corporation tax on chargeable gains accruing on the realisation of any asset of the company; (r) any other expenses properly chargeable by the liquidator in carrying out his functions in the liquidation. The equivalent provision in relation to the expenses of an administration is rule 2.67(1) (rule 2.67(1)), which states that The expenses of the administration are payable in the following order of priority, namely, (a) expenses properly incurred by the administrator in performing his functions in the administration of the company; (b) the cost of any security provided by the administrator in accordance with the Act or the Rules; (d) any amount payable to a person employed to assist in the preparation of a statement of affairs .; (f) any necessary disbursements by the administrator in the course of the administration ; (g) the remuneration or emoluments of any person who has been employed by the administrator to perform any services for the company .; (h) the remuneration of the administrator ; (j) the amount of any corporation tax on chargeable gains accruing on the realisation of any asset of the company . Where the assets of the company are insufficient to meet the totality of the expenses, rule 2.67(2) and (3) gives the court power to make an order as to the payment out of the assets of the expenses incurred in the administration in such order of priority as the court thinks just. Turning to unsecured debts and liabilities which are not expenses or preferential debts, rules 4.181 and rule 2.69 of the Insolvency Rules apply to liquidations and administrations respectively, and make it clear that, in so far as they are provable, they rank equally and, if there is insufficient money to meet them all, that they are to be abate[d] in equal proportions among themselves. In relation to what constitutes a provable debt, rule 12.3 of the Insolvency Rules in its form which applies to the instant administrations (rule 12.3) is headed Provable debts, and it provides as follows: (1) Subject as follows, in administration, winding up and bankruptcy, all claims by creditors are provable as debts against the company , whether they are present or future, certain or contingent, ascertained or sounding only in damages. (3) Nothing in this Rule prejudices any enactment or rule of law under which a particular kind of debt is not provable, whether on grounds of public policy or otherwise. Rule 13.12 of the Insolvency Rules (rule 13.12) is of critical importance on these appeals and it states: (1) Debt in relation to the winding up of a company, means. any of the following (a) any debt or liability to which the company is subject at the date on which the company went into liquidation; (b) any debt or liability to which the company may become subject after that date by reason of any obligation incurred before that date; (2) For the purposes of any provision of the Act or the Rules about winding up, any liability in tort is a debt provable in the winding up, if either (a) the cause of action has accrued at the date on which the company went into liquidation; or (b) all the elements necessary to establish the cause of action exist at that date except for actionable damage. (3) For the purposes of references in any provision of the Act or the Rules about winding up to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent, or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion . (4) except in so far as the context otherwise requires, liability means (subject to paragraph (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment, and any liability arising out of an obligation to make restitution. (5) This Rule shall apply where a company is in administration and shall be read as if references to winding up were references to administration. The relevant facts The Lehman group The Lehman group was a very substantial international financial concern which notoriously collapsed on 15 September 2008. The main London based group companies in the group were placed into administration that day, and I will refer to the administrators as the Lehman Administrators. The ultimate parent company of the Lehman group is Lehman Brothers Holdings Inc. (LBHI), a company incorporated in Delaware USA, which commenced Chapter 11 bankruptcy proceedings in September 2008, and emerged from them in March 2013. The main UK operating company is Lehman Brothers International (Europe) (LBIE), an unlimited company. The principal Lehman employer company within the UK, providing employees on secondment for most of the group's European activities, based in London, is Lehman Brothers Limited (LBL). When LBL went into administration on 15 September 2008, it crystallised a section 75 debt in relation to the Lehman Brothers Pension Scheme of approximately 120m. LBL is a shareholder in LBIE, and therefore liable without limit for LBIEs liabilities. Both LBIE and Lehman Brothers Europe Limited (LBEL), the other main London operating company, are subsidiaries of Lehman Brothers Holdings plc (LBH), which is itself wholly owned by Lehman Brothers UK Holdings Limited (LBUKH), which is in turn an indirect subsidiary of LBHI. Shortly after the Lehman group crash, the Regulator began investigations, with the consent of the Lehman Administrators, into the Lehman companies pursuant to notices under section 72 of the 2004 Act. Warning notices were issued to a number of Lehman group companies on or after 24 May 2010 on the ground that LBL was a service company, and the other requirements of section 43 of the 2004 Act were satisfied. There was then an oral hearing in September 2010 before the DP (at which the Lehman Administrators solicitors attended to observe, but made no submissions). A determination was then made by the DP on 13 September 2010 that a FSD should be issued against six Target companies, namely LBHI, LBIE, LBEL, LBH, LBUKH and Lehman Brothers Asset Management (Europe) Limited, which is no longer part of the Lehman group and is now called Neuberger Newman Europe Limited. The FSD process in relation to the Lehman companies is now stayed until after the outcome of these applications. The Nortel Group Prior to its collapse in January 2009, the Nortel group carried on a very substantial international telecommunications, computer network and software business. Its ultimate parent company is Nortel Networks Corporation (NNC) based in Canada. Its main Canadian operating company was Nortel Networks Limited (NNL) and its substantial USA business was headed by Nortel Networks Inc. (NNI), a direct subsidiary of NNL. The group's principal operating company in the UK was Nortel Networks UK Limited (NNUK) which is also a direct subsidiary of NNL. Since June 2000 it is principal Nortel employer in relation to the Nortel Networks UK Pension Plan (the Nortel Scheme). NNUK had a number of subsidiaries incorporated in various European countries. In addition, the European business was also carried on by certain European subsidiaries of NNL, including the applicants Nortel Networks SA, Nortel Networks France SAS and Nortel Networks (Ireland) Limited. At the time of the group's collapse in January 2009, NNUKs section 75 debt crystallised in an amount of about 2.1bn. Upon the group's collapse, NNC and NNL sought protection under Canadian bankruptcy law to facilitate the reorganisation of the group for the benefit of its creditors. On the same day NNI was placed into Chapter 11 bankruptcy in the United States, whilst NNUK, fifteen of its subsidiaries and the three European subsidiaries of NNL referred to above were placed into administration in England. The English administrators of the nineteen Nortel companies (the Nortel Administrators) have cooperated with other Nortel group office holders worldwide, in the process of selling the Nortel groups businesses along business rather than corporate demarcation lines and total global realisations of approximately US$7.5bn have been made. The Regulator's investigations into the Nortel Scheme began in early 2009, with the benefit of information provided by the Nortel Administrators. A warning notice was issued on 11 January 2010 to twenty nine Target companies in the Nortel group, on the basis that NNUK was insufficiently resourced and the other requirements of section 43 of the 2004 Act were satisfied. Representatives of the Nortel Administrators were present as observers, but did not make any representations at the oral hearing before the DP on 2 June 2010. After that hearing, the DP issued a determination notice on 25 June 2010 deciding that a FSD should be issued to the applicant Nortel companies, together with certain other Target companies. Following a reference to the Tribunal by the applicant Nortel companies and certain other of the Target companies, the automatic stay of the FSD process means that no FSD has yet been issued to those referring Target companies. The Tribunal proceedings have been informally stayed pending the outcome of these applications. Overview The issue in both appeals is how the administrators of a target should treat the targets potential liability under the FSD regime (and in due course the liability under a CN) in a case where the FSD is not issued until after the target has gone into administration. The courts below both held that the potential liability constituted an expense of the administration, falling within category (2) as described in para 39 above, so that it took priority over the normal run of unsecured creditors and even over the preferential creditors. Four possibilities have been canvassed before us. The first is that the courts below were right. The second is that the potential liability is an ordinary provable unsecured debt, ranking pari passu with other unsecured debts falling within category (5). The third possibility is that it is not a provable debt within rule 13.12, and therefore it falls within category (7). The fourth possibility is that, if the third is correct, then the court could and should direct the administrators to treat the potential FSD liability more favourably. Counsel representing the various parties very sensibly divided up the issues between them, so as to ensure that there was no repetition, and it is right to record the courts gratitude for the way the appeals were argued. Both Briggs J and the Court of Appeal felt constrained by a consistent line of authority, of which the most recent is R (Steele) v Birmingham City Council [2006] 1 WLR 2380, from holding that the potential liability as a result of a FSD issued after the commencement of an insolvent administration or liquidation (which I will refer to as an insolvency event) could constitute a provable debt within rule 12.3, although it appears that they would have so held if they had felt able to do so (see eg Briggs Js reluctance at para 191 of his judgment). They also considered that the effect of the House of Lords decision in In re Toshoku Finance UK plc [2002] 1 WLR 671 was that the potential liability was to be treated as an expense of the administration. Before this court, it was common ground that the potential liability under a FSD could not be both a provable debt and an expense of the administration, but there was discussion as to which should be considered first. In some cases, a liability which would otherwise be a provable debt can be, on special facts, an expense of the administration or liquidation (as in In re ABC Coupler and Engineering Co Ltd (No 3) [1970] 1 WLR 702), which may seem to suggest that the expense issue should be considered first. However, in the light of the common ground in this case, it appears to me that it is appropriate to consider the provable debt issue first, although it would be wrong not to address the expense question as well. Before I turn to examine in detail the arguments on the two issues, it is right to say that, at any rate on the face of it, the sensible and fair answer would appear to be that the potential liability of a target, under a FSD issued after an insolvency event, and in particular the liability under a CN issued thereafter, should be treated as a provable debt. There seems no particular sense in the rights of the pension scheme trustees to receive a sum which the legislature considers they should be entitled to receive having any greater or any lesser priority than the rights of any other unsecured creditor. It is common ground that if a CN had been issued in respect of a company before an insolvency event, it would give rise to a provable debt, and the courts below considered that, if a CN were issued after an insolvency event, it would give rise to a provable debt if it was based on a FSD issued before the insolvency event. It appears somewhat arbitrary that the characterisation and treatment of the liability under the FSD regime should turn on when the FSD or CN happens to have been issued, if it is based on a state of affairs which existed before the insolvency event. The notion that the potential liability under the FSD regime should be a provable debt if the FSD is issued after the administration or liquidation is supported by the fact any section 75 debt would itself be a provable debt, and not a preferential debt, in any insolvent liquidation or administration of an employer. That is clear from the provisions summarised in para 7 above. It would be strange if the employer companys statutory obligation to make good a shortfall in its employees pension scheme ranked lower in its insolvency than the more indirect statutory obligation of a target to make that deficiency good ranked in the targets insolvency. Indeed, it would be somewhat surprising if there was any significant difference in the treatment of the two types of obligation, in the light of the interrelationship between the FSD regime and the section 75 debt as evidenced for instance by section 50(6) of the 2004 Act. If the decisions below were correct, it would also mean that the legislature had given the Regulator a significantly valuable and somewhat arbitrary power, in what may (in the light of what is said in para 63 below) be an admittedly rare case in practice. Where the Regulator is proposing to issue a FSD in respect of a company not yet in administration or liquidation, it would be well advised to wait for the insolvency event, if the decisions below are right, because the amount recoverable under a subsequent CN would inevitably be greater than under a CN issued following a FSD issued before the insolvency event. The liability under the FSD regime could be said to be some sort of indirect liability for past wages of employees, as pensions are often treated as deferred pay. However, quite apart from the fact that that argument involves a considerable stretch (not least because the liability is not that of the employer or former employer), it would prove too much. If the potential liability under consideration in these appeals counted as expenses, they would rank ahead of past wages and holiday pay, which have preferential status ie they would fall within category (3), not (5), in para 39 above. It also seems unlikely that it can have been intended that liability under the FSD regime could rank behind provable debts. One would have expected that FSDs and CNs would normally be issued in respect of insolvent companies (that certainly appears to have been the invariable experience so far); accordingly, it would mean that, save in very unusual cases, nothing would be paid in respect of most FSDs issued after an insolvency event. Further, it would be a relatively unusual case where a FSD, let alone a CN, was issued before an insolvency event. As Briggs J said, the investigations, steps and opportunity for representations, required by the 2004 Act, as summarised in para 34 above, are such that a FSD would rarely be issued for many months after the Regulator is first aware of a possible problem, and the time before a CN could be issued could easily be much more than a year. With those preliminary observations, I turn to consider whether the liability under a FSD issued after a target has gone into administration or liquidation (ie after an insolvency event) is (i) a provable debt, or (ii) an expense of the administration/ liquidation, and (iii) if it is neither, whether the court can require the administrator or liquidator to treat it as if it was. Is the liability under a FSD issued after an administration a provable debt? In the light of the reference in rule 13.12(4) to any liability under an enactment, it appears clear that a liability under a CN, which on any view imposes a duty on the target to pay a sum of money, would be capable of giving rise to a liability. The question, therefore, is whether the potential liability under a FSD which was issued after an insolvency event is capable of being a liability falling within the ambit of rule 13.12(1). The definition of provable debt in rule 12.3 is strikingly wide, particularly when the rule is read together with rule 13.12, which defines debt. It is therefore unsurprisingly not in issue that the consequences for a target of, or at least following, the issuing of a FSD constitute a liability within the meaning of rule 13.12. However, where a FSD is issued after the target goes into administration or liquidation, the argument which has to be addressed is whether any potential liability thereby created falls within rule 13.12(1), because, if it does not, then it cannot constitute a debt for the purposes of the rule, and therefore cannot be a provable debt for the purposes of rule 12.3. The primary argument advanced in support of the contention that the potential liability under a FSD notice issued after the insolvency event gives rise to a provable debt was based on the contention that it would be a liability to which the company may become subject after [the insolvency event] by reason of any obligation incurred before that date within rule 13.12(1)(b). However, it was also argued that, in the light of the very wide ambit of rule 13.12(3) and its reference to future, contingent and matter of opinion, the potential liability would fall within rule 13.12(1)(a), as the potential liability was, as at the date of the insolvency event, a liability to which the company is subject. Does the potential liability fall within rule 13.12(1)(a)? It is convenient first to deal with the argument that potential liability under a FSD issued against a company after the start of its administration or liquidation gives rise to a liability which falls under rule 13.12(1)(a). This argument is based on the simple proposition that the risk of being issued with a FSD is a contingent liability, and is therefore a liability for the purposes of rule 13.12(1)(a) as a result of rule 13.12(3). If this argument was right, it would avoid the possible problem thrown up by the closing ten words of rule 13.12(1)(b). The argument would be easy to understand were it not for rule 13.12(1)(b). Para (b) of rule 13.12(1) contains a limitation, in that it provides that, if a company in liquidation or administration becomes subject to a liability after the date of the insolvency event, then that liability can only be treated as a debt under that paragraph if it arises by reason of any obligation incurred before that date. If para (a) of rule 13.12(1) could apply to a liability which arises after the insolvency event, then it would not only render para (b) otiose, but it would also effectively override this limitation. In other words, the very limitation which rule 13.12(1)(a) is being invoked to avoid represents the reason why rule 13.12(1)(a) cannot be invoked. It is fair to say that it is somewhat ironic to invoke para (b) to limit the ambit of para (a), when it would appear that the purpose of para (b) is to extend the ambit of para (a). However, the provisions of the Insolvency Rules, and of each rule of those Rules, have to be read in a sensible and coherent way, and one has to read paras (a) and (b) so that they work together. I agree with the view expressed by David Richards J in In re T & N Ltd [2006] 1 WLR 1728, para 115, that para (a) is concerned with liabilities to which the company is subject at the date of the insolvency event, whereas para (b) is directed to those liabilities to which it may become subject subsequent to that date, and that there is no overlap between these two categories. Accordingly, if there is a debt or liability in this case, it cannot fall within para (a): the issue is whether it falls within para (b). Does the potential liability fall within Rule 13.12(1)(b)? There is no doubt that the liability which is imposed on a target on the issuing of a FSD after the commencement of its administration or liquidation is a liability for the purposes of rule 13.12(1)(b), as it is a liability under an enactment within rule 13.12(4). The question is, however, whether it can be said to be a liability which arose by reason of any obligation incurred before the insolvency event. In these cases, a Target companys liability under the FSD scheme arises because it was a member of a group of companies, which, to put it very loosely, fell within the scope of the regime (as the group included a company which had a pension scheme, and that company was a service company, or insufficiently resourced). In order for the liability in issue to fall within rule 13.12(1)(b), therefore, the fact that the Target company was a member of such a group must amount to a sufficient obligation incurred within the meaning of that rule, before the target went into administration. Timing is no problem in the present cases, because each of the Target companies in the Lehman and Nortel groups were members of a group which fell within the scope of the regime, as I have used that expression, well before they went into administration. That issue thus centres on the meaning of the word obligation in rule 13.12(1)(b). The meaning of the word obligation will, of course, depend on its context. However, perhaps more than many words, obligation can have a number of different meanings or nuances. In many contexts, it has the same meaning as liability, but it clearly cannot have such a meaning here. Indeed, in the context of rule 13.12, it must imply a more inchoate, or imprecise, meaning than liability, as the liability is what can be proved for, whereas the obligation is the anterior source of that liability. Where a liability arises after the insolvency event as a result of a contract entered into by a company, there is no real problem. The contract, in so far as it imposes any actual or contingent liabilities on the company, can fairly be said to impose the incurred obligation. Accordingly, in such a case the question whether the liability falls within para (b) will depend on whether the contract was entered into before or after the insolvency event. Where the liability arises other than under a contract, the position is not necessarily so straightforward. There can be no doubt but that an arrangement other than a contractual one can give rise to an obligation for the purposes of para (b). That seems to follow from rule 13.12(4). As Lord Hoffmann said, (albeit in a slightly different context) in relation to contingent liabilities arising on a liquidation, in Secretary of State for Trade and Industry v Frid [2004] 2 AC 506, para 19, [h]ow those debts arose whether by contract, statute or tort, voluntarily or by compulsion is not material. However, the mere fact that a company could become under a liability pursuant to a provision in a statute which was in force before the insolvency event, cannot mean that, where the liability arises after the insolvency event, it falls within rule 13.12(1)(b). It would be dangerous to try and suggest a universally applicable formula, given the many different statutory and other liabilities and obligations which could exist. However, I would suggest that, at least normally, in order for a company to have incurred a relevant obligation under rule 13.12(1)(b), it must have taken, or been subjected to, some step or combination of steps which (a) had some legal effect (such as putting it under some legal duty or into some legal relationship), and which (b) resulted in it being vulnerable to the specific liability in question, such that there would be a real prospect of that liability being incurred. If these two requirements are satisfied, it is also, I think, relevant to consider (c) whether it would be consistent with the regime under which the liability is imposed to conclude that the step or combination of steps gave rise to an obligation under rule 13.12(1)(b). When deciding whether a particular state of affairs or relationship is sufficient to amount to the incur[ring] of an obligation, by reason of which the liability arose, considerable assistance can, I think, be gained from the majority decision in Winter v Inland Revenue Commissioners, In re Sutherland (decd) [1963] AC 235. That case was concerned with whether an arrangement was within the expression contingent liabilities in section 50 of the Finance Act 1940. As Lord Reid explained at p 247, at the relevant date, the position of the company was that, by applying for and accepting allowances in respect of these ships, it had become bound by the statute to pay tax under a balancing charge when it ceased to use these ships in its trade, if the moneys which it received for them exceeded any expenditure on them which was still unallowed. contingent liability as at the relevant date. Lord Reid said this at p 248: [I]f an Act says I must pay tax if I trade and make a profit, I am not before I begin trading under a contingent liability to pay tax in the event of my starting trading. In neither case have I committed myself to anything. But if I agree by contract to accept allowances on the footing that I will pay a sum if I later sell something above a certain price I have committed myself and I come under a contingent liability to pay in that event. In those circumstances, the majority concluded that the obligation was a Reference to a passage in Lord Hodsons dissenting speech highlights the effect of this reasoning. At p 257, he said that he thought that the risk of attracting liability is not enough and the argument involves a misconception of what is meant by contingent liabilities in their context, and went on to point out that [t]here may be no day of reckoning; the ships may never be sold; if there is a sale there may be a balancing allowance not a balancing charge. This contrast is also highlighted by what Lord Guest (who agreed with Lord Reid) said at p 264: The claim for initial allowances for what has been described as depreciation is the voluntary choice of the taxpayer, but, once he has obtained such allowances, he is automatically involved by the operation of law in the payment of balancing charges, if the assets are parted with at a price greater than the written down value in the circumstances defined in section 292 of the Income Tax Act, 1952 It is true that in Sutherland, the House of Lords was concerned with the meaning of contingent liabilities in the context of estate duty, whereas these appeals are concerned with the meaning of obligation from which a contingent liability derives in insolvency legislation. It was suggested that the reasoning of Lord Reid should not, therefore, be relied on here. I do not agree. Lord Reid gave a characteristically illuminating and authoritative analysis of an issue of principle. It appears to me that the issue of (i) what is a contingent liability and (ii) what is an obligation by reason of which a contingent liability arises, are closely related. In Sutherland the House had to decide whether what a company had done was sufficient, in Lord Reids words, to have committed [it]self to a contingent liability. As I see it, that is much the same thing as having incurred an obligation from which a contingent liability may arise, for the purposes of rule 13.12(1)(b). I note that the approach to contingent liabilities adopted in Sutherland was considered helpful in two cases concerned with insolvency law decided by judges experienced in the field Pennycuick J In re SBA Properties Ltd [1967] 1 WLR 799, 802D 803E, and David Richards J in In re T & N Ltd, [2006] 1 WLR 1728, paras 48 61. In the latter case, the judge pointed out at para 61 that the case before him was, as these cases are, in one important respect a stronger case than Sutherland, because the majority did not regard as decisive that the liability to pay the balancing charges would arise only as a result of the company's own choice to sell the ships. In this case there is no question of volition. The reasoning of Lord Reid, and of Lord Guest, in Sutherland self evidently supports the argument that the potential FSD regime liabilities in the present cases fall within rule 13.12(1)(b), even where the FSD is not issued until after the relevant insolvency event. More specifically, if one asks whether those potential liabilities of the Target companies in these two appeals satisfy the requirements suggested in para 77 above, it appears to me that the answer is yes. As to the first requirement, on the date they went into administration, each of the Target companies had become a member of a group of companies, and had been such a member for the whole of the preceding two years the crucial look back period under the 2004 Act. Membership of a group of companies is undoubtedly a significant relationship in terms of law: it carries with it many legal rights and obligations in revenue, company and common law. As to the second requirement, by the date they went into administration, the group concerned included either a service company with a pension scheme, or an insufficiently resourced company with a pension scheme, and that had been the position for more than two years. Accordingly, the Target companies were precisely the type of entities who were intended to be rendered liable under the FSD regime. Given that the group in each case was in very serious financial difficulties at the time the Target companies went into administration, this point is particularly telling. In other words, the Target companies were not in the sunlight, free of the FSD regime, but were well inside the penumbra of the regime, even though they were not in the full shadow of the receipt of a FSD, let alone in the darkness of the receipt of a CN. So far as the third requirement is concerned, I would simply refer back to the points made in paras 58 63 above. The earlier authorities I should refer to the authorities which the Court of Appeal and Briggs J understandably held bound them to reach a contrary conclusion. Those authorities were mostly concerned with individual bankruptcy rather than corporate insolvency. However, the meaning of the expression debt in the two regimes is very similar: rule 12.3 applies to both, and section 382 of the 1986 Act has a very similar definition of provable debt for bankruptcies as rule 13.12 has for liquidations. In a number of cases, it has been held that, where an order for costs was made against a person after an insolvency process had been instituted against him, his liability for costs did not arise from an obligation which had arisen before issue of the bankruptcy proceedings, even though the costs order was made in proceedings which had been started before that insolvency process had begun see for instance In re Bluck, Ex p Bluck (1887) 57 LT 419, In re British Gold Fields of West Africa [1899] 2 Ch 7, In re A Debtor (No 68 of 1911) [1911] 2 KB 652, and In re Pitchford [1924] 2 Ch 260. In my view, by becoming a party to legal proceedings in this jurisdiction, a person is brought within a system governed by rules of court, which carry with them the potential for being rendered legally liable for costs, subject of course to the discretion of the court. An order for costs made against a company in liquidation, made in proceedings begun before it went into liquidation, is therefore provable as a contingent liability under rule 13.12(1)(b), as the liability for those costs will have arisen by reason of the obligation which the company incurred when it became party to the proceedings. I have little concern about overruling those earlier decisions, although they are long standing. First, the judgments are very short of any reasoning, and consist of little but assertion. Secondly, they were decided at a time when the legislature and the courts were less anxious than currently for an insolvency to clear all the liabilities of a bankrupt (as they were all concerned with individual insolvencies). Although most of the provisions of rule 13.12 and section 382 can be found in section 30(3), (4) and (8) of the Bankruptcy Act 1914, over the past three hundred years, the legislature has progressively widened the definition of provable debts and narrowed the class of non provable liabilities to quote from the written case of Mr Phillips QC who relied on those cases. Thirdly, those cases are impossible to reconcile logically with the earlier case of In re Smith, Ex p Edwards (1886) 3 Morrell 179, where, on identical facts (save that it was an arbitration rather than litigation) it was held that an order for costs did give rise to a provable debt. Fourthly, the unsatisfactory nature of those decisions can be seen from the way in which the Court of Appeal sought to evade their consequence in Day v Haine [2008] ICR 1102, a case which I consider to have been rightly decided. For the same reasons, I consider that the decisions of the Court of Appeal in Glenister v Rowe [2000] Ch 76 and Steele [2006] 1 WLR 2380 were wrongly decided, although I can see how it might be said that they were justified on the basis of stare decisis. The reasoning of Arden LJ in the latter case at paras 21 23 is instructive, because, as she says, the previous authorities in relation to provable debts suggested a narrower meaning of contingent liability than was adopted by the majority in Sutherland. That observation neatly illustrates why they were wrongly decided. The Report of the Review Committee on Insolvency Law and Practice (the Cork Report, 1982, Cmnd 8558), para 1289, described it as a basic principle of the law of insolvency that every debt or liability capable of being expressed in money terms should be eligible for proof so that the insolvency administration should deal comprehensively with, and in one way or another discharge, all such debts and liabilities. The notion that all possible liabilities within reason should be provable helps achieve equal justice to all creditors and potential creditors in any insolvency, and, in bankruptcy proceedings, helps ensure that the former bankrupt can in due course start afresh. Indeed, that seems to have been the approach of the courts in the 19th century before the somewhat aberrant decisions referred to in para 88 above. Thus, in Ex p Llynvi Coal and Iron Co; In re Hide (1871) LR 7 Ch App 28, 32, James LJ described one of the main aims of the bankruptcy regime as to enable the bankrupt to be a freed man freed not only from debts, but from contracts, liabilities, engagements and contingencies of every kind. If that was true in 1871, it is all the more true following the passing of the 1986 and 2002 Acts, and as illustrated by the amendment to rule 13.12(2) effected following the decision in In re T & N Ltd [2006] 1 WLR 1728, so as to extend the rights of potential tort claimants to prove. It was suggested that para (m) was included in rule 4.218(3) on the assumption that cases such as those mentioned in para 88 above were rightly decided. That may be so. But, even if it is, the fact that a rule has been drafted on the basis that a decision of the Court of Appeal was right does not mean that this court should uphold the decision if satisfied that it was wrong. Conclusion on the provable debt issue I would accordingly dismiss these appeals to the extent of holding that the administrators are bound to meet the liabilities of the Target companies under the FSD regime, but allow the appeals to the extent of holding that these liabilities are to be treated as provable debts. I have had the opportunity of reading in draft the judgment of Lord Sumption on this issue and I agree with it. His reference to Carron Iron Co Proprietors v Maclaren (1855) HL Cas 416 and In re Oriental Inland Steam Co (1873 4) LR 9 Ch App 557 appears to me to be very much in point. I have also found assistance in the careful judgment of Lord Drummond Young in the Outer House in In re Thomas v Burton, liquidator of Ben Line Steamers Ltd [2010] CSOH 174; 2011 SLT 535. Is the liability under a FSD issued after an insolvency event a liquidation expense? Given that the potential FSD liability in each of these cases is a debt falling within rule 13.12(1)(b), and therefore a provable debt within rule 12.3, and the acceptance on all sides that it would not therefore be an expense, it is strictly unnecessary to consider this question. However, it should be addressed as it was fully debated, and the point is of some potential importance, as I do not entirely agree with the courts below as to the effect of the reasoning and decision of the House of Lords in In re Toshoku Finance UK plc [2002] 1 WLR 671. The question which would arise if the potential liability under the FSD regime did not give rise to a provable debt under rule 13.12 where the FSD is issued after the relevant insolvency event, is whether the liability would be within the expression charges and other expenses incurred in the course of the administration within rule 12.2, and, more particularly, within the expression any necessary disbursements by the administrator in the course of the administration, within rule 2.67(1)(f) the equivalent provision in a liquidation being rule 4.218(3)(m). The word necessary in rule 2.67(1)(f) carries with it a legal obligation to pay (or, possibly, in exceptional cases, a moral obligation to pay, as to which see the next section of this judgment). However, that is somewhat circular, as it leaves open the very question which has to be decided, namely whether the liability in question which has been imposed on the company is one which the administrator must pay. Further, a liability may arise during an administration without falling within rule 2.67(1)(f), without being in the course of the administration. In Davidson v Robb [1918] AC 304, 321, Lord Dunedin explained that in the course of his employment had a more limited meaning than during the period of his employment and connoted something which is part of his service namely work or the natural incidents connected with the class of work, a view echoed by Lord Russell in Alderman v Great Western Railway Co [1937] AC 454, 459. While it would be dangerous to treat any formulation as an absolute rule, it seems to me, at any rate subject to closer examination of the authorities and counter arguments, a disbursement falls within rule 2.67(1)(f) if it arises out of something done in the administration (normally by the administrator or on the administrators behalf), or if it is imposed by a statute whose terms render it clear that the liability to make the disbursement falls on an administrator as part of the administration either because of the nature of the liability or because of the terms of the statute. Thus, if an administrator, on behalf of the company, enters into a transaction which gives rise to tax, or starts (or adopts) proceedings which give rise to a liability for costs, that tax or those costs would fall within the rule, as they arise from his actions as administrator during the administration. This conclusion is consistent with the authorities on liquidations see eg In re Beni Felkai Mining Co Ltd [1934] 1 Ch 406, In re Mesco Properties Ltd [1979] 1 WLR 558, affirmed [1980] 1 WLR 96 (tax), In re Trent & Humber Shipbuilding Co; Bailey & Leethams Case (1869) LR 8 Eq 94 and In re Wenborn & Co [1905] 1 Ch 413 (costs). An area in which liquidators have been held liable to meet a statutorily imposed liability is that of property taxes ie business and domestic rates and community charge see, for instance, In re International Marine Hydropathic Co (1884) 28 Ch D 470, In re National Arms & Ammunition Co (1885) 28 Ch D 474, In re Blazer Fire Lighter Ltd [1895] 1 Ch 402, and more recently Exeter City Council v Bairstow [2007] Bus LR 813. The explanations in the judgments in those cases of the basis on which a liquidator has been held liable for rates and (in Kentish Homes) for community charge as an expense of the liquidation, are not entirely consistent. Sometimes it was said to be because the liquidator is retaining the property in question for the benefit of the winding up see eg per Baggallay LJ in Marine Hydropathic at 471 and Fry LJ in National Arms at 481. However, it was also said that the rates should count as an expense on the ground that, because the liquidator remained in rateable occupation of the property in question, the rates for the period should rank as an expense of the liquidation see eg per Bowen LJ in National Arms at 480 and 482, and Vaughan Williams J in Blazer at 406 7. The latter rationale seems to me to represent the current state of the law see per Lord Hoffmann in Toshoku at para 34 and per David Richards J in Exeter at paras 15 19. In my view, therefore, the fact that the liability for rates falling due after an insolvency event on property retained by the liquidator ranks as an expense of the liquidation, is based on the proposition that, as a matter of interpretation, the rating (and community charge) legislation imposes such a liability on the liquidator (and the same logic must apply in an administration). This is consistent with the fact that liability for rates (and community charge), arises from day to day, and the liability is treated as an expense only in respect of the companys occupation of property during the liquidation. This conclusion derives a degree of support from the fact that, in the context of a liquidation, it is always open to a liquidator to disclaim onerous property (under sections 178 182 of the 1986 Act) and, if he chooses not to do so, it would presumably be as a result of a conscious decision to retain the property for the benefit of the creditors. An administrator cannot disclaim property, but there is force in the point that the rating authorities should not be worse off because a company opts for administration rather than liquidation, given that the normal reason for preferring administration to liquidation is to seek a better outcome for creditors and/or shareholders of the company see para 3(1) of Schedule B1 to the 1986 Act. Adopting the approach I have suggested, it appears to me that a potential liability under a FSD or a liability under a CN does not fall within the scope of expenses of an administration within rule 12.2 or rule 2.67(1)(f). First, there is no question of such a liability resulting from any act or decision taken by or on behalf of the administrator or any act or decision taken during the administration. The liability self evidently arises out of events which occurred before the insolvency event. Secondly, I do not consider that the terms of the 2004 Act, properly interpreted, mean that a liability under a CN would be an expense of the administration, if it was not a provable debt under rule 13.12. It is true that the effect of a CN under section 49(3) of the 2004 Act is that it gives rise to a debt payable by the target once it is issued, but it does not seem to me that that can be sufficient to render the payment of the debt a necessary disbursement by the administrator in the course of the administration. The mere fact that an event occurs during the administration of a company which a statute provides gives rise to a debt on the part of the company cannot, of itself, be enough to render payment of the debt an expense of the administration. It would be a debt payable during the period of the administration, but it would not be part of the administration, or a payment which was one of the natural incidents connected with the administration, to use the language of Lord Dunedin in Davidson. In my view, something more would be required, either from the wording of the 2004 Act or from the nature of the liabilities which it imposes, before a CN issued after the targets insolvency event could be held to be an expense of the administration or liquidation. The 2004 Act and the FSD Regulations are silent on the issue of the status of the liability under the FSD regime where the target has suffered or suffers an insolvency event. It is therefore necessary to consider whether there is any indication that can be gathered from the 2004 Act, its aims and procedures, that it was intended that such a liability should rank as an expense of the targets administration or liquidation, if it does not give rise to a provable debt. For the reasons given in paras 59 62 above, it would be remarkable if a liability under a CN issued to a target pursuant to a FSD issued after the target suffered an insolvency event had priority over the targets other unsecured creditors, when a CN, based on precisely the same facts, would not have such priority if it was issued pursuant to a FSD issued notice issued before the insolvency event. I accept that it would be curious if a FSD issued after an insolvency event was significantly less effective than one issued before that event, and indeed that it would be unlikely to result in any sum being paid as explained in para 63 above. However, the notion that liability pursuant to a FSD issued after the target had suffered an insolvency event ranks behind the targets provable debts, is, to my mind, less surprising than the notion that it should rank ahead of them. First, I consider that the balance of anomalies, as discussed in paras 59 63 above, is such that the former appears a much less unlikely outcome. Secondly, as a general proposition, once the facts giving rise to a right to raise a claim (in these cases, by issuing a FSD) exist, it would be very unusual for the beneficiary of the right to be better off as a result of a delay in raising the claim, but it would be far from surprising if the beneficiary were worse off as a result of such a delay. The reason that the courts below reached a different conclusion is best explained by quoting a passage, from the first instance judgment, which the Court of Appeal (in paras 99 101 of Lloyd LJs judgment) expressly approved. At [2011] Bus LR 766, para 146, Briggs J said that Lord Hoffmanns speech in Toshoku established as a general rule that: [W]here by statute Parliament imposes a financial liability which is not a provable debt on a company in an insolvency process then, unless it constitutes an expense under any other sub paragraph in the twin expenses regimes for liquidation and administration, it will constitute a necessary disbursement of the liquidator or administrator. That is the general rule, whether the statute expressly refers to companies in an insolvency process as being subject to the liability, or whether the statute achieves the same result by using a criterion for liability which is insolvency neutral. Any other conclusion would in my judgment attribute an excessive weight to the linguistic method by which different legislation achieved the same result, namely that the statutory obligation in question is a liability of a company in an insolvency process. While it is fair to say that some observations of Lord Hoffmann in Toshoku, if read on their own, may appear to support that general rule, I consider that Briggs Js summary amounts to an incorrect statement of the law. In my view, the general guidance given by Lord Hoffmann in Toshoku is to be found in para 46, where he said that the question of whether [any particular] liabilities should be imposed upon companies in liquidation is a legislative decision which will depend upon the particular liability in question. In a case, such as the present, where (i) the statutory liability is one which could have been imposed before or after liquidation, (ii) the liability does not give rise to a provable debt (as is being assumed for present purposes) and (iii) the statute is completely silent as to how the liability should be treated if it is imposed after an insolvency event, the liability can only be an expense of the liquidation or administration if the nature of the liability is such that it must reasonably have been intended by the legislature that it should rank ahead of provable debts. It would be wrong to suggest that this is a test which may not need to be refined in future cases, but it appears to me to be supported by the facts and arguments raised on these appeals. I do not consider that Toshoku takes matters any further in the present case. Lord Hoffmann explained in para 2 that the liability in Toshoku arose from a statutory provision which stated that: a company is chargeable to corporation tax on profits arising in the winding up of the company. It may be assessed in respect of an accounting period deemed to commence on the liquidation date , and the liquidator is the proper officer liable to pay the tax . [Other relevant statutory requirements were that] profits must be computed on an accruals basis [and] the computation must be made on the assumption that every amount payable under the relationship will be paid in full as it becomes due. In other words, unlike the present cases, Toshoku concerned a tax liability which was imposed on a liquidator, as opposed to the company, and it was a tax which only applied (in specified circumstances) to a company which had gone into liquidation. As Lord Hoffmann said at para 30, [t]here would be little point in a statute which specifically imposed liabilities upon a company in liquidation if they were payable only in the rare case in which it emerged with all other creditors having been paid. Even in such a case, I consider that it would be appropriate for a court to consider whether the legislature intended the liabilities concerned to rank as an expense, but the point made by Lord Hoffmann would clearly be a very powerful factor as to why it should. I therefore would conclude that, if the liability in these cases did not rank as a provable debt, it would not count as an expense of the administration. Does the court have a residual discretion? If I had taken a different view on the provable debt issue, an alternative argument to that just discussed was that the court has the power to direct the administrator of a Target company to accord to the potential liability under the FSD regime a higher ranking than it would be given under the 1986 Act and the Insolvency Rules. In other words, that the court could order the administrator to treat the potential FSD liability as a provable debt (category 5 in para 39 above) even though the effect of the legislation is that it should rank lower (namely category 7). At any rate at first sight, it would be extraordinary if a court, which had decided that a liability did not fall within the definition of provable debts in rule 13.12, could nonetheless go on to decide that it was to be so treated, in the absence of any specific statutory power to do so. Such a course would appear to be wrong in principle, because it would involve a judge effectively overruling the lawful provisions of a statute or statutory instrument. It would also be highly problematic in practice because it would throw many liquidations and administrations into confusion: the law would be uncertain, and many creditors who felt that the statutory ranking caused them unfair prejudice would make applications to the court. If further reasons were required for this conclusion, they may be found in rule 2.67 and in Toshoku. Rule 2.67(2) and (3), referred to in para 42 above, show that, where the Insolvency Rules wish to give the court the ability to change the priority rules, they say so. In the course of his speech in Toshoku at para 38, Lord Hoffmann referred to the proposition whether debts should count as expenses of the liquidation is a matter for the discretion of the court and held that there was no such discretion and disapproved Sir Donald Nicholls V Cs comments in In re Kentish Homes Ltd [1993] BCLC 1375. As Lord Hoffmann made clear in para 41, how a particular liability was to be ranked depended solely on the proper interpretation of the Insolvency Rules. The justification for a contrary view was based on three paragraphs of Schedule B1 to the 1986 Act (Schedule B1), and a number of decisions where the court has ordered a liquidator to take a particular action. Para 13 of Schedule 1 entitles an administrator to make any payment which is necessary or incidental to the performance of his functions. I do not see how that can entitle him, let alone the court to direct him, to treat an unprovable debt as a provable debt (unless, conceivably, there was resulting benefit which would redound for the benefit of the proving creditors, although even then it would be problematic). It can scarcely be said to be incidental or necessary to a persons statutorily prescribed functions to do something inconsistent with those functions. Para 65(3) of Schedule B1 precludes an administrator from paying a creditor who is neither secured nor preferential without the sanction of the court. I cannot see how this provision can be properly interpreted as giving the court a roving commission to change the statutory priorities in a particular case simply because it does not like the consequences of those priorities. It was no doubt intended to apply where the payment in question is necessary or desirable to achieve one of the administrators statutory functions under paragraph 3 of Schedule B1 to the 1986 Act (eg the companys survival or a more advantageous realisation of the companys assets). Para 74 of Schedule B1 entitles a creditor to apply to the court if it considers that the administrator proposes to act in a way which would unfairly prejudice it. This cannot, in my view, apply to a case where the administrator is proposing to do that which the legislation requires him to do. It applies where the administrator is exercising a power, or discretion, most obviously carrying on the companys business in a certain way or selling off an asset of the company, or not performing an obligation, such as paying off creditors in the order mandated by the legislation. Again, it cannot have sensibly been intended to give the court a roving commission to vary the clear statutory ranking of liabilities as summarised in para 39 above. As to the common law, there are a number of cases, starting with In re Condon Ex p James (1874) LR 9 Ch App 609, in which a principle has been developed and applied to the effect that where it would be unfair for a trustee in bankruptcy to take full advantage of his legal rights as such, the court will order him not to do so, to quote Walton J in In re Clark (a bankrupt) [1975] 1 WLR 559, 563. The same point was made by Slade LJ in In re TH Knitwear (Wholesale) Ltd [1988] Ch 275, 287, quoting Slater J in In re Wigzall, Ex p Hart [1921] 2 KB 835, at 845: where a bankrupts estate is being administered under the supervision of a court, that court has a discretionary jurisdiction to disregard legal right, which should be exercised wherever the enforcement of legal right would be contrary to natural justice. The principle obviously applies to administrators and liquidators see In re Lune Metal Products Ltd [2007] 2 Bus LR 589, para 34. However, none of these cases begins to justify the contention that an administrator can be ordered to change the ranking of a particular debt simply because the statutory ranking appears unattractive in this case because it means that a particular debt is ranked lower than other unsecured debts because (as I am assuming) it is not provable according to the statutory formula. Indeed, observations in Lune Metal, paras 35 38, tend to support the notion that the court cannot sanction a course which would be outside an administrators statutory powers. It is right to mention that the court has sanctioned an otherwise unauthorised payment where a company in administration wishes to avoid the cost of going into compulsory liquidation. In such cases, which include In re UCT (UK) Ltd [2001] 1 WLR 436 and Lune Metal, the terms on which the administrators are discharged includes a direction which ensures that the preferential creditors are in no worse a position than if there had been a compulsory liquidation. However, those cases provide no assistance to the argument that the court can direct a FSD regime liability to be promoted ahead of its statutory ranking, as (i) the direction benefits the creditors with provable debts, (ii) the direction is tied to the discharge of the administrators, not the performance of their on going functions, and (iii) the direction does not involve any conflict with statutory ranking of claims, and in particular, it does not harm the interests of the creditors with provable debts: on the contrary, they benefit from the direction. In the present cases, I understand the attraction of the argument that the court should order the administrators of the Target companies to treat the potential FSD liabilities as provable debts (if they are not so provable): otherwise, they may be valueless. However, I come back to the point that, if the effect of the Insolvency Rules is that the liabilities are not provable debts, there is no basis for the court deciding that they are. It would be wrong for the courts to override the statutory ranking, especially given it would cause significant prejudice to others (in this case the creditors with provable debts). That is particularly true as the liabilities are statutory, so that the legislature could have dealt with their status in a liquidation or administration (as indeed it did in relation to a section 75 debt). The argument to the contrary also relied on the fact that the liability of a target under the FSD regime would have been a provable debt if the FSD had been issued before the insolvency event. That is undoubtedly an argument in favour of the liability where the FSD is issued after an insolvency event being a provable debt, as mentioned above. However, if the liability is not a provable debt in such circumstances, the argument does not support the contention that the administrator can be required to treat it as if it were. As already mentioned, the mere fact that the court does not think it fair that a particular statutory liability should not rank as a provable liability under the relevant statutory provisions is not enough to justify a decision to alter the effect of those provisions. The point can be taken a little further. The decision of the courts below, that the liability in these cases was an expense of the administration and not a provable debt, was unattractive for the reasons given in paras 59 62 above. It seems to me that, if, as is suggested by the argument I am considering, the courts had had power to do so, they should have gone on to hold that it would nonetheless direct the administrators to treat the liability as a provable debt. Such a direction would not merely have been a surprising one, but it would have been one which flew in the face of Lord Hoffmanns observations at paras 38 41 in Toshoku, disapproving In re Kentish Homes Ltd [1993] BCLC 1375. Conclusion I would accordingly allow these appeals to the extent of declaring that a Target companys liability under the FSD regime, arising pursuant to a FSD issued after the company has gone into administration, ranks as a provable debt of the company, and does not rank as an expense of the administration. LORD SUMPTION (with whom Lord Mance and Lord Clarke agree) I agree with the order proposed by Lord Neuberger and with his reasons. I add a few observations of my own on a point which might be regarded as a matter of wholly abstract jurisprudence if it were not fundamental to the analysis of the effect of this particular scheme. The critical question is what constitutes an obligation incurred for the purpose of rule 13.12(1)(b) of the Insolvency Rules 1986. The context shows it means a legal rule applying before the date when the company goes into liquidation which may, contingently on some future event, give rise to a debt or liability arising after that date. But it cannot extend to every legal rule which may on any contingency have that effect. Otherwise every debt or liability would be provable irrespective of the date when it accrued, unless the law changed after the company went into liquidation. Since the scheme depends on there being a common date as at which the fund falls to be valued and distributed pari passu, that cannot be right. Some limitation must be read into sub paragraph (b). But what limitation? The paradigm case of an obligation within the sub paragraph is a contract which was already in existence before the company went into liquidation. It is implicit in the argument of those who contend on this appeal that there is no provable debt, in this case that contract is not just the paradigm case but the only one. Yet when one asks what it is about a contract that qualifies it as a relevant source of obligation, the answer must be that where a subsisting contract gives rise to a contingent debt or liability, a legal relationship between the company and the creditor exists from the moment that the contract is made and before the contingency occurs. The judgment of Lord Reid in In re Sutherland (decd) [1963] AC 235 was concerned with a very different statutory scheme, but his analysis is nevertheless illuminating because it makes precisely this point at pp 247 8: It is said that where there is a contract there is an existing obligation even if you must await events to see if anything ever becomes payable, but that there is no comparable obligation in a case like the present. But there appears to me to be a close similarity. To take the first stage, if I see a watch in a shop window and think of buying it, I am not under a contingent liability to pay the price: similarly, if an Act says I must pay tax if I trade and make a profit I am not before I begin trading under a contingent liability to pay tax in the event of my starting trading. In neither case have I committed myself to anything. But if I agree by contract to accept allowances on the footing that I will pay a sum if I later sell something above a certain price I have committed myself and I come under a contingent liability to pay in that event. Contract is not the only legal basis on which a contingent obligation of this kind may arise. A statute may also give rise to one. A good example is the substantive obligation which English law has always held to be owed by a debtor under a foreign judgment. It is the basis of the common law action to enforce it. Another is the obligation of a creditor arising from the statutory scheme of distribution in an English insolvency, not to seek by litigation in a foreign court a priority inconsistent with that scheme: see Carron Iron Co Proprietors v Maclaren (1855) HL Cas 416, 440 per Lord Cranworth LC, In re Oriental Inland Team Co (1873 4) LR 9 Ch App 557, and in the United States Cole v Cunningham (1882) 133 US 107. In both of these examples, a legal relationship is created between the debtor and other persons, albeit without contract. In the first, it is the legal relationship with the judgment creditor arising from the fact that the judgment debtor was subject to the jurisdiction of the foreign court, whether by virtue of residence or submission. In the second, it is the legal relationship of the creditor with the debtor company and with other creditors arising from the statutory scheme of distribution. If the mandatory provisions of a statute may create a legal relationship between the company and a creditor (or potential creditor) giving rise to a provable debt, then there is no reason why it should not do so contingently upon some future event. In In re Sutherland decd [1963] AC 235 the companys liability for balancing charges by way of recoupment of capital allowances, which the majority held should be taken into account when valuing its assets, did not exist at the valuation date because at that date it was still contingent upon a future sale of those assets. It was nevertheless a relevant contingent liability for valuation purposes, because at the valuation date there was a legal relationship between the companies and the Crown arising from the statutory scheme which made capital allowances subject to balancing charges in the contingency of a sale. In Secretary of State for Trade and Industry v Frid [2004] 2 AC 506 the Secretary of State was subrogated by statute to the claims of employees to compensatory notice pay and redundancy payments. The liability of the company to meet those claims did not arise until the employees were dismissed, which was after the company went into liquidation. But the obligation existed before, because the statutory scheme superimposed upon the contract of employment created the legal relationship which made the compensatory notice pay and the redundancy payments due. Lord Hoffmann, with whom the rest of the committee agreed, said at paras 17, 19: if the Secretary of State had agreed by contract before the insolvency date to guarantee any future liability of the company to pay compensatory notice pay or make redundancy payments to employees under the 1996 Act, the contract of guarantee would have created a contingent liability on the part of the company to reimburse the Secretary of State which was a debt at the insolvency date and became capable of set off when the employees were afterwards paid. The next question is whether it makes a difference that the contingent liability existed by virtue of a statute rather than a contract and, not being consensual, that it involved no direct contract or other relationship with the employees or the company. If a statutory origin does not prevent set off in the case of debts due and payable at the insolvency date, I do not see why it should make any difference that the statute creates a contingent liability which exists before the insolvency date but falls due for payment and is paid afterwards. In the Victoria case of Lofthouse v Commissioner of Taxation [2001] 164 FLR 106, the statute conferred upon the Commissioner an indemnity against the directors of a company if tax payments under the Australian equivalent of PAYE were subsequently held repayable as insolvent transactions (in effect, preferences). The indemnity was contingent upon the tax being determined to be repayable after the employer had gone into liquidation, but the statutory scheme created the relevant legal relationship between the directors and the Commissioner as soon as the tax payments were made by the company. They were therefore provable as contingent debts in the insolvency of the directors. Warren J observed at p 118: The potential liability of the third parties in this proceeding is a contingent liability within the meaning of s 82(1) of the Act because the potential liability arose from an obligation pursuant to an indemnity. Furthermore, all the objective circumstances giving rise to the potential for the invocation of the chose in action represented by the right to indemnity had transpired prior to the third parties entering into their composition under Pt X of the Bankruptcy Act. given after the commencement of the insolvency was not provable as a contingent debt, even if the litigation was in progress when the company went into liquidation. The case law begins with In re Bluck Ex p Bluck (1887) 57 LT 419, and continues with In re British Gold Fields of West Africa [1899] 2 Ch 7, In re A Debtor (No 68 of 1911) [1911] 2 KB 652, In re Pitchford [1924] 2 Ch 260, Glenister v Rowe [2000] Ch 76. The reasoning of these cases has recently been applied to other claims said to represent contingent liabilities: see R (Steele) v Birmingham City Council [2006] 1 WLR 2380. There are a number of problems about these cases. One of them, as it seems to me, is the absence of any real attempt to analyse the effect of the statutory scheme in creating an obligation to meet a liability contingently on some specified event. In the earlier cases, this can perhaps be regarded as the legacy of the older principle which admitted only contractual debts to proof. But that consideration cannot explain the more recent decisions. In my view they were wrongly decided. In the costs cases, I consider that those who engage in litigation whether as claimant or defendant, submit themselves to a statutory scheme which gives rise to a relationship between them governed by rules of court. They are liable under those rules to be made to pay costs contingently on the outcome and on the exercise of the courts discretion. An order for costs made in proceedings which were begun before the judgment debtor went into liquidation is in my view provable as a contingent liability, as indeed it has been held to be in the case of arbitration proceedings: In re Smith, Ex p Edwards (1886) 3 Morrell 179. In both cases, the order for costs is made against some one who is subject to a scheme of rules under which that is a contingent outcome. The fact that in one case the submission is contractual while in the other it is not, cannot make any difference under the modern scheme of insolvency law under which all liabilities arising from the state of affairs which obtains at the time when the company went into liquidation are in principle provable. Of course, an order for costs like many other contingencies to which a debt or liability may arise, depends on the exercise of a discretion and may never be made. But that does not make it special. It is not a condition of the right to prove for a debt or liability which is contingent at the date when the company went into liquidation that the contingency should be bound to occur or that its occurrence should be determined by absolute rather than discretionary factors. In the present case, the Court of Appeal considered itself to be bound by a line of cases in which it was held that a liability for costs arising from a judgment |
Where an international commercial contract contains an agreement to resolve disputes by arbitration, at least three systems of national law are engaged when a dispute occurs. They are: the law governing the substance of the dispute; the law governing the agreement to arbitrate; and the law governing the arbitration process. The law governing the substance of the dispute is generally the law applicable to the contract from which the dispute has arisen. The law governing the arbitration process (sometimes referred to as the curial law) is generally the law of the seat of the arbitration, which is usually the place chosen for the arbitration in the arbitration agreement. These two systems of law may differ from each other. Each may also differ from the law which governs the validity and scope of the arbitration agreement. The central issue on this appeal concerns which system of national law governs the validity and scope of the arbitration agreement when the law applicable to the contract containing it differs from the law of the seat of the arbitration. This is an issue which has long divided courts and commentators, both in this country and internationally. On one side there are those who say that the law that governs a contract should generally also govern an arbitration agreement which, though separable, forms part of that contract. On the other side there are those who say that the law of the chosen seat of the arbitration should also generally govern the arbitration agreement. There have been Court of Appeal decisions falling on either side of this divide: Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102 and C v D [2007] EWCA Civ 1282; [2008] Bus LR 843. In its judgment in the present case [2020] EWCA Civ 574, the Court of Appeal considered that the time has come to seek to impose some order and clarity on this area of the law (para 89) and held that, unless there has been an express choice of the law that is to govern the arbitration agreement, the general rule should be that the arbitration agreement is governed by the law of the seat, as a matter of implied choice, subject only to any particular features of the case demonstrating powerful reasons to the contrary (para 91). On this appeal the appellant argues that this conclusion is heterodox and wrong and that the correct approach is that, in the absence of strong indications to the contrary, a choice of law for the contract is a choice of that law to govern the arbitration agreement. The appellant contends that in the present case the parties have chosen Russian law to govern the construction contract between them and that the implication that they intended the arbitration agreement included in that contract to be governed by Russian law is not displaced by their choice of London as the seat of arbitration. If that issue is decided in its favour, the appellant goes on to argue that the Court of Appeal was wrong to grant an injunction to restrain it from pursuing proceedings in Russia in alleged breach of the arbitration agreement. The appellants case is that, because the arbitration agreement is governed by Russian law, the Russian courts are best placed to decide whether or not the arbitration agreement applies to the claim which the appellant has brought against the respondent in Russia and that, as a matter of comity or discretion, the English courts ought not to interfere with those proceedings by granting an anti suit injunction. II. Factual background (i) The construction contract On 1 February 2016 a power plant situated at Berezovskaya in Russia was severely damaged by fire. The appellant (Chubb Russia) is a Russian insurance company which had insured the owner of the power plant, a company now named PJSC Unipro (Unipro), against such damage. Chubb Russia is part of the Chubb Group, which is the worlds largest publicly traded property and casualty insurer. The company responsible for the design and construction of the power plant under a contract made with Unipro in May 2011 was a Russian company called CJSC Energoproekt. The respondent (Enka) was engaged by Energoproekt as one of many sub contractors involved in the construction project. Enka is a global engineering and construction company incorporated and based in Turkey with a substantial presence and history of operations in Russia, amongst other countries. The contract between Energoproekt and Enka dated 27 June 2012 (the construction contract) is a substantial document running to 97 pages, with around 400 pages of attachments. It was executed in parallel Russian and English versions (though it provides that the Russian language version has precedence). The construction contract contains, in article 50, a dispute resolution clause in these terms: Resolution of disputes 50.1. The Parties undertake to make in good faith every reasonable effort to resolve any dispute or disagreement arising from or in connection with this Agreement (including disputes regarding validity of this agreement and the fact of its conclusion (hereinafter Dispute) by means of negotiations between themselves. In the event of the failure to resolve any Dispute pursuant to this article within 10 (ten) days from the date that either Party sends a Notification to the opposite Party containing an indication of the given Dispute (the given period may be extended by mutual consent of the Parties) any Party may, by giving written notice, cause the matter to be referred to a meeting between the senior managements of the Contractor and Customer (in the case of the Contractor senior management shall be understood as a member of the executive board or above, in the case of Customer, senior management shall be understood as general directors of their respective companies). The parties may invite the End Customer to such Senior Management Meeting. Such meeting shall be held within fourteen (14) calendar days following the giving of a notice. If the matter is not resolved within twenty (20) calendar days after the date of the notice referring the matter to appropriate higher management or such later date as may be unanimously agreed upon, the Dispute shall be referred to international arbitration as follows: the Dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce, appointed in accordance with these Rules, language, and the Dispute shall be settled by three arbitrators the arbitration shall be conducted in the English the place of arbitration shall be London, England. in 50.2. Unless otherwise explicitly stipulated this Agreement, the existence of any Dispute shall not give the Contractor the right to suspend Work. 50.3. Not used. 50.4. Not used. 50.5. All other documentation such as financial documentation and cover documents for it must be presented in Russian. On 21 May 2014 Energoproekt transferred its rights and obligations under the construction contract to Unipro pursuant to an assignment agreement made between Energoproekt, Unipro and Enka. By clause 7.5 of that agreement, the parties agreed that disputes between Unipro and Enka were to be finally and exclusively resolved by arbitration in accordance with the provisions of article 50.1 of the construction contract. After the fire in February 2016 Chubb Russia paid 26.1 billion roubles (approximately US$400m) to Unipro under its property insurance policy and thereby became subrogated to any rights of Unipro to claim compensation from third parties for the damage caused by the fire. (ii) The Russian proceedings On 25 May 2019 Chubb Russia filed a claim in the Moscow Arbitrazh (ie commercial) Court against Enka and ten other defendants whom it claimed were jointly liable for the damage caused by the fire. Chubb Russia was required by the Moscow court to provide further details of its claims, following which the claims were accepted by the court on 3 September 2019. On 17 September 2019 Enka filed a motion in the Russian proceedings to have Chubb Russias claim against it dismissed (or left without consideration) pursuant to article 148(5) of the Arbitrazh Procedure Code, which is intended to give effect to Russias obligations under article II(3) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) to refer to arbitration parties who have agreed to submit to arbitration a dispute of which a court of a contracting state is seized. Enka argued that the claim against it fell within the scope of the arbitration agreement contained in article 50.1 of the construction contract and ought therefore to be resolved, not by the Russian courts, but by an arbitration conducted in accordance with that provision in London. The Moscow court decided to deal with Enkas motion at the same time as the merits of Chubb Russias claims at a hearing fixed for 22 January 2020. Following that hearing, which continued on two later dates, on 18 March 2020 the judge in the Russian proceedings announced her decisions (a) not to grant Enkas motion to refer the claim against it to arbitration and (b) to dismiss Chubb Russias claims against all the defendants on the merits. The reasons for those decisions were given in a written judgment handed down on 6 May 2020. Chubb Russia and Enka have both filed appeals in the Russian proceedings (in relation to the decision on the merits and the decision to refuse Enkas application, respectively). (iii) The English proceedings Meanwhile, Enka had on 16 September 2019 brought an arbitration claim in the Commercial Court in London seeking an anti suit injunction to restrain Chubb Russia from further pursuing the Russian proceedings against Enka on the ground that this was a breach of the arbitration agreement in article 50.1 of the construction contract. Enka also sought injunctions against other members of the Chubb Group said to be caught up in Chubb Russias breach of the arbitration agreement, namely Chubb UK Ltd, Chubb European Group SE (Chubb Europe) and the ultimate parent company of the Chubb Group which is incorporated in Switzerland. On 15 October 2019 Carr J declined to grant an interim anti suit injunction but gave directions for an expedited trial. The trial took place on 11 and 12 December 2019 before Andrew Baker J. He gave judgment on 20 December 2019, dismissing Enkas claims against all the defendants. His primary reason for doing so was that he considered the appropriate forum to decide whether Chubb Russias claim against Enka falls within the arbitration agreement to be the Moscow Arbitrazh Court and not the English Commercial Court. Enka applied to the Court of Appeal for permission to appeal from this decision as it applied to Chubb Russia (alone). The application was granted on 6 February 2020 and the appeal was heard on 7 and 8 April 2020. On 29 April 2020 the Court of Appeal (Flaux, Males and Popplewell LJJ) allowed Enkas appeal and issued an anti suit injunction restraining Chubb Russia from continuing the Russian proceedings. (iv) The arbitration proceedings On 10 January 2020 Enka gave notice to Chubb Russia and Chubb Europe of a Dispute under article 50 of the construction contract. This was followed on 11 March 2020 by a request for arbitration filed with the International Chamber of Commerce (ICC) in which Enka sought a declaration that Chubb Russias claims in the Russian court fall within the scope of the arbitration agreement and damages. On 22 May 2020 Chubb Russia and Chubb Europe filed their answer to the request for arbitration in which they challenged the jurisdiction of the arbitrators and denied that Enka is entitled to any of the relief claimed. On 12 June 2020 the ICC notified the parties of the appointment of Mr Michael Brindle QC as president of the arbitral tribunal. The other members of the tribunal are Lord Hoffmann, nominated by Enka, and Lord Mance, nominated by Chubb Russia and Chubb Europe (without prejudice to their objections to the jurisdiction of the tribunal). (v) This appeal On 26 May 2020 Chubb Russia applied to the Supreme Court for permission to appeal from the decision of the Court of Appeal. On 5 June 2020 this court granted permission to appeal and also stayed the anti suit injunction upon Chubb Russia giving suitable undertakings to protect Enkas position pending the outcome of the appeal. The appeal was expedited and heard over two days on 27 and 28 July 2020. It is a striking feature of the English proceedings that the trial, the appeal to the Court of Appeal and the appeal to the Supreme Court have all been heard in just over seven months. This is a vivid demonstration of the speed with which the English courts can act when the urgency of a matter requires it. III. The English conflict of laws rules (i) The Rome I Regulation Where a court of England and Wales has to decide which system of national law governs a contract, the court must normally apply the provisions of the Rome I Regulation (a shorthand for Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations). By article 1(1), the Rome I Regulation applies, in situations involving a conflict of laws, to contractual obligations in civil and commercial matters. Article 1(2)(e), however, excludes from its scope arbitration agreements and agreements on the choice of court. Pursuant to article 3, a contract to which the Rome I Regulation applies is governed by the law chosen by the parties, where the choice is made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. In determining whether the parties have made a choice of law, the court should adopt a broad Regulation based approach, not constrained by national rules of contractual interpretation: see eg Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 32 048. Article 4 contains rules for determining the law applicable to the contract to the extent that no such choice has been made. Article 4(1) sets out presumptions or prima facie rules that apply in relation to particular types of contract. However, where it is clear from the circumstances of the case that the contract is manifestly more closely connected with another country, or where none of the prima facie rules applies, articles 4(3) and 4(4) respectively provide for the contract to be governed by the law of the country with which it is most closely connected. (ii) The common law rules Because the Rome I Regulation does not apply to arbitration agreements, an English court which has to decide which system of law governs the validity, scope or interpretation of an arbitration agreement must apply the rules developed by the common law for determining the law governing contractual obligations. Those rules are that a contract (or relevant part of it) is governed by: (i) the law expressly or impliedly chosen by the parties; or (ii) in the absence of such choice, the law with which it is most closely connected: see eg Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), rule 64(1). In view of the similarity between the common law rules and the rules provided by the Rome I Regulation, cases in which the two regimes would yield different results are likely to be rare. But in principle, where an English court has to determine which law governs an arbitration agreement incorporated in a contract, it is the common law rules alone which because of the exclusion of arbitration agreements from the scope of the Rome I Regulation by article 1(2)(e) the court must apply. (iii) Party choice The starting point at common law (as under the Rome I Regulation) is that contracting parties are free to choose the system of law which is to govern their contract, provided only that their choice is not contrary to public policy. The court must therefore construe the contract to see whether the parties have agreed on a choice of law to govern it. As Lord Diplock explained in Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, 603: The first stage, therefore, when any question arises between parties to a contract as to the proper law applicable to it, is to determine whether the parties intended by their contract to exercise any choice at all and, if they did, to determine what was the system of law which they selected. In determining this the English court applies the ordinary rules of English law relating to the construction of contracts. The exclusion of arbitration agreements from the scope of the Rome I Regulation by article 1(2)(e) does not prevent an arbitration clause from being taken into consideration for the purposes of article 3 in determining whether there has been a choice of the law applicable to other parts of the contract, as noted in Giuliano and Lagarde, Council Report on the Convention on the law applicable to contractual obligations (OJ EU No C 282 1) at p 12. By the same token, the fact that other parts of the contract are within the scope of the Rome I Regulation does not prevent them from being taken into consideration in determining in accordance with the English common law rules of construction whether the parties have agreed on a choice of law to govern the arbitration clause. Like any question of contractual interpretation, this is a unitary exercise which requires the court to construe the contract, including the arbitration clause, as a whole. (iv) Law of the forum Where an English court has to decide whether a contract which is said to be governed by a foreign system of law is valid, the court applies the putative applicable law, in other words the law which would govern the contract if it were validly concluded. At the prior stage, however, of determining what is the applicable law or putative applicable law of the contract, all the leading authorities proceed on the basis that it is English rules of law which apply, as stated by Lord Diplock in the passage quoted above. In the Tunisienne case, for example, a contract for the transport of oil in several shipments contained a provision (clause 13) that the contract shall be governed by the laws of the flag of the vessels carrying the goods . The first question which the House of Lords had to decide was whether, in the circumstances of the case which included the fact that vessels flying different flags were used to ship the oil, this clause conveyed a choice of French law to govern the contract, as the shipowners argued. To answer that question the House did not apply the rules of French law governing the interpretation of contracts, but (only) those of English law. The same approach was adopted in Whitworth Street Estates (Manchester) Ltd v James Miller & Partners Ltd [1970] AC 583, where the House of Lords held that subsequent conduct of the parties could not be looked at to construe a contract in order to decide whether it was intended to be governed by English (rather than Scottish) law. The exclusion of subsequent conduct as an aid to interpretation is a consequence of the objective principle of interpretation in English law, which searches not for what the parties subjectively thought or intended the effect of their contract to be but for what reasonable people in their position would be understood to have meant by the language used. Although in the Whitworth Street Estates case English law was one putative applicable law of the contract, there is no suggestion in the speeches that this was the basis for applying English principles of contractual interpretation. In our view, it is both consistent with authority and sound in principle to apply English law as the law of the forum to ascertain whether the parties have agreed on the law which is to govern their contract (and, if not, what law governs it in the absence of agreement). To apply any other law for this purpose would introduce an additional layer of complexity into the conflict of laws analysis without any clear justification and could produce odd or inconsistent results. As the authors of Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012) observe, at para 32 036, by reference to a case in which subsequent conduct was taken into account to construe a contract found to be governed by Chilean law because it was admissible under that law: But it would be very odd if when a question arose as to whether a contract was governed by English law or Chilean law, subsequent conduct would not be taken into account in determining whether a choice of English law could be inferred, but it could be taken into account in determining whether Chilean law applied. The Court of Appeal in the present case asserted (although without explanation) that, in construing the contract to determine whether a choice of governing law applies to an arbitration agreement within it, the court should apply the principles of construction of the main contract law if different from English law (see paras 90 and 105(2) of the judgment). We do not consider this to be correct. As we have indicated, the proper approach in determining whether there has been a choice of law is to apply English law as the law of the forum. Where the question is whether there has been a choice of the law applicable to an arbitration clause, the relevant English law rules are the common law rules which require the court to interpret the contract as a whole applying the ordinary English rules of contractual interpretation. The main contract law, if different, has no part to play in the analysis. (v) Express or implied choice Many of the cases applying the common law rules distinguish between a choice of law which is express or implied. Article 3 of the Rome I Regulation draws a similar distinction in referring to a choice which is made expressly or clearly demonstrated. The terminology is useful in reflecting the fact that an agreement on a choice of law to govern a contract, like any contractual term, may be explicitly articulated or may be a matter of necessary implication or inference from other terms of the contract and the surrounding circumstances. The distinction, however, is not a sharp one: language may be more or less explicit and the extent to which a contractual term is spelt out in so many words or requires a process of inference to identify it is a matter of degree. Determining whether the parties have agreed on a choice of law to govern their contract is in every case a question of interpretation. It is also important to keep in mind that whether a choice is described as express or implied is not a distinction on which any legal consequence turns. An implied choice is still a choice which is just as effective as a choice made expressly. (vi) The default rule Where a choice of law cannot be identified by interpreting the contract, the approach of the common law was at one time to presume that the parties must nevertheless have intended their contract to be governed by some particular system of national law and to impute a relevant intention to them. This is reflected, for example, in the first edition of Diceys treatise on the conflict of laws, which defined the law governing a contract as the law or laws to which the parties intended, or may fairly be presumed to have intended, to submit themselves: Dicey, A Digest on the Law of England with reference to the Conflict of Laws, 1st ed (1896), rule 143. In the second half of the 20th century, however, the test of presumed intention came gradually to be superseded by an acknowledgement that at this stage of the analysis the court is no longer concerned with intention at all and is applying a positive rule of law, with the rule being that the contract is governed by the system of law with which it has its closest and most real connection: see Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), paras 32 006 32 007; Hellenic Steel Co v Svolamar Shipping Co Ltd (The Komninos S) [1991] 1 Lloyds Rep 370, 374 (Bingham LJ). Lord Diplock stated the modern position clearly in the Tunisienne case, at pp 603 604: If, applying these rules [sc the ordinary rules of English law relating to the construction of contracts], the court reaches the conclusion that the parties did not intend to exercise any choice of proper law, or is unable to identify what their choice was, it becomes necessary for the court to proceed to the second stage, of determining itself what is the proper law applicable. In doing so, the court applies the English rule of the conflict of laws that the proper law is that system of law with which the transaction has its closest and most real connection: Bonython v Commonwealth of Australia [1951] AC 201, 219. My Lords, this is applied as a positive rule of English law. It is applied not because it is the choice of the parties themselves but because they never intended to exercise their liberty to make a choice or, if they did, they have failed to make their choice clear. Whether the parties have agreed on a choice of law is a matter which inevitably may sometimes give rise to differences of opinion. In the Tunisienne case three members of the House of Lords appellate committee (Lord Morris of Borth y Gest, Viscount Dilhorne and Lord Diplock) held that clause 13 (quoted earlier) was in its context to be construed as an agreement that French law was to govern the contract. The other two members of the committee (Lord Reid and Lord Wilberforce) did not consider that the clause could be so construed but still concluded at the second stage of the analysis that French law was the governing law. In Amin Rasheed Shipping Corpn v Kuwait Insurance Co (The Al Wahab) [1984] AC 50, Lord Diplock (with whose speech three of the other law lords agreed) applied the principles he had identified in the Tunisienne case to determine whether an insurance contract was governed by English law or the law of Kuwait. He concluded (at p 62) that on their proper construction the provisions of the contract, taken as a whole, by necessary implication point ineluctably to the conclusion that the intention of the parties was that their mutual rights and obligations under it should be determined in accordance with the English law of marine insurance. Lord Wilberforce reached the same result on the basis that English law was the system of law with which the contract had the closest and most real connection. (vii) Splitting the contract English common law (along with other legal systems) recognises the possibility that different parts of a contract may be governed by different laws a concept known in conflict of laws theory as dpeage. This is also expressly provided for in the Rome I Regulation. Article 3(1) includes the statement: By their choice the parties can select the law applicable to the whole or to part only of the contract. There are many English cases in which courts have contemplated that different obligations in the same contract may be governed by different laws. The earliest such case to which we were referred was the decision of the Court of Appeal in Jacobs, Marcus & Co v Crdit Lyonnais (1884) 12 QBD 589. There appear to be few cases, however, in which such a situation has been found to exist (although one such case is Libyan Arab Foreign Bank v Bankers Trust [1989] QB 728, 746 747). No doubt this is because, as Lord MacDermott said in Kahler v Midland Bank Ltd [1950] AC 24 at 42, the courts of this country will not split the contract in this sense readily or without good reason. It is generally reasonable to assume that parties would intend or expect their contract to be governed by a single system of law. To apply different systems of law to different parts of a contract has the potential to give rise to inconsistency and uncertainty. This is particularly so where questions about the validity or enforceability of contractual obligations arise. As observed in Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012) at para 32 026: Even if different parts of a contract are said to be governed by different laws, it would be highly inconvenient and contrary to principle for such issues as whether the contract is discharged by frustration, or whether the innocent party may terminate or withhold performance on account of the other partys breach, not to be governed by a single law. The assumption that, unless there is good reason to conclude otherwise, all the terms of a contract are governed by the same law applies to an arbitration clause, as it does to any other clause of a contract. As Mustill J said in Black Clawson International Ltd v Papierwerke Waldhof Aschaffenburg AG [1981] 2 Lloyds Rep 446, 456: In the ordinary way, this [sc the law of the arbitration agreement] would be likely to follow the law of the substantive contract. An arbitration clause may, however, more readily than other clauses be governed by a different law. One reason for this is that an arbitration clause has a different subject matter and purpose from the rest of the contract. It is concerned not with establishing substantive rights and obligations of the parties but with providing a mechanism by which a dispute about such rights and obligations will be resolved. A second reason flows from the principle of separability of the arbitration agreement. This is a cardinal principle of arbitration law, codified in section 7 of the Arbitration Act 1996. Section 7 provides that, unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement shall not be regarded as invalid, non existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement. As counsel for Chubb Russia emphasised, the principle of separability is not a principle that an arbitration agreement is to be treated as a distinct agreement for all purposes but only that it is to be so treated for the purpose of determining its validity or enforceability. That is clear from the words for that purpose in section 7 of the 1996 Act. Thus, the separability principle does not require that an arbitration agreement should be treated as a separate agreement for the purpose of determining its governing law. Nevertheless, the principle is relevant to the conflict of laws analysis because it alleviates the difficulty identified by Dicey, Morris & Collins in the passage quoted at para 39 above in treating different parts of a contract as governed by different laws. Where the separability principle is recognised by the putative applicable law of the arbitration agreement, no inconsistency will arise from treating issues such as whether the contract is discharged by frustration, or whether the innocent party may terminate or withhold performance on account of the other partys breach, or whether the contract has been rescinded for misrepresentation, as governed by a different law from the law of the arbitration agreement, as the resolution of those issues will not affect the validity or enforceability of the arbitration agreement. The possibility that an arbitration agreement may be governed by a different system of law from the contract of which it forms part is also implicitly recognised by the exclusion of arbitration agreements from the scope of the Rome I Regulation, with the consequence that the law applicable to an arbitration agreement and the law applicable to the rest of the contract must be determined independently by different conflict of laws regimes. IV. Choice of law for the whole contract Significance of a governing law clause (i) It is rare for the law governing an arbitration clause to be specifically identified (either in the arbitration clause itself or elsewhere in the contract). It is common, however, in a contract which has connections with more than one country (or territory with its own legal system) to find a clause specifying the law which is to govern the contract. A typical clause of this kind states: This Agreement shall be governed by and construed in accordance with the laws of [name of legal system]. Where the contract also contains an arbitration clause, it is natural to interpret such a governing law clause, in the absence of good reason to the contrary, as applying to the arbitration clause for the simple reason that the arbitration clause is part of the contract which the parties have agreed is to be governed by the specified system of law. As stated in Redfern and Hunter: Law and Practice of International Commercial Arbitration, 6th ed (2015) at para 3.12: Since the arbitration clause is only one of many clauses in a contract, it might seem reasonable to assume that the law chosen by the parties to govern the contract will also govern the arbitration clause. If the parties expressly choose a particular law to govern their agreement, why should some other law which the parties have not chosen be applied to only one of the clauses in the agreement, simply because it happens to be the arbitration clause? This approach is supported by other leading commentaries. For example, Merkin on Arbitration Law, Issue 84 (2020), para 7.12, states that: even if there is no express contractual statement to that effect, a choice of law clause for the entire agreement is likely to be construed as extending to the arbitration clause. There are numerous decisions to this effect However, that presumption may be ousted in appropriate circumstances See also Dicey, Morris & Collins on The Conflicts of Laws, 15th ed (2012) at para 16 017: If there is an express choice of law to govern the contract as a whole, the arbitration agreement may also be governed by that law. (ii) Domestic case law There is a considerable body of English case law which proceeds on the assumption that a choice of law for the contract will normally apply to an arbitration clause in the contract. The approach was summarised by Colman J in Sonatrach Petroleum Corpn (BVI) v Ferrell International Ltd [2002] 1 All ER (Comm) 627 at para 32: Where the substantive contract contains an express choice of law, but the agreement to arbitrate contains no separate express choice of law, the latter agreement will normally be governed by the body of law expressly chosen to govern the substantive contract. It has not generally been considered to make any difference in this regard that the arbitration clause provides for arbitration to take place in a different country from the country whose law has been chosen to govern the contract. Examples of decisions in which a choice of law clause in the contract has been treated as applying to the arbitration agreement despite the seat of arbitration being in a different jurisdiction include: Cia Maritima Zorroza SA v Sesostris SAE (The Marques De Bolarque) [1984] 1 Lloyds Rep 652, 653; Union of India v McDonnell Douglas Corpn [1993] 2 Lloyds Rep 48, 49 50; Sumitomo Heavy Industries Ltd v Oil and Natural Gas Commission [1994] 1 Lloyds Rep 45, 57; Deutz AG v General Electric Co (Thomas J, 14 April 2000) at p 17; Peterson Farms Inc v C&M Farming Ltd [2004] EWHC 121 (Comm); [2004] 1 Lloyds Rep 603, paras 43 46; Leibinger v Stryker Trauma GmbH [2005] EWHC 690 (Comm), para 38; and Svenska Petroleum Exploration AB v Government of the Republic of Lithuania [2005] EWHC 2437 (Comm); [2006] 1 All ER (Comm) 731, paras 76 77. A different view was expressed in XL Insurance Ltd v Owens Corning [2001] 1 All ER (Comm) 530, a case concerning a policy of insurance on Bermuda form terms which provide for New York law to govern the policy but for disputes to be determined by arbitration in London. The English court granted an injunction to restrain the insured from pursuing a claim against the insurers in the courts of Delaware. The insured argued that the choice of New York law to govern the policy included the arbitration agreement and that this agreement was invalid under the Federal Arbitration Act which formed part of New York law. Toulson J rejected that argument and concluded that, by stipulating for arbitration in London under the provisions of the 1996 Act, the parties had impliedly chosen English law to govern the arbitration agreement (see p 543b). We will consider his reasoning later in this judgment. In C v D [2007] EWCA Civ 1282; [2008] Bus LR 843, another case concerning a Bermuda form insurance policy, the Court of Appeal likewise expressed the view (obiter) that the arbitration agreement was governed by English law. In C v D, however, Longmore LJ (with whom the other members of the court agreed) reached this conclusion, not on the basis of implied choice, but on the basis that there was no choice of law for the arbitration agreement so that it was necessary to identify the law with which it was most closely connected. He considered this to be the law of the place where the parties had chosen to arbitrate rather than the law of the insurance contract (paras 25 26). Many commentaries and authorities, including XL Insurance and C v D, were considered by the Court of Appeal in Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102. In a judgment with which the other members of the court agreed, Moore Bick LJ said (at para 11): It is common for parties to make an express choice of law to govern their contract, but unusual for them to make an express choice of the law to govern any arbitration agreement contained within it; and where they have not done so, the natural inference is that they intended the proper law chosen to govern the substantive contract also to govern the agreement to arbitrate. Moore Bick LJ expressed reservations about the dicta of Longmore LJ in C v D, noting that the court in that case did not have the benefit of full citation of authority and that a rule that an arbitration agreement is governed by the law of the seat even where there is a choice of law clause in the contract cannot easily be reconciled with the earlier authorities or with the established principles for determining the proper law (para 24). His conclusion (at para 26) was in the following terms: In the absence of any indication to the contrary, an express choice of law governing the substantive contract is a strong indication of the parties intention in relation to the agreement to arbitrate. A search for an implied choice of proper law to govern the arbitration agreement is therefore likely (as the dicta in the earlier cases indicate) to lead to the conclusion that the parties intended the arbitration agreement to be governed by the same system of law as the substantive contract, unless there are other factors present which point to a different conclusion. These may include the terms of the arbitration agreement itself or the consequences for its effectiveness of choosing the proper law of the substantive contract This approach was followed in Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm); [2013] 2 All ER (Comm) 1. In that case a contract contained clauses providing that it was to be governed by the laws of India and that disputes were to be settled by arbitration in London. It was held that, as a matter of construction, the parties had chosen Indian law to govern the arbitration agreement. Recently, in Kabab Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2020] EWCA Civ 6; [2020] 1 Lloyds Rep 269 the Court of Appeal similarly construed a clause in a contract which stated This Agreement shall be governed by and construed in accordance with the laws of England as meaning that all the terms of the contract were governed by English law including an arbitration clause which provided for arbitration in France. This conclusion was reinforced by the fact that the contract included a clause which stated that This Agreement consists of the terms of agreement set forth herein below . (iii) Considerations of principle A number of further considerations confirm the reasonableness of, as a general rule, construing a choice of law to govern the contract as applying to an arbitration agreement set out in a clause of the contract, even where the law chosen to govern the contract differs from that of the place chosen as the seat of the arbitration: i) This approach provides a degree of certainty. The parties can be assured that an agreement as to the governing law will generally be an effective choice in relation to all of their contractual rights and obligations and to all of their disputes. ii) It achieves consistency. The same system of law governs all the parties rights and obligations. It can be unsatisfactory for potentially closely related issues such as the identity of the contracting parties or the proper approach to the interpretation of their bargain to be governed by different systems of law, depending on whether it relates to the main contract or the arbitration agreement. iii) It avoids complexities and uncertainties. As soon as the relationship between the parties is subject to two systems of law, problems can arise as to where and how to draw the boundaries between them. This is exemplified by the increasing prevalence of multi tier dispute resolution clauses. If the arbitration agreement is governed by a different system of law from the main body of the contract, provisions that require negotiation and/or mediation and/or expert determination in advance of arbitration raise potentially difficult questions as to whether they are governed by the law applicable to the arbitration agreement or by the law generally applicable to the contract, and indeed as to whether those questions should be answered by applying the common law rules or the Rome I Regulation. Article 50.1 of the construction contract is an example of such a clause. Although we explain later how these difficulties may be addressed, if there is only one system of law then no such difficulties arise. iv) It avoids artificiality. The principle that an arbitration agreement is separable from the contract containing it is an important part of arbitration law but it is a legal doctrine and one which is likely to be much better known to arbitration lawyers than to commercial parties. For them a contract is a contract; not a contract with an ancillary or collateral or interior arbitration agreement. They would therefore reasonably expect a choice of law to apply to the whole of that contract. v) It ensures coherence. It is consistent with the treatment of other types of clauses whose validity is also insulated from challenges to the contract, such as choice of law or choice of court clauses. Such clauses are generally presumed to be governed by the law of the contract of which they form part: see Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012) at paras 12 103 and 12 109. As a matter of principle and authority there are therefore strong reasons why an agreement on a choice of law to govern a contract should generally be construed as applying to an arbitration agreement set out or otherwise incorporated in the contract. (iv) The international perspective As to the international perspective, although there is no uniformity, there are many commentators on international arbitration who support such an approach, at least where there is an express choice of governing law for the contract. Examples to which we were referred include: Bantekas, The Proper Law of the Arbitration Clause: A Challenge to the Prevailing Orthodoxy (2010) 27 Journal of International Arbitration 1, 1 2; Born, International Commercial Arbitration, 2nd ed (2014), p 592; Grover, Dilemma of the Proper Law of the Arbitration Agreement: An Approach Towards Unification of Applicable Laws (2014) 32 Sing L Rev 227, 255; Choi, Choice of Law Rules Applicable for International Arbitration Agreements (2015) 11 Asian International Arbitration Journal 105, 108 109; Khatchadourian, Fortifying the Arbitration Clause in Ziad (ed), Festschrift Ahmed Sadek El Kosheri (2015), pp 53 56; and Miles and Goh, A Principled Approach Towards the Law Governing Arbitration Agreements in Kaplan and Moser (eds), Jurisdiction, Admissibility and Choice of Law in International Arbitration: Liber Amicorum Michael Pryles (2018) Chapter 24, p 393. This is also said to be the approach generally adopted by ICC arbitrators (see Lew, The Law Applicable to the Form and Substance of the Arbitration Clause: 40 Years of Application of the New York Convention in van den Berg (ed), Improving the Efficiency of Arbitration Agreements and Awards, (1998) ICCA Congress Series Vol 9, pp 143 144). It would appear that the same approach has been adopted in a number of common law and civil law jurisdictions. These include Singapore, India, Pakistan, Germany and Austria. According to Chubb Russia they also include Hong Kong, Australia and Switzerland, although this was questioned by Enka. Singapore provides an instructive example. In FirstLink Investments Corpn Ltd v GT Payment Pte Ltd [2014] SGHCR 12 it was held that the law of the seat should generally apply to the arbitration agreement. In BCY v BCZ [2016] SGHC 249; [2016] 2 Lloyds Rep 583 Steven Chong J disagreed and held that the approach in Sulamrica should be followed as it is supported by the weight of authority and is, in any event, preferable as a matter of principle (para 49). Having set out detailed reasons why that was so, he concluded that, as the arbitration agreement in that case was contained in a contract expressly governed by New York law, the presumption was that New York law governed the arbitration agreement and this presumption was not displaced by the choice of Singapore as the seat of arbitration. BCY v BCZ has been approved by the Singapore Court of Appeal see BNA v BNB [2020] 1 Lloyds Rep 55, para 44, where it was accepted by both parties as a correct statement of the law. The approach of the Court of Appeal (i) The Court of Appeals judgment The Court of Appeal reached a contrary conclusion in the present case. Leaving aside cases in which, exceptionally, a choice of the law governing the arbitration agreement is specified in the arbitration agreement itself, Popplewell LJ (with whom Flaux and Males LJJ agreed) was prepared to accept that an express choice of the law applicable to the contract containing the arbitration agreement may sometimes, as a matter of construction, amount to an express choice of the law applicable to the arbitration agreement (para 90). But he considered that this conclusion would follow only in a minority of cases and that in all other cases there is a strong presumption that the parties have impliedly chosen the law of the seat of the arbitration to govern the arbitration agreement. This was said to be the general rule, subject only to any particular features of the case demonstrating powerful reasons to the contrary (para 91). (ii) Separability Our first difficulty with this proposed general rule is that we do not agree that it is only in a minority of cases that an express choice of law to govern the contract should properly be construed as being a choice of law to govern an arbitration agreement included in the contract. As we have discussed, a clause such as This Agreement is to be governed by and construed in accordance with the laws of [a named country] is naturally and sensibly understood to mean that the law of that country should govern and determine the meaning and effect of all the clauses in the contract which the parties signed including the arbitration clause. It is unclear to us why more should be needed or what more on the Court of Appeals approach is required to make it clear that a phrase such as This Agreement means the whole agreement and not just part of it. The Court of Appeal justified its approach on the ground that a choice of law to govern the contract has little if anything to say about the [arbitration agreement] law choice because it is directed to a different and separate agreement (para 92). This was said to follow from the doctrine that an arbitration agreement is separable from the rest of the contract. In our view, this puts the principle of separability of the arbitration agreement too high. For reasons given earlier, the requirement that an arbitration clause is to be treated as a distinct agreement for the purpose of determining its validity, existence and effectiveness makes it more amenable than other parts of a contract to the application of a different law. The rationale underlying the separability principle is also relevant, as we will mention later, in cases where applying the governing law of the contract to the arbitration clause would render the arbitration agreement invalid or ineffective. But it does not follow from the separability principle that an arbitration agreement is generally to be regarded as a different and separate agreement from the rest of the contract or that a choice of governing law for the contract should not generally be interpreted as applying to an arbitration clause. Descriptions of an arbitration clause as, for example, collateral to the main contract in which it is incorporated (Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal (The Hannah Blumenthal) [1983] 1 AC 854, 917, per Lord Diplock) or a separate contract, ancillary to the main contract (Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corpn Ltd [1981] AC 909, 998, per Lord Scarman) need to be seen in their context as ways of expressing the doctrine that the discharge by frustration (or for other reasons) of the substantive obligations created by the contract will not discharge the parties agreement to arbitrate. The arbitration clause is nonetheless part of the bundle of rights and obligations recorded in the contractual document. So, for example, an assignment of the contract will include an arbitration clause without the need for any separate or additional assignment: see Schiffahrtsgesellschaft Detlev von Appen GmbH v Voest Alpine Intertrading GmbH (The Jay Bola) [1997] 2 Lloyds Rep 279, 285; Shayler v Woolf [1946] Ch 320; and Cockett Marine Oil DMCC v ING Bank NV (The M/V Ziemia Ciesznska) [2019] EWHC 1533 (Comm); [2019] 2 Lloyds Rep 541. As Colman J put it in construing the words any clause of this Agreement as including an arbitration clause in JSC Zestafoni G Nikoladze Ferroalloy Plant v Ronly Holdings Ltd [2004] EWHC 245 (Comm); [2004] 2 Lloyds Rep 335, para 31: There is nothing in the intrinsic character of an arbitration agreement as having an attribute of separability which prevents it from being included in that phrase. Moore Bick LJ summed up the position clearly when he said in the Sulamrica case at para 26: The concept of separability itself, however, simply reflects the parties presumed intention that their agreed procedure for resolving disputes should remain effective in circumstances that would render the substantive contract ineffective. Its purpose is to give legal effect to that intention, not to insulate the arbitration agreement from the substantive contract for all purposes. In his lead judgment in the Court of Appeal Popplewell LJ quoted this passage (at para 93) and appeared there to recognise that it is wrong to characterise an arbitration clause generally as a separate agreement. He went on, however, to make a more specific point that one of the purposes for which an arbitration agreement is treated as separate and severable is that of applying the curial law which, where the parties have chosen a different arbitration seat and hence curial law from the law applicable to their contract, is distinct from the latter system of law. The rhetorical question was posed, at para 94: Why then should [the law applicable to the contract] have anything to say about the closely related aspect of the very same arbitration agreement, namely the [law which governs it] (absent express language to that effect so as to give rise to an express choice of [the arbitration agreement] law)? Leaving aside what should count as express language in this regard, this argument rests on the premise that the curial law which governs the arbitration process is so closely related to the law governing the arbitration agreement that a choice of law to govern the contract should generally be presumed not to apply to an arbitration clause when the parties have chosen a different curial law. It is to this argument, which was central to the Court of Appeals reasoning, that we therefore turn. (iii) The overlap argument This argument, which we will call the overlap argument, seems to have made its first appearance in XL Insurance Ltd v Owens Corning [2001] 1 All ER (Comm) 530, mentioned earlier, where Toulson J considered that, by stipulating for arbitration in London under the provisions of the Arbitration Act 1996, the parties had impliedly chosen English law to govern the validity of the arbitration agreement despite the choice of New York law as the governing law of the policy (see p 543b). His essential reasoning (at p 541e) was that the substance and process of arbitration are closely intertwined and that the 1996 Act contains various provisions which could not readily be separated into boxes labelled substantive arbitration law or procedural law, because that would be an artificial division. The Court of Appeal in the present case endorsed and elaborated on this reasoning, concluding that the overlap between the scope of the curial law and that of the [arbitration agreement] law strongly suggests that they should be the same (para 96). They further considered that, given this overlap and the fact that the curial law which regulates the arbitration process is a matter of choice which comes with an express choice of seat, it seems natural to regard a choice of seat as an implied choice of the law applicable to the arbitration agreement (para 101). On this basis they held that there is a strong presumption that a choice of seat is an implied choice of the law which is to govern the arbitration agreement (para 105(3)). (iv) Choice of curial law On this appeal Chubb Russia disputed the initial premise that a choice of seat for an arbitration involves any choice of law at all, procedural or substantive. Counsel for Chubb Russia submitted that the application of the curial law of the seat is something that follows automatically from a choice of place of arbitration rather than being itself a matter of choice. They cited as an analogy a hypothetical case postulated by Redfern and Hunter: Law and Practice of International Commercial Arbitration, 6th ed (2015), para 3.63, of an English motorist who takes her car to France. Redfern and Hunter comment that: it would be an odd use of language to say that this notional motorist had opted for French traffic law; rather, she has chosen to go to France and the applicability of French law then follows automatically. It is not a matter of choice. We agree that it would be inapt to describe the tourist in this example as having made a choice to be regulated by French traffic law. But as Mr Dicker QC for Enka submitted, it is difficult to conceive that a persons decision to visit France might be informed by a desire to be governed by French traffic law. By contrast, the nature and scope of the jurisdiction exercised by the courts of a country over an arbitration which has its seat there is a highly material consideration in choosing a seat for the arbitration. That is reinforced by the fact that the seat of an arbitration is a legal concept rather than a physical one. A choice of place as the seat does not dictate that hearings must be held, or that any award must actually be issued, in that place. As the Court of Appeal observed (at para 46), it is perfectly possible to conduct an arbitration with an English seat at any convenient location, anywhere in the world. Furthermore, under section 53 of the Arbitration Act 1996, unless otherwise agreed by the parties, where the seat of an arbitration is in England and Wales, any award in the proceedings shall be treated as made there, regardless of where it was signed, despatched or delivered to any of the parties (see also article 31(3) of the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985). The point of agreeing a seat is to agree that the law and courts of a particular country will exercise control over an arbitration which has its seat in that country to the extent provided for by that countrys law. A choice of seat can in these circumstances aptly be regarded as a choice of the curial law. As noted at the beginning of this judgment, however, the curial law which applies to the arbitration process is conceptually distinct from the law which governs the validity and scope of the arbitration agreement. Whether a choice of the curial law carries any implication that the parties intended the same system of law to govern the arbitration agreement and, if so, the strength of any such implication must depend on the content of the relevant curial law. (v) Relationship between curial law and arbitration agreement law In Carpatsky Petroleum Corpn v PJSC Ukrnafta [2020] EWHC 769 (Comm); [2020] Bus LR 1284, the claimant applied to enforce in England and Wales an arbitration award made in Sweden. Enforcement was resisted on the ground (among others) that there was no valid arbitration agreement in the contract between the parties. This argument depended on the assumption that the validity of the arbitration agreement was governed by the law of Ukraine. The contract provided for the law of substance of Ukraine to apply on examination of disputes. Butcher J held (at paras 67 71) that this was not a choice of Ukrainian law to govern the arbitration agreement and that, in the circumstances, the choice of Stockholm as the seat for any arbitration demonstrated an implied choice that the validity and interpretation of the arbitration agreement should be governed by Swedish law. His reasons were that: (1) it was reasonable to infer that the parties had deliberately chosen a neutral forum to resolve their disputes and hence intended the law of that jurisdiction to determine issues as to the validity and ambit of that choice; and (2) by choosing Sweden as the seat for the arbitration, the parties agreed to the application of the Swedish Arbitration Act, including section 48 which provides that, in the absence of agreement on a choice of law to govern an arbitration agreement with an international connection, the arbitration agreement shall be governed by the law of the country in which, by virtue of that agreement, the arbitration proceedings have taken place or will take place. It follows that, by providing for a Swedish seat, the parties were impliedly agreeing that Swedish law should govern the arbitration agreement. A similar inference could also be drawn where a contract contains an agreement for arbitration in Scotland. Section 6 of the Arbitration (Scotland) Act 2010 provides: Where (a) the parties to an arbitration agreement agree that an arbitration under that agreement is to be seated in Scotland, but (b) law which is to govern it, the arbitration agreement does not specify the then, unless the parties otherwise agree, the arbitration agreement is to be governed by Scots law. There is, however, no similar provision in the Arbitration Act 1996. The argument made by Enka, and accepted by the Court of Appeal, is that the 1996 Act contains provisions which are substantive as well as provisions which are procedural in nature, and that there is no clear division between the two. In these circumstances it is argued that, by choosing an English seat in the knowledge that the Arbitration Act 1996 will apply where the seat of the arbitration is in England, the parties are by implication choosing English law to govern at least some aspects of their substantive rights under the arbitration agreement. Furthermore, as suggested by Toulson J in the XL Insurance case, the provisions which affect substantive rights are intertwined with, and cannot readily be separated from, procedural provisions of the Act. The natural inference is said to be that the parties intended all their rights under the arbitration agreement to be governed by English law. (vi) Section 4(5) of the 1996 Act We agree that there is a close relationship between provisions of the Arbitration Act concerned with the arbitration agreement and provisions of the Act concerned with the arbitration process and that the distinction between them is not always clear or easy to draw. But we do not accept that this justifies the conclusion that a choice of an English seat of arbitration is an implied choice that the arbitration agreement will be governed by English law. In our view, a conclusive answer to that argument lies in a point raised by Chubb Russia on this appeal which was not fully developed in the Court of Appeal. The point in short is that almost all the provisions of the 1996 Act relied on to support the overlap argument are non mandatory and, where the arbitration agreement is governed a foreign law, by reason of section 4(5) the non mandatory provisions of the Act which concern arbitration agreements do not apply to it. As the legislation contemplates and specifically provides for a situation in which the arbitration agreement will be governed by a foreign law even though English law governs the arbitration process, no necessary inference can be drawn that, by choosing an English seat and with it English law as the curial law, parties are also impliedly choosing English law to govern their arbitration agreement. Section 4(5) of the 1996 Act states: The choice of a law other than the law of England and Wales or Northern Ireland as the applicable law in respect of a matter provided for by a non mandatory provision of this Part is equivalent to an agreement making provision about that matter. For this purpose an applicable law determined in accordance with the parties agreement, or which is objectively determined in the absence of any express or implied choice, shall be treated as chosen by the parties. The clear meaning and effect of this provision is that, where a foreign law is applicable to an arbitration agreement (whether by choice or as determined in the absence of choice by the closest connection test), that fact alone is enough to disapply any non mandatory provision of the Act in so far as it would otherwise affect a matter governed by the law applicable to the arbitration agreement. This is because the applicability of a foreign law is treated as equivalent to an agreement to make contrary provision about a matter. It is not necessary to inquire whether or not the foreign law does in fact make such contrary provision. Even if there were otherwise considered to be any ambiguity in the meaning of section 4(5), it is dispelled by the Supplementary Report on the Arbitration Act 1996, dated January 1997, produced by the Departmental Advisory Committee on Arbitration (the DAC), which explains the genesis of the provision. As originally drafted, clause 2 of the Bill provided: (1) The provisions of this Part apply where the law of England and Wales or Northern Ireland is applicable, or the powers of the court are exercisable, in accordance with the rules of the conflict of laws. (2) They apply, in particular (a) to matters relating to or governed by the arbitration agreement, where the applicable law is the law of England and Wales or Northern Ireland; and (b) to matters governed by the law applicable to the arbitral proceedings, where the seat of the arbitration is in England and Wales or Northern Ireland. The DAC Supplementary Report, at para 7(ii), observed that the purpose of clause 2(2) was to avoid the danger that all the provisions of Part I of the Act would be imported if English law was found to govern one particular aspect of an arbitration. For example: an arbitration may have a French seat, with French law governing the procedure, but English law governing the arbitration agreement. In such a situation, only those provisions of the Act which concern arbitration agreements should apply. It would be quite wrong to apply provisions of the Act which concern arbitral procedure, as this would be governed by French law. Plainly, this reasoning applies equally in reverse to an arbitration with an English seat and English law governing the procedure, but French law governing the arbitration agreement. In such a situation, only those provisions of the Act which concern arbitral procedure should apply and not those which concern the arbitration agreement, as this would be governed by French law. The clause as drafted, however, was considered unworkable in practice (although sound in principle) one reason being that, to apply clause 2(2), it would have been necessary individually to characterise and separate all those provisions of the Act which concerned the arbitration agreement, as distinct from all those that concerned the arbitral procedure (see para 9(ii) of the DAC Supplementary Report). It was noted that the attempt to do this had proved an extremely difficult and complex exercise. Furthermore: Many provisions concern both arbitration agreements and arbitral procedure, and there appeared to be a divergence of view with respect to many others. In the light of these difficulties, the DAC decided to recommend recasting the whole provision so as to establish in section 2(1) the basic rule that Part I of the Act applies to arbitrations which have their seat in England and Wales or Northern Ireland (see paras 10 11 of the DAC Supplementary Report). In such a case, however, as explained in para 12: If a foreign law has been chosen to govern any particular aspect of the arbitration, such as the arbitral procedure or the arbitration agreement, or is otherwise applicable to any such aspect, this is catered for by section 4(5). Therefore, reference may be made to this Act in the first instance, and then back to another law with respect to a specific issue. Whilst a process of characterisation may still have to be done, the combination of section 2 and section 4(5) avoids the dangers that: a choice of English law with respect to one part of an arbitration will import other parts of the Act that concern other aspects of the arbitration; a choice of England as the seat of the arbitration will necessarily entail the imposition of every provision of the Act. We observe that the recasting carried out on the recommendation of the DAC did not remove the need individually to characterise the provisions of the Act as substantive or procedural (or partly substantive and partly procedural) whenever the applicable law is in issue an exercise described by the DAC as extremely difficult and complex. Nevertheless, the legislative history confirms that sections 2 and 4(5) of the 1996 Act as enacted were intended to have the effect that, where England is chosen as the seat of an arbitration but the arbitration agreement is governed by a foreign law, the non mandatory provisions of the Act do not apply to any matter concerning the parties substantive rights and obligations under the arbitration agreement. The fact that the Act contains some provisions which are substantive, or partly substantive, cannot therefore where those provisions are non mandatory support an inference that, by choosing an English seat of arbitration, parties must be taken to have contemplated and intended that the validity and scope of their arbitration agreement should be governed by English law. The only mandatory provisions of the 1996 Act are sections 12, 13 and 66 to 68. Section 12 gives the court power to extend time for beginning an arbitration where there is a contractual time limit. This could only have any bearing on the law applicable to the arbitration agreement if the arbitration agreement includes a contractual time limit (which the relevant clause in this case does not). Section 13 applies the Limitation Acts to arbitrations. As these Acts include the Foreign Limitation Periods Act 1984, which applies foreign limitation law to any substantive obligation governed by foreign law, this cannot support an inference that the arbitration agreement is governed by English law. Sections 66 to 68 are concerned with enforcement of the award and applications to the court to challenge an award. They are procedural in nature and cannot be said to determine the law applicable to the arbitration agreement. The provisions of the Arbitration Act 1996 therefore do not justify any general inference that parties who choose an English seat of arbitration thereby intend their arbitration agreement to be governed by English law. (vii) Enkas case on section 4(5) Enka put forward three responses to this reasoning, none of which we have found persuasive. First, counsel for Enka submitted that section 4(5) is concerned only with a choice of foreign law as the curial law for the arbitration process, and not with a choice of foreign law to govern the arbitration agreement. This, however, is not a tenable reading of section 4(5), which is manifestly not limited in this way and expressly applies whenever a foreign law is applicable in respect of a matter provided for by a non mandatory provision of the Act. As emphasised on Enkas own case, the matters provided for by non mandatory provisions of the Act include some matters which concern the substance of the arbitration agreement as well as matters of procedure. Nor does section 4(4) support a different interpretation, as suggested in Enkas written case. Section 4(4) provides that it is immaterial whether or not the law applicable to the parties agreement is the law of England and Wales . This makes it clear that, if the parties have made arrangements by agreement in place of any non mandatory provision of the Act, it is irrelevant whether or not that agreement is governed by English law. There is no inconsistency between that provision and the rule established by section 4(5) that a choice of foreign law in respect of a matter is equivalent to an agreement making provision about that matter. The second argument advanced by Enka is that, if as we think clear section 4(5) is not confined to a choice of curial law and also covers cases where a foreign law is applicable to the arbitration agreement, section 4(5) nevertheless applies only where the arbitration agreement makes specific reference to the matter provided for by a non mandatory provision of the Act. As authority for this restrictive interpretation, Enka relied on a dictum of Lord Steyn in Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 AC 221. That case involved an attempted challenge under section 68 of the 1996 Act to a decision by an arbitral tribunal to award interest under section 49(3) on principal sums awarded. The challenge failed because the House of Lords held that substantial injustice had not been established, as required to invoke section 68. However, Lord Steyn, who gave the leading speech, went on to point out that the challenge had also faced other formidable difficulties. In particular, the power under section 49(3) to award interest was prima facie available: the only question was whether there had been an agreement to the contrary for the purpose of section 49(2). In that context Lord Steyn noted (at para 37) that the judge at first instance had appeared to take the view that the law of Lesotho, as the law applicable to the construction contract under which the claim arose, might be relevant presumably on the basis that it constituted an agreement to the contrary. In relation to this, Lord Steyn remarked: Ignoring for the moment the fact that one does not know what the law of Lesotho is, this view comes up against the difficulty that only an agreement in writing as defined in the Act can qualify as an agreement to the contrary under section 49: section 5(1). The law of Lesotho is not an agreement to the contrary in writing. Lord Steyn made no mention of section 4(5) of the Act: the point that he made was based on section 5(1), which states that an agreement between the parties as to any matter is effective for the purposes of this Part only if in writing. Nevertheless, in C v D, at para 19, Longmore LJ treated Lord Steyns dictum as supporting the view that section 4(5) requires a choice of law with regard to the specific provision of the [1996] Act which the parties agree is not to apply. This statement was in turn relied on by Burton J in National Iranian Oil Co v Crescent Petroleum Co International Ltd [2016] EWHC 510 (Comm); [2016] 2 Lloyds Rep 146, paras 12 17, to conclude that a choice of Iranian law to govern an arbitration agreement was not sufficient to disapply section 7 of the 1996 Act, which codifies the principle of separability of the arbitration agreement, and that nothing less than an agreement expressly disapplying section 7 or the English law governing separability would have sufficed for that purpose. The notion that section 4(5) applies only where parties have specifically excluded a non mandatory provision of the Act by the terms of their arbitration agreement cannot, in our view, be accepted. It is not consistent with the language of section 4(5). The words in respect of a matter provided for by a non mandatory provision require only that the matter governed by the foreign law should be a matter provided for by a non mandatory provision of the Act. They cannot reasonably be read as requiring the parties specific agreement that the foreign law and not the non mandatory provision will govern the matter. Apart from anything else, the second paragraph of section 4(5) makes it explicitly clear that no choice or agreement of the parties at all is required for section 4(5) to apply. The interpretation contended for by Enka is also inconsistent with the legislative intent, as explained in the DAC Supplementary Report. Furthermore, as the late Mr VV Veeder QC observed, if correct, it would make a practical nonsense of the 1996 Act by requiring parties choosing a foreign law to govern an agreement for arbitration in England to analyse and identify individually in their agreement each of the 35 or so non mandatory provisions of the 1996 Act which they wish to disapply. We agree with Mr Veeders comment that the absurd consequences of such an interpretation speak for themselves: see Kaplan and Moser (eds), Jurisdiction, Admissibility and Choice of Law in International Arbitration: Liber Amicorum Michael Pryles (2018), Chapter 23, p 382. We do not think it credible that Lord Steyn in the Lesotho case intended to endorse such an interpretation of section 4(5), and to do so without giving any reasons or even mentioning that provision of the Act at all. The likely reason why no reference was made to section 4(5) is that it was not relevant to the power to award interest. The Court of Appeal in the Lesotho case characterised the power to award interest under section 49(3) of the 1996 Act as discretionary and procedural a characterisation which Lord Steyn seems to have endorsed when referring to the reasoning of the Court of Appeal in para 38 of his speech. The fact that section 49(3) was treated by both the Court of Appeal and the House of Lords in the Lesotho case as procedural in nature was later relied on by the Court of Appeal in Maher v Groupama Grand Est [2009] EWCA Civ 1191; [2010] 1 WLR 1564, para 38, to support a similar characterisation of the power of a court to award interest under section 35A of the Senior Courts Act 1981. Because section 49(3) is procedural, the choice of the law of Lesotho to govern substantive contractual rights was not in respect of a matter provided for by section 49(3) and therefore did not engage section 4(5). As it was not in doubt that the curial law governing the arbitration process was English law, to disapply section 49(3) would accordingly have required a specific agreement (in writing), as Lord Steyn observed. Whether or not Lesotho law contained any equivalent procedural power was in these circumstances not relevant. Even if it did, the law of Lesotho concerning that matter could not amount to an agreement to the contrary. This is, we think, how Lord Steyns dictum should be understood. But whether this was what was meant or not, we are satisfied that section 4(5) does not require a specific agreement to disapply a non mandatory provision of the Act. It follows that Longmore LJs statement to that effect in C v D was erroneous and that the National Iranian Oil Co case was wrongly decided on this point. The third response of Enka was to contend that the consequences of giving section 4(5) what we consider to be its unambiguous meaning would be as far reaching as they are surprising because it would cause numerous non mandatory provisions, which parties to a London arbitration are unlikely to have intended to exclude, nonetheless to be excluded. To support this contention, Enka relied as examples on sections 5, 7, 30 and 58 of the 1996 Act. Of these provisions, only section 7 which codifies the principle of separability concerns the validity or scope of the arbitration agreement. Section 5, which states that Part I of the Act applies only where the arbitration agreement is in writing, is not concerned with the validity or scope of the arbitration agreement but with the circumstances in which the provisions of the Act will apply. If the requirement of writing is not met, Part I of the Act will not apply to the arbitration agreement but it will be regulated by, and will still be valid at, common law (see section 81). Section 30, which empowers the arbitral tribunal to rule on its own jurisdiction, is procedural. It does not deal with the parties substantive rights under the arbitration agreement but with the competence of the tribunal to determine the validity and scope of those rights. Section 58, which provides for the finality of an arbitral award, is also procedural in nature. (For that reason, the insurers argument in C v D that, as a result of section 4(5), section 58 was disapplied by a choice of New York law to govern the arbitration agreement was misconceived.) These and other procedural non mandatory provisions will only be excluded in the unusual event that the parties have chosen a foreign procedural law for an English seated arbitration: see Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1 All ER (Comm) 514, para 31; C v D [2007] EWHC 1541 (Comm); [2007] 2 All ER (Comm) 557, paras 25 26 (Cooke J); Sterling v Rand [2019] EWHC 2560 (Ch); [2019] 2 Lloyds Rep 577, para 58. As observed in the DAC Supplementary Report, para 7(ii) (quoted at para 77 above), in such a case it would be wrong to apply non mandatory provisions of the Act which concern arbitral procedure, as this would be governed by foreign law. We accept that characterising individual provisions of that Act as procedural or substantive can, as recognised by the DAC, be a difficult and complex exercise. But we are satisfied that giving section 4(5) its plain meaning does not lead to surprising or untoward consequences and is inconsistent with the contention that choosing English law as the curial law of an arbitration involves an implied choice of English law as the law applicable to the arbitration agreement. For these reasons, we do not consider the overlap argument as accepted by the Court of Appeal to be well founded. While a choice of seat and curial law is capable in some cases (based on the content of the relevant curial law) of supporting an inference that the parties were choosing the law of that place to govern the arbitration agreement, the content of the Arbitration Act 1996 does not support such a general inference where the arbitration has its seat in England and Wales. VI. Avoiding invalidity (i) The validation principle It is a well established principle of contractual interpretation in English law, which dates back at least to the time of Sir Edward Coke (see Coke upon Littleton (1628) 42a), that an interpretation which upholds the validity of a transaction is to be preferred to one which would render it invalid or ineffective. In the days when Latin was commonly used in the courts, it was expressed by the maxim verba ita sunt intelligenda ut res magis valeat quam pereat translated by Staughton LJ in Lancashire County Council v Municipal Mutual Insurance Ltd [1997] QB 897, 910, as the contract should be interpreted so that it is valid rather than ineffective. This principle may apply if, in determining whether the parties have agreed on a choice of governing law, a putative governing law would render all or a part of the contract ineffective. For example, in In re Missouri Steamship Co (1889) 42 Ch D 321 a contract for the carriage of cattle by sea from Boston to England contained a clause that the carrier should not be liable for the negligence of the master or crew of the ship. The clause was valid under English law but void under the law of Massachusetts as being against public policy. The cattle were lost by the negligence of the master and crew, and the shipper claimed against the carrier for the loss. In concluding that the parties intended the contract to be governed by English law, the judge and the Court of Appeal placed reliance on the presumption that, in the words of Fry LJ at p 341, the law which would make the contract valid in all particulars was the law [intended] to regulate the conduct of the parties. In that case the potential invalidity of a significant clause in a contract was relied on as indicating the law intended to govern the entire contract. Where the clause in question is an arbitration clause, because of its severable character its putative invalidity may support an inference that it was intended to be governed by a different law from the other provisions of the contract or may at least negate an inference that the law generally applicable to the contract was intended to apply to the arbitration clause. (ii) Hamlyn v Talisker An early but authoritative instance of such reasoning is the decision of the House of Lords in Hamlyn & Co v Talisker Distillery [1894] AC 202. A contract between an English company and a Scottish company, to be performed in Scotland, contained the following provision: Should any dispute arise out of this contract, the same to be settled by arbitration by two members of the London Corn Exchange, or their umpire, in the usual way. It was common ground that this arbitration clause was valid according to English law but invalid according to the law of Scotland because the arbitrators were not named. The Court of Session held that the contract was governed by Scottish law as the law of the place of performance of the contract and that, in consequence, the arbitration clause was invalid. The House of Lords unanimously reversed that decision. As Lord Wilberforce subsequently noted in the Tunisienne case (at p 596), the only question decided by the House of Lords was whether the arbitration clause was governed by Scottish law or by English law. The members of the appellate committee were careful to limit their opinions to that question and to express no view on which law governed the other provisions of the contract. Two reasons were given for concluding that the arbitration clause was governed by English law. One reason, most fully expressed by Lord Watson (at pp 212 213), was that the language of the arbitration clause showed that the parties were contracting with reference to English law, as the clause required the arbitrators to be members of a commercial body in London and to decide disputes in the usual way in other words, in the manner customary in London. This reasoning did not, however, as it seems to us, justify treating the arbitration clause itself as governed by English law irrespective of which law governed the rest of the contract. It was a reason for inferring that the parties intended the arbitrators to apply English law in deciding any dispute under the contract and therefore for regarding the parties substantive contractual obligations as governed by English law. The question whether the arbitration clause was valid determined whether the arbitrators had jurisdiction, which was not at that time a matter that the arbitrators themselves were seen as competent to decide. This reasoning is therefore an early example of an approach we will consider shortly which treats a choice of seat of arbitration as an implied choice of law to govern the contract as a whole. The principal enduring significance of Hamlyn v Talisker lies in the second reason given for the decision, which was clearly articulated by Lord Herschell LC and Lord Ashbourne. It was this reason which justified treating the arbitration clause as potentially governed by a different law from rest of the contract. In Lord Herschells words (at p 208): the contract with reference to arbitration would have been absolutely null and void if it were to be governed by the law of Scotland. That cannot have been the intention of the parties; it is not reasonable to attribute that intention to them if the contract may be otherwise construed; Lord Ashbourne made the same point, stating graphically (at p 215) that the arbitration clause becomes mere waste paper if it is held that the parties were contracting on the basis of the application of the law of Scotland, which would at once refuse to acknowledge the full efficacy of a clause so framed. He continued: It is more reasonable to hold that the parties contracted with the common intention of giving entire effect to every clause, rather than of mutilating or destroying one of the most important provisions. (iii) The decision in Sulamrica It was this reasoning which led the Court of Appeal in the Sulamrica case to conclude that the arbitration clause in that case was governed by English law despite, as discussed earlier, starting from the position that an express choice of law to govern the contract is normally intended to apply to the arbitration clause. In the Sulamrica case claims were made by Brazilian companies involved in a construction project in Brazil under two insurance policies. Each policy contained an express choice of Brazilian law to govern the policy and a clause conferring exclusive jurisdiction on the courts of Brazil, but also mediation and arbitration clauses. These provided that any dispute should be referred to mediation and that, if the parties failed to agree the amount to be paid under the policy through mediation, the dispute should then be referred to arbitration in London. The insurers commenced arbitration proceedings in London and applied successfully to the English court for an interim injunction to restrain the insured from pursuing proceedings in the courts of Brazil. An appeal by the insured was dismissed by the Court of Appeal. The insureds case was that the contract, including the arbitration agreement, was governed by Brazilian law and that under Brazilian law the arbitration agreement was not enforceable against them without their consent. As noted earlier, Moore Bick LJ (with whom Hallett LJ and Lord Neuberger MR agreed) accepted that the choice of Brazilian law to govern the contract was a strong indication that the parties intended that system of law to govern the arbitration agreement. However, Moore Bick LJ identified two factors pointing the other way. The first was the overlap argument which we have just discussed: that by choosing London as the seat of arbitration, the parties must have foreseen and intended that the provisions of the Arbitration Act 1996 should apply to any arbitration, including those provisions which are more substantive than procedural in nature (para 29). For the reasons already given, we do not think that this argument is sound, as it overlooks the fact that, if the arbitration agreement was governed by Brazilian law, the non mandatory substantive provisions of the Act would be excluded by section 4(5). It was the second factor, however, which the Court of Appeal regarded as decisive. This was the possible existence of a rule of Brazilian law which would render the arbitration agreement enforceable only with the insureds consent (para 30). Moore Bick LJ reasoned that, given the terms of the mediation and arbitration clauses, the parties could not have intended to choose a system of law that either would, or might well, have that effect (para 31). As he also put it, Brazilian law could not have been intended to govern the arbitration agreement when there is at least a serious risk that a choice of Brazilian law would significantly undermine that agreement. In these circumstances it was necessary to identify the system of law with which the arbitration agreement was most closely connected. On this point Moore Bick LJ said (at para 32) that: an agreement to resolve disputes by arbitration in London, and therefore in accordance with English arbitral law, does not have a close juridical connection with the system of law governing the policy of insurance, whose purpose is unrelated to that of dispute resolution; rather, it has its closest and most real connection with the law of the place where the arbitration is to be held and which will exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure is effective. On this basis he concluded that the arbitration agreement was governed by English law. Although reasoning of this kind was not relied on in the XL Insurance case where, as discussed earlier, Toulson J relied on the overlap argument it provides in our view a better justification for the result reached in that case. The fact that the arbitration clause would arguably have been invalid under New York law was itself a strong reason for interpreting the choice of New York law to govern the insurance policy as not extending to the arbitration agreement. (iv) Commercial purpose of an arbitration clause The principle that contracting parties could not reasonably have intended a significant clause in their contract, such as an arbitration clause, to be invalid is a form of purposive interpretation, which seeks to interpret the language of the contract, so far as possible, in a way which will give effect to rather than defeat an aim or purpose which the parties can be taken to have had in view. The strength of the inference that an interpretation of the contract would defeat an aim of the parties is, however, a matter of degree. An interpretation which would without doubt mean that an arbitration clause is void and of no legal effect at all gives rise to a very powerful inference that such a meaning could not rationally have been intended. That was the position in Hamlyn v Talisker, where it was common ground that, if the arbitration clause were governed by Scottish law, it would have been (in Lord Herschells words [1894] AC 202, 208) absolutely null and void. In the Sulamrica case the inference was weaker. There was a serious risk but not a certainty that, if Brazilian law applied to the arbitration clause, it would render the agreement to arbitrate enforceable only with the insureds consent. That would not have meant that the arbitration clause was of no effect at all. As Moore Bick LJ acknowledged, although most arbitration agreements permit either party to refer disputes to arbitration, some provide for arbitration only at the option of one or other party. He did not think it reasonable, however, to attribute to the parties in that case an intention to enter into a one sided arrangement of that kind (para 30). In Fiona Trust & Holding Corpn v Privalov [2007] UKHL 40; [2007] Bus LR 1719, the House of Lords affirmed the principle that the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal (see para 13, per Lord Hoffmann). Contrary to a submission made on behalf of Chubb Russia, this is not a parochial approach but one which, as the House of Lords noted in the Fiona Trust case, has been recognised by (amongst other foreign courts) the German Federal Supreme Court (Bundesgerichtshof), the Federal Court of Australia and the United States Supreme Court and, as stated by Lord Hope at para 31, is now firmly embedded as part of the law of international commerce. In his monumental work on International Commercial Arbitration, 2nd ed (2014), p 1403 Gary Born summarises the position as follows: In a substantial majority of all jurisdictions, national law provides that international arbitration agreements should be interpreted in light of a pro arbitration presumption. Derived from the policies of leading international arbitration conventions and national arbitration legislation, and from the parties likely objectives, this type of presumption provides that a valid arbitration clause should generally be interpreted expansively and, in cases of doubt, extended to encompass disputed claims. That is particularly true where an arbitration clause encompasses some of the parties disputes and the question is whether it also applies to related disputes, so that all such controversies can be resolved in a single proceeding (rather than in multiple proceedings in different forums). To the extent that a putative applicable law fails to recognise this presumption that arbitration has been chosen as a one stop method of dispute resolution, it is inherently less likely that reasonable commercial parties would have intended that law to determine the validity and scope of their agreement to arbitrate (rather than litigate) disputes. What degree of impairment to the commercial purpose of an arbitration agreement will be enough to negate the assumption that a choice of law to govern the contract is intended to apply to the arbitration agreement is not a question which can be answered in the abstract. As with any question of construction, it will be necessary to have regard to the particular words used in the contract and the surrounding circumstances, as well as the nature and extent of the risk that the purpose of the arbitration agreement would be undermined if its validity and scope were governed by the relevant system of law. We cannot improve on the formulation of Moore Bick LJ in the Sulamrica case, para 31, that commercial parties are generally unlikely to have intended a choice of governing law for the contract to apply to an arbitration agreement if there is at least a serious risk that a choice of that law would significantly undermine that agreement. Relevance of the arbitration seat to the main contract law During the 20th century a line of authority developed which treated a choice of place of arbitration, where there was no express choice of governing law clause in the contract, as a strong indication that the parties intended the contract to be governed by the law of that place. This inference hardened into a rule of law and reached its high water mark in Tzortzis v Monark Line A/B [1968] 1 WLR 406, where the Court of Appeal held that a London arbitration clause gave rise to an implication that the parties intended English law to govern their contract which could only be rebutted by an express provision to the contrary. In the Tunisienne case the House of Lords held that this put the strength of the implication too high and that the implication stemming from a choice of arbitral forum could be overridden by contrary indications derived from the express provisions of the contract or relevant surrounding circumstances. Nevertheless, Lord Wilberforce (at p 596B) described the inference that the parties intended the law of the place of arbitration to govern their contract as a sound general rule. Lord Diplock went further and said (at p 609E) that he did not wish to throw any doubt upon the proposition that an arbitration clause is generally intended by the parties to operate as a choice of the proper law of the contract as well as the curial law and should be so construed unless there are compelling indications to the contrary . As is apparent from, for example, the submissions of Robert Goff QC in defence of this approach in the Tunisienne case (at p 579D), its rationale was that contracting parties, by agreeing to arbitration in a particular place, must normally be taken to have expected the arbitrators to be resident in that place and to apply the law with which they are familiar. Lord Wilberforce expressed some reservation about this reasoning, observing (at p 596C): I venture to think that in commercial matters, at the present time, this may give insufficient recognition to the international character of the City of London as a commercial centre the reason, rather than any preference for English rules, for which arbitration in London is selected. In the half century since the Tunisienne case was decided international arbitration has undergone major evolution and exponential growth. This has been accompanied by the development of international arbitral institutions such as the ICCs International Court of Arbitration, the International Centre for Dispute Resolution established by the American Arbitration Association and the London Court of International Arbitration. The primary reason for selecting London as a place of arbitration is no longer the international character of London as a commercial centre but its attractiveness specifically as a forum in which to arbitrate international disputes. In some cases where the parties have chosen English law as the governing law of their contract, the ready availability of expert English lawyers may be a relevant factor in choosing London as the arbitration venue. But even in the kinds of arbitration where the members of the arbitral tribunal are chosen for their legal expertise (rather than solely or mainly for their commercial experience), there is nothing to prevent the appointment of lawyers qualified in other jurisdictions to act as arbitrators in a London seated arbitration, or English lawyers to act as arbitrators in a foreign seated arbitration, and such appointments are frequently made. Furthermore, experienced international arbitrators qualified as lawyers in England and Wales or in other jurisdictions are perfectly familiar with applying systems of law other than their own. There can in these circumstances be no general implication that a choice of London (or any other major arbitration centre) as the seat of arbitration demonstrates an intention that the parties contractual obligations will be governed by the law of that place. This is equally so whether the question of implied choice is governed by article 3 of the Rome I Regulation (in relation to the main body of the contract) or the common law conflict rules (in relation to the arbitration agreement). There are still cases in which an arbitration clause providing for arbitration in London by, for example, English maritime arbitrators, or by London brokers, or by a local association or exchange, may in combination with other factors be regarded as conveying an implied choice of law. An example is Egon Oldendorff v Libera Corpn (No 2) [1996] 1 Lloyds Rep 380, where an arbitration clause in a charterparty made between Japanese owners and German charterers provided for arbitration in London by arbitrators appointed by the London Maritime Arbitrators Association. Also relevant to Clarke Js decision that the parties intended English law to govern the charterparty were: (1) the fact that it was made on a well known standard form containing clauses with well known meanings in English law; and (2) that having agreed a neutral forum, the parties intended that forum to apply a neutral law, namely English law and not German or Japanese law. In such cases that implied choice of law will equally apply to the arbitration agreement: see Habas Sinai Ve Tibbi Gazlar Istihsal v VSC Steel Co Ltd [2013] EWHC 4071 (Comm); [2014] 1 Lloyds Rep 479, para 102. Such a situation may be contrasted with one in which the arbitration clause, although it specifies a place of arbitration, does not provide for a method of identifying the arbitrators except through appointment by an international arbitral body such as the ICC. As Andrew Baker J observed in his judgment in this case (at para 62), the ICC is a quintessentially and deliberately supranational institution, with its own internal, and so again supranational, supervisory apparatus of the International Court of Arbitration and its Secretary General and Secretariat. In a case of this kind the parties could not reasonably assume that the selection of London as the seat of arbitration, even where it is a neutral forum, points ineluctably by necessary implication to a choice of English law to govern the contract so as to make the express designation of a governing law unnecessary. Enka did not seek to argue on this appeal that the choice of London as the seat of arbitration in this case implies that the parties intended the construction contract as a whole to be governed by English law. But counsel for Enka submitted that, even though such an inference cannot be drawn in relation to the law intended to govern the parties substantive contractual obligations, it can nevertheless be drawn in relation to the arbitration agreement itself. We do not accept this. Where there is insufficient reason to infer that the parties chose London as the seat of arbitration because they wanted the arbitrators to be versed in English law, that applies as much to any issues concerning the validity or scope of the arbitration agreement which the arbitrators might be asked to decide as it does to the substance of any dispute. Nor can any necessary implication be drawn from the possibility that issues concerning the validity or scope of the arbitration agreement might have to be decided by the English courts in the exercise of their supervisory jurisdiction. Questions of foreign law are dealt with in the English Commercial Court on a daily basis the trial of the present case being an example and, as Steyn LJ said in Star Shipping AS v China Shipping Foreign Trade Transportation Corpn (The Star Texas) [1993] 2 Lloyds Rep 445, 451 452, even an express choice of jurisdiction does not by itself give rise to an implied choice of law. We therefore do not consider that a choice of the seat of arbitration can by itself be construed as an implied choice of the law applicable to the arbitration agreement. VIII Applying the closest connection test So far we have been considering the question whether the parties to a contract have chosen the law applicable to the arbitration agreement, either specifically or by choosing a system of law to govern the contract as a whole including the arbitration agreement. We now turn to the situation in which no such choice has been made. As discussed earlier (see para 36 above), the court must in these circumstances determine, objectively and irrespective of the parties intention, with which system of law the arbitration agreement has its closest connection. This exercise is different in nature from the attempt to identify a choice (whether express or implied), as it involves the application of a rule of law and not a process of contractual interpretation. Even where the parties have not agreed what law is to govern their contract, it is reasonable to start from an assumption for reasons given earlier that all the terms of the contract, including an arbitration clause, are governed by the same system of law. Where, however, the parties have selected a place for the arbitration of disputes, there is authority for, as a general rule, regarding the law with which the arbitration agreement is most closely connected as the law of the seat of arbitration. As we have seen, this was the approach adopted by the Court of Appeal in the Sulamrica case (see para 104 above). It was also endorsed by the Court of Appeal in C v D (see para 48 above), albeit that in that case insufficient reason was given, in our opinion, for rejecting the inference that the law chosen to govern the insurance contract was intended to apply to the arbitration clause. Among commentators, this rule notably has the support of Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), rule 64(1)(b) and para 16 016; see also Russell on Arbitration, 24th ed, (2015) at para 2 121. There are a number of reasons of principle and policy which in our opinion justify as a general rule regarding the law of the place chosen as the seat of arbitration as the law most closely connected with the arbitration agreement which in the absence of choice will apply by default. (i) The place of performance The starting point is that the seat of arbitration is the place where (legally, even if not physically) the arbitration agreement is to be performed. In identifying the system of law with which a contract (or relevant part of it) has its closest and most real connection, the place where the transaction is to be performed is the connecting factor to which the common law has long attached the greatest weight (since the place where the contract was concluded ceased to be seen as significant): see eg Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 32 073. This is justified by the fact that states have an interest in regulating transactions taking place within their territory and by the consequent natural assumption that the law of the territory in which a transaction is taking place will govern it in the absence of a contrary indication. By agreeing to a seat of arbitration the parties submit themselves to the jurisdiction of the courts of that place and to its law and coercive powers for the purposes of deciding any issue relating to the validity or enforceability of their arbitration agreement. Thus, as we discuss later in this judgment (see Part XI below), the courts of the seat have jurisdiction to grant an injunction to restrain proceedings brought in breach of the agreement to arbitrate. The parties also by their choice of seat impliedly agree to bring any claim for a remedy relating to the existence or scope of the arbitrators jurisdiction (including any issue as to the validity or scope or the arbitration agreement), and any challenge to an arbitral award, in the courts of that place: see C v D [2007] EWHC 1541 (Comm); [2007] 2 All ER (Comm) 557, paras 29 34 (Cooke J); C v D [2007] EWCA Civ 1282; [2008] Bus LR 843, para 17 (CA); Minister of Finance (Inc) v International Petroleum Investment Co [2019] EWCA Civ 2080; [2020] Bus LR 45, paras 36 49; Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 16 036. The seat of arbitration is in these circumstances the place to whose system of law the arbitration agreement is most closely attached. By contrast, there is no reason to regard the place of performance of the substantive obligations created by the contract as a significant connection for the purpose of determining the law applicable to the arbitration agreement (as opposed to for the purpose of determining what law the arbitrators should apply in deciding a dispute). This is because (as noted at para 40 above) the subject matter and purpose of an arbitration agreement are different from those of the contract in which it is incorporated. The irrelevance of the place of performance of the main contract is illustrated by the fact that seats of arbitration are frequently chosen which have no connection with where the parties substantive obligations are to be performed (or otherwise with the contract) and sometimes precisely because they have no such connection. Other factors connecting the main contract to a country or its laws are equally irrelevant in regard to the arbitration agreement. For example, article 4 of the Rome I Regulation adopts a presumption that the contract is most closely connected with the country where the party required to effect the characteristic performance of the contract has his habitual residence. There is no reason to regard this as a factor which should have any bearing on the law applicable to the arbitration agreement. We therefore agree with the view of Moore Bick LJ in the Sulamrica case quoted at para 104 above and also with statement of Longmore LJ in C v D [2007] EWCA Civ 1282; [2008] Bus LR 843, para 26, that: an agreement to arbitrate will normally have a closer and more real connection with the place where the parties have chosen to arbitrate than with the place of the law of the underlying contract in cases where the parties have deliberately chosen to arbitrate in one place disputes which have arisen under a contract governed by the law of another place. We do not consider that the importance of the connection between the law governing the arbitration agreement and the law of the seat is undermined by the fact that some national laws, such as the Arbitration Act 1996 in England and Wales, allow the parties a wide degree of freedom to make their own arrangements, either by choosing another system of law to govern their arbitration agreement or arbitral procedure (see section 4(5) of the 1996 Act, discussed earlier) or by agreeing to the application of institutional rules made by an arbitral body such as the ICC (see section 4(3) of the 1996 Act). The extent to which the parties are free to make such arrangements is itself a matter for the law of the seat. Furthermore, any national law is likely to include mandatory provisions, described in section 1(b) of the 1996 Act as such safeguards as are necessary in the public interest, which have effect notwithstanding any agreement to the contrary. As noted earlier, in the 1996 Act these include sections 66 to 68, which govern any challenge to an award made in England including any challenge to the substantive jurisdiction of the arbitrators on grounds that the arbitration agreement is invalid or unenforceable or does not cover the dispute referred to arbitration. Such provisions of themselves establish a close nexus between the law determining the validity and scope of the arbitration agreement and the law of the seat of arbitration. (ii) Consistency with international law and legislative policy A second, and in our view compelling, reason for treating an arbitration agreement as governed by the law of the seat of arbitration in the absence of choice is that such a rule accords with international law as embodied in the 1958 New York Convention and other international instruments, as well as with the national law which gives effect to the New York Convention in England and Wales. The New York Convention, to which the United Kingdom became a party in 1975 and which more than 160 states have now signed, has been described as the single most important pillar on which the edifice of international arbitration rests, and as perhaps the most effective instance of international legislation in the entire history of commercial law: see Redfern and Hunter: Law and Practice of International Commercial Arbitration, 6th ed (2015), para 2.11, quoting Wetter, The present status of the International Court of Arbitration of the ICC: An appraisal (1990) 1 Am Rev Intl Arb 91, p 93, and Mustill, Arbitration: History and background (1989) 6 J Intl Arb 43, p 49. The essential aim of the Convention was to establish a single uniform set of international legal standards for the recognition and enforcement of arbitration agreements and awards. Its success is reflected in the fact that, according to Born, International Commercial Arbitration, 2nd ed (2014), p 113, the New York Convention has been implemented through national legislation in virtually all contracting states. Article V(1)(a) of the Convention specifies, among the limited circumstances in which recognition or enforcement by the courts of a Convention state of an award made in another Convention state may be refused, proof that the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made. As stated in Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 16 014: In the light of the pervasive reach of the New York Convention in modern times, this rule, although not itself prescribing a choice of law rule of general application, nevertheless provides a strong indication of one Article V(1)(a) enacted into English law by section 103(2)(b) of the Arbitration Act 1996 has two limbs, which are intended to be treated as uniform international conflict of laws rules: see Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2008] EWHC 1901 (Comm); [2009] 1 All ER (Comm) 505, para 78 (Aikens J); and [2010] UKSC 46; [2011] 1 AC 763, para 123 (Lord Collins). The first, and primary, rule is that the validity of the arbitration agreement is governed by the law to which the parties [have] subjected it in other words the law chosen by the parties. The second, default rule, which applies where no choice has been indicated is that the applicable law is that of the country where the award was made. Where the parties have chosen the seat of arbitration, this will be (or be deemed to be) the law of the seat. In English law this is expressly provided by section 100(2)(b) of the 1996 Act. There is a division of opinion among commentators over whether the first limb of article V(1)(a) applies only where there is an express choice of law to govern the arbitration agreement or whether it also encompasses a choice that is implied for example from a choice of law to govern the contract in general: compare van den Berg, The New York Arbitration Convention of 1958 (1981), p 293 and Born, International Commercial Arbitration, 2nd ed (2014), pp 564 565. We think the latter is the better view. As discussed earlier, a choice of law for the arbitration agreement may be clearly indicated by a choice of law for the contract of which it forms part and a choice conveyed impliedly is just as much a choice entitled to respect in accordance with the principle of party autonomy as a choice stated expressly. Furthermore, the broader interpretation is supported by the language of article V(1)(a), which applies the default rule only failing any indication of the law to which the parties have subjected the arbitration agreement. Where proceedings are brought in a court of a contracting state in respect of a matter covered by an arbitration agreement to which the New York Convention applies, article II(3) of the Convention requires the court, at the request of one of the parties, to refer the parties to arbitration, unless the agreement is null and void, inoperative or incapable of being performed. Article II does not itself specify rules for identifying the law by which the validity of the arbitration agreement is to be determined. There is, however, a strong and widely accepted argument that the Convention is to be interpreted as requiring the same conflict rules to be applied in relation to article II(3) as are specifically required at the stage of enforcement by article V(1)(a). Thus, Professor van den Berg, a leading authority on the New York Convention, has written: A systematic interpretation of the Convention, in principle, permits the application by analogy of the conflict rules of article V(1)(a) to the enforcement of the agreement. It would appear inconsistent at the time of the enforcement of the award to apply the Conventions uniform conflict rules and at the time of the enforcement of the agreement to apply possibly different conflict rules of the forum. It could lead to the undesirable situation of the same arbitration agreement being held to be governed by two different laws: one law determined according to the conflict rules of the forum at the time of the enforcement of the agreement, and the other determined according to article V(1)(a) at the time of enforcement of the award. van den Berg, The New York Arbitration Convention of 1958 (1981), p 126 7; and see Born, International Commercial Arbitration, 2nd ed (2014), pp 494, 495 499; Lew & Mistelis, Comparative International Commercial Arbitration (2003), para 6 55; Schramm, Geisinger & Pinsolle, Article II in Kronke, Nacimiento et al (eds), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (2010), p 55. This approach is also supported by other international instruments. The 1961 European Convention on International Commercial Arbitration adopts the conflict rules set out in article V(1)(a) of the New York Convention and, by article VI(2), provides for those rules to be applied at any stage when a court of a contracting state is required to rule on the existence or validity of an arbitration agreement in other words, whether the question arises pre or post award. Article 36 of the Model Law adopted by the United Nations Commission on International Trade Law (UNCITRAL) on 21 June 1985 parallels article V of the New York Convention in its list of grounds (set out in article 36) on which recognition or enforcement of an arbitral award may be refused. The Model Law takes this a step further in article 34 by restricting any challenge to an arbitral award to an application brought in the state in which the award was made and by limiting the grounds on which an award may be set aside to those on which recognition or enforcement of a foreign award may be refused. The primary reason for the exclusion of arbitration agreements from the Rome I Regulation was that such agreements were already adequately regulated by international conventions: see McParland, The Rome I Regulation on the Law Applicable to Contractual Obligations (2015), paras 7 126 7 127. The exclusion can accordingly be seen as a recognition of the fact that arbitration agreements are already subject to international uniform conflict rules derived, in particular, from the 1958 New York Convention and the 1961 European Convention. Although the United Kingdom has not signed the 1961 European Convention and has not in all respects adopted the UNCITRAL Model Law, the rules laid down in article V of the New York Convention (and article 36 of the Model Law) relating to the recognition or enforcement of awards have been directly incorporated into English law by section 103 of the 1996 Act. Thus, under section 103(2)(b) the grounds on which recognition or enforcement of an award made in another Convention state may be refused include proof that: the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made; While this provision only applies directly in proceedings brought to enforce an award made in another Convention state, it would be illogical to apply different conflict rules to determine which law governs the validity of the arbitration agreement where the arbitration is seated (and the award therefore treated as made) in England. Thus, in cases where the parties have not chosen the law of the arbitration agreement but have chosen the seat of arbitration, it would be illogical if the English courts were to treat the validity of the arbitration agreement as governed by the law of the seat if the parties have chosen a foreign seat but by the law of the main contract if they have been chosen an English seat of arbitration. Such an approach would be all the more incoherent given that, if proceedings were brought in another Convention state to enforce an award made in England, the foreign court would apply the law of the seat (and not the law of the main contract, if different) to determine the validity of the award as required by article V(1)(a) of the Convention. As pointed out by Professor van den Berg in the passage quoted at para 130 above, it would be equally illogical if the law governing the validity of the arbitration agreement were to differ depending on whether the question of validity is raised before or after an award has been made. To ensure consistency and coherence in the law, the same law should be applied to answer the question in either case. Again, the incoherence that would result if English common law were to adopt a different conflict rule from the New York Conventions uniform rule would be compounded when the international perspective is considered. As one commentator has observed: It is fair to say that today, the conflict rule contained in article V(1)(a) New York Convention has developed into a truly transnational conflict rule for the determination of the law governing the substantive validity of the arbitration agreement. This rule has been applied in numerous international arbitral awards, is favoured by international arbitral doctrine and has been accepted by domestic courts. See Berger, Re examining the Arbitration Agreement: Applicable Law Consensus or Confusion?, in Van den Berg (ed), (2006) ICCA Congress Series Vol 13, 301, pp 316 317. It is not desirable that, when a question about the enforceability of the same arbitration agreement arises in different national courts, different conflict rules should be applied to determine the governing law. This point is well made by Gary Born in his work on International Commercial Arbitration, 2nd ed (2014), p 498: The international arbitral process aspires towards a maximally uniform approach by national courts presented with disputes about the substantive validity of a particular international arbitration agreement. A lack of uniformity on this issue would result in some courts referring parties to arbitration, and others refusing to do so, under the same arbitration agreement; that makes no sense and results in unnecessary litigation, forum shopping and uncertainty. Rather, insofar as possible, it is much more desirable for all national courts to reach the same conclusion as to the validity (or invalidity) of a particular arbitration agreement. Exactly the same points apply to the approach taken by national courts to the scope of an international arbitration agreement. As with questions of validity, issues about whether a dispute falls within the scope of the arbitration agreement may arise at any stage from when a party wishes to refer a dispute to arbitration to the stage of seeking to enforce an award. Article V(1)(c) of New York Convention provides that recognition and enforcement may be refused if [t]he award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration . Section 103(2)(d) of the 1996 Act contains an almost identical provision, as does article 36(i)(a)(iii) of the UNCITRAL Model Law and article IX(1)(c) of the European Convention. The general approach in the conflict of laws, adopted by both the common law and the Rome I Regulation, is to treat the validity and scope of a contract (as well as other issues such as the consequences of breach and ways of extinguishing obligations) as governed by the same applicable law. This makes good sense, not least because the boundary between issues of validity and scope is not always clear. Thus, it is logical to apply the law identified by the conflict rules prescribed by article V(1)(a) of the New York Convention and section 103(2)(b) of the 1996 Act to questions about the scope or interpretation of the arbitration agreement as well as disputes about its validity. This also accords with the approach taken by the American Law Institute in the final draft of the Restatement (Third) of the US Law of International Commercial and Investor State Arbitration (24 April 2019). Section 2.14 of the draft Restatement recommends a rule that a court should determine whether an international arbitration agreement is null and void in accordance with: (1) the law to which the parties have subjected the arbitration agreement; or (2) in the absence of such a choice of law, the law of the seat of arbitration. This approach is consistent with article V(1)(a) of the New York Convention. The comment on the applicable law explains: On balance, the present section favors ensuring symmetry between pre arbitration and post award standards for determining the validity of an arbitration agreement. There is no reason in principle why a court should answer that question differently depending on the stage of the proceedings, and doing so would inject unnecessary uncertainty and complexity into the analysis. Section 2.15 of the draft Restatement adopts the same rule for the purpose of determining whether a matter falls within the scope of an arbitration agreement, taking the position that the law applicable to determining the scope of an agreement to arbitrate should parallel the law applicable to determining whether the agreement is valid. Accordingly, whatever merit there might be, if one were designing a system of law from scratch, in a conflicts rule which treated the law of the main contract as applicable to the arbitration agreement in the absence of choice, it would in our view be wrong for the English common law to adopt a rule out of step with both the legislative policy of the 1996 Act and the underlying uniform rule established by the New York Convention. The court should apply the same conflict rules to identify the governing law irrespective of whether the arbitration has a domestic or foreign seat and irrespective of the stage at which an issue about the validity or scope of the arbitration agreement is raised. Internal coherence of English law, as well as harmony with international law and practice, is achieved by treating the applicable law in all cases, in the absence of a choice by the parties, as the law of the seat of arbitration. (iii) Giving effect to commercial purpose A third reason for applying the law of the seat as a default rule is that it is likely to uphold the reasonable expectations of contracting parties who have chosen to settle their disputes by arbitration in a specified place but made no choice of law for their contract. This is particularly so where, as is often the case in contracts made between parties of different nationalities, a popular seat of international arbitration has been chosen as a neutral forum with which neither party is connected. In such circumstances, if the parties had been required to make a common choice of law to govern their arbitration agreement at the time of contracting, it is inherently unlikely that they would have agreed on either of their national systems of law and much more likely that they would have settled on the law of the place which they had chosen as the seat of arbitration. Not only does this provide a neutral choice of law but it is already the law of that place which in countries which have implemented the Model Law or are parties to the New York Convention will determine the validity of an award if an application is made to set it aside or if its enforcement in the other partys home state is resisted. Countries frequently chosen as neutral seats of arbitration can also be expected to have legal regimes which are supportive of arbitration and which seek to give effect to the parties intention that they do not wish to have their disputes decided by a court. That is the case for all the most preferred seats of international arbitration which, according to the most recent 2018 international arbitration survey conducted by the School of International Arbitration at Queen Mary University of London, are London, Paris, Singapore, Hong Kong and Geneva. As discussed earlier, it is reasonable to assume that parties who have chosen to settle their disputes by international arbitration want an arbitration that resolves all (and not only some) disputes through an award that is binding and enforceable and which is immune from collateral attacks, particularly in the home country of one of the parties. As a general rule, applying the law of the chosen seat of arbitration is calculated to achieve that purpose. (iv) Legal certainty Finally, there is merit is recognising a clear default rule in the interests of legal certainty. Applying a general rule that, in the absence of choice, an arbitration agreement is governed by the law of the seat of arbitration (where a seat has been designated) enables the parties to predict easily and with little room for argument which law the court will apply by default. The benefits of certainty are further enhanced if the same law is applied irrespective of the country in which the proceedings are brought and whether the question of the validity or scope of the arbitration agreement is raised before or after an award has been made. Certainty might not be a sufficient reason to recognise a clear and uniform rule if the rule interfered with party choice. But here there is no risk of such interference because we are concerned with the situation in which the parties have not exercised their freedom to choose the law to be applied so that the court must make the selection for them. It is desirable that parties should be able to know with certainty what law a court will apply in this situation. If they do not like the default option, they can always choose a system of law that they prefer. (v) Conclusion on the default rule Chubb Russia did not argue against the contention that the law most closely connected with the arbitration agreement, which in the absence of choice will apply by default, will in general be the law of the seat of the arbitration. Indeed, leading counsel for Chubb Russia at one point in oral argument volunteered the suggestion that an appropriate default rule would be that the arbitration agreement is governed by the law of the seat. He noted that such a rule would have the advantages of certainty and consistency with article V(1)(a) of the New York Convention. Counsel later withdrew that suggestion and in reaching our conclusion on this issue we have placed no reliance on the fact it was made. But it was in our view no more than a realistic acknowledgement of the overwhelming case for recognising such a general rule. A case can be made for recognising an exception to the ordinary default rule where the arbitration agreement would be invalid under the law of the seat but not under the law governing the rest of the contract: see eg Merkin & Flannery on The Arbitration Act 1996, 6th ed (2019), para 46.10.5 and Born, International Commercial Arbitration, 2nd ed (2014), pp 542 549; for a contrary view, see Glick and Venkatesan, Choosing the Law Governing the Arbitration Agreement in Kaplan and Moser (eds), Jurisdiction, Admissibility and Choice of Law in International Arbitration: Liber Amicorum Michael Pryles (2018), Chapter 9, pp 148 149. Since the issue does not arise in the present case, it is not necessary to decide whether such an exception should be recognised. Even if there be no such exception, where the law of the seat is English law an arbitration agreement will only be invalid in limited circumstances and for good reason. Where the law of the seat is not English law, an award made under an arbitration agreement invalid under that law is liable in any event to be set aside by the courts of the seat, whose decision would normally be followed by the English courts: see the discussion by Lord Mance in Arbitration a law unto itself? (2016) 32 Arbitration International 223. There can also be cases where no seat has been designated, where it may be appropriate to apply the law applicable to the rest of the contract. But such exceptional cases apart, we consider that the law of the seat will apply by default. IX The law applicable to the arbitration agreement in article 50.1 Applying the principles discussed above to the present case, it is common ground that the parties have not chosen a system of law specifically to govern the arbitration agreement contained in article 50.1 of the construction contract. Chubb Russia, however, contends that the parties have chosen Russian law to govern the contract as a whole including the arbitration agreement. Enka disputes this. Enka accepts that the main body of the construction contract is governed by Russian law but maintains that this is so only because of the connections between the construction contract and the law of Russia and not as a matter of choice. (i) No choice of law The first thing to note is that the construction contract does not contain a choice of governing law clause. Amongst almost 100 pages of primary text and another 400 pages of appendices, there is no provision which says that the contract shall be governed by or interpreted in accordance with a specified system of law. In a detailed and professionally drafted commercial contract made between substantial organisations based in different countries, such a clause is an entirely standard clause, almost invariably included along with a clause specifying the forum in which any dispute is to be resolved. It is difficult to conceive that the omission of such a clause in this case despite the inclusion of a detailed provision dealing with the resolution of disputes was accidental. We agree with counsel for Enka that an obvious explanation for its absence is that the parties were not able to agree on a choice of the governing law. Chubb Russia contends that a choice of Russian law can nonetheless be discerned from the use in the construction contract of the term Applicable Law, taken together with the definition of that term in Attachment 17 as: Law of the Russian Federation, including legislation of the Russian Federation, all regulatory legal acts of the State Authority Federal Bodies, State Authorities of the constituent entities of the Russian Federation, legislation of the constituent entities of the Russian Federation, regulatory legal acts by Local Authorities and any other applicable regulatory legal acts. There are numerous references throughout the body of the contract to the Applicable Law, as well as other references to the law or laws of the Russian Federation. Counsel for Chubb Russia submitted that, read as a whole, the language of the construction contract makes it clear that the parties were contracting by reference to Russian law and chose Russian law as the law applicable to their agreement. Had it been the parties choice, however, that the construction contract should be governed by the Applicable Law as defined in Attachment 17, it would have been simple to say so. Yet, as noted, there is no clause which states this. Rather, the term Applicable Law is used in specific provisions of the contract which impose obligations on the contractor to comply with laws and regulations applicable in the country where the construction work was to take place. As the Court of Appeal observed (at para 107), it is a common technique in international construction contracts to define such an applicable law or laws and to impose an obligation to comply with them separately from any choice of the law that is to govern the validity and interpretation of the parties contractual rights and obligations. As evidence of this practice, the Court of Appeal cited a leading text on the widely used standard forms of international construction contract issued by the International Federation of Consulting Engineers (FIDIC): see Baker Mellors Chalmers and Lavers on FIDIC Contracts: Law and Practice, 5th ed (2009), paras 2.126, 2.140 and 2.145. Counsel for Chubb Russia pointed out that the contract in this case was not made on a FIDIC standard form and, unlike contracts made on FIDIC forms, does not contain a governing law clause. They observed that the technique employed in drafting FIDIC contracts is to select a governing law and then to apply a different law (usually the local law) expressly to certain provisions in such a way that the contractor will be obliged to comply with that law. That was not done here, where the only law specified was the Applicable Law. The drafting technique to which the Court of Appeal referred is not, however, peculiar to FIDIC standard forms. Authoritative texts cited by counsel for Enka confirm that other standard forms of international construction contract also typically include provisions which require the contractor to comply with applicable laws or with laws of the country where the works are carried out: see Huse, Understanding and Negotiating Turnkey and EPC Contracts, 4th ed (2020), paras 4 110 4 112; Bailey, Construction Law, 2nd ed (2016), para 18.11. The clear purpose of such provisions is to protect the employer against the risk of incurring liability through failure by the contractor to comply with local laws such as building regulations, health and safety and environmental laws, tax laws and other applicable regulatory requirements. The rationale for including such provisions is not affected by the presence or absence of a governing law clause in the contract. There is no necessary inference that the validity and interpretation of a contractual obligation requiring compliance with a law or laws of a particular country is itself to be determined by applying the contract law of that country. This is underlined by the point which Chubb Russia itself makes that the law chosen to govern a contract made on a FIDIC standard form (or, we would add, other forms of international construction contract) may and often does differ from the applicable law with which the contractor is required to comply in performing the contract. In any case the contractual obligations of Enka were not limited to compliance with the Applicable Law. Article 4.1 of the construction contract provides: The Contractor shall ensure performance of the Work in accordance with: a) The requirements of this Agreement (including references to the non mandatory rules of Applicable Law but to the extent the provisions of the Agreement are not at variance with mandatory rules of Applicable Law); b) Applicable Law (including the Mandatory Technical Rules constituting a part of such Applicable Law); c) An Implied Covenant of Good Faith and Fair Dealing. The definition in Attachment 17 of the phrase Implied Covenant of Good Faith and Fair Dealing imports standards applied by experienced international contractor organisations engaged in similar projects. As well as such standards, the construction contract and its attachments set out many specific requirements for the work which do not form part of the Applicable Law. Quite apart from this, there are numerous rights and obligations established by the construction contract which make no reference to the Applicable Law (or to laws of the Russian Federation). Examples are clauses dealing with the consequences of delay (article 26), force majeure (article 31), payment of the price (article 33) and termination (article 43). In these circumstances, it cannot be said that the parties have in the construction contract expressly selected a system of law to govern the validity and interpretation of their contractual obligations nor that the terms of the contract construed in their context point ineluctably to the conclusion that the parties intended Russian law to apply. To the contrary, the obvious inference from the fact that the parties have not anywhere in the contract stated what system of law is to govern any of their contractual obligations as opposed to creating obligations to comply with applicable laws is that they have not agreed (for whatever reason) on a choice of governing law. This inference applies to the arbitration agreement as much as to the rest of the contract. (ii) Closest connection In the absence of any choice of the law that is to govern the arbitration agreement, it is necessary to fall back on the default rule and identify the system of law with which the arbitration agreement is most closely connected. In accordance with our earlier analysis, this will generally be the law of the seat chosen by the parties, which in this case is London. As already mentioned, Chubb Russia did not actively oppose this conclusion if it is necessary to identify the law with which the arbitration agreement is most closely connected. Chubb Russias case has been put solely on the basis that the parties chose Russian law as the law governing the contract including the arbitration agreement. No alternative argument has been advanced that, if this is wrong, Russian law nevertheless applies as the law most closely connected with the arbitration agreement. Chubb Russia has put forward an argument, however, about the proper interpretation of particular terms of the construction contract which it remains relevant to consider. This argument is that the agreement to arbitrate disputes is embedded in a clause of the contract (article 50) dealing with dispute resolution which contains other obligations in addition to the obligation to arbitrate and which itself is, as Mr Bailey QC put it, buried deep inside the contract and inextricably connected to other provisions of it. It is said that in these circumstances the parties must have intended all the obligations in article 50, including the arbitration agreement, to be governed by the same system of law as each other and as the rest of the contract. For the purpose of this argument, it is necessary to determine the law applicable to the main body of the construction contract. As discussed earlier, for that purpose the court must apply the Rome I Regulation. (iii) The law applicable to the main contract Although it would be a mistake to interpret the Rome I Regulation through the prism of the common law, there does not appear to be any substantial difference (save possibly in relation to the admissibility of subsequent conduct) between the approach of the common law to determining whether there has been an express or implied choice of law and the approach to be followed in deciding whether a choice has been made expressly or clearly demonstrated for the purpose of article 3 of the Rome I Regulation. Thus, in Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd [2013] EWCA Civ 365; [2013] 2 Lloyds Rep 98, para 33, the Court of Appeal held that the test of whether a choice has been clearly demonstrated is objective and is equivalent to Lord Diplocks formulation of the common law test, requiring the court to be satisfied that the only reasonable conclusion to be drawn from the circumstances is that the parties should be taken to have intended the putative law to apply. For the reasons already given when considering the position at common law, the parties have not in this case expressly made or clearly demonstrated a choice of law to govern the construction contract but are, as it seems to us, reasonably to be understood as having not agreed on a choice of law. The governing law is therefore to be determined by applying article 4 of the Rome I Regulation. Under the construction contract Enka was engaged to install a boiler and auxiliary equipment, with the equipment and materials (except for consumable materials) to be supplied by Energoproekt as customer. The contract was therefore, at least predominantly, a contract for the provision of services by Enka. Article 4(1)(b) of the Rome I Regulation establishes a prima facie rule that, to the extent that the law applicable to it has not been chosen in accordance with article 3, a contract for the provision of services shall be governed by the law of the country where service provider has his habitual residence. This rule points towards the law of Turkey as the country where the contractor, Enka, had its place of central administration and therefore habitual residence (see article 19(1)). However, the other party to the contract, Energoproekt, was a Russian company, as was the End Customer, Unipro. The contract was for the performance of construction work in Russia and required compliance with Russian laws and regulations. It is written in the Russian language (as the authoritative version); notifications under it were likewise required to be written in Russian and English but with the Russian version taking precedence and, when sent to the contractor, were to be sent to its Moscow office. The price for the work, although calculated in US dollars, was to be paid in roubles to a Russian bank account. The fact that the dispute resolution clause provides for arbitration in London is not a sufficient connection to indicate that English law should govern the contractual obligations of the parties. It is clear from all the circumstances of the case that the main body of the construction contract is manifestly more closely connected with Russia than with any other country. Pursuant to article 4(3) of the Rome I Regulation, it is therefore governed by Russian law. (iv) The dispute resolution clause Chubb Russias argument that the arbitration agreement cannot reasonably be detached from the rest of the contract in terms of its governing law has two aspects. The first is that article 50.1, which contains the arbitration agreement, must be governed by a single law. The second is that it makes no sense for that law to differ from the law applicable to the rest of the construction contract. Article 50.1 sets outs a series of procedures of increasing formality which the parties have agreed to follow for resolving any dispute, with arbitration being the last resort. Thus, where a Dispute as defined in the first sentence of article 50.1 arises, the parties are first of all obliged to make in good faith every reasonable effort to resolve it by negotiations. If the Dispute is not resolved within ten days of either party sending a Notification (a term defined in article 51.2 of the contract) to the opposite party containing an indication of the Dispute, either party may then give a written notice causing it to be referred to a meeting between the parties senior managements. It is only if the matter is not resolved within a further 20 calendar days that the obligation arises to refer the Dispute to international arbitration. Enka accepts that article 50.1 can only reasonably be interpreted as governed by a single system of law, as it is clearly intended to establish a single, staged dispute resolution process and it would make no sense for the meaning or scope of a Dispute as defined in the earlier part the clause to be determined by applying a different system of law from the law governing the validity and scope of the obligation to arbitrate. But it is Enkas case that the implication in terms of governing law flows in the opposite direction from that contended for by Chubb Russia, and that it follows from the identification of English law as the law which (on Enkas case) governs the arbitration agreement that English law applies to the whole of article 50.1. That conclusion should be reached, Enka contends, either by applying the common law rules to the whole of article 50.1 on the basis that the whole of that clause constitutes an arbitration agreement within the meaning of article 1(2)(e) of the Rome I Regulation or by applying the principle of dpeage and treating article 50.1 as a severable part of the contract for the purpose of the Rome I Regulation. Mr Bailey QC for Chubb Russia drew attention to connections between article 50.1 and other parts of the contract: in particular the use of capitalised terms such as Notification which are defined elsewhere. He also pointed out that article 42.2 of the contract includes provision for referring disputes arising out of the operation of the change control procedure to arbitration pursuant to article 50. He submitted that the dispute resolution clause is not hermetically sealed from the rest of the contract but is inextricably bound up with it, and that this points strongly to the conclusion that the arbitration agreement and the other obligations contained within the contract must all be governed by the same system of law. This contention could be formulated on the basis of implied choice or by reference to the closest connection test. As to the former, no doubt parties could in principle agree that the whole of their contract, including an arbitration agreement within it, should be governed by a single system of law even though they have not agreed on what that law should be. But this does not seem to us an inherently likely agreement for contracting parties to make. To establish such an agreement a clearer demonstration of intent would be necessary than the mere fact that the arbitration agreement forms part of a wider dispute resolution clause which is referred to elsewhere and uses terms defined elsewhere in the contract. In terms of connections, we agree with both parties that article 50.1 makes sense only as an integrated whole governed by one system of law. But we do not regard the connections to which Chubb Russia drew attention between article 50.1 and the rest of the contract as particularly strong or sufficient to require the application of the same law in circumstances where no choice of law has been made by the parties. There is no difficulty in principle in using within a contract or clause of a contract governed by a particular system of law a term defined in another part of the contract or in a separate instrument governed by a different system of law. In such a case the term will carry its defined meaning by agreement. The reference in article 50.1 to a Notification can readily operate in this way. Likewise, the cross reference in article 42.2 of the construction contract to the dispute resolution clause does not require both clauses to be governed by the same system of law. It has become increasingly common for commercial parties to include in their contracts provisions which require other forms of dispute resolution, such as good faith negotiation or mediation, to be undertaken without success before a dispute is referred to arbitration. We find it difficult to see how, as a matter of principle or policy, the fact that such an approach is adopted can justify the application of a different law to determine the validity or scope of the arbitration agreement. All the reasons that we have identified for, as a general rule, regarding the law governing the arbitration agreement in the absence of choice as the law of the seat of arbitration apply equally and with equal force where the arbitration agreement is contained in a wider dispute resolution clause (or integrated set of clauses) as where it is self contained. We do not think that reasonable commercial parties would expect the law applied to determine the validity and scope of their arbitration agreement to depend on which form of dispute resolution procedure is chosen. Rather, it is reasonable to expect that, where a multi tiered procedure is chosen, the law which determines the validity and scope of the arbitration agreement will determine the validity and scope of the whole dispute resolution agreement. The fact that two conflict of laws regimes are potentially in play complicates the analysis but provides no reason to alter the result. Where, as in this case, an obligation to arbitrate disputes is embedded in a single dispute resolution agreement which provides for other steps to be undertaken before the obligation to arbitrate arises, we do not think it unreasonable to regard the whole dispute resolution agreement as an arbitration agreement for the purpose of article 1(2)(e) of the Rome I Regulation. On this basis, applying the common law conflict of laws rules, article 50.1 of the construction contract is governed by English law. X Conclusions on applicable law It may be useful to summarise the principles which in our judgment govern the determination of the law applicable to the arbitration agreement in cases of this kind: i) Where a contract contains an agreement to resolve disputes arising from it by arbitration, the law applicable to the arbitration agreement may not be the same as the law applicable to the other parts of the contract and is to be determined by applying English common law rules for resolving conflicts of laws rather than the provisions of the Rome I Regulation. ii) According to these rules, the law applicable to the arbitration agreement will be (a) the law chosen by the parties to govern it or (b) in the absence of such a choice, the system of law with which the arbitration agreement is most closely connected. iii) Whether the parties have agreed on a choice of law to govern the arbitration agreement is ascertained by construing the arbitration agreement and the contract containing it, as a whole, applying the rules of contractual interpretation of English law as the law of the forum. iv) Where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract will generally apply to an arbitration agreement which forms part of the contract. v) The choice of a different country as the seat of the arbitration is not, without more, sufficient to negate an inference that a choice of law to govern the contract was intended to apply to the arbitration agreement. vi) Additional factors which may, however, negate such an inference and may in some cases imply that the arbitration agreement was intended to be governed by the law of the seat are: (a) any provision of the law of the seat which indicates that, where an arbitration is subject to that law, the arbitration will also be treated as governed by that countrys law; or (b) the existence of a serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective. Either factor may be reinforced by circumstances indicating that the seat was deliberately chosen as a neutral forum for the arbitration. vii) Where there is no express choice of law to govern the contract, a clause providing for arbitration in a particular place will not by itself justify an inference that the contract (or the arbitration agreement) is intended to be governed by the law of that place. viii) In the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most closely connected. Where the parties have chosen a seat of arbitration, this will generally be the law of the seat, even if this differs from the law applicable to the parties substantive contractual obligations. ix) The fact that the contract requires the parties to attempt to resolve a dispute through good faith negotiation, mediation or any other procedure before referring it to arbitration will not generally provide a reason to displace the law of the seat of arbitration as the law applicable to the arbitration agreement by default in the absence of a choice of law to govern it. Applying these principles, we have concluded that the contract from which a dispute has arisen in this case contains no choice of the law that is intended to govern the contract or the arbitration agreement within it. In these circumstances the validity and scope of the arbitration agreement (and in our opinion the rest of the dispute resolution clause containing that agreement) is governed by the law of the chosen seat of arbitration, as the law with which the dispute resolution clause is most closely connected. We would therefore affirm albeit for different reasons the Court of Appeals conclusion that the law applicable to the arbitration agreement is English law. We have not found it necessary to consider arguments made by Enka that, if the arbitration agreement were governed by the law of Russia as the place of performance of the construction project and country with which the parties substantive contractual obligations have their closest connection, there would be a serious risk that the parties intention of having their disputes finally settled by arbitration in a neutral forum would be defeated. This was disputed by Chubb Russia, but in the light of the conclusion we have reached there is no need to resolve this further issue. XI The anti suit injunction If, as we have held, the arbitration agreement is governed by English law, Chubb Russia does not dispute that it was legitimate for the Court of Appeal to exercise its discretion whether to grant an anti suit injunction afresh and does not contend that it erred in so doing. Its challenge to the order made by the Court of Appeal rests on the assumption that the arbitration agreement is governed by Russian law. Chubb Russia contends that the English courts ought in these circumstances to defer to the decision of the Russian courts on whether their dispute must be referred to arbitration or may be resolved by litigation in the Russian courts. On Chubb Russias case the English courts approach to the grant of anti suit injunctions should differ according to whether the arbitration agreement is governed by English law or a foreign law. As we have held that the arbitration agreement is governed by English and not Russian law, it is not necessary to address this further ground of appeal. Nevertheless, given that it has been fully argued and the importance of the issues raised, we shall briefly address it. As already noted, by choosing a seat of arbitration the parties are choosing to submit themselves to the supervisory and supporting jurisdiction of the courts of that seat over the arbitration. A well established and well recognised feature of the supervisory and supporting jurisdiction of the English courts is the grant of injunctive relief to restrain a party from breaching its obligations under the arbitration agreement by bringing claims which fall within that agreement in court proceedings rather than, as agreed, in arbitration. A promise to arbitrate is also a promise not to litigate. As explained by Lord Hoffmann in West Tankers Inc v RAS Riunione Adriatica di Sicurt SpA (The Front Comor) [2007] UKHL 4; [2007] 1 Lloyds Rep 391, at paras 20 22: 20. Of course arbitration cannot be self sustaining. It needs the support of the courts Different national systems give support in different ways and an important aspect of the autonomy of the parties is the right to choose the governing law and seat of the arbitration according to what they consider will best serve their interests. 21. The Courts of the United Kingdom have for many years exercised the jurisdiction to restrain foreign court proceedings as Colman J did in this case: see Pena Copper Mines Ltd v Rio Tinto Co Ltd (1911) 105 LT 846. It is generally regarded as an important and valuable weapon in the hands of a court exercising supervisory jurisdiction over the arbitration. It promotes legal certainty and reduces the possibility of conflict between the arbitration award and the judgment of a national court. it saves a party to an arbitration agreement from having to keep a watchful eye upon parallel court proceedings in another jurisdiction, trying to steer a course between so much involvement as will amount to a submission to the jurisdiction and so little as to lead to a default judgment. That is just the kind of thing that the parties meant to avoid by having an arbitration agreement. 22. Whether the parties should submit themselves to such a jurisdiction by choosing this country as the seat of their arbitration is, in my opinion, entirely a matter for them. The courts are there to serve the business community rather than the other way round. No one is obliged to choose London. The existence of the jurisdiction to restrain proceedings in breach of an arbitration agreement clearly does not deter parties to commercial agreements. On the contrary, it may be regarded as one of the advantages which the chosen seat of arbitration has to offer. In the same case Lord Mance stated at paras 31 32: The purpose of arbitration (enshrined in most modern arbitration legislation) is that disputes should be resolved by a consensual mechanism outside any court structure, subject to no more than limited supervision by the courts of the place of arbitration. Experience as a commercial judge shows that, once a dispute has arisen within the scope of an arbitration clause, it is not uncommon for persons bound by the clause to seek to avoid its application. Anti suit injunctions issued by the courts of the place of arbitration represent a carefully developed and, I would emphasise, carefully applied tool which has proved a highly efficient means to give speedy effect to clearly applicable arbitration agreements. 32. It is in practice no or little comfort or use for a person entitled to the benefit of a London arbitration clause to be told that (where a binding arbitration clause is being however clearly disregarded) the only remedy is to become engaged in the foreign litigation pursued in disregard of the clause. Engagement in the foreign litigation is precisely what the person pursuing such litigation wishes to draw the other party into, but is precisely what the latter party aimed and bargained to avoid. In granting an anti suit injunction the English courts are seeking to uphold and enforce the parties contractual bargain as set out in the arbitration agreement. In principle it should make no difference whether that agreement is governed by English law or by a foreign law. In both cases the enquiry is whether there has been a breach of the arbitration agreement and whether it is just and convenient to restrain that breach by the grant of an anti suit injunction. The detail of the enquiry may differ, but its nature is the same. Chubb Russia contends that as a matter of discretion the considerations to be taken into account are different where the arbitration agreement is governed by foreign law. It submits that issues of scope and breach of the arbitration agreement are generally best left to the foreign court which has the requisite expertise in the applicable foreign law. The judges view was that different considerations arise where the arbitration agreement is governed by foreign law by reason of the doctrine of forum conveniens. We agree with the Court of Appeal that forum conveniens, which is a matter that goes to the courts jurisdiction, is not relevant. By agreeing to arbitrate in London the parties were agreeing to submit to the supervisory and supporting jurisdiction of the English courts, including its jurisdiction to grant anti suit injunctions. Chubb Russias principal argument is that considerations of comity nevertheless make it appropriate to defer to the foreign court as a matter of discretion. Comity, however, has little if any role to play where anti suit injunctive relief is sought on the grounds of breach of contract. As Millett LJ stated in Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyds Rep 87, 96: in my judgment there is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them. The courts in countries party to the New York Convention, are accustomed to the concept that they may be under a duty to decline jurisdiction in a particular case because of the existence of an arbitration clause. I cannot accept the proposition that any court would be offended by the grant of an injunction to restrain a party from invoking a jurisdiction which he had promised not to invoke and which it was its own duty to decline. Although The Angelic Grace concerned an arbitration agreement governed by English law, that was not material to the reasoning of the Court of Appeal. The rationale for the courts approach was the fact of the promise made, not the law by which it was governed. That accords with principle. Nor does article II(3) of the New York Convention make any difference. As noted earlier, under this article a court of a Convention state is required to refer the parties to arbitration when it is seized of a matter which the parties have agreed to arbitrate (unless the arbitration agreement is null and void, inoperative or incapable of being performed). The New York Convention is concerned with recognition and enforcement of arbitration agreements and awards, not jurisdiction see, for example, Shashoua v Sharma [2009] EWHC 957 (Comm); [2009] 2 All ER (Comm) 477, paras 36 38. If a court is seized of jurisdiction under its own law or rules, article II(3) obliges it to exercise that jurisdiction to enforce arbitration agreements. It does not purport to nor does it confer any primacy over the jurisdiction of the courts of the seat. The grant of an anti suit injunction is always a matter of discretion. There may be circumstances in which it would be appropriate to await a decision of a foreign court. If, for example, the scope of the arbitration agreement was about to be determined by the highest court in the country of the governing law in unrelated proceedings, then it might be sensible for the English court to await that decision. Where, however, the issue arises in proceedings brought in alleged breach of the arbitration agreement, deference to the foreign court should generally give way to the importance of upholding the parties bargain and restraining a party to an arbitration agreement from doing something it has promised not to do. We therefore agree with the Court of Appeal that the principles governing the grant of an anti suit injunction in support of an arbitration agreement with an English seat do not differ according to whether the arbitration agreement is governed by English law or foreign law. Forum conveniens considerations are irrelevant and comity has little if any role to play. The courts concern will be to uphold the parties bargain, absent strong reason to the contrary, and the courts readiness to do so is itself an important reason for choosing an English seat of arbitration. It follows that if the agreement to arbitrate disputes contained in article 50.1 of the construction contract had been governed by Russian law, it would have been necessary for the English court to determine whether under the law of Russia the agreement is valid and the claim which Chubb Russia is seeking to pursue in Russia falls within its scope. If those questions were answered in the affirmative, it would in any event have been appropriate to grant an anti suit injunction. XII Overall conclusion Although our approach to the determination of the law applicable to the arbitration agreement differs from that taken by the Court of Appeal, we have similarly concluded that the arbitration agreement in this case is governed by English law. It is common ground that in these circumstances the arbitration agreement is valid, the dispute between the parties falls within it and that the injunction granted by the Court of Appeal to restrain Chubb Russia from proceeding against Enka in Russia was properly granted. It follows that we would dismiss the appeal. Introduction LORD BURROWS: (dissenting) (with whom Lord Sales agrees) 1. In this case, we are presented with an intriguing question of law which courts and commentators have been grappling with for many years. What is the proper law (in the English common law conflicts of law) of an arbitration agreement where there is no express choice of law clause in the arbitration agreement? In particular, should the proper law of the arbitration agreement be the law of the main contract in which the arbitration agreement is contained or should it be the law of the seat of arbitration? In shorthand, should one determine the proper law of the arbitration agreement by the main contract approach or the seat approach? In this case, the seat of the arbitration is England but the proper law of the main construction contract, in which the arbitration agreement is contained, is Russian law (although there is a dispute as to the precise reason for that). Although the ultimate question for this court is whether to issue an anti suit injunction to stop proceedings in Russia it is first helpful, and arguably essential, to determine the proper law of the arbitration agreement. That proper law issue is of wide public importance and this (dissenting) judgment is almost entirely devoted to it. A bare outline of the facts will here be sufficient. The claimant and respondent to this appeal (Enka) is a Turkish engineering company that had been engaged as a subcontractor in construction work at a power plant in Russia. The head contractor (CJSC Energoproekt) assigned its rights against Enka to the owner and developer (PJSC Unipro). There was an arbitration agreement (in article 50.1) in the construction contract (the main contract) between Enka and the head contractor that disputes would be determined by way of International Chamber of Commerce (ICC) arbitration with London seat. Following a massive fire at the power plant, the Russian first defendant insurer and the appellant in this appeal, OOO Insurance Company Chubb (which I shall refer to throughout as Chubb Russia), paid an insurance claim made by the owner and was subrogated to any rights the owner had against Enka. Chubb Russia brought a claim against Enka (and others) in Russia. Enka contended that those proceedings were in breach of the arbitration agreement and applied to the Russian court to dismiss Chubb Russias claim. It also brought a claim in England for an anti suit injunction against the defendants, all members of the Chubb group of companies. At first instance, Andrew Baker J declined to reach a decision on the proper law of the arbitration agreement but dismissed Enkas claim for an anti suit injunction on the ground of forum non conveniens: [2019] EWHC 3568 (Comm). Subsequently Enkas claim in Russia to dismiss the Russian proceedings, as being in breach of the arbitration agreement, failed although Chubb Russias claim on the merits against Enka also failed. Both Enka and Chubb Russia are appealing that decision to the Russian appeal court (and the appeal is set for late October 2020). Meanwhile the Court of Appeal here (Flaux, Males and Popplewell LJJ) ([2020] EWCA Civ 574) allowed Enkas appeal against Andrew Baker Js decision. It held that the proper law of the arbitration agreement was English and granted Enka an anti suit injunction to stop any Russian appeal going ahead as being in breach of the arbitration agreement. Chubb Russia applied to the Supreme Court for permission to appeal from the decision of the Court of Appeal. This court granted permission to appeal and also stayed the anti suit injunction upon Chubb Russia giving suitable undertakings to protect Enkas position pending the outcome of this expedited appeal. It will be helpful to set out immediately the arbitration agreement. This appears within article 50.1 of the main construction contract in the following terms: Resolution of disputes 50.1. The Parties undertake to make in good faith every reasonable effort to resolve any dispute or disagreement arising from or in connection with this Agreement (including disputes regarding validity of this agreement and the fact of its conclusion (hereinafter Dispute) by means of negotiations between themselves. In the event of the failure to resolve any Dispute pursuant to this article within 10 (ten) days from the date that either Party sends a Notification to the opposite Party containing an indication of the given Dispute (the given period may be extended by mutual consent of the Parties) any Party may, by giving written notice, cause the matter to be referred to a meeting between the senior managements of the Contractor and Customer (in the case of the Contractor senior management shall be understood as a member of the executive board or above, in the case of Customer, senior management shall be understood as general directors of their respective companies). The parties may invite the End Customer to such Senior Management Meeting. Such meeting shall be held within fourteen (14) calendar days following the giving of a notice. If the matter is not resolved within twenty (20) calendar days after the date of the notice referring the matter to appropriate higher management or such later date as may be unanimously agreed upon, the Dispute shall be referred to international arbitration as follows: the Dispute shall be settled by three arbitrators the Dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce, appointed in accordance with these Rules, language, and the arbitration shall be conducted in the English in the place of arbitration shall be London, England. 50.2. Unless otherwise explicitly stipulated this Agreement, the existence of any Dispute shall not give the Contractor the right to suspend Work. 50.3. Not used. 50.4. Not used. financial 50.5. All other documentation such as documentation and cover documents for it must be presented in Russian. This judgment builds up to answering the question as to the proper law of the arbitration agreement by initially clearing the ground in three sections. The first sets out some clear or undisputed points of law, the second explains that the issue in this case concerns interpretation not invalidity, and the third clarifies why the proper law of the main contract is Russian. There is then an overview of the case law on the proper law of the arbitration agreement before I come to the central sections of the judgment on determining the proper law of the arbitration agreement in this case and generally. The analysis enables me to provide a statement of the common law on the proper law of an arbitration agreement that is principled, straightforward, clear and easy to apply. Clear or undisputed points of law A number of important matters of law relevant to deciding the proper law of the arbitration agreement are not in dispute (or are clear) and are worth setting out immediately. They are: (i) The seat of the arbitration is England as set out in article 50.1. (ii) The proper (or applicable) law of the main construction contract, which is determined by applying the Rome I Regulation (EC) No 593/2008 (laying down the EU and therefore English conflict of law rules to determine the proper law for contractual obligations), is Russian law. But there is a dispute as to how that conclusion is reached. The relevant provisions of the Rome I Regulation are as follows: Article 3 Freedom of choice 1. A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract. Article 4 Applicable law in the absence of choice 1. To the extent that the law applicable to the contract has not been chosen in accordance with article 3 , the law governing the contract shall be determined as follows: (b) a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence; 2. Where the contract is not covered by paragraph 1 or where the elements of the contract would be covered by more than one of points (a) to (h) of paragraph 1, the contract shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence. 3. Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. 4. Where the law applicable cannot be determined pursuant to paragraphs 1 or 2, the contract shall be governed by the law of the country with which it is most closely connected. David Bailey QC, for Chubb Russia, submitted that the proper law of the main contract is Russian because, applying article 3(1) of Rome I, the choice of Russian law has been made expressly or clearly demonstrated. Robin Dicker QC, for Enka, denied that there has been an express or implied (ie clearly demonstrated) choice of Russian law. Mr Dicker accepted that Russian law is the proper law by reason of article 4 of Rome I but he did not pinpoint why that was so (but because Enka, as the service provider, is Turkish this must presumably be because Russia is the country with which the contract is manifestly more closely connected than Turkey). (iii) Although there is no bar to having different proper laws applying to different clauses of the same contract (the so called concept of dpeage), the general position taken at common law (not least on grounds of practical convenience) is that a contract has a single proper law. See, for example, Kahler v Midland Bank [1950] AC 24, 42 (per Lord MacDermott); Libyan Arab Foreign Bank v Bankers Trust Co [1989] QB 728, 747 (per Staughton J); Dicey, Morris & Collins, The Conflict of Laws, 15th ed (2012), para 32 026. It is worth stressing that the arbitration agreement here is contained in the main contract. We are not concerned with a free standing arbitration agreement (see para 230 below). (iv) The Rome I Regulation does not apply (directly) to an arbitration agreement because of an exclusion from the Regulation of arbitration agreements and agreements on the choice of court in article 1(2)(e) of the Regulation. The proper law of the arbitration agreement must therefore (in an English court) be determined by applying English common law conflict of laws rules. They require a court to look for (applying English law) an express choice, an implied choice or, if neither of those applies, the system of law with which the arbitration agreement has its closest and most real connection: Bonython v Commonwealth of Australia [1951] AC 201, 219; Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102, paras 9 and 25. The first two of those stages are both concerned with ascertaining the parties objective intentions. One can regard the exercise as being one of interpretation of the main contract and the arbitration agreement. There is no express choice of law clause in the arbitration agreement in this case, ie there is no mention of choice of law in article 50.1 of the contract. (v) Mr Bailey at one stage in oral argument appeared to concede that, if the proper law of the arbitration agreement was not Russian by reason of an express or implied choice, it must be English because, as the seat of the arbitration was England, one could not decide that the arbitration agreement had its closest and most real connection to Russia. But he later withdrew that concession. I consider that he was correct to do so (I return to this in para 256 below). (vi) What is commonly referred to as the curial law is, according to Mustill and Boyd, Commercial Arbitration, 2nd ed (1989), pp 60 62, 64 68, the law dealing with the manner in which the parties and the arbitrator are required to conduct the reference of a particular dispute (p 60) and includes the procedural powers and duties of the arbitrator (p 62). The curial law is (almost) invariably the law of the seat of the arbitration. As the law of the seat is England, the curial law here is English. Inextricably linked to this is what may be referred to as the curial or supervisory jurisdiction of the courts. This is concerned with the courts jurisdiction to support and enforce the arbitration. It includes, for example, the power to remove or replace an arbitrator, to enforce or set aside an arbitral award, and to grant injunctions to support the arbitration including anti suit injunctions. Like the curial law, the curial or supervisory jurisdiction of the courts is (almost) invariably determined by the seat of the arbitration. Here, therefore, it is not in doubt that the English courts have curial or supervisory jurisdiction in relation to the arbitration and this includes the jurisdiction to grant an anti suit injunction in this case to restrain the Russian proceedings. In summary, as Popplewell LJ expressed it in the Court of Appeal at para 46, The significance of the choice of a seat is a legal one as to the curial law and the curial court. (vii) If the proper law of the arbitration agreement is determined to be English, the anti suit injunction ordered by the Court of Appeal is appropriate. This was conceded by Mr Bailey. The dispute as to whether an anti suit injunction should be ordered therefore arises only if the proper law of the arbitration agreement is determined to be Russian. 3. A preliminary important point: the dispute concerns the interpretation (or scope) of the arbitration agreement not its validity The reason why the parties respectively favour Russian or English law as the proper law of the arbitration agreement is because English law may take a wider interpretation of the arbitration agreement in this case than Russian law. The precise basis for this is not entirely clear. The most obvious basis is that English law regards tort as well as contractual claims between the parties to be included within the scope of the disputes covered by the arbitration agreement (see Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyds Rep 87), whereas Russian law may interpret disputes as applying only to contractual disputes between the parties. However, it may be that the true basis is slightly more complex than that and involves Russian law tending to interpret the arbitration agreement as not covering joint tortious liability whereas English law appears to include that. Whatever the precise basis for respectively favouring Russian or English law, the important point is that the issue between the parties is as to the scope or interpretation of the arbitration agreement. It is not about the validity of the arbitration agreement. Andrew Baker J recognised this in his judgment at paras 11 12 (and also at para 88). He said: 11. [I]t is common ground that there exists between Enka and Chubb Russia a valid and binding arbitration agreement. That is so even though Chubb Russia is suing in Moscow, and is therefore sued here, as subrogated insurer of Enkas original contractual counterparty. Whether Russian law or English law governs that question, it is common ground that such an insurer is bound by its insureds applicable arbitration agreement. The dispute between the parties, then, again as it was in The Angelic Grace, is whether the claim being pursued in the target proceedings is a claim in tort that falls outside the scope of the agreement to arbitrate. 12. The detail is more complex than it was in The Angelic Grace, however, because in that case there was no dispute but that the claim as brought in Italy was a claim in tort, and it was common ground that the question whether it fell within the scope of the arbitration agreement was governed by English law. Here the law applicable to the question of the scope of the arbitration agreement is disputed; and it is also contentious between the parties whether the claim as brought under Russian law in the Moscow Claim is a claim in tort, or, more strictly, whether it is viable as such. Furthermore, it is effectively common ground that if the question of the scope of the arbitration agreement is governed by English law, then that claim, however it is to be characterised under Russian law, is within that scope. The defendants argument that the claim, if rightly characterised as a claim in tort, falls outwith the scope of the arbitration agreement, only arises at all if they are right that scope is a matter of Russian law. That interpretation or scope, not validity, is in issue is borne out by the decision of the Russian court on 6 May 2020 which decided a preliminary question as to whether, applying Russian law, the court proceedings should go ahead despite the arbitration clause. The Russian court made clear that the issue was as to the interpretation or scope of the arbitration agreement and not the validity of the arbitration agreement. The Courts short judgment on this preliminary question was as follows: So it is article 965 of the Russian Federation Civil Code that establishes the right of the claimant to file against the persons liable for the losses, regardless of what served as the grounds for their occurrence. Therefore, the arbitration clause to which Enka refers does not encompass this dispute and does not extend to it, as the participants are not Enka alone, but also the other ten co defendants who did not enter into an arbitration clause, and the subject of the dispute is the general obligation of all 11 co defendants to indemnify the losses caused. On the basis of the above, the arbitral clause set out in point 50.1 of the contract is not applicable and because of this the motion declared by defendant 11 that the claim should be left on file should not be granted. (Emphasis added) However, Mr Dicker has now submitted that there is also an issue about the validity of the arbitration agreement under Russian law that does not arise under English law. He referred to a Russian decision on 8 February 2018 (in an unrelated matter) on enforcement of an arbitral award under this type of arbitration agreement. The decision was that the arbitration agreement was too uncertain to be enforceable under Russian law apparently because of uncertainty about whether there should have been a reference in the arbitration agreement to the International Court of Arbitration. It was submitted by Mr Bailey in Chubb Russias written case (at para 22) that there is no question of the arbitration agreement being invalid under Russian law; and, as we have seen in the last paragraph, such an argument about invalidity played no part in the reasoning of the Russian court in the 6 May 2020 decision. In any event, our attention was drawn to a note on the website of Debevoise & Plimpton LLP, dated 7 January 2019, indicating that the February 2018 decision in Russia is inconsistent with the usual approach of the Russian Supreme Court and is not a binding authority. Although Mr Dicker submitted that, in the light of that case, there is a serious risk (to use the language in Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102, para 31: see below para 217) that the arbitration agreement would be struck down as invalid under Russian law, that is not a submission that I can accept without having been provided with proper evidence as to the Russian law on the point. One can accept that there may be a triable issue as to whether there is a serious risk of invalidity in this case by reason of that 2018 case. However, we must decide the issue before us as to the proper law of the arbitration agreement on the evidence presented and on the matters pleaded (which do not include this invalidity point). In any event, the arbitration agreement in question in this case was entered into in 2012 and it would seem that, for the purpose of determining the proper law of the arbitration agreement, we must assess the parties intentions and all other relevant factors as at that point in time unaffected by subsequent legal developments in 2018. Why is it an important point that the dispute concerns the interpretation or scope of the arbitration agreement not its validity? There are two linked reasons. First, it is a general principle within the English conflict of laws that, as between two possible proper laws, the courts should favour the proper law that would uphold the validity of an agreement rather than one that would invalidate it (see, for example, In re Missouri Steamship Co (1889) 42 Ch D 321, 341; South African Breweries Ltd v King [1899] 2 Ch 173, 181; Coast Lines Ltd v Hudig and Veder Chartering NV [1972] 2 QB 34, 44 (per Lord Denning MR), 48 (per Megaw LJ); Chitty on Contracts, 33rd ed (2018), para 30 12). Mr Bailey referred to this (in reliance on the work of Gary Born, International Commercial Arbitration, 2nd ed (2014), pp 542 549, and Robert Merkin and Louis Flannery, The Arbitration Act 1996, 6th ed (2019), para 46.10.5) as the validation principle. It rests on the rational assumption that parties would prefer to have an agreement upheld than not. But if it is correct that there is no dispute about the validity of the arbitration agreement in this case, the validation principle is not a reason here for favouring English law over Russian law as the proper law of the arbitration agreement. Secondly, Mr Dicker submitted that, even if the dispute goes to the interpretation of the arbitration agreement and not its validity, the rational assumption is that parties would prefer to have all their disputes referred to arbitration rather than just some ie that rational businessmen are likely to have intended (using Lord Hoffmanns words in Fiona Trust & Holding Corpn v Privalov [2007] UKHL 40; [2007] Bus LR 1719, para 13) that a wider rather than a narrower interpretation of disputes which should be arbitrated was intended. However, there is an important difference between, on the one hand, upholding as valid an undisputed agreement which the parties have reached and, on the other hand, determining the correct interpretation or scope of the agreement where the very question at issue is what is it that the parties have agreed. Without empirical evidence about what rational businessmen, one Russian and one Turkish, concluding a contract for work to be carried out in Russia, would be likely to have intended, I am reluctant to place weight on the idea that these parties would have intended a wider rather than a narrower interpretation of their arbitration agreement. The rational assumption is that the parties intended their agreement to be interpreted in such a way that matches what they agreed. Rationally they do not want to be held to have agreed something which is outside their agreement. And one cannot say that, just because English law may adopt a wider rather than a narrower approach to interpretation of an arbitration agreement than Russian law, that will ensure the correct interpretation of the arbitration agreement. I therefore agree with Mr Baileys written submission on this point where he said: [T]here is no suggestion of invalidity in this case, so as to engage the validation principle. The argument is simply that English law should be taken to apply because it construes AAs [ie arbitration agreements] more liberally. That point only has to be articulated to reveal its parochialism. It is impossible to say that just because Russian law takes a narrower view of AAs than English law does that the parties must have intended English law to apply. That is results based reasoning that ignores the fact that there are legitimate reasons for adopting a narrower approach (such as, in this very case, that a broad interpretation of AAs can lead to an undesirable fragmentation of disputes and proceedings where many different parties are involved). 4. Why is the proper law of the main contract Russian? As I have explained in para 193(ii), while it is not in dispute that the proper law of the main construction contract is Russian, the route to that conclusion through the Rome I Regulation is disputed. This matter is of central importance because it has a significant impact on determining the proper law of the arbitration agreement. As we have seen in para 193(ii), the Rome I Regulation provides in article 3.1 that the governing law is that chosen by the parties where a choice is made expressly or is clearly demonstrated by the terms of the contract or the circumstances of the case. In the absence of such choice article 4 provides that in a contract for the provision of services the governing law is prima facie that of the habitual residence of the service provider but that the law of another country applies where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with [that] country. Mr Bailey submitted that Russian law had been expressly chosen as the proper law. He relied on the definition of Applicable Law in Attachment 17 to the contract which reads: Law of the Russian Federation, including legislation of the Russian Federation, all regulatory legal acts of the State Authority Federal Bodies, State Authorities of the constituent entities of the Russian Federation, legislation of the constituent entities of the Russian Federation, regulatory legal acts by Local Authorities and any other applicable regulatory legal acts. Although this was not a classic choice of law clause of the type This Agreement is governed by Russian law Mr Bailey submitted that it had the same effect. I am not persuaded by that. The applicable law article (Attachment 17) does not say This Agreement is governed by the Applicable law. Rather article 1 of the contract provides that The terms used in this Agreement shall have the definitions set forth in Attachment No 17 to this Agreement. Admittedly, the term Applicable Law is used in a large number of specific provisions. But Mr Dicker submitted that one is here talking about an incorporation by reference of relevant legislative provisions and that that is how the phrase Applicable law is used in international construction contracts (and he here referred us to a major practitioner work on standard contracts issued by the International Federation of Consulting Engineers (FIDIC): Baker Mellors Chalmers and Lavers on FIDIC Contracts, Law and Practice at paras 2.126, 2.140, 2.145). Mr Dicker took as a typical article in the main contract, article 4.1(b) which provides that Enka shall ensure performance of the work in accordance with the Applicable Law. This ensures that, incorporated into the contract, are local laws and regulations, such as those governing planning, health and safety, labour laws, taxes and customs. Admittedly the main contract was not a FIDIC contract. And it may be thought odd to incorporate, where specified, all the relevant law of the Russian Federation (as the first phrase of Attachment 17 requires) including presumably the Russian law of contract in the Russian Civil Code, if all one is concerned with are particular mandatory regulations. My view is that, although there is some ambiguity about the role of the Applicable Law definition, Mr Dicker is correct that Attachment 17 does not constitute an express choice of law clause. However, Attachment 17 is not alone. There are many other additional references to Russian law in the contract. So, for example, at article 24.2 there is reference to the provisions of the Russian Civil Code, there is reference to RF law in article 4.15, and there are numerous references (eg at articles 4.5, 4.26, 19.2 and 36.1) to law which, in the context, are clearly references to Russian law. It is helpful here to refer to Title II, article 3, para 3 of the Giuliano Lagarde Report on the Convention on the law applicable to contractual obligations which was the report that lay behind the Rome Convention which was the predecessor of the Rome I Regulation (and had the same wording as article 3.1 except that the formulation was The choice must be expressed or demonstrated with reasonable certainty rather than The choice shall be made expressly or clearly demonstrated): The choice of law by the parties will often be express but the Convention recognizes the possibility that the court may, in the light of all the facts, find that the parties have made a real choice of law although this is not expressly stated in the contract. For example . references in a contract to specific articles of the French Civil Code may leave the court in no doubt that the parties have deliberately chosen French law, although there is no expressly stated choice of law. (OJ C282/17) One can add to those express words in the contract, several other circumstances. The head contractor in the contract with Enka was Energoproekt, a Russian company and the owner and end customer, Unipro, was also Russian. The place of performance was Russian. The effects of any breach would be suffered in Russia. The primary language of the contract was Russian. And the price for the work was to be paid in Russian currency to a Russian bank account. Indeed, the only non Russian elements of the contract are that Enka is a Turkish company and that the seat of the arbitration is England. My conclusion, therefore, is that, applying article 3.1 of the Rome I Regulation, Russian law is the proper law of the main contract chosen by the parties because, even though not expressly chosen, that choice has been clearly demonstrated by the terms of the contract or the circumstances of the case. The most powerful argument to the contrary is that the parties could easily have inserted a choice of law clause into the contract and yet failed to do so. Mr Dicker submitted that, in the context of a professionally drafted, detailed, and long contract, the most obvious explanation for that was that the parties could not agree on which law should be the governing law. But we have seen no evidence as to the circumstances in which this contract was drawn up and it seems to me more plausible as an objective interpretation of the parties intentions that, given that there was some ambiguity over the role of the Applicable Law definition, the parties thought it was clear, and did not need to be further stated, that Russian law was the proper law. Although there may be marginal differences as between article 3.1 of the Rome I Regulation and the first two stages (express or implied choice) of the common law test for the proper law, they are very closely aligned: see Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd [2013] EWCA Civ 365; [2013] 2 Lloyds Rep 98. In my view, English common law, which I here refer to by analogy, would in this case regard there as having been an implied choice of Russian law. Even though there was no express term to that effect, the correct objective interpretation of the contract is that Russian law has been chosen by the parties. I should stress that the lower courts did not decide this question as to why Russian law was the proper law of the main contract. Andrew Baker J, at paras 91 93, simply said that whether there was a choice of Russian law as the proper law is far from clear in Enkas favour (ie it was not clear that no choice had been made). The Court of Appeal decided that there was no express choice of proper law but appeared to leave open whether there had nevertheless been a clearly demonstrated choice under article 3(1) of the Rome I Regulation. The case law on the proper law of the arbitration agreement In the Court of Appeal in this case, Popplewell LJ said, at para 89, In my view the time has come to seek to impose some order and clarity on this area of the law, in particular as to the relative significance to be attached to the main contract law on the one hand, and the curial law of the arbitration agreement on the other, in seeking to determine the AA law. The current state of the authorities does no credit to English commercial law which seeks to serve the business community by providing certainty. As this passage suggests, the English cases on this question, which appear to have been proliferating in recent years, do not speak with one voice. Certainly in seeking to provide the clarity which Popplewell LJ was rightly seeking, one cannot simply examine the relevant cases and hope to find in them a definitive answer to our question. With reasoning and decisions going both ways, the major purpose of looking at past cases is rather to put the task facing us in context and to ensure that all relevant considerations have been borne in mind. But ultimately, and without any authority binding this court, the way forward rests on a re examination of principle. It also follows that no attempt is here being made to cover all relevant cases. Rather I shall focus on the most important cases to which we were referred by counsel. The earliest case we were referred to was the House of Lords decision in Hamlyn & Co v Talisker Distillery [1894] AC 202. This concerned a contract between an English and Scots firm, made in London but to be performed in Scotland, with an arbitration clause for arbitration by two members of the London Corn Exchange, or their umpire, in the usual way. It was held that the interpretation of the arbitration clause was governed by English law (ie in modern terminology, the proper law of the arbitration agreement was English). But in determining the respective weights of the proper law of the main contract and the proper law of the seat of the arbitration, the case does not take one very far for two reasons. First, the proper law of the main contract was not clarified and indeed it seemed to be assumed that the proper law of the arbitration agreement would also be the proper law of the main contract. In the words of Lord Herschell LC, at p 209: I see no difficulty whatever in construing the language used as an indication that the contract, or that term of it [ie the arbitration agreement], was to be governed and regulated by the law of England. Secondly, it was regarded as an important consideration that the arbitration clause was invalid in Scotland because the arbitrators were not named but valid in England. It was for this reason that Mr Bailey submitted that this case was an example of the application of the validation principle. In Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, the House of Lords was deciding on the proper law of the main contract (a contract for the carriage of goods by sea) in a context where that proper law was specified as being governed by the laws of the flag of the vessel carrying the goods. There was an arbitration clause with London as the seat. It was held that the proper law of the main contract was French. The majority (Lords Morris, Dilhorne and Diplock) reasoned that this was because there was a choice of French law as the proper law (because, on the true construction of the choice of law clause, the relevant flag was French). Lords Reid and Wilberforce reasoned that, although there was no operative choice of law clause (because the dispute could not be related to a specific vessel or shipment), the rest of the contract and the relevant surrounding facts meant that the contract had the closest connection with France (the majority preferred to treat this as an alternative reason for their decision). Their Lordships placed considerable weight on the seat of the arbitration as a strong indication of the proper law of the main contract (and implicitly the proper law of the arbitration agreement) but held that that strong indication was here negatived by the choice of law clause (per the majority) or by the other factors linking the contract most closely to French law (per Lords Reid and Wilberforce). Lord Diplocks analysis of the curial law is particularly helpful. He said the following at p 604: My Lords, it is possible for parties to a contract to choose one system of law as the proper law of their contract and a different system of law as the curial law. Although they may want their mutual rights and obligations under the contract to be ascertained by reference to the system of law of a country with which the transaction has some close and real connection, they may nonetheless consider that the arbitral procedure adopted in some other country, or the high reputation and commercial expertise of arbitrators available there, make the curial law of that country preferable to the curial law of the country whose system of law they have chosen as the proper law. It is not now open to question that if parties to a commercial contract have agreed expressly upon the system of law of one country as the proper law of their contract and have selected a different curial law by providing expressly that disputes under the contract shall be submitted to arbitration in another country, the arbitrators must apply as the proper law of the contract that system of law upon which the parties have expressly agreed. But the cases which have given rise to difficulty are those where the parties have made a choice of curial law by a clause of their contract expressly agreeing to arbitration in a particular country but have made no express provision as to the proper law applicable to the contract. We were then referred to two judgments of Lord Mustill, who was the co author, with Stewart Boyd QC, of Commercial Arbitration (the first edition of which appeared in 1982 with a second edition in 1989). In Black Clawson International Ltd v Papierwerke Waldhof Aschaffenburg AG [1981] 2 Lloyds Rep 446 Mustill J as he then was said, at p 455: Where the laws diverge at all, one will find in most instances that the law governing the continuous agreement [sc the arbitration agreement] is the same as the substantive law of the contract in which it is embodied And at p 456: In the ordinary way, this [sc the proper law of the arbitration agreement] would be likely to follow the law of the substantive contract. These statements offer support to the proper law of the arbitration agreement being the same law as the main contract rather than being the law of the seat. This is consistent with the approach favoured in Mustill and Boyd, Commercial Arbitration, 2nd ed (1989), at p 63: The starting point is to determine the proper law of the contract in which the arbitration is embodied. As a general rule the arbitration agreement will be governed by the same law, since it is part of the substance of the underlying contract. However, in the Black Clawson case itself, the force of Mustill Js support for the main contract approach is somewhat diminished because he went on to treat the parties choice of Zurich as the place of arbitration as indicating an intention that the law governing the arbitration agreement should be the law of Zurich. Subsequently, we see Lord Mustill favouring the main contract approach in the House of Lords in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. At p 357, Lord Mustill said: It is by now firmly established that more than one national system of law may bear upon an international arbitration. Thus, there is the proper law which regulates the substantive rights and duties of the parties to the contract from which the dispute has arisen. Exceptionally, this may differ from the national law governing the interpretation of the agreement to submit the dispute to arbitration. Less exceptionally it may also differ from the national law which the parties have expressly or by implication selected to govern the relationship between themselves and the arbitrator in the conduct of the arbitration: the curial law of the arbitration, as it is often called. (Emphasis added) In XL Insurance Ltd v Owens Corning [2001] 1 All ER (Comm) 530 Toulson J was concerned with an insurance policy which (to simplify slightly) had a New York governing law clause and an arbitration clause with a London seat which included reference to the Arbitration Act 1996. It was alleged that the arbitration agreement was unenforceable because it was not in the correct written form under New York law. It was held, inter alia, that the enforceability of the arbitration agreement should be governed by English law as the law of the seat. Although Toulson Js reasoning is open to various possible interpretations and certainly his reasoning lends support to hiving off arbitration from the rest of the main contract as dealing with a particular method of resolving disputes (at 541e) one interpretation is that, as he was satisfied that the parties had made an arbitration agreement, the validation principle was being applied so as to ensure that that arbitration agreement was upheld. The primary importance of C v D [2007] EWCA Civ 1282; [2008] Bus LR 843 is obiter dicta of Longmore LJ supporting the seat approach. The case dealt with an insurance contract governed by New York law with an English arbitration clause (ie an English seat). The question was which law, New York or English, governed challenges to the arbitral award. It was held that English law applied to determine that question. That seems straightforward because that question was one of curial law and curial jurisdiction and the seat of arbitration (here England) almost invariably determines that law. The proper law of the arbitration agreement and the proper law of main contract were irrelevant in this case. However, Longmore LJ went on, in obiter dicta, to look at the proper law of the arbitration agreement and said this, at para 22: The question then arises whether, if there is no express law of the arbitration agreement, the law with which that agreement has its closest and most real connection is the law of the underlying contract or the law of the seat of arbitration. It seems to me that if (contrary to what I have said above) this is a relevant question, the answer is more likely to be the law of the seat of arbitration than the law of the underlying contract. It is worth interjecting here that, in line with Longmore LJs obiter dicta, the 15th edition of Dicey, Morris & Collins, The Conflict of Laws, published in 2012 has the following main rule (rule 64(1)): the law expressly or impliedly chosen by the The material validity, scope and interpretation of an arbitration agreement are governed by its applicable law, namely: (a) parties; or, (b) in the absence of such choice, the law which is most closely connected with the arbitration agreement, which will in general be the law of the seat of the arbitration. We then come to what can probably be regarded as the leading case: Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102. Moore Bick LJs leading judgment (with which Hallett LJ and Lord Neuberger MR agreed) was cited by both Mr Bailey and Mr Dicker in support of their submissions. Claims were brought by Brazilian companies under two insurance policies covering construction work in Brazil. The insurers denied liability on the basis of an exclusion clause and material non disclosure. There was an express choice of Brazilian law as the governing law in the insurance contracts and an exclusive jurisdiction clause in favour of Brazilian courts. However, the arbitration clause specified England as the seat. In the insurers application for an anti suit injunction, the central question was what was the proper law of the arbitration agreement. Under Brazilian law, there was a serious risk (per Moore Bick LJ at para 31) that the insured was not bound by the arbitration clause as the insured may not have specifically consented to its enforcement. The Court of Appeal held that English law was the proper law of the arbitration agreement. But it is not easy to determine whether Moore Bick LJs judgment supports the main contract or seat approach. The following passage, at para 26, supports the main contract approach provided there is an express choice of law clause in the main contract: where the arbitration agreement forms part of a substantive contract an express choice of proper law to govern that contract is an important factor to be taken into account. In the absence of any indication to the contrary, an express choice of law governing the substantive contract is a strong indication of the parties intention in relation to the agreement to arbitrate. A search for an implied choice of proper law to govern the arbitration agreement is therefore likely to lead to the conclusion that the parties intended the arbitration agreement to be governed by the same system of law as the substantive contract, unless there are other factors present which point to a different conclusion. These may include the terms of the arbitration agreement itself or the consequences for its effectiveness of choosing the proper law of the substantive contract. Moore Bick LJ went on to decide that there were two conflicting indications (para 31) that meant that the parties had not impliedly chosen Brazilian law as the proper law of the arbitration agreement. The first was that England was the seat, which inevitably imported English law, and hence the provisions of the Arbitration Act 1996, relating to the conduct and supervision of the arbitration (ie the curial law was English and the English courts had supervisory jurisdiction). The second was the serious risk that the arbitration agreement might not be binding, as against the insured, under Brazilian law. He then turned to the third stage of the common law approach and, in a passage which supports the seat approach he said this at para 32: One then has to consider with what system of law the agreement has the closest and most real connection. Although [counsel for the appellant] submitted that the agreement has a close and real connection with the law of Brazil, being the law governing the substantive contract in which the arbitration agreement itself is embedded, I think his argument fails adequately to distinguish between the substantive contract and the system of law by which it is governed. No doubt the arbitration agreement has a close and real connection with the contract of which it forms part, but its nature and purpose are very different. In my view an agreement to resolve disputes by arbitration in London, and therefore in accordance with English arbitral law, does not have a close juridical connection with the system of law governing the policy of insurance, whose purpose is unrelated to that of dispute resolution; rather, it has its closest and most real connection with the law of the place where the arbitration is to be held and which will exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure is effective. Its closest and most real connection is with English law. I therefore agree with the judge that the arbitration agreement is governed by English law. Subsequent to Sulamrica, there have been two significant first instance decisions. In Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm); [2013] 2 All ER (Comm) 1, Andrew Smith J was faced with an express choice of Indian law in the main contract and an arbitration agreement with a London seat. Distinguishing Sulamrica, because there were no indications conflicting with the express choice of law, he held that the proper law of the arbitration agreement was Indian law. Then we come to the valiant attempt by Hamblen J (as he then was) in Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi AS v VSC Steel Co Ltd [2013] EWHC 4071 (Comm); [2014] 1 Lloyds Rep 479, to set out, as clearly as possible, the relevant principles to be derived from the cases in this tangled area. In relation to the question of the proper law of the arbitration agreement it was assumed that there was no choice of law in the main contract but that it was governed by Turkish law as the law with which it was most closely connected. The parties had agreed (as found by Hamblen J) a London arbitration clause. It was held that the proper law of the arbitration agreement was English. At para 101, Hamblen J said: 101. The leading authority is the recent Court of Appeal decision in Sul Amrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] 1 Lloyds Rep 671. Moore Bick LJ (with whom Hallett LJ and Lord Neuberger MR agreed), summarised the test for determining the law applicable to arbitration agreements at paras 26 32. The Court of Appeals decision was considered but distinguished by Andrew Smith J in Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2013] 1 Lloyds Rep 235. The guidance provided by these authorities may be summarised as follows: (1) Even if an arbitration agreement forms part of a matrix contract (as is commonly the case), its proper law may not be the same as that of the matrix contract. (2) The proper law is to be determined by undertaking a three stage enquiry into: (i) express choice; (ii) implied choice; and (iii) the system of law with which the arbitration agreement has the closest and most real connection. (3) Where the matrix contract does not contain an express governing law clause, the significance of the choice of seat of the arbitration is likely to be overwhelming. That is because the system of law of the country seat will usually be that with which the arbitration agreement has its closest and most real connection. (4) Where the matrix contract contains an express choice of law, this is a strong indication or pointer in relation to the parties intention as to the governing law of the agreement to arbitrate, in the absence of any indication to the contrary. (5) The choice of a different country for the seat of the arbitration is a factor pointing the other way. However, it may not in itself be sufficient to displace the indication of choice implicit in the express choice of law to govern the matrix contract. (6) Where there are sufficient factors pointing the other way to negate the implied choice derived from the express choice of law in the matrix contract the arbitration agreement will be governed by the law with which it has the closest and most real connection. That is likely to be the law of the country of seat, being the place where the arbitration is to be held and which will exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure is effective. 102. In relation to point (3), I would add that the terms of the arbitration clause may themselves connote an implied choice of law. It is recognised that they may operate as an implied choice of law for the matrix contract itself see, for example, Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, Lord Wilberforce at p 596 and Lord Diplock at pp 604 605; In such cases they must surely equally operate as an implied choice of law for the arbitration agreement. 103. The present case is one where there is no express choice of law in the matrix contract. In such a case the Sul Amrica decision is clear authority that the applicable law will be that of the country of seat. This was acknowledged by Habas who reserved the right to challenge the decision should this case go further. The reference to overwhelming in point (3) appears to refer to the words of Moore Bick LJ in the Sulamrica case, at para 26, but it should be noted that Moore Bick LJ was using that description in the context of a free standing agreement to arbitrate not an arbitration agreement contained in a main contract. Hamblen Js summary represents clear support for the seat approach: unless there is an express choice of law clause in the main contract, the seat will very likely determine the proper law of the arbitration agreement; and even where there is such an express choice of law clause, there may be sufficient factors pointing towards the seat determining the arbitration agreements proper law. I interject at this point that there was a careful analysis of these issues by Steven Chong J (as he then was) in BCY v BCZ [2016] SGHC 249; [2016] 2 Lloyds Rep 583 in the High Court of Singapore. In a judgment which favoured the main contract approach, he said at para 65: where the arbitration agreement is part of the main contract, I would hold, adopting Sul Amrica, that the governing law of the main contract is a strong indicator of the governing law of the arbitration agreement unless there are indications to the contrary. The choice of a seat different from the law of the governing contract would not in itself be sufficient to displace that starting point. The approach in the BCY case was subsequently assumed to be the correct law in Singapore by the Singaporean Court of Appeal (Sundaresh Menon CJ, Judith Prakash JA, and Steven Chong JA), and by the parties, in BNA v BNB [2019] SGCA 84; [2020] 1 Lloyds Rep 55, paras 44 95. Popplewell LJs approach in the Court of Appeal in the present case may be regarded as somewhat similar to that of Hamblen Js in the Habas case. At para 91, Popplewell LJ said that, subject to an express choice of law in the main contract, the general rule should be that the arbitration agreement law is the curial law, as a matter of implied choice, subject only to any particular features of the case demonstrating powerful reasons to the contrary. And at para 105, he said the following: I would therefore summarise the principles applicable to determining the proper law of an arbitration agreement, what I have called the AA law, when found in an agreement governed by a different system of law, as follows: (1) The AA law is to be determined by applying the three stage test required by English common law conflict of laws rules, namely (i) is there an express choice of law? (ii) if not, is there an implied choice of law? (iii) if not, with what system of law does the arbitration agreement have its closest and most real connection? (2) Where there is an express choice of law in the main contract it may amount to an express choice of the AA law. Whether it does so will be a matter of construction of the whole contract, including the arbitration agreement (3) In all other cases there is a strong presumption that the parties have impliedly chosen the curial law as the AA law. This is the general rule, but may yield to another system of law governing the arbitration agreement where there are powerful countervailing factors in the relationship between the parties or the circumstances of the case. 6. What is the proper law of the arbitration agreement? (1) The proper law of the arbitration agreement is Russian law by reason of an implied choice We are now in a position to decide what is the proper law of the arbitration agreement. As I have said at para 193(iv) above, this is to be resolved by the common law choice of law rules ie one is looking for an express choice, an implied choice or, if neither of those applies, the system of law with which the arbitration agreement has its closest and most real connection. In this case, the three most important factors in deciding this issue are: (i) There is no express choice of law clause in the arbitration agreement here ie there is no mention of choice of law in article 50.1 of the main construction contract. (ii) The seat of the arbitration, as laid down in the arbitration agreement, is England. (iii) The proper law of the main construction contract, as we have established at paras 200 208 above, is Russian law by reason of the implied choice of the parties. It is my view that that combination of factors leads to the conclusion that, under English common law, the proper law of the arbitration agreement is, by reason of an implied choice, Russian law. As the parties have impliedly chosen Russian law for the main contract it is natural, rational and realistic to regard that choice for the main contract as encompassing, or carrying across to, the arbitration agreement. That implied choice is simply the correct objective interpretation of the parties main contract and arbitration agreement. Although the decision as to the proper law of the arbitration agreement turns on the interpretation of the main contract and the arbitration agreement, there are a number of general reasons (ie reasons that do not turn on the interpretation of these particular contracts) which support the view that, absent an express choice of law in the arbitration agreement, there is a presumption (or general rule) that the proper law of the main contract is also the proper law of the arbitration agreement; and there is no such presumption (or general rule) that the law of the seat is the proper law of the arbitration agreement. In short, these are reasons for favouring the main contract rather than the seat approach. I should make clear at the outset that, everything that is here said, relates to an arbitration agreement that is contained in a main contract. While a free standing arbitration agreement entered into at the same time would not be treated differently, a free standing arbitration agreement entered into at a different time and under different circumstances would require a different analysis. (2) Reasons why, absent an express choice of law in the arbitration agreement, there is a presumption (or general rule) that the proper law of the main contract is also the proper law of the arbitration agreement (i) Dpeage is the exception not the rule If one were to treat the arbitration agreement in the same way as all the other clauses in the main contract, the general rule would be that the same proper law would apply throughout. Dpeage is the exception not the rule. See para 193(iii) above. (ii) The rationale of the separability doctrine Under the separability doctrine, an arbitration agreement is viewed for certain purposes, both at common law and under section 7 of the Arbitration Act 1996, as a separate contract from the main contract. The reason for that is in order to ensure that the arbitration agreement is effective despite the non existence, invalidity, termination or rescission of the main contract. In other words, it stops the argument that the parties have not agreed to arbitration to deal with disputes about the non existence, invalidity or initial ineffectiveness of the main contract; and it also stops the argument that the arbitration agreement cannot deal with disputes once the main contract has been terminated or rescinded. This explains the wording of section 7 of the Arbitration Act 1996: Separability of arbitration agreement Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement. (Emphasis added) This statutory wording makes clear that the separability doctrine has been devised for a particular purpose. For that purpose, it treats (one might say somewhat fictionally) the arbitration agreement as a separate agreement when, in reality, it is not a free standing agreement but is merely part of the main contract. However, that purpose does not extend to working out the conflict of laws rules applicable to an arbitration agreement. It follows that in deciding on the proper law of the arbitration agreement, the arbitration agreement should be regarded as part of the main contract. I therefore agree with the characteristically clear and helpful exposition by Adrian Briggs, Private International Law in English Courts (2014), paras 14.37 14.38: If the agreement to arbitrate is a term of a larger contract, the law which governs the contract as a whole will generally determine the scope of the terms of that contract. For even though the arbitration agreement is for some important purposes notionally severable from the substantive contract, those purposes do not include the need for its governing law to be separate or different from that of the substantive contract in which the arbitration agreement is contained. It would be perverse to deduce from the principle of severability a rule that the law governing the agreement to arbitrate should be identified without reference to the substantive contract in which the parties included it as a term. The autonomy of the arbitration agreement is one thing; its hermetic isolation would be quite another. To put the point yet another way: the agreement to arbitrate is severable, but that does not mean it is separate. Prior to any severance it will have been governed by the law which governs the contract; after severance, it must remain governed by the same law, for otherwise it is not being severed; something else is instead being created. The result is that if the law which governs the substantive contract is identified by the Rome I Regulation, that law is very likely to govern the agreement to arbitrate, and will therefore also be used by the court to determine the validity, meaning and scope of the arbitration agreement. The fact that the Rome I Regulation makes no claim to identify the applicable law for arbitration agreements does not prevent the common law rules of private international law applying their own solution to the question, which is that the agreement to arbitrate is generally governed by the law of the contract of which it is a term if it is a term of a substantive contract. (footnotes omitted) (iii) Dividing the arbitration agreement from the rest of the contract be problematic There may sometimes be practical problems in drawing the line for proper law purposes between the arbitration agreement and the rest of the main contract. This case provides an excellent example. This is because the arbitration agreement is itself part of a wider dispute resolution clause, ie article 50.1 (set out at para 191 above) includes an obligation to resolve the dispute in good faith and for there to be a meeting of senior management and only after that should the dispute, if still unresolved, be referred to international arbitration. It would be very odd and inconvenient to apply one proper law to interpret the earlier sentences in article 50.1 and a different proper law to interpret the later sentences. Moreover, the terms notification and written notice are used in article 50.1 and therefore impact on the time when the matter can be referred to arbitration and the meaning of those terms is set out in article 51.4 of the main contract. It might be said that the whole of article 50.1 should be separated off from the main contract for the purposes of deciding the proper law. But while that would avoid the difficulty of different proper laws applying within the same dispute resolution clause, it creates the problem of how to ensure consistency with other terms of the main contract, such as article 51.4 (or another example, article 51.2 which is an entire agreement clause). To have a different proper law applying to the definitional article 51.4 than applies to article 50.1 would be problematic. All these difficulties would be avoided if the proper law of the arbitration agreement were the same as the proper law of the main contract. Let us further assume that, instead of putting the arbitration agreement in a dispute resolution clause, the contract, as is often the case, had two separate clauses: a dispute resolution clause operative prior to arbitration and an arbitration agreement. Surely using two clauses instead of one cannot make all the difference to the proper law issue. Yet on the face of it that is what the seat approach would require. One can envisage other examples of the difficulties that this division of the proper law would cause. Take, for example, the English law rule of interpretation that pre contractual negotiations are not to be taken into account. Let us assume (as appears to be the case) that that is different from the law on interpretation in New York. Then, let us assume, that there is a main contract governed by New York law which includes an arbitration agreement with London as the seat. There may be pre contractual negotiations that are relevant to understanding the contract including the arbitration agreement. It would be most odd to take those negotiations into account in interpreting the main contract (governed by New York law) but to exclude them when interpreting the arbitration agreement (governed by English law). Again that problem is avoided if the same proper law applies across the board. Another problematic example arises because of different possible approaches to a no oral modification clause. Such a clause is effective to prevent subsequent oral variations of a contract in English law (as laid down in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24; [2019] AC 119). Let us assume, as appears to be the case, that the contrary position is taken under New York law. Let us then assume that there is a contract containing a no oral modification clause and an arbitration agreement. The main contract is governed by New York law but London is the seat of the arbitration. If one applies different proper laws to the main contract and to the arbitration agreement, that would appear to produce the odd result that a subsequent oral variation, which might affect the arbitration agreement, would be effective in relation to the main contract but would be ineffective in relation to the arbitration agreement. Again there would be no such problem if the proper law that applied to the main contract applied also to the arbitration agreement. No doubt one can envisage many other such practical problems arising from the division required by the seat approach. They indicate the underlying truth that, in contrast to the main contract approach, the seat approach cuts across a principled way forward. (iv) arbitration In past cases excessive weight has been given to the seat of It is not easy to pinpoint why, in several past cases (as we have seen in paras 209 226 above) the seat of arbitration has been thought to be of such major importance in determining the proper law of the arbitration agreement. True it is that the seat of arbitration (almost) invariably carries with it the curial law and the courts curial or supervisory jurisdiction (see para 193(vi) above). So in this case it is not in dispute that the curial law of the arbitration agreement here is England and that the English courts have curial or supervisory jurisdiction. It may be, therefore, that in the past there has sometimes been a failure to distinguish between, on the one hand, the curial law and the curial/supervisory jurisdiction of the courts which are (almost) invariably determined by the law of the seat and, on the other hand, the proper law of the arbitration agreement. As Adrian Briggs has written in Private International Law in English Courts (2014), para 14.41: [T]he identification of the seat is a reliable indicator of the law which was intended or expected by the parties to apply to the proceedings before the arbitral tribunal, to their support, supervision, and control, but it is not a statement of the law which will govern the initial validity and scope of the agreement to arbitrate. The parties may say that they wish to have arbitration in London, and it may well be true that they expect the Arbitration Act 1996 to provide the template for the procedure which will be followed once the arbitration is underway. But it does not follow, or does not need to follow, that the validity of the contract by means of which that agreement was or [was] not made must also be understood to be governed by English law, for that is another question entirely. Another possible explanation for the weight given to the seat in older cases is that this has rested on the now outdated assumption (given the way modern international arbitration works) that arbitrators at the seat would only be comfortable applying their own law. In Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, the House of Lords reasoned that the choice of seat in an arbitration clause was an indicator as to the proper law of the main contract. A submission put forward in support of that was that a reason for choosing an English seat was because English arbitrators would be most familiar with English law. Lord Wilberforce rejected that submission. He said, at 596, I venture to think that in commercial matters, at the present time, this may give insufficient recognition to the international character of the City of London as a commercial centre the reason, rather than any preference for English rules, for which arbitration in London is selected. In this case the arbitrators had no difficulty in finding for French law and I do not suppose they would find ascertainment of the French law as to damages any more difficult than the English law of anticipatory breach. And as Popplewell LJ said in the Court of Appeal in this case, at para 72: I doubt that [that submission] would now be accorded significant weight in the context of most international arbitration in England, in which English arbitrators are often asked to decide questions under a foreign governing law and are regarded as equipped to do so. A fortiori it is inapplicable to a case such as the present involving arbitration under the ICC Rules which commonly involves appointment of foreign arbitrators from different legal traditions and disciplines notwithstanding that the seat of the arbitration is in London. Mr Dicker submitted that the seat might often be chosen to ensure neutrality. However, the desire for neutrality is surely normally concerned with the quality and integrity of the decision makers and rarely has anything to do with the proper law to be applied (ie the relevant neutrality is referring to the decision maker not the proper law to be applied by that decision maker). There may have been an implication in Mr Dickers submission that the parties in this case precisely chose England as the seat because they did not trust the Russian courts. Certainly one can readily accept that neutrality away from home courts may be a reason why parties choose international arbitration, and that the curial or supervisory jurisdiction of the courts at the seat may be significant. But the desire for neutrality does not explain why the parties would choose the law of the seat rather than the law of the main contract as the proper law of the arbitration agreement. Moreover, in this case if the parties really did not trust the Russian courts, one would have expected there to have been an exclusive jurisdiction clause (requiring any litigation to come before the English courts) in the main contract. In any event, we were supplied with no evidence to support any suggestion that the parties in the present case did not trust the Russian courts. Clearly they preferred to resolve the matter by arbitration rather than litigation but that is a different point. In past cases insufficient weight has traditionally been given to the (v) implied choice of the parties Although it is very difficult to rationalise all past cases, the apparent rationalisation given by the Court of Appeal in this case (mirroring other judicial attempts), in seeking to put the law on a sound footing, with respect places insufficient weight on the implied choice of the parties. That approach was to say that, in general, the proper law of the arbitration agreement was dictated by the seat chosen for the arbitration unless there was an express choice of proper law in the main contract (see Popplewell LJs judgment at paras 90 91 and 105 and above para 226). But why should only an express choice of proper law in the main contract have this effect? As Mr Bailey persuasively submitted, in his written case, it is the fact that the parties have made a choice which matters, not the way in which that choice was manifested. In other words, it makes no rational sense to place heavy weight on an express choice in the main contract while placing little weight on an implied choice in the main contract. (vi) The curial law and curial jurisdiction can be separated out from the proper law of the arbitration agreement A central submission of Mr Dicker, in line with the views of Popplewell LJ in the Court of Appeal at paras 96 to 99, is that one cannot properly separate out the curial law of the arbitration from the proper law of the arbitration agreement. They are intertwined. It follows, so the submission goes, that the parties are unlikely to have intended the proper law of the arbitration agreement to be different from the curial law (and we know that the latter is English by reason of the choice of seat). While in general terms, the curial law may be said to be dealing with arbitral procedure, and the proper law of the arbitration agreement with the substance of the parties arbitration agreement (its existence, validity and scope), one cannot in this context neatly divide procedure and substance. This is illustrated, so the submission goes, by the provisions of the Arbitration Act 1996. If the seat is England, the provisions of that Act apply whatever the proper law of the arbitration agreement; and many of these provisions (for example, sections 5, 7, 12, 28(1), 58, 60, 71(4), 79 and 82(2)) are substantive not procedural. Looked at in the overall context of the English rules on the conflict of laws, this may be thought a surprising submission. This is because it has long been recognised that, while there may be issues at the margins in drawing the distinction, there is an important difference between matters of procedure that are governed by the law of the forum and matters of substance that are governed by the particular proper law; and in modern times it would not be suggested that the forum chosen, governing procedure, would be a decisive, or even an important, factor in deciding on the proper law determining the substantive rights of the parties. It should also be noted that one would face the same issue of separating out the curial law from the proper law of the arbitration agreement if there were an express choice of law clause in the main contract specifying a different proper law than the curial law. Yet there is wide acceptance that an express choice of law clause in the main contract would override the choice of seat in determining the proper law of the arbitration agreement. Moreover, as regards the Arbitration Act 1996, I accept the submissions of Chubb Russia, put forward so persuasively on this matter by Toby Landau QC, that Mr Dickers submissions (and the reasoning of Popplewell LJ on this) are incorrect for the following two reasons: (i) Almost all the provisions of the Arbitration Act 1996 being referred to as substantive not procedural are non mandatory. And in relation to such non mandatory provisions, section 4(5) of the 1996 Act lays down (as one would expect in any event) that a foreign proper law for the arbitration agreement means that the non mandatory provisions of the 1996 Act do not apply. This provision was not relied on by Chubb Russia in the Court of Appeal and was not mentioned in the Court of Appeals judgment. Section 4 reads as follows: Mandatory and non mandatory provisions (1) The mandatory provisions of this Part are listed in Schedule 1 and have effect notwithstanding any agreement to the contrary. (2) The other provisions of this Part (the non mandatory provisions) allow the parties to make their own arrangements by agreement but provide rules which apply in the absence of such agreement. (3) The parties may make such arrangements by agreeing to the application of institutional rules or providing any other means by which a matter may be decided. (5) The choice of a law other than the law of England and Wales or Northern Ireland as the applicable law in respect of a matter provided for by a non mandatory provision of this Part is equivalent to an agreement making provision about that matter. For this purpose an applicable law determined in accordance with the parties agreement, or which is objectively determined in the absence of any express or implied choice, shall be treated as chosen by the parties. As the Supplemental Report of the Departments Advisory Committee on Arbitration Law (DAC) said, at para 12, section 4(5) avoids the dangers that a choice of England as the seat of the arbitration will necessarily entail the imposition of every provision of the Act. (ii) The remaining provisions of the 1996 Act relied on by Mr Dicker (sections 12 13 and 66 68) appear to be procedural not substantive (they are concerned with extending time limits for beginning arbitration proceedings, limitation periods, and the enforcement and setting aside of an award). But even if one regards them as substantive (see Popplewell LJ at para 96) it is clear that, in themselves, they cannot be regarded as having any bearing on the proper law of the arbitration agreement. (vii) Section 103(2)(b) of the Arbitration Act 1996 (codifying article V(1)(a) of the 1958 New York Convention) is neutral Mr Dicker sought to pray in aid article V(1)(a) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has been codified in what is now section 103(2)(b) of the Arbitration Act 1996. This statutory provision (which is materially identical to article V(1)(a) of the 1958 New York Convention) reads as follows: 103. Refusal of recognition or enforcement. (1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases. (2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves (a) that a party to the arbitration agreement was (under the law applicable to him) under some incapacity; that the arbitration agreement was not valid under (b) the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made; This statutory provision therefore deals with the refusal of recognition or enforcement of a non domestic arbitral award (ie an award made in a territory outside the UK in a state which is a party to the New York Convention: Arbitration Act 1996 section 100(1)) where an arbitration agreement is invalid under the law to which the parties subjected it or, failing any indication thereon, under the law of the seat. True it is that that constitutes legislative acceptance of the relevance of the law of the seat. But this provision is only directly concerned with the enforcement or recognition of arbitral awards. It is not directly concerned with the validity of an arbitration agreement prior to any question as to its enforcement or recognition although Mr Dicker submitted (relying on Albert van den Berg, The New York Convention of 1958 (1981), pp 126 128) that what is relevant at the end should also be relevant at the start. Mr Baileys response was that, even if one were to regard this provision as having relevance at the pre enforcement stage, the provision tended to support his case because the relevance of the law of the seat is only at the default level: where the parties have chosen the proper law of the arbitration agreement, including impliedly, the law of the seat does not apply. In other words, his submission was that this statutory provision was simply irrelevant where there has been an implied choice (as on the facts of this case). I agree with that. However, it is important to add that the statutory provision is irrelevant to this case for a wider reason: as I have made clear at paras 194 199 above, this case is concerned with the interpretation of an arbitration agreement and not with its validity. It should also be stressed that the award in this case, because the seat is England, would be a domestic award to which section 103(2)(b) does not apply. Nevertheless, I am here concerned to articulate reasons that apply generally to favour the main contract as opposed to seat approach. On the face of it, the statutory provision (and article V(1)(a) of the New York Convention) does offer support in relation to the validity of the arbitration agreement and, at least at the enforcement and recognition stage, for applying the law of the seat where there has been no choice of law, express or implied, made by the parties. One may say that it represents a legislative policy, and a policy of international arbitration, which the common law should respect. However, in so far as one might apply this provision so as to make a practical difference to the determination of the proper law of the arbitration agreement (ie where one would be applying, as the proper law of the arbitration agreement, at the pre enforcement stage, the law of the seat rather than the law of the main contract) there is a difficulty with reconciling that provision with the validation principle. We have explained in para 198 above that that principle is the general principle whereby the courts favour the proper law that would uphold an arbitration agreement rather than one that would invalidate it; and this can be seen to rest on the assumption that rational parties would prefer to have an agreement upheld than not. It follows that, unless one is to accept the unfortunate conclusion that the legislative provision may (sometimes) override the validation principle (of course sometimes it will be consistent with it), one will need to interpret the provision in such a way that, where the arbitration agreement would be invalid under the law of the seat but valid under the law of the main contract, the law of the seat will give way to the law of the main contract. The most obvious way of achieving this is to recognise that the provision confers a discretion. The relevant statutory words are that recognition or enforcement of the award may be refused. Assuming there is such a discretion, it should be exercised to accommodate the validation principle. The consequence would be that any practical difference, as to validity, between the proper law of the seat and the proper law of the main contract would be nullified. Ardavan Arzandeh and Jonathan Hill, Ascertaining the Proper Law of an Arbitration Clause under English Law (2009) Journal of Private International Law 425, 442, stress, correctly in my view, that, while superficially attractive, it is problematic to decide the proper law of the arbitration agreement by reading across from article V(1)(a) of the New York Convention (and hence from section 103(2)(b) of the 1996 Act): Although international harmonisation of choice of law rules on the basis of the rules enshrined in article V(1)(a) of the New York Convention is superficially attractive, it is not wholly unproblematical. If a national court may, in the exercise of discretion, order enforcement of an award notwithstanding the fact that the underlying arbitration clause is invalid according to the law specified by article V(l)(a), it is legitimate to question whether it would be logical or sensible to treat the choice of law rules endorsed by article V(l)(a), as interpreted by van den Berg, as being automatically applicable in contexts other than the enforcement of arbitral awards, contexts in which the element of discretion is absent. The overall position, therefore, is that not only does section 103(2)(b) have no direct relevance to the facts of this case (because we are concerned with interpretation not validity and the award would be a domestic award), it also has no direct relevance to our general enquiry because we are not concerned with the enforcement or recognition of an award. This is in line with the view of Robert Merkin, Arbitration Law (Issue 84, 2020) para 7.15 that the provision has a more limited effect than may at first sight appear. In any event, it would appear that the provisions support for the seat approach can, and should, be limited so as to adhere to the validation principle (thereby nullifying any practical difference, as to validity, between the proper law of the seat and the proper law of the main contract). For all these reasons, it seems reasonable to regard section 103(2)(b) of the Arbitration Act 1996 as an essentially neutral consideration that should not be regarded as inconsistent with, or as standing in the way of, a principled solution. (viii) The analogy to an exclusive jurisdiction clause In deciding on a principled approach to the proper law of an arbitration agreement, it is helpful to think of the analogy between an arbitration agreement and an exclusive jurisdiction clause. Say one has a contract governed by Russian law but with a jurisdiction clause giving the English courts exclusive jurisdiction. What is the proper law of the exclusive jurisdiction agreement? Although Mr Dicker submitted that that clause would be governed (presumptively) by English law as the courts (and place) chosen by the parties he was not able to support that submission with any convincing references. It would be surprising if, at least normally, the proper law of the jurisdiction clause is anything other than the same as the proper law of the main contract. Certainly that is the position favoured by Dicey, Morris & Collins, The Conflict of Laws, 15th ed (2012), para 12.103: [A]s a matter of common law, normally a jurisdiction agreement (like arbitration agreements, which are also excluded by article 1(2)(e) from the application of the Rome I Regulation) is governed by the law applicable to the contract of which it forms a part. Accordingly, and as a matter of the common law principles of the conflict of laws, the law which governs the contract will also generally govern the jurisdiction agreement. This means that this law governs the construction and interpretation of the agreement (ix) Conclusion Taken together, these reasons provide a convincing case for favouring the main contract as opposed to seat approach to determining the proper law of the arbitration agreement. They should be viewed as supporting a presumption (or general rule) that the proper law of the main contract is also the proper law of the arbitration agreement. In this case, they support the conclusion that the proper law of the arbitration agreement is Russian law by reason of an implied choice. (3) The proper law of the arbitration agreement is Russian law even if there has been no implied choice I would arrive at the same conclusion that the proper law of the arbitration agreement is Russian law for the reasons that have been set out in paras 231 255 above, even if the proper law of the main contract was Russian under article 4, rather than under article 3(1), of Rome I Regulation at least if the reason for that was that Russia is the country with which the contract is most closely connected. That would then carry across to the third stage of the common law approach and would mean that, despite the seat for the arbitration being England, the arbitration agreement also has the closest and most real connection with Russia. That one arrives at the same result at common law whether applying the implied choice or the default rule is unsurprising. It has long been recognised that there is a thin distinction between those two stages: they represent the distinction between implied and imputed intention. In Amin Rasheed Shipping Corpn v Kuwait Insurance Co [1984] AC 50 the majority, led by Lord Diplock, decided that English law was the proper law by necessary implication whereas Lord Wilberforce came to the same conclusion applying the closest and most real connection test while recognising, at p 69, that the two merge into each other. But although, in general terms, it is important to recognise that one would arrive at the same conclusion if one applied the third stage of the common law approach, this case can be decided without going beyond the choice of the parties. The proper law of the arbitration agreement is Russian because that is the law which they have impliedly chosen. (4) Stating the common law on the proper law of an arbitration agreement The reasoning above enables me to state the common law on the proper law of an arbitration agreement (contained in a main contract) in the following straightforward and principled way which (had this view found favour) would have been easy to apply and would have been one way of providing the clarity that Popplewell LJ was rightly seeking: (i) The proper law of the arbitration agreement is to be determined by applying the three stage common law test. Is there an express choice of law? If not, is there an implied choice of law? If not, with what system of law does the arbitration agreement have its closest and most real connection? (ii) Where there is an express proper law clause in the arbitration agreement (which is rare) that will be determinative. (iii) Where there is no such clause, there is a presumption or general rule that the proper law of the main contract is also the proper law of the arbitration agreement. That presumption or general rule can assist the enquiry at any of the three stages of the common law approach. (It is most appropriate to use the language of a presumption where one is considering the parties choice at the first two stages of the enquiry ie it is a presumption of the parties intentions and to use the language of a general rule where one is considering the third stage of the closest and most real connection.) (iv) That presumption may most obviously be rebutted, or there is an exception to that general rule, where the standard validation principle (of the English conflict of laws) applies ie where the law of the seat (or another relevant jurisdiction) would treat the arbitration agreement as valid whereas the proper law of the main contract would treat the arbitration agreement as invalid (or, as in the Sulamrica case, not binding on one of the parties). In very rare cases that presumption would also be rebutted where it is clear that the parties have chosen the law of the seat as the proper law of the arbitration agreement even though there is no express proper law clause in the arbitration agreement. The above statement of the common law on the proper law of an arbitration agreement does not undermine the well established and uncontroversial position that the curial law and curial jurisdiction are (almost) invariably determined by the seat chosen for the arbitration. Concluding remarks on the proper law of an arbitration agreement We were referred to the writings of many commentators on this issue. Several (for example, Gary Born, International Commercial Arbitration, 2nd ed (2014), Chapter 4; and Julian Lew, The Law Applicable to the Form and Substance of the Arbitration Clause in Albert van den Berg (ed) Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention, (1998) ICCA Congress Series Vol 9, 114, 114 145) refer to the international context and I have been very conscious throughout that it would be inappropriate to lay down an approach for the English common law that would be inconsistent with accepted principles of international arbitration law. Although the commentators, as with the judges, do not speak with one voice on the issue facing us, I have found illuminating most of the writings to which we were referred. I have derived particular help from the work I have earlier mentioned of Lord Mustill and Stewart Boyd, Gary Born, Robert Merkin and Louis Flannery, Albert van den Berg, Adrian Briggs, and Ardavan Arzandeh and Jonathan Hill. In addition, I have been helped by an excellent case note on the Court of Appeal decision in this case by Edwin Peel, The Proper Law of an Arbitration Agreement (2020) 136 LQR 534. It will be clear from all that I have said above that, while there are large measures of agreement between us (for example, that (at least in general) an express or implied choice of the proper law for the main contract carries across to be the proper law of the arbitration agreement, irrespective of the specified seat of arbitration) I cannot agree, with great respect, with the overall approach or conclusion in this case of my colleagues, Lords Hamblen and Leggatt (with whom Lord Kerr agrees). In their view, the proper law of the arbitration agreement is here English law because there has been no choice of law for the arbitration agreement, express or implied, and the arbitration agreement has the closest and most real connection to England as the seat of the arbitration. Their decision would have been different had the proper law of the main contract been Russian law by reason of an express or implied choice. But because the proper law of the main contract is, in their view, Russian law, only because it has the closest and most real connection to Russia, that means that the proper law of the arbitration agreement is English law. That is to rest crucially different consequences on a divide between the choice and default stages of the Rome I Regulation and between the second and third stages of the common law approach in a way that, with respect, I do not believe to be justified in principle. I also consider that that approach produces undesirable practical and unprincipled consequences (especially by forcing a division of the proper laws) such as those set out in paras 235 239 above. I also have misgivings about the idea that the English common law should depart from a principled solution on the basis of a supposed but in my view unproven consensus as to international arbitration policy favouring the seat approach (in the absence of choice). My view is that the proper law of the arbitration agreement is Russian. That is because the proper law of the main contract is Russian by implied choice and that implied choice encompasses, or carries across to constitute, an implied choice of Russian law for the arbitration agreement. Even if my reasoning on the proper law of the main contract is wrong and the proper law of the main contract is Russian by reason of Russia having the closest and most real connection rather than by implied choice I would still regard the proper law of the arbitration agreement as being Russian law by reason of the arbitration agreement having the closest and most real connection with Russian law. This is to apply the general rule, to which there is here no exception, that the proper law of the main contract is also the proper law of the arbitration agreement. The anti suit injunction Had my conclusion on the proper law of the arbitration agreement prevailed that the proper law of the arbitration agreement is Russian the following question would have arisen. Should this matter be remitted to the English Commercial Court to decide if an anti suit injunction should be granted or, as Mr Bailey submitted, should the matter be left to the Russian courts by refusing an anti suit injunction (overturning the Court of Appeal)? It is not in dispute that the English courts, because England is the seat of the arbitration, have curial or supervisory jurisdiction to support and enforce the arbitration agreement (see para 193(vi) above). It is also clear that the English Commercial Court has the means and experience, relying on expert evidence on Russian law, to decide on the correct interpretation of the arbitration agreement applying Russian law. I consider that, in these circumstances, had my view on the proper law of the arbitration agreement been the majority view, the appropriate course would have been for the question as to whether an anti suit injunction should be ordered to be remitted to the English Commercial Court which would have been required to determine whether, applying Russian law to interpret the arbitration agreement, the proceedings in Russia constituted a breach of the arbitration agreement. That court would also have been required to determine, if Enka had been given permission to plead the point, whether, applying Russian law, there was a serious risk of the arbitration agreement being held invalid under Russian law as at the time this arbitration agreement was entered into (see para 197 above). Had my view on the proper law prevailed, the stay of execution of the anti suit injunction would not therefore have been lifted and the undertakings given by the parties, pending the outcome of this appeal, would have had to be extended to protect Enkas position. 9. Conclusion Contrary to the joint judgment of Lord Hamblen and Lord Leggatt (with whom Lord Kerr agrees), it is therefore my view that, on the main issue in the case, Chubb Russia is correct that the proper law of the arbitration agreement is Russian, not English, law; and, on that basis, I would have remitted the question, whether an anti suit injunction should be ordered, to the English Commercial Court. LORD SALES: I agree with the judgment of Lord Burrows. In relation to determining the proper law of an arbitration agreement contained in a main contract my view is that the main contract approach should be preferred to the seat approach. I add a short judgment of my own to explain my position in relation to the points on which there is a difference of view within the court and to indicate the areas where I am in agreement with the judgment of Lord Hamblen and Lord Leggatt. The court is taking this opportunity to clarify the position regarding the approach to determining the proper law of an arbitration agreement which is a provision within a main contract. The main contract may or may not contain a provision stating the proper law of the contract. Where the main contract contains such a provision, it is not usual for the parties also to include a distinct term to state the proper law of the arbitration agreement embedded in the main contract. According to English conflict of laws rules, the proper law of the main contract will usually be determined by application of the Rome I Regulation, but that does not apply in relation to the arbitration agreement. In relation to the arbitration agreement, the proper law is determined by reference to the conflict of laws rules of the common law: the proper law is that chosen by the parties (i) expressly or (ii) by implication, according to the terms of any agreement between them, and (iii) in the absence of such choice is the law of the jurisdiction with which the arbitration agreement has the closest and most real connection. Choice of the parties Where the main contract includes a provision stating the proper law of that contract, I agree with Lord Hamblen and Lord Leggatt that the ordinary effect of the provision is that this indicates that the parties have chosen the same proper law for the arbitration agreement. I further agree with Lord Hamblen and Lord Leggatt that for these purposes there is not necessarily a sharp division between an express choice of law and an implied choice of law. The point can be illustrated by the decision in Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102 (Sulamrica). That case concerned an arbitration agreement contained in a main contract which included a term stating that the proper law of the contract was Brazilian. In his judgment, Moore Bick LJ assumed that what was in issue was whether the parties had thereby made an implied choice of law in relation to the arbitration agreement, and held that by virtue of the application of the validation principle the choice of law term could not be interpreted as having that effect: paras 25 26 and 31. However, one might analyse the effect of the proper law provision in the main contract by asking whether on the true construction of its express terms the statement that the proper law of the contract was Brazilian law extended to cover the arbitration agreement which was part of that contract. Again, application of the validation principle would indicate that in the particular circumstances of the case the parties did not intend that statement to extend so far. Stages (i) and (ii) of the common law rule are aligned with the test in article 3(1) of the Rome I Regulation. The first main point of difference between the judgment of Lord Burrows and the judgment of Lord Hamblen and Lord Leggatt is whether in the circumstances of the present case the parties impliedly chose Russian law as the law governing the main contract, including the arbitration agreement. On that question, I agree with Lord Burrows that they did. Although the parties did not include an express choice of law statement in the main contract, they included many references in the main contract to make it clear that they intended that Russian law should govern their relationship. In the circumstances of the case, and given the nature of the task to be performed by Enka, it would have been bizarre for them to assume that any other law was to apply. The guidance in the report by Giuliano and Lagarde on the Rome Convention which later became the Rome I Regulation (para 203 above) is strong support for this view. Unlike in Sulamrica, there was no good countervailing reason to indicate that the parties intended that the choice of law they had made for their contract should not extend to the arbitration agreement which was part of it. Where the parties to a main contract include an arbitration agreement as part of that contract, then in general terms there are strong grounds to infer that they intend their choice of the law to govern that contract to cover the arbitration agreement as well, as Lord Hamblen and Lord Leggatt point out: para 53 above. There is a presumption that in ordinary circumstances a contract has a single proper law since otherwise a serious element of uncertainty would be introduced into mercantile agreements: Jacobs, Marcus & Co v Credit Lyonnais (1884) 12 QBD 589, 602 603 per Bowen LJ; see also Kahler v Midland Bank [1950] AC 24, 42 (Lord MacDermott). A contract contains a unified package of rights and obligations, created in the same set of circumstances, so the usual and natural inference is that the parties intend, on an objective basis, that the same proper law should apply in relation to it. An arbitration agreement contained in the main contract imposes an obligation to take disputes to arbitration in certain circumstances, as part of the package of rights and obligations created by and set out in the main contract. In usual circumstances, I can see no good reason to infer that the parties to the main contract intended the interpretation of the obligation to arbitrate to be governed by any different system of law than the system of law which governs the interpretation of all the other obligations in their contract. Applying the same system of law to govern the construction of the whole of the contract the parties have made ensures simplicity and coherence in its interpretation. It avoids the uncertainty associated with subjecting different parts of the contract to interpretation according to different systems of law. Any national system of law may be expected to have internal coherence, which will not be the case when two national systems of law are set side by side or are overlaid. Each will have an internal logic and in dealing with particular matters which is at variance from the internal logic of the other. Each may have different solutions to practical problems which are coherent within that system, but are opposed to the solutions given by the other system according to what is coherent within that other system. The presumption that a contract has a single proper law thus reflects the usual expectations of the parties to a contract, since it is a reasonable inference that they prefer certainty, coherence and simplicity in working out the practical implications of their agreement. In my view, these points underlie the observation by Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, 357 358, that it would be exceptional for the proper law of the arbitration agreement to be different from the proper law of the main contract. Lord Mustills opinion in this area carries great weight. He also pointed out that it is less unusual for the curial law in relation to an arbitration to be different from the proper law of the main contract (and the proper law of an arbitration agreement contained in the main contract). The explanation for this is that the curial law follows the choice of seat. When the parties choose a particular seat, their reasons for doing so include the relationship stipulated by the law of the jurisdiction of the seat as to the grounds on which the courts of that jurisdiction may interfere with the arbitral process or its outcome and the extent to which those courts may take action positively to support the arbitral process and uphold the agreement to arbitrate, including by the grant of injunctive relief. These reasons apply whatever the proper law of the main contract or the arbitration agreement may be. Hence I do not consider that ordinarily the choice of the seat provides any sound basis to infer what the parties intended or might have expected the proper law of the main contract or the arbitration agreement to be. Two comments may be made about this. First, many decades ago it was understood that when the parties stipulated that the seat for their arbitration would be in a particular jurisdiction their intention was that the arbitrators would be local lawyers chosen for their expertise in the law of that jurisdiction, so that the inference could be drawn that the parties intended that they would apply that law in determining issues in dispute, including as to the proper interpretation of the arbitration agreement and the main contract. But changes in the way international arbitration was conducted meant that such an inference was already suspect by 1970, as Lord Wilberforce explained in Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, 596. Under modern conditions of international arbitration, in which arbitrators may be drawn from different jurisdictions and are regularly expected to receive evidence about and to apply foreign law, it is now no longer a plausible inference. Secondly, parties may sometimes choose arbitration for resolution of their disputes with a seat in a neutral jurisdiction because one or other of them does not have complete trust in the impartiality of the courts of the state of the other. But a preference for a neutral seat does not support any inference as to the parties intentions as to the law which the arbitrators should apply when interpreting the main contract or the arbitration agreement. Arbitrators can be expected to apply any relevant law, of whichever legal system is appropriate, in an impartial way and the courts of the neutral jurisdiction will be impartial in applying the curial law. If an inference is sought to be drawn as to the proper law of the main contract or the arbitration agreement, something more is required: an indication that the parties wished the law to be applied to govern the interpretation of their contract to be neutral in the sense that it is not aligned with the home jurisdiction of either of them. Exceptionally, the circumstances may support such an inference: see eg Egon Oldendorff v Libera Corpn [1995] 2 Lloyds Law Rep 64, 69 and see para 114 above. However, the circumstances of the present case show that no such inference can be drawn here. The parties have stipulated that Enkas obligations under the main contract should incorporate norms of Russian law. Accordingly, it is my view that Lord Hamblen and Lord Leggatt overstate the significance of the choice of the seat in this case. The choice of curial law associated with the choice of the seat is directed to a different subject matter (regulation of the relationship between the courts of place of the seat and the arbitral process) than the rules directed to determining the proper law of a contract for the purpose of interpreting it, so it is not appropriate to use the former as a basis for establishing what the latter should be. The inference that the parties who made the contract in the present case intended that the interpretation of the whole of it should be governed by Russian law is especially strong, since the arbitration agreement is contained in a complex main contract with many interacting parts which have to live together in a coherent relationship. In particular, the parties intention, judged objectively, is that the obligation to arbitrate set out in the arbitration agreement contained in article 50.1 of the main contract should be interpreted in a way which makes it coherent with the other obligations in the same provision to seek to negotiate in good faith to find a resolution for disputes. I can see no reason why the interpretation of the latter set of obligations is not governed by Russian law, like all the other obligations in the main contract. The obligation to arbitrate in article 50.1 is likewise just another obligation set out in the main contract and it is so closely related to the other dispute resolution obligations in the main contract that the obvious inference is that the parties intended the interpretation of the whole of the provision to be governed by the same law, ie Russian law. The separability principle which exists in relation to an arbitration agreement contained within a main contract does not alter this analysis. That principle has limited significance. As reflected in section 7 of the Arbitration Act 1996, it allows for the survival of an arbitration agreement contained in a main contract if the validity, existence or effectiveness of the main contract is called in question, so that the arbitrators can rule on such matters. This tells one nothing about the legal system which the parties intended or might reasonably have expected to govern the interpretation of the arbitration agreement as part of the main contract. By contrast, the validation principle, as illustrated by Hamlyn & Co v Talisker Distillery [1894] AC 202 and Sulamrica, does allow one to draw an inference as to the system of law which the parties intended should govern the interpretation of the arbitration agreement. The principle can provide a basis for distinguishing the proper law of the arbitration agreement from that of the main contract or, where the proper law of the main contract is uncertain, it may provide a basis for an inference also to be drawn that the proper law of the main contract is intended to follow the choice of proper law for the arbitration agreement (in Hamlyn v Talisker Lord Herschell LC referred to this possibility at p 209). In my view, the validation principle is an aspect of the general objective approach to determining the intention of the parties to a contract ut res magis valeat quam pereat (so that the main object of the agreement is upheld and not destroyed). Where the main contract contains an arbitration agreement, it will be clear that the parties intend that the obligation to arbitrate as set out in the arbitration agreement should be valid and effective. The parties are presumed to know the state of the law at the time they contract. If it appears that according to the law which governs the main contract the arbitration agreement would be invalid, then it can be inferred that the parties intended that a different law should govern the arbitration agreement in order to uphold its validity and effect. The same is true if it appears that according to the law which governs the main contract the arbitration agreement would be subject to a serious risk of being found to be invalid or that its binding force would be destroyed (as in Sulamrica), since the inference is that the parties would choose certainty rather than uncertainty in upholding the effectiveness of this part of their contract. Usually, since the legal system which governs the main contract is ruled out by this reasoning, the obvious conclusion is that the parties intended the law of the jurisdiction of the seat which they have stipulated to apply instead. The terms of the arbitration agreement, set against the background of the state of the law in the two candidate jurisdictions, show that the parties intended the law of the jurisdiction of the seat to apply in this sort of case. This reasoning does not apply where what is in issue is the choice of the proper law to determine the scope of the arbitration agreement rather than whether it would be invalid or would not impose a binding obligation to go to arbitration if one system of law were applied rather than another. In Sulamrica, Moore Bick LJ rightly held that the validation principle applied so as to negative any choice of Brazilian law as the proper law of the arbitration agreement. He seems to have drawn the conclusion that this meant that the parties had formed no intention regarding what was to be the proper law of the arbitration agreement (see para 31) and so proceeded to analyse the position by reference to the common law default rule at stage (iii), in order to conclude that English rather than Brazilian law governed the arbitration agreement contained in the main contract. However, in my opinion, following the reasoning above, the better view is that the validation principle showed that the parties intended that English law should govern the arbitration agreement. This conclusion should have been reached at stage (i)/stage (ii) of the common law analysis. In the present case, subject to one argument introduced by Enka for the first time on the appeal to this court (see para 197 above), the validation principle has no application. Up to the hearing in this court, it has been common ground that under Russian law the arbitration agreement in article 50.1 is valid and binding in its effect; the issue that has divided the parties is the effect that application of Russian law would have regarding the interpretation of its scope. As to Enkas new argument that the validation principle does in fact apply, I agree with Lord Burrows that if our view regarding the proper law of the arbitration agreement had prevailed the case should have been remitted to the Commercial Court and that it would have been for that court to consider whether the new argument could be introduced and, if it were, then to rule upon it alongside the other issue of Russian law which is in dispute between the parties, namely whether the interpretation of article 50.1 according to Russian law would be narrower or the same as that given by English law. The second main area of disagreement appearing from the judgment of Lord Burrows and the judgment of Lord Hamblen and Lord Leggatt relates to the operation of the common law default rule at stage (iii), if the parties have made no choice at stage (i) or stage (ii). On the analysis of Lord Burrows, with which I agree, the parties to the main contract impliedly intended that the interpretation of the AA in that contract should be governed by Russian law, at stage (ii). If that were right, stage (iii) would not be reached. However, the majority do not agree about this. On their analysis it is necessary to consider the position on the footing that the parties have made no choice at stage (i) or stage (ii). The default rule In the early formulation of the common law rule by Dicey in 1896 (para 36 above), the difference between stage (i)/stage (ii) and stage (iii) was described as one between what the parties (actually) intended and what they may fairly be presumed to have intended. Obviously, imputed choice is something different from actual choice. Later, the common law default rule at stage (iii) was formulated in terms of the system of law with which the contract has its closest and most real connection. But this does not mark a radical change. Rather, focusing on the closest and most real connection serves the same underlying policy, which is to seek to reflect the likely expectations of the parties as businesspeople, by producing an outcome which is reasonable and coherent in its own terms and does not place excessive emphasis on the boundary between stage (ii) and stage (iii). If, on analysis, the parties have not made a choice of proper law themselves perhaps because they did not think about it or they chose to leave matters unclear in the interests of arriving at an agreement without having to argue about it and in the hope that a dispute might never arise which required a determination of the issue the policy of the common law, as expressed in the default rule at stage (iii), is to produce the answer which it is plausible to think businesspeople in the position of the parties, acting reasonably, would have been likely to have chosen for themselves if they had to confront the issue. Many of the factors relevant to an argument that an implied choice of proper law can be identified at stage (ii) will also be relevant to the alternative argument based on the default rule at stage (iii). In broad terms, businesspeople would expect them to be likely to produce similar outcomes. That has certainly been the judicial approach until fairly recently, as illustrated by the decision of the House of Lords in Amin Rasheed Shipping Corpn v Kuwait Insurance Co [1984] AC 50. In that case, the majority of the Appellate Committee determined the proper law of the contract by reference to stage (ii), while Lord Wilberforce reached the same conclusion by reference to the test at stage (iii), for closely similar reasons. Similarly, in the Cie Tunisienne case all members of the Appellate Committee arrived at the same conclusion regarding the proper law of the contract, but they did so by different routes; some found that the parties had made a choice, others that the default rule in stage (iii) applied. In the leading authorities referred to in the Cie Tunisienne case, Bonython v Commonwealth of Australia [1951] AC 201, and In re United Railways of Havana and Regla Warehouses Ltd [1961] AC 1007, the test applied to determine the proper law of the contract was that stated by Lord Simonds in Bonython, at p 219: the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connexion, which elides the question of party choice and the default rule, and deliberately so. The close alignment of the approach under stage (ii) and that under stage (iii) was traced by Toulson LJ in Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd [2013] 2 Lloyds Law Rep 98, paras 20 27. Since the boundary between stage (ii) and stage (iii) is by no means crystal clear and there is scope for eminent judges to reach different views about which stage of the common law analysis supplies the answer in any given case, it would risk the appearance of arbitrariness to adopt a default rule at stage (iii) which was radically at variance in the results it produced by comparison with stage (i) and stage (ii). Further, if the common law adopted a radically divergent default rule, so that significant differences in outcome turned on this, that would be an incentive for parties to litigate the question of whether a case was to be analysed as falling within stage (i)/ stage (ii) or within stage (iii). This would be contrary to the interest of businesspeople to avoid expensive litigation to resolve disputes, so far as possible. If the parties appreciate that all roads lead to Rome, so to speak, the need for litigation to decide which road should be taken is avoided. This analysis prompts a further comment on Sulamrica. Having held (contrary to my view at para 278 above) that the application of the validation principle meant that the parties had made no choice as to the proper law of the arbitration agreement within the main contract, Moore Bick LJ proceeded to apply the default rule at stage (iii) (para 32). However, in doing so he took the view that the arbitration agreement had its closest and most real connection with the law of the place of the seat (England); and this despite the fact that, subject to the application of the validation principle, he thought that at stage (ii) the parties impliedly intended that the proper law of the main contract (Brazilian law) would also apply to the arbitration agreement (paras 26 27). I think it is evident that Moore Bick LJs analysis at both stage (ii) and stage (iii) was rightly designed to give effect to the validation principle and to uphold the effective binding force of the arbitration agreement in that case in line with the parties intention. But unfortunately in doing so he proposed a solution which, if taken at face value and generalised, would give rise to the kind of radical divergence of outcome between stage (i)/stage (ii) and stage (iii) which the common law default rule in fact seeks to avoid, and which does not reflect the previous authorities referred to above. The court in Sulamrica did not need to take the step of saying that the arbitration agreement had its closest and most real connection with the law of the place of the seat in order to produce the appropriate result, which was to uphold the binding effect of the arbitration agreement in line with the parties intention by application of the validation principle: see para 278 above. One might also say that the validation principle is capable of operating at stage (iii) as well as at stage (i)/stage (ii), as an aspect of the common law default rule, as an expression of the policy of the common law to uphold the validity and binding effect of an arbitration agreement which the parties have chosen to enter into. But again, that would mean that the law of the place of the seat (England) was applicable as the proper law of the arbitration agreement as the only remaining candidate once Brazilian law had been eliminated as a candidate by application of the validation principle. At the end of this process of analysis, it could be said that the arbitration agreement had its closest and most real connection with the law of the place of the seat; but that is only in the very limited sense that this was the only system of law with which the arbitration agreement could be said to have any connection, if the validation principle was to be given effect. However, the way in which Moore Bick LJ explains his reasoning at para 32 makes it sound as though the general starting point, if the analysis at stage (i)/stage (ii) does not give a result, is always that the arbitration agreement contained in the main contract has as its proper law the law of the place of the seat rather than generally following the proper law of the main contract. In my respectful opinion, that approach is erroneous and contrary to principle and authority. In my view, the powerful points which Lord Hamblen and Lord Leggatt make at para 53 of their judgment regarding the expectations of businesspeople to the effect that their contractual arrangements should have internal coherence (so that if the parties have chosen the proper law of the main contract they would ordinarily expect the same proper law to apply in relation to an arbitration agreement contained within it) also apply in relation to the operation of the default rule at stage (iii) where the circumstances mean that it is clear what the proper law of the main contract is, even when that is not as a result of the exercise of choice within the meaning of article 3(1) of the Rome I Regulation. The main contract carries with it the legal system which governs its interpretation and application. Accordingly, the need for and expectation that there will be coherence between the main contract and the arbitration agreement contained within it means that the arbitration agreement has its closest and most real connection with the legal system which constitutes the proper law of the main contract in which it is contained. By contrast, it is my opinion that the argument for a connection between the arbitration agreement and the law of the place of the seat is much weaker. The parties obtain the benefits of the curial law of the place of the seat in any event, whatever the proper law of the arbitration agreement: see para 271 above. Therefore the choice of seat does not point to any particular connection with the arbitration agreement in terms of providing guidance as to its proper law. To the extent that the courts of the place of the seat exercise a supervisory function in relation to the arbitration, for example to ensure that the arbitrators act within the scope of the arbitration agreement according to its true construction, they can readily do that by reference to evidence about any foreign law which is identified as the proper law of the arbitration agreement. In the present case, Enka disputes that there has been a choice of proper law within article 3(1) of the Rome I Regulation for the main contract but accepts that article 4, as the default rule set out in the Regulation, has the effect that the proper law of the main contract is Russian. This concession must be based on an acceptance that it is clear from all the circumstances that the main contract is manifestly more connected with Russia than with any other country (including the country where Enka is habitually resident, Turkey): see article 4(3). The assessment under article 4(3) involves inquiring into the country with which the contract taken as a whole has its closest connection. Where, in this case, following this path of analysis, the main contract taken as a whole manifestly has its closest connection with Russia so that Russian law is taken to be its proper law, it seems to me that the reasoning above indicates that the arbitration agreement contained in the main contract similarly has its closest and most real connection with Russian law. There is no good reason to conclude that the law of the seat is more closely connected or provides a better guide for the purposes of application of a rule designed to identify the law which is to govern the interpretation of the arbitration agreement. In their judgment, in relation to stage (iii) of the common law rule Lord Hamblen and Lord Leggatt rely on article V(1)(a) of the New York Convention and section 103(2)(b) of the Arbitration Act 1996 in support of their view that at that stage the arbitration agreement in the main contract has its closest and most real connection with the law of the seat (England) rather than with the law which governs the main contract. In my opinion, this is to give those provisions excessive weight in analysing the application of the common law rule. As I have sought to show, the policy of the common law as reflected in the default rule at stage (iii) is to align that rule with the likely result the parties would have wished to achieve to produce reasonable coherence across their whole contractual relationship. Application of article V(1)(a) would defeat that policy, because it would produce a radical divergence between the effect of stage (i)/stage (ii) and stage (iii) of the common law rule. Another way of putting this is to say that the points made by Lord Hamblen and Lord Leggatt at para 53 of their judgment do not drop out of the analysis for the purposes of the common law at stage (iii), but continue to have validity and force at that stage as well. By contrast, when one is applying article V(1)(a) those points do drop out of the picture and have no force, precisely because the New York Convention legislates for a rule which excludes them from being relevant. Moreover, article V(1)(a) does not provide a good guide as to the application of the common law rule. Article V(1)(a) sets out a default rule within the scheme of the Convention which is different from the default rule under the common law and which, if applied, would undermine the validation principle when it is applied by the common law as an aspect of stage (iii) (see para 285 above). The provision states that, in the absence of a choice by the parties, recognition of an arbitral award may be refused if the arbitration agreement is not valid under the law of the country where the award was made. That seems to say that recognition may be refused if the arbitration agreement is invalid according to the law of the place of the seat; but under the common law in such a case the validation principle would apply and the court would identify another system of law as the proper law of the arbitration agreement in order to uphold and give effect to the arbitration agreement. Article V(1)(a) thus sets out what can fairly be described as a very simple and inflexible default rule for the purposes of the Convention regime which is different from the more flexible and nuanced common law default rule of closest and most real connection and should not be taken to displace that rule. Within the Convention regime, the rationale for the choice of a simple test is not difficult to understand. It is a clear rule by reference to which it is reasonably easy to judge whether the actions of states party to the Convention comply with it or not. By contrast, the common law default rule has been established for a very long period of time, well before international policy arguably came to crystallise in line with article V(1)(a) of the New York Convention, and it reflects different policy objectives, as set out above. So far as choice of proper law for an arbitration agreement is concerned (as distinct from regulation of the recognition of foreign arbitral awards, which is governed by section 103(2)(b) of the 1996 Act), article V(1)(a) of the New York Convention is part of an unincorporated treaty and it is unclear by what process of legal reasoning it could be taken to have displaced the well established common law default rule. None of the leading common law authorities give any weight to article V(1)(a) in the formulation or application of the common law rule. For present purposes, it is not necessary to determine the position where it is not article 4(3) but one of the other more mechanical rules in article 4 which determines the proper law of the main contract. It suffices to say that I think there is force in the argument that the analysis above tends to indicate that also in that sort of case the proper law of the main contract will usually provide the best indication of the proper law of an arbitration agreement contained within it, at stage (iii) of the common law rule. Again, the points made by Lord Hamblen and Lord Leggatt at para 53 of their judgment should not drop out of the picture here. This approach would reflect how the parties are likely to have approached matters themselves, by starting with their agreement on the substantive aspects of the main contract and then adding the arbitration agreement into that framework, with the general intention and expectation that the main contract and the arbitration agreement would form a coherent whole. It would also have the merit of making the analysis in any case as simple and clear as possible. One would start by identifying the proper law of the main contract according to the choice of the parties pursuant to article 3 of the Rome I Regulation and, in default of any choice, by reference to the rules in article 4 of the Regulation, and then the presumption would be that the proper law of the arbitration agreement is the same. The anti suit injunction Finally, if the interpretation of article 50.1 were governed by Russian law, as Lord Burrows and I think it is, and a Russian court is about to pronounce on the interpretation of that provision according to Russian law in the parallel proceedings between the parties in Russia, the question arises whether this makes it inappropriate for the English court to issue an anti suit injunction in favour of Enka, whether on grounds of forum non conveniens, comity or otherwise. On that issue, I agree with section IX of the judgment of Lord Hamblen and Lord Leggatt, which is in line with Lord Burrows judgment. The English court, as the court of the place of the seat of the arbitration chosen by the parties, has a particular responsibility to ensure that the arbitration agreement is upheld and applied in accordance with its terms. On the basis of expert evidence of foreign law adduced in the usual way, the English court could determine the meaning of article 50.1 according to Russian law. If article 50.1, so construed, imposes an obligation on Chubb Russia to proceed by way of arbitration rather than by litigation, the English court could and should enforce that obligation by way of an anti suit injunction. |
On 17 May 2011, the respondent, Ms Tiffany Moreno, a United Kingdom resident, was on holiday in Greece. Walking along the verge of a road, she was struck from behind by a vehicle registered in Greece driven by a Ms Kristina Beqiri. Ms Beqiri had neither a valid driving licence nor it appears any insurance and is admitted to have been responsible for the accident. Sadly, Ms Moreno suffered very serious injuries, which included loss of her right leg requiring her to use a wheelchair, continuing pain and psychological reaction, as well as loss of earnings. The preliminary issue the subject of this appeal is whether the scope of her claim to damages is to be determined in accordance with English or Greek law. Ms Morenos claim is against the Motor Insurers Bureau of the United Kingdom (the UK MIB). That it can be pursued against the UK MIB is the result of a series of Council Directives of the European Economic Community (now Union) dating back to 1972 and culminating in a codified Sixth Directive 2009/103/EC of 16 September 2009. These Directives are in part transposed into English law by The Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body) Regulations 2003 (SI 2003/37) (the 2003 Regulations). The 2003 Regulations were enacted prior to the codifying Sixth Directive and therefore refer to the earlier Directives. The expressed and obviously beneficial purpose of the arrangements introduced by the Directives and Regulations is to ensure that compensation is available for victims of motor accidents occurring anywhere in the Community (now the Union) and to facilitate their recovery of such compensation. With British exit from the Union, this will, no doubt, be one of the many current arrangements requiring thought. In the present case, the effect of the arrangements is that Ms Moreno is entitled to pursue the UK MIB, rather than pursue Ms Beqiri or search for some (evidently non existent) insurer of Ms Beqiri or pursue the Greek body responsible for providing compensation in respect of uninsured vehicles involved in Greek accidents. Under the Sixth Directive the UK MIB will, once it has compensated Ms Moreno, be able to claim reimbursement from the Greek compensation body, which will in turn be subrogated to Ms Morenos rights against Ms Beqiri. The issue is, as stated, whether the scope of the UK MIBs liability to Ms Moreno is be measured according to English or Greek law. Ms Morenos concern is that Greek law would yield a lesser measure of compensation than English law. It is accepted however that in other contexts the reverse might be the case. There is, for example, evidence that Irish personal injuries damages can be significantly higher than English, and that Italian law can in fatal accident cases award significantly more (and, if relevant, to a broader range of persons) than English law. Ms Morenos case, advanced on her behalf by Mr Daniel Beard QC, is that the Regulations provide for English law to govern the measure of recovery, and that there is nothing in the Sixth Directive to the contrary or precluding this. Submissions to like effect were accepted in 2010 by the Court of Appeal (Laws, Moore Bick and Rimer LJJ), overruling Owen J, in Jacobs v Motor Insurers Bureau [2010] EWCA Civ 1208; [2011] 1 WLR 2609. The Court of Appeals decision in Jacobs was followed in Bloy v Motor Insurers Bureau [2013] EWCA Civ 1543; [2014] 1 Lloyds Rep IR 75. In the present case, Gilbart J on 17 April 2015 rightly also held himself bound by the decision in Jacobs, but saw very considerable force in a contrary conclusion. On 23 April 2015 he granted the UK MIBs application for a leap frog certificate under section 12 of the Administration of Justice Act 1969, and the appeal comes before the Supreme Court accordingly, with its permission granted 28 July 2015. Prior to the Directives, there was already in existence the Green Card System established by Internal Regulations and an Inter Bureaux Agreement covering states both within and outside the then European Economic Community. Under this System, still effective in the form of Internal Regulations (as adopted by the UN General Assembly in Crete on 30 May 2002 and revised in Lisbon on 29 May 2008 and in Istanbul on 23 May 2013) and in force in substance since 1 July 2008, the insurers of vehicles in participating states issue Green Cards guaranteeing compensation to victims of motor accidents caused by the driving of such vehicles abroad, and bureaux set up in each such state guarantee that the foreign insurer will abide by the law applicable in that country and compensate injured parties within its limits. Article 3(4) headed Handling of Claims further provides: All claims shall be handled by the bureau with complete autonomy in conformity with legal and regulatory provisions applicable in the country of accident relating to liability, compensation of injured parties and compulsory insurance Article 5(1) provides for the local bureau which has thus settled a claim arising out of an accident to be able to demand reimbursement of the sums paid as compensation, together with costs and a handling fee, from the member of the bureau (ie the relevant insurer) which issued the Green Card or policy of insurance or, if appropriate, from the foreign bureau itself, while under article 6(1) each bureau guarantees the reimbursement by its members (ie the insurers) of any amount so demanded. The Directives start with the First Council Directive 72/166/EEC of 24 April 1972 requiring each member state under article 3(1) to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance, which must also under article 3(2) cover any loss or injury caused in the territory of another member state. Equivalent provision is now made in article 3 of the codifying Sixth Directive. Articles 2(2) and 7 of the Directive (now, articles 2 and 4 of the Sixth Directive) contemplated that the requirement for a vehicle based in one member state to produce a Green Card on entry into another member state would cease from a date to be fixed by the Commission once it ascertained that an agreement had been concluded between the national insurance bureaux established under the Green Card System in member states whereby each such bureau (elsewhere sometimes described as a guarantee fund): guarantees the settlement, in accordance with the provisions of its own national law on compulsory insurance, of claims in respect of accidents occurring in its territory caused by vehicles normally based in the territory of another member state, whether or not such vehicles are insured. The relevant Convention complmentaire entre Bureaux nationaux was entered into on 12 December 1973. Article 3(a) provides that it modifies pro tanto the Inter Bureaux Agreement, the terms of which otherwise remain in force. Domestic effect is currently given to the requirement in article 1(4) of the Second Directive 84/5/EEC of 30 December 1983 for a guarantee by the Uninsured Drivers Agreement dated 3 July 2015 made between the Secretary of State for the Environment, Transport and the Regions and the UK MIB. The Second Directive specified in article 1(1) that the insurance referred to in article 3(1) of the First Directive should cover compulsorily both property damage and personal injuries, up to specified minimum amounts (article 1(2)). Equivalent provision is made in the Sixth Directive in articles 3 and 9. Further it was provided by article 1(4) of the Second Directive (or now article 10 of the Sixth Directive) that each member state should: set up or authorize a body with the task of providing compensation, at least up to the limits of the insurance obligation for damage to property or personal injuries caused by an unidentified vehicle or a vehicle for which the insurance obligation provided for in paragraph 1 [or article 3 of the Sixth Directive] has not been satisfied. Article 1(4) of the Second Directive (now article 10(4) of the Sixth Directive) continued: . [E]ach member state shall apply its laws, regulations and administrative provisions to the payment of compensation by this body, without prejudice to any other practice which is more favourable to the victim. The intention of the legislature in passing the Second Directive was to entitle victims of damage or injury caused by unidentified or insufficiently insured vehicles to protection equivalent to, and as effective as, that available to persons injured by identified and insured vehicles: Evans v Secretary of State for the Environment, Transport and the Regions (Case C 63/01) [2004] RTR 32, para 27. The Fourth Directive 2000/26/EC of 16 May 2000 carried matters further, most notably by giving victims of foreign motor accidents various possibilities of recourse in their home states of residence. Article 1(1) stated that: The objective of this Directive is to lay down special provisions applicable injured parties entitled to compensation in respect of any loss or injury resulting from accidents occurring in a member state other than the member state of residence of the injured party which are caused by the use of vehicles insured and normally based in a member state. to Injured party was by article 2(d) defined as stated in article 1(2) of the First Directive, that is as any person entitled to compensation in respect of any loss or injury caused by vehicles, a definition repeated in article 1(2) of the Sixth Directive. The special provisions included: (a) a provision that injured parties should enjoy a direct right of action against the insurer covering the responsible person against civil liability: article 3 (now article 18 of the Sixth Directive); (b) a requirement on member states to ensure that motor liability insurers appoint a claims representative in each member state other than that in which they received their authorisation, to be responsible for handling and settling accident claims: article 4 (now article 21(1) of the Sixth Directive); (c) a requirement that each member state establish or approve an information centre responsible for keeping a register containing information including the registration numbers of vehicles normally based in that state, the numbers of the insurance policy covering their use and their expiry date, if past: article 5(1) (now article 23(1) of the Sixth Directive); (d) a requirement that each member state establish or approve a compensation body responsible for providing compensation to injured parties in the cases referred to in article 1: article 6(1) (now article 24(1) of the Sixth Directive), coupled with a provision entitling such injured parties to present a claim to the compensation body in their member state of residence if within three months the insurer or its claims representative has not provided a reasoned reply to their claim, or the insurer has not appointed a claims representative in the injured partys state of residence (unless the injured party has taken legal action directly against the insurer); (e) a provision entitling an injured party to apply for compensation to the compensation body in the member state if it is impossible to identify the vehicle or if, within two months following the accident, it is impossible to identify the insurance undertaking: article 7 (now article 25(1) of the Sixth Directive). Article 7 goes on to provide that The compensation shall be provided in accordance with the provisions of article 1 of the Second Directive (as to which see para 7 above). Article 25(1) says that it will be provided in accordance with the provisions of articles 9 and 10 of the Sixth Directive, which relate respectively to the requirements on member states to ensure compulsory insurance in minimum amounts and to set up or authorise a compensation body to cover property damage or personal injuries caused by an unidentified or uninsured vehicle (see para 7 above). The special provisions described in sub paragraphs (d) and (e) of the previous paragraph mean that liability was in the first instance imposed on compensation bodies in the member state of the victims residence which would otherwise have been expected to be borne by someone else, ie the person responsible for the accident, his or her insurer or an insurance bureau or guarantee fund in the state where the relevant vehicle was normally based. For that reason, both articles 6 and 7 of the Fourth Directive (now articles 24(10) and 25(1) of the Sixth Directive) contain provisions in articles 6(2) and 7 (now articles 24(2) and 25) regarding reimbursement, aimed at passing responsibility on to the insurer (where one can be identified) or guarantee fund described in this context in recital (31) to the Fourth Directive (recital (53) to the Sixth Directive) as the ultimate debtor, coupled with further provision for subrogation rights against the person responsible for the accident. Thus article 6(2) read: The compensation body which has compensated the injured party in his member state of residence shall be entitled to claim reimbursement of the sum paid by way of compensation from the compensation body in the member state of the insurance undertakings establishment which issued the policy. The latter body shall then be subrogated to the injured party in his rights against the person who caused the accident or his insurance undertaking in so far as the compensation body in the member state of residence of the injured party has provided compensation for the loss or injury suffered. Each member state is obliged to acknowledge this subrogation as provided for by any other member state. Subject to very minor linguistic differences, article 24(2) of the Sixth Directive is identical. Article 7 (now article 25(1)) read: The compensation body shall then have a claim, on the conditions laid down in article 6(2) of this Directive: (a) where the insurance undertaking cannot be identified: against the guarantee fund provided for in article 1(4) of [the Second] Directive 84/5/EEC in the member state where the vehicle is normally based; (b) in the case of an unidentified vehicle: against the guarantee fund in the member state in which the accident took place; in the case of third country vehicles: against the (c) guarantee fund of the member state in which the accident took place. Under article 6(3) of the Fourth Directive (article 24(3) of the Sixth Directive), the operation of both articles 6 and 7 (now articles 24(1) and 25(1)) was also suspended until: (a) after an agreement has been concluded between the compensation bodies established or approved by the member states relating to their functions and obligations and the procedures for reimbursement; (b) from the date fixed by the Commission upon its having ascertained in close cooperation with the member states that such an agreement has been concluded. An agreement between compensation bodies and guarantee funds was reached on 29 April 2002. On that basis, the Commission by decision of 27 December 2002 determined that article 6 (and so also article 7) of the Fourth Directive should take effect as from 20 January 2003. In the United Kingdom, the UK MIB acts both as the bureau or guarantee fund contemplated by article 1(4) of the Second Directive (article 10 of the Sixth Directive) and, under regulation 10 of the 2003 Regulations, as the compensation body required under articles 6 and 7 (now articles 24(1) and 25(1) of the Sixth Directive). But in some states they are different bodies, a fact recognised in the agreement which deals separately with articles 6 and 7 accordingly. In relation to the two situations in which article 7 applies (an unidentified or uninsured vehicle), the agreement provides: 7.1. In either of the situations referred to , the Compensation Body which has received a claim must immediately inform, depending on the circumstances, either the Guarantee Fund defined in article 1 of [the Second] Directive 84/5/EEC of the member state in which the accident took place or the Guarantee Fund of the member state in which the road traffic vehicle which caused the accident is normally based. 7.2. When it makes a compensation payment to an injured party, the Compensation Body shall: reply to requests for information enabling the claim to be assessed, which it receives from the final paying body for reimbursement (Guarantee Fund), apply, in evaluating liability and assessing compensation, the law of the country in which the accident occurred, comply with the provisions of article 1 of Directive 84/5/EEC. 8.1. When a Compensation Body has compensated upon request an injured party, it is entitled to receive, depending on the circumstances of the accident, either from the Guarantee Fund of the member state in which the accident took place or from the Guarantee Fund of the member state in which the road traffic vehicle which caused the accident is normally based, reimbursement containing, to the exclusion of everything else, the following: 8.1.1. the amount paid in compensation to the injured party or his/her beneficiaries; specifying the amounts paid as material damage and as bodily injury; 8.1.2. the sums paid for external services such as, for example, experts, lawyers or doctors fees inherent in the instruction and the in or out of court settlement of the claim; 8.1.3. the handling fees covering all other costs as defined by clause 8.3 hereof. 8.2. The amount to be reimbursed may only be disputed by the final paying Guarantee Fund if the Compensation Body which settled the injured partys claim has ignored objective material information given to it or has not observed the rules of applicable law. Articles 6 and 7 of the Fourth Directive were transposed into English law by the 2003 Regulations using section 2(2) of the European Communities Act 1972. The Explanatory Note states simply that These Regulations give effect to articles 5, 6 and 7 of the Fourth Motor Insurance Directive. There is no indication in the Lord Chancellors Departments transposition note or elsewhere that anything was intended other than straightforward implementation of the United Kingdoms European obligations under the Directives. Addressing the subject matter of article 6 of the Fourth Directive, now article 24(1) of the Sixth Directive, (ie the situation where no reasoned reply has been received from an insurer or its claims representative within three months or where no claims representative has been appointed), regulation 12(3) and (4) provides: If the injured party satisfies the compensation body as to the matters specified in paragraph (4), the compensation body shall indemnify the injured party in respect of the loss and damage described in paragraph (4)(b). The matters referred to in paragraph (3) are that a person whose liability for the use of the (a) vehicle is insured by the insurer referred to in regulation 11(1)(c) is liable to the injured party in respect of the accident which is the subject of the claim, and (b) the amount of loss and damage (including interest) that is properly recoverable in consequence of that accident by the injured party from that person under the laws applying in that part of the United Kingdom in which the injured party resided at the date of the accident. Addressing the subject matter of article 7 of the Fourth Directive, now article 25(1) of the Sixth Directive, (ie an unidentified or uninsured vehicle), regulation 13(2) provides: (2) Where this regulation applies the injured party may make a claim for (a) compensation from the compensation body, and (b) the compensation body shall compensate the injured party in accordance with the provisions of article 1 of the second motor insurance directive as if it were the body authorised under paragraph 4 of that article and the accident had occurred in Great Britain. Moore Bick LJ, giving the sole reasoned judgment in Jacobs, expressed the view at para 21 that: The scheme [of articles 6 and 7 of the Fourth Directive] appears to proceed on the assumption that the existence of the driver's liability and the determination of the amount of compensation payable to the injured party will be governed by the same principles at all stages of the process, but the Fourth Directive does not go so far as to provide that such questions are to be determined by reference to the law of the country in which the accident occurred. He noted (para 22) that, at the date of the Fourth Directive, there was no universal rule governing the question what law should govern liability and damages in tort, and that at that date the position in English law was that: issues of liability and heads of recoverable damages were normally determined by reference to the law of the place where the accident occurred, but the assessment of damages was determined by English law as the lex fori, as subsequently confirmed by the decision of the House of Lords in Harding v Wealands [2007] 2 AC 1. He also noted (para 23) that, if a victim could recover from the compensation body in his or her own country more than he or she could have recovered from the driver responsible for the accident or the drivers insurer, that might be regarded as anomalous, but did not ultimately think (para 30) that this anomaly, such as it is, provides sufficient grounds for giving a domestic regulation a meaning it does not naturally bear. Turning to the 2003 Regulations, he said correctly (para 23) that it was from them that the domestic right of an injured person to make a claim against the compensation body derives. Examining regulation 12(4)(b), he found himself driven to the conclusion that in the case of the insured driver the bureau is obliged to pay compensation assessed in accordance with English, Scots or Northern Irish law, as the case may be (para 29). He noted that this might mean that the injured party was able to recover from the UK compensation body (the UK MIB) more or less than the compensation that he could have recovered in, for example, an action against the person responsible for the accident or his or her insurer (or, one could add, the bureau or fund of the state of the accident) (paras 29). But he said that, although this: may at first sight appear to be inconsistent with the scheme of the Fourth Directive, the Directive itself does in fact contemplate the existence of such arrangements, since article 10(4) provides: Member states may, in accordance with the Treaty, maintain or bring into force provisions which are more favourable to the injured party than the provisions necessary to comply with this Directive. Article 10(4) is now article 28(1) of the Sixth Directive. A problem about Moore Bick LJs observation in this connection is that it overlooks the previously mentioned possibility that the level of compensation under English law can be less favourable than that provided under the law of the state of the accident. Turning to regulation 13, directly in issue in Jacobs and now on the present appeal, Moore Bick LJ concluded first that it must contemplate the victim being able to show the existence of liability on the part of the person responsible for the accident. The answer on this point lay, he considered, in the words shall compensate the injured party in accordance with the provisions of article 1 of the Second Directive. He went on (para 32): I think it is reasonably clear from the recitals to the Second Directive that its purpose was to assimilate the position of the victim of an unidentified or uninsured driver or vehicle to that of the victim of an identified and insured driver or vehicle; it is not its purpose to require the establishment of a system of no fault compensation. It is, therefore, implicit in the scheme of the Second Directive that the victim must be able to establish that the driver is liable to him in respect of his injuries, but whether that requires proof of fault will depend on the law of the country in which the accident occurred. The reference in regulation 13(1)(c)(ii) to an insurance undertaking which insures the use of the vehicle assumes the existence of a liability on the part of the driver which ought to be, but is not, covered by insurance. It follows, in my view, that the obligation imposed on the bureau by regulation 13(2)(b) to compensate the injured party in accordance with the provisions of article 1 of the Second Directive carries with it the implicit proviso that the injured party must be able to show that the driver is liable to him. As in the case of a claim under regulation 12, that is a question to be determined by reference to the applicable law identified in accordance with the appropriate conflicts of laws rules. At the time the 2003 Regulations were made the applicable rules were those of the Private International Law (Miscellaneous Provisions) Act 1995, but since the introduction of Rome II, the rules set out in that Regulation will apply and will normally lead to the application of the law of the country in which the accident occurred. There is no reason to differ from this analysis. Nor is there any reason to differ from Moore Bick LJs further analysis in paras 33 34 of the basic reasoning behind the expression in regulation 13(2) as if it were the body authorised under paragraph 4 of that article and the accident had occurred in Great Britain. Moore Bick LJ pointed out a difference between the Uninsured Drivers Agreement (see para 6 above) and the Untraced Drivers Agreement dated 7 February 2003 made between the Secretary of State for Transport and the UK MIB. The former Agreement covers the use in Great Britain or elsewhere in the European Union of British registered vehicles, which are, under article 3 of the First Directive (article 3 of the Sixth Directive) to which effect is given by sections 143 145 of the Road Traffic Act 1988, required to be insured in respect of such use throughout the European Union. The latter Agreement is limited in its scope to accidents occurring in Great Britain. Once the United Kingdom became obliged under article 7 of the Fourth Directive to have a compensation body to which victims of foreign motor accidents resident in the United Kingdom could apply for compensation, specific language was accordingly required to expand the UK MIBs liability to cover such victims when the vehicle responsible for the foreign accident was untraced. Hence, in Moore Bick LJs words, the somewhat complicated language of regulation 13(2)(b) was designed to achieve that result (para 34). The UK MIB, which acted as the guarantee fund for Great Britain pursuant to article 1(4) of the Second Directive, has also been designated as the United Kingdoms compensation body required by the Fourth Directive, and the language was necessary to impose on the bureau in its capacity as compensation body an obligation of the kind that it already bore as guarantee fund, including a liability in respect of accidents occurring abroad (para 33). However, Moore Bick LJ continued at the end of para 34 and in para 35: 34. It does not necessarily follow, however, that it does not have the effect for which Mr Layton contended. A legal fiction may have consequences beyond its immediate purpose. 35. The mechanism by which the bureaus obligation to compensate persons injured in accidents occurring abroad involving uninsured or unidentified drivers is established is to treat the accident as having occurred in Great Britain, but in the absence of any provision limiting its scope it is difficult to see why it should not also affect the principles governing the assessment of damages, particularly in the absence at the time of complete harmonisation throughout the EEA of the conflicts of laws rules governing that issue. Although Moore Bick LJ went on immediately to say that the matter was nonetheless not free from difficulty and to return to the recitals to the Fourth Directive to see whether they pointed to a different conclusion, he regarded the recitals as showing concern as primarily directed to the ability of injured parties to obtain compensation, not to the amount of that compensation, and found nothing there to support either partys case or to change his view (para 36). He also regarded his view as having the incidental merit of ensuring that the measure of compensation recoverable under regulation 13 is likely to be broadly the same as that recoverable under regulation 12 (para 37). Finally, Moore Bick LJ regarded the provisions of Regulation (EC) No 864/2007 of 11 July 2007 on the law applicable to non contractual obligations (Rome II), in force from 11 January 2009, as irrelevant on the basis that regulation 13(2)(b) is defining the existence and extent of the UK MIBs obligation as a compensation body, rather than determining the liability of the wrongdoer (para 38). Before the Supreme Court Mr Beard representing Ms Moreno supports the reasoning and conclusions of the Court of Appeal in Jacobs. He accepts, as did Moore Bick LJ, that this may lead to some apparent anomalies, but submits that they are either capable of satisfactory resolution or insignificant and that the domestic legislator can be taken in the 2003 Regulations to have adopted a measure of recovery which reflected the basis of recovery under English law in respect of a foreign tort at the relevant times, and would have been seen as both convenient and favourable to the claimant. In construing the 2003 Regulations, the starting point is that they should, so far as possible, be interpreted in a sense which is not in any way inconsistent with the Directives: Marleasing SA v La Comercial Internacional de Alimentacin SA (Case C 106/89) [1990] ECR I 4135. It was however open to the domestic legislator, as Moore Bick LJ noted (para 19 above), to introduce provisions more favourable to the injured party. But it is unlikely that it would do so by including a provision which could in some circumstances also prove less favourable to the injured party, and so put the United Kingdom in breach of the Directives. A second point to be borne in mind is that the 2003 Regulations were made under section 2 of the European Communities Act 1972 (as amended subsequently by sections 27 and 33 of the Legislative and Regulatory Reform Act 2006 and sections 3 and 8 of and Part I of the Schedule to the European Union (Amendment) Act 2008). Section 2(2) authorises regulations making provision (so far as relevant): (a) for the purpose of implementing any EU obligation of the United Kingdom, or enabling any such obligation to be implemented ; or (b) related to any such obligation for the purpose of dealing with matters arising out of or No question of vires has been raised in this case, and the 2003 Regulations must be approached on the basis that they implement or enable the implementation of the United Kingdoms EU obligations or deal with matters arising out of or related thereto. In so far as any of the Directives is: in general terms leaving member states freedom to decide on the precise means for its implementation, provisions which the United Kingdom makes within the scope of such freedom will on the face of it fall within section 2(2)(a), as being for the purpose of implementing or enabling the implementation of the Directive. See United States of America v Nolan [2015] UKSC 63; [2016] AC 463, para 63. But, in so far as the Directives prescribe a particular approach, the interpretive presumption, based on Marleasing (above), is that this was what the domestic legislator intended to be achieved. Third, there is no suggestion in the 2003 Regulations or the Explanatory Note or elsewhere of any intention on the part of the domestic legislator to do anything other than faithfully implement and give effect to the Directives. Fourth, on that basis, two questions are central to this appeal. One is whether the Directives prescribe any particular approach to the scope or measure of recovery applicable in a claim against a compensation body under article 7 of the Fourth Directive (article 25(1) of the Sixth Directive). The other is whether, if they do, the language of regulation 13(2)(b) reflects this approach, or mandates some different approach, whatever the Directives may have required. Taking the first question, the Court of Appeal in Jacobs looked too narrowly, in my opinion, at the scheme created and represented by the Directives. Viewing its development holistically, it can be seen to be a scheme of which the constant aim has been to improve the prospects and ease with which injured parties can recover the compensation to which they are entitled in respect of any loss or damage caused by vehicles. This follows from the original definition of injured party in the First Directive. The first and Second Directives aim to ensure such compensation by providing for compulsory insurance, with the back up of the guarantee (covering cases of non insurance) provided by each national motor insurance bureau in accordance with article 1(4) of the Second Directive. The aim follows through into the special provisions applicable to injured parties entitled to compensation, in respect of loss or injury in motor accidents occurring in a member state other than that of their residence, introduced by the Fourth Directive (see article 1(1)). These give injured parties, inter alia, a direct right of action against any insurer (article 3), a right to have a local claims representative of such insurers in their own state to handle and settle their claims (article 4) and a right to look to a compensation body in their own state if an insurer fails to provide a reasoned reply to the claim or to appoint a claims representative there (article 6) or if the accident is caused by an uninsured or unidentifiable vehicle (article 7). The injured parties, claims and compensation referred to throughout these articles are the injured parties who are entitled to and so claim the compensation in respect of loss or damage, to which article 1(1) of the Fourth Directive refers. The inference is that, to whichever special provision of the Fourth Directive the victim of a motor accident may have to have recourse, the compensation to which he or she is entitled is and remains the same. It is the same compensation as that to which the victim is entitled as against the driver responsible, or his or her insurer, or, that failing, as against the guarantee fund of the state of the accident. The compensation remains the same if and when the victim has recourse instead to the compensation body established in his own state of residence under article 6 or 7. On the analysis accepted by the Court of Appeal in Jacobs, however, the measure of compensation could vary according to the happenchance of the route to recovery which the victim chose or was forced to pursue. If the victim chose or was led to pursue the responsible driver or a direct action against his or her insurer or a claim against the insurers local claims representative, the measure would be that applicable in the state of the accident. If, on the other hand, the insurer did not respond appropriately or failed to appoint a claims representative, the victim could pursue the local compensation fund for whatever measure of compensation might be provided in this context by the local legislator or law but would have (under article 6(1) of the Fourth Directive) to revert to looking to the insurer or its claims representative if even then one of these belatedly produced a reasoned reply. If, however, no insurer or vehicle could be identified, then the victim could without more recover whatever might be the measure of compensation provided in this context by his or her local legislator or law. In the case of a claim against the driver responsible or his or her insurer or the guarantee fund of the state of the accident, such compensation would normally be measured in and under the law of the state of the accident. Under the predecessor international Green Card scheme, article 3(4), described in para 5 above, it was expressly provided that Green Card bureaux would handle claims in conformity with the legal provisions applicable in the country of accident relating to both liability and compensation. This is a provision which continued in force under article 3(a) of the Convention complmentaire entre Bureaux nationaux dated 12 December 1973, made pursuant to article 1(4) of the Second Directive. Under the First Directive, each national insurers bureau was also to guarantee the settlement, in accordance with the provisions of its own national law on compulsory insurance, of claims in respect of accidents occurring in its territory caused by [foreign based] vehicles (article 2(2)). Under the Second Directive, article 1(4), each member state was to establish a guarantee fund to provide compensation in cases of unidentified or uninsured vehicles, applying its own laws to the payment of such compensation, without prejudice to any other practice more favourable to the victim. Counsel were agreed that this provision was solely directed to accidents in the territory of the member state in question, as it certainly must be in relation to unidentified vehicles. In essence, it was formalising and generalising at a Community (now Union) level the requirement for a local guarantee fund which up to that point only existed under the international Green Card scheme and the agreement between Community insurers bureaux contemplated by article 2(2) of the First Directive. On this basis, the reference to applying the laws of the member state to the payment of compensation is further confirmation of an intention that that the law of the state of the accident should govern liability and the measure of compensation. Next, as recorded in para 14 above, clauses 7.2 and 8.2 of the Agreement between Compensation Bodies and Guarantee Funds expressly provided that the compensation body established to give effect to those articles was to apply, in evaluating liability and assessing compensation, the law of the country in which the accident occurred, and, further, indicated that the final paying guarantee fund might refuse reimbursement to the extent that the compensation body had not observed the rules of applicable law. Gilbart J referred to this Agreement as a private agreement that cannot be used to interpret the Directives or the Regulations, and Mr Beard pointed out that it post dated the Fourth Directive. This is in my opinion to under value the role of the Agreement and to view matters over technically. Clauses 7.2 and 8.2 of the Agreement introduced in relation to compensation bodies provisions paralleling those applicable under the predecessor Green Card and motor insurance bureaux schemes. The making and approval by the European Commission of the Agreement containing such clauses were pre conditions to the coming into force of articles 6 and 7 of the Fourth Directive. They can and in my opinion should be seen as part of a consistent scheme, to be viewed and construed as a whole. A further indication of the way in which the scheme was intended to operate is provided by clause 7.3 of the agreement. According to clause 7.3: The Guarantee Fund of the member state in which the accident took place, even though it is not responsible for the reimbursement described in Section III below, shall provide, upon request, to the Compensation Body to which a claim for compensation has been made, all necessary advice assistance and information in particular on the content of the applicable law and all documents it has available relating to the accident which this body wishes to obtain. Section III deals with reimbursement procedures, from the Guarantee Fund either of the member state in which the accident took place or of the member state in which the road traffic vehicle which caused the accident is normally based. The rationale behind clause 7.3 is clearly that the Guarantee Fund of the member state of the accident will be able to provide the necessary information about the applicable law of that state to enable the Compensation Body in the victims state to be able to settle the victims claim in accordance with that law. It would not be consistent with the scheme of the precursor Green Card System or with the scheme of the series of European Directives and associated agreements from 1972 onwards, for the compensation body established and acting under article 6 or 7 of the Fourth Directive to provide compensation other than in accordance with the law of the state of the accident. Further confirmation of this intention is present in the express provisions of articles 6 and 7. First, the provision in article 7 for compensation to be provided in accordance with the provisions of the Second Directive requiring each member state to ensure compulsory insurance in minimum amounts and to set up or authorise a guarantee fund to cover property damage or personal injuries caused by unidentified or uninsured vehicles is a yet further pointer towards the intended link between the compensation available in the state of the accident and that available from the victims local compensation body. Second, the provisions of article 6 and 7 regarding reimbursement are significant. Under article 6(2) what is clearly envisaged is that the compensation body in the state of the victims residence should be able to recover from the compensation body in the state of the insurer the whole sum that the former compensation body has paid out to the victim. The latter compensation body is then subrogated to the victims rights against the responsible driver or his insurer in so far as the compensation body in the member state of residence of the injured party has provided compensation. But, on the analysis accepted by the Court of Appeal in Jacobs and supported on this appeal by Mr Beard, there is no necessary correlation between the amounts paid out by the compensation body of the state of the victims residence and that recoverable from the compensation body of the state of the insurer or that to which that latter compensation body is subrogated. Clauses 7.2 and 8.2 of the Agreement between Compensation Bodies and Guarantee Funds would bar the compensation body which paid the victim from recovering more from the compensation body of the state of the insurer than was payable in respect of the claim under the law of the state of the accident. As to subrogation, even if that bar could be overcome, it is impossible to be subrogated to a victims claim unless and except to the extent that the victim could him or herself pursue such a claim. A similar point applies under article 7. On its face, it envisages that the compensation body meeting the victims claim will be able to recover from the guarantee fund of either the state where the vehicle was normally based or, in case of an unidentified (or a third country) vehicle, the state in which the accident took place. But the Court of Appeals analysis in Jacobs would leave the compensation body without reimbursement to the extent that it had under (eg) English law to pay compensation on a basis more favourable than would be recovered under the law of the state of the accident. Conversely, as Mr Beard accepted, to the extent that English law was in some respect less favourable than the law of the state of the accident, the victim would suffer a shortfall in recovery. Mr Beard suggested that the victims remedy then would be to make a further top up claim direct against the guarantee fund established under article 1(4) of the Second Directive (now article 10(1) of the Sixth Directive) in the state where the vehicle was normally based in the case of an uninsured vehicle or the state of the accident in the case of an unidentified vehicle. But the need to avoid having to pursue proceedings in either of those states is the reason for articles 6 and 7. I conclude, in these circumstances, that the scheme of the Directives is clear, and that they do not leave it to individual member states to provide for compensation in accordance with any law that such states may choose. On the contrary, they proceed on the basis that a victims entitlement to compensation will be measured on a consistent basis, by reference to the law of the state of the accident, whichever of the routes to recovery provided by the Directives he or she invokes. In consequence, it also makes no difference to the measure of liability of the body or person ultimately responsible, which route is chosen. Since the position as a matter of European Union law is in all these respects clear, there is no need to contemplate a reference to the Court of Justice. The next question is whether the 2003 Regulations give effect to this scheme, or have to be read as mandating a different approach, even if it is one which is potentially inconsistent with the Directives. The Court of Appeal in Jacobs started with regulation 12(4)(b), before moving to regulation 13(2)(b) and finding some incidental merit in a conclusion that it provided a measure of compensation likely to be broadly the same as that recoverable under regulation 12. The wording of regulations 12(4)(b) and 13(2)(b) is however notably different, and even the Court of Appeal does not appear to have regarded the two as having, necessarily, the same effect. I prefer to start with regulation 13(2)(b) which is the one directly in issue on this appeal. As I have already indicated (para 21 above), the Court of Appeal in Jacobs was in my opinion correct in its identification of the basic reasoning behind the expression in regulation 13(2)(b) as if it were the body authorised under paragraph 4 of that article and the accident had occurred in Great Britain. Where it went wrong, in my opinion, was in concluding (paras 22 23 above) that this did not exhaust the rationale of that expression. Regulation 13(2)(b) can and should in my opinion be read as having a purely mechanical or functional operation. Once it is concluded that the scheme of the Directives is to provide a consistent measure of compensation, whatever the route to recovery taken by the victim, there is certainly no need to regard regulation 13(2)(b) as having any further purpose or effect. The Court of Appeal in Jacobs was right to conclude that regulation 13(2)(b) carried with it the implicit proviso that the injured party must be able to show that the driver is liable to him (para 32: see para 20 above). But it was wrong to draw on the old common law distinction recognised (not uncontroversially) in Harding v Wealands and now removed from our law by Rome II (see eg Cox v Ergo Versicherung AG [2014] UKSC 22; [2014] AC 1379) between liability and heads of damage on the one hand and measure of compensation on the other; and it was wrong to find this distinction reflected in regulation 13(2)(b). Regulation 12(4)(b) is more specific and less easy to fit within the scheme of the Directives which I have identified. The loss and damage recoverable from the UK MIB in its role as compensation body is said to be that properly recoverable in consequence of that accident by the injured party from [the insured] person under the laws applying in that part of the United Kingdom in which the injured party resided at the date of the accident. The most obvious purpose of this is to determine which of the United Kingdoms three legal systems should apply in proceedings which might, conceivably (subject to considerations of forum conveniens), be brought in any one of them. On this basis, the provision may well not have been aimed at prescribing the measure of recovery in such proceedings. This would and could then be left to and derived from the scheme of the Directives, as it is to be under regulation 13(2)(b). Again, I doubt whether the legislator, when drafting regulation 12(4)(b), was intending to draw a distinction between liability and heads of recovery (subject implicitly to the law of the state of the accident) and the measure of compensation. Even if the legislator had been, the distinction has with Rome II now been abolished. If regulation 12(4)(b) is dealing with the governing law at all, which I doubt, it could in my view also be read as embracing the conflicts of laws applying in that part of the United Kingdom in which the victim resided at the date of the accident, which would, at least normally, yield a result consistent with the scheme of the Directives, by identifying the law of the State of the accident: see Rome II, article 4(1). It follows from the above that it is unnecessary to address further submissions that were, briefly, addressed to the Supreme Court on the Rome II Regulation. The decisions in Jacobs v Motor Insurers Bureau [2010] EWCA Civ 1208; [2011] 1 WLR 2609 and Bloy v Motor Insurers Bureau [2013] EWCA Civ 1543; [2014] 1 Lloyds Rep IR 75 should be overruled in relation to the meaning of regulation 13(2)(b). The UK MIBs present appeal should be allowed and the answer to the preliminary issue declared to be that the scope of the UK MIBs liability to Ms Moreno is to be determined in accordance with the law of Greece. |
This appeal is concerned with Stamp Duty Land Tax (SDLT), which was introduced by the Finance Act 2003 (the FA 2003) to replace Stamp Duty, a tax on written instruments which had been the subject of many successful tax avoidance schemes. The principal question in the appeal is whether Project Blue Ltd (PBL) is due to pay SDLT of 50m arising out of its purchase from the Ministry of Defence (the MoD) of the former Chelsea Barracks in Chelsea Bridge Road, London. Since its enactment, the FA 2003 has been amended on several occasions. This appeal is concerned with that Act as it existed on 31 January 2008. Two issues lie at the heart of the appeal. The first concerns the relationship between section 45 of the FA 2003, which provides what is often called sub-sale relief where there is a transfer of rights to a contract for a land transaction which is to be completed by a conveyance, and section 71A of that Act, which creates exemptions for alternative property finance which complies with the prohibition of usury in Sharia law. The first issue does not arise in relation to transactions after 24 March 2011 because of an amendment to section 45(3) of the FA 2003 which was made by the Finance Act 2011, to which I refer in para 33 below. The second issue concerns the correct interpretation of the anti-avoidance provisions in section 75A of the FA 2003, which was introduced by the Finance Act 2007. If the anti- avoidance provisions do not apply to the transactions, PBL is not liable to pay the SDLT which HMRC claims; if they do apply, there is a dispute over the amount of SDLT which is due and who was or is liable to pay it. PBL purchased the Chelsea Barracks through a sealed bid deadline tender process for the price of 959m and exchanged contracts with the Secretary of State for Defence on 5 April 2007. A 20% deposit was paid on exchange of contracts and the balance of the price was to be paid in four equal instalments. Completion of the purchase was postponed by the contract until 31 January 2008 to allow the MoD to re-house the troops from the barracks. The principal shareholder in PBL was Qatari Diar Real Estate Investment Company (QD), which was owned by the Qatari Investment Authority, a sovereign wealth fund owned by the Qatari government. QD provided the funding for the initial deposit but PBL required to obtain finance for the purchase of the barracks from Qatari Bank Masraf al Rayan (MAR), a Qatari financial institution which provided a portfolio of Sharia-compliant products, and which syndicated the finance for the purchase. Financial institutions, which seek to comply with the Islamic prohibition on usury, have adopted structures for financing deals which do not involve lending in return for interest and the taking of security for the repayment of the borrowed sums and interest by means of a mortgage. One such form of Sharia -compliant financing, known as Ijara finance, was used to fund the purchase of the barracks. PBLs written case (paras 14 and 15) contains a convenient summary of the paradigm forms of Ijara arrangements, which I quote in full: 14. Such transactions are likely to occur in one of two categories of case. In the first, the counterparty wishes to acquire a property from a third party and requires funding to enable it to do so. The financial institution buys the property from the third party, leases it to the counterparty and, at the same time, grants the counterparty an option to acquire the financial institutions interest at a later stage. In the event that the counterparty has some, but insufficient, capital to acquire the property, each party can take an undivided share in the land; and the rent charged by the financial institution takes account of its reduced interest. 15. In the second case, the counterparty already owns the property but wishes to obtain funds to use for another purpose. In this case the Ijara involves the counterparty selling his own interest in the property to the financial institution and taking a lease back, together with an option to repurchase. HMRC in para 44 of their written case described the two situations in which Ijara finance was used in essentially similar terms and stated (as is clearly the case) that section 71A was drafted with those situations in mind. The funding of the purchase of the barracks was an adaptation of the first of the two categories. I set out the transactions in the following steps so as to assist understanding of the arguments which follow in relation to the tax consequences of the transaction: (1) 5 April 2007: PBL and the MoD entered into a contract to purchase the barracks. (2) 29 January 2008: PBL contracted to sub-sell the freehold to MAR. (3) 29 January 2008: MAR agreed to lease the barracks back to PBL. (4) 31 January 2008: On completion, (a) MAR and PBL entered into call and put options respectively entitling or requiring PBL to repurchase the freehold in the barracks; (b) the MoD conveyed the freehold in the barracks to PBL; (c) PBL conveyed the freehold in the barracks to MAR, and (d) immediately after that, MAR leased the barracks back to PBL. On 1 February 2008 PBL granted a 999-year lease to its subsidiary, Project Blue Developments Ltd (PBDL) with call and put options for the purchase of the freehold, but that transaction is not relevant to this appeal. As will be seen, it is not disputed that stages 4(b) and (c) brought into play the sub-sale relief provided by section 45 of the FA 2003, while it is contested whether stage 4(c) engaged the exemption for alternative property finance which section 71A(2) of the Act provides. This is the first of the two principal issues mentioned in para 2 above. On 1 February 2008, Clifford Chance LLP submitted a notification Disclosure of Tax Avoidance Scheme in accordance with the Stamp Duty Land Tax Avoidance (Prescribed Descriptions of Arrangements) Regulations (SI 2005/1868). The notification stated: No SDLT is payable by [PBL] on the sale from [the MoD] to [PBL] by virtue of sub-sale relief under section 45(3) Finance Act 2003. No SDLT is payable by [MAR] on the sale of the property from [PBL] to [MAR] by virtue of alternative property finance relief under section 71A(2) Finance Act 2003. Such a notification is not an acknowledgement that the arrangements were entered into for the purpose of tax avoidance. Arrangements are notifiable under section 306(1) of the Finance Act 2004 if they enable, or might be expected to enable, any person to obtain a tax advantage and are such that one of the main benefits that might be expected to arise from the arrangements is the obtaining of that advantage. The focus of the statutory provision is on the consequences of the arrangements and not on the intention of the parties who enter into them. On 22 February 2008 several land transaction returns were filed in relation to these transactions. Three are relevant to this appeal. First, a return lodged on behalf of PBL, which related to the completion on 31 January 2008 of the contract of 5 April 2007 between the MoD and PBL, claimed that there was no liability to SDLT because of the sub-sale relief in section 45(3) of the FA 2003. Secondly, a return lodged on behalf of MAR related to the completion on 31 January 2008 of the sale agreement between PBL and MAR dated 29 January 2008. The consideration was stated to be 1.25 billion, which was the Sterling equivalent of US$2,467,875,000 which was specified in the sale agreement. In the return MAR claimed alternative property finance relief under section 71A of the FA 2003. Thirdly, a return was filed relating to the grant by MAR of a lease to PBL on 31 January 2008. Again, alternative property finance relief was claimed under section 71A. The consequence was that the taxpayers claimed that nobody incurred a liability to SDLT as a result of the completion of those transactions. HMRC opened an inquiry into the SDLT returns which had been submitted in relation to these transactions. In relation to the first return, which was lodged on behalf of PBL, HMRC concluded the inquiry by a closure notice contained in a letter dated 13 July 2011, which amended that return by adjusting the amount of SDLT due from 0 to 38.36m. This sum is the SDLT which would be due on the completion of the sale by the MoD to PBL for the consideration of 959m if that were a chargeable transaction. PBL now argues that HMRC were not empowered to amend that return as they did. I discuss this challenge under the heading The wrong return challenge in paras 81-84 below. HMRC did not require any amendment to the other land transaction returns as a result of their inquiry. But when PBL appealed the amendment of the return, HMRC successfully applied to amend its case to increase the amount of SDLT due from 38.36m to 50m. This was because the total consideration which MAR agreed to provide to PBL was 1.25 billion, and, at first sight at least, 50m would be the tax due on that transaction. I discuss those figures in greater detail below. The sale contract which PBL and MAR entered into on 29 January 2008 involved payments by instalments which were subject to contingencies (clause 4.1 and 4.2). The fourth tranche of consideration, which was US$378,670,740 payable on 31 January 2011, was never paid because the arrangement was terminated on 1 March 2010. This is relevant to the dispute about the actual consideration and PBLs human rights challenge which I consider in paras 57-80 below. The Finance Act 2003 Part 4 of the FA 2003 introduced SDLT into British tax law. It is a tax on land transactions (section 42(1)). A land transaction is any acquisition of a chargeable interest (section 43(1)); and a chargeable interest is defined (in section 48(1)) as including an estate, interest, right or power in or over land in the United Kingdom other than an exempt interest. A security interest, which is an interest or right (other than a rentcharge) held for the purpose of securing the payment of money or the performance of any other obligation (section 48(3)), is an exempt interest (section 48(2)). Thus, in relation to land purchases and conventional property funding arrangements in the United Kingdom, the tax is levied on the acquisition of chargeable interests, such as freehold or leasehold interests in land, while security interests, including those which secure the financing of such acquisitions, are exempted. When persons enter into a contract for a land transaction under which the transaction is to be completed by a conveyance, section 44(2) provides that they are not regarded as entering into a land transaction by reason of entering into the contract. Thus steps (1) and (2) in para 5 above would not of themselves give rise to any liability to SDLT. Instead, if the transaction is completed without previously having been substantially performed, the contract and the transaction effected on completion are treated as parts of a single land transaction, whose effective date is the date of completion (section 44(3)). If the contract is not completed but is substantially performed (for example, if the purchaser takes possession of the subject matter of the contract or a substantial amount of the consideration is paid) the contract is treated as if it were the transaction provided for in the contract and its effective date is when the contract is substantially performed (section 44(4) and (5)). It is common ground in this appeal that section 45, which creates sub-sale relief by modifying the operation of section 44, applies in relation to the completion of the two contracts for the sale of the barracks (steps (1) and (2) in para 5 above) to prevent a charge to tax on the completion of the contract between the MoD and PBL at step 4(b) in para 5 above. Section 45 (as amended by section 49 of and paragraph 2 of Schedule 10 to the Finance (No 2) Act 2005) provides: (a) (b) (2) The transferee is not regarded as entering into a land transaction by reason of the transfer of rights, but section 44 (contract and conveyance) has effect in accordance with the following provisions of this section. (3) That section applies as if there were a contract for a land transaction (a secondary contract) under which - the transferee is the purchaser, and the consideration for the transaction is - (i) so much of the consideration under the original contract as is referable to the subject- matter of the transfer of rights and is to be given (directly or indirectly) by the transferee or a person connected with him, and (ii) rights. the consideration given for the transfer of The substantial performance or completion of the original contract at the same time as, and in connection with, the substantial performance or completion of the secondary contract shall be disregarded except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of subsection (3) of section 73 (alternative property finance: land sold to financial institution and re-sold to individual). The consequence of the tailpiece of section 45(3) was that the completion of the contract between the MoD and PBL for the purchase of the barracks was disregarded. Section 71A The FA 2003 as originally enacted contained an exemption for Ijara financing in section 72. Section 71A was added in April 2005 by section 94 of and paragraph 2 of Schedule 8 to the Finance Act 2005 and applies in place of section 72, except in relation to land in Scotland, to which sections 72 and 72A apply. Section 71A(1) sets out the scope of the section; it provides: (1) This section applies where arrangements are entered into between a person and a financial institution under which - (a) the institution purchases a major interest in land or an undivided share of a major interest in land (the first transaction), (b) where the interest purchased is an undivided share, the major interest is held on trust for the institution and the person as beneficial tenants in common, (c) the institution (or the person holding the land on trust as mentioned in paragraph (b)) grants to the person out of the major interest a lease (if the major interest is freehold) or a sub-lease (if the major interest is leasehold) (the second transaction), and (d) the institution and the person enter into an agreement under which the person has a right to require the institution or its successor in title to transfer to the person (in one transaction or a series of transactions) the whole interest purchased by the institution under the first transaction. The section therefore has the scope to cover the contracts between PBL and MAR at steps (2), (3) and (4)(a) in para 5 above. The section then spells out the exemptions which it confers on Ijara arrangements as follows. First, subsection (2) exempts the first transaction (the institutions purchase of a major interest in land) if the vendor is the counterparty to the arrangement with the financial institution (or is another financial institution which has provided Ijara finance to that person). It provides: (2) The first transaction is exempt from charge if the vendor is - (a) the person, or (b) another financial institution by whom the interest was acquired under arrangements of the kind mentioned in subsection (1) entered into between it and the person. Secondly, subsection (3) exempts from charge the grant of the lease of the subjects to the counterparty by providing: The second transaction is exempt from charge if the provisions of this Part relating to the first transaction are complied with (including the payment of any tax chargeable). Thirdly, subsections (4), (5) and (7) exempt from charge the re-conveyance by the financial institution of the major interest in land to the counterparty. They provide: (4) Any transfer to the person that results from the exercise of the right mentioned in subsection (1)(d) (a further transaction) is exempt from charge if - the provisions of this Part relating to the first and (a) second transactions are complied with, and (b) the further transaction - at all times between the second transaction and (i) the interest purchased under the first transaction is held by a financial institution so far as not transferred by a previous further transaction, and (ii) second transaction is held by the person. the lease or sub-lease granted under the (5) The agreement mentioned in subsection (1)(d) is not to be treated - (a) as substantially performed unless and until the whole interest purchased by the institution under the first transaction has been transferred (and accordingly section 44(5) does not apply), or (b) 46 (options and rights of pre-emption). as a distinct land transaction by virtue of section (7) A further transaction that is exempt from charge by virtue of subsection (4) is not a notifiable transaction unless the transaction involves the transfer to the person of the whole interest purchased by the institution under the first transaction, so far as not transferred by a previous further transaction. Section 71A therefore reflects the two paradigm forms of Ijara finance set out in para 4 above. First, if the financial institution purchases the property from a third party, that transaction is not exempted under subsection (2) and the financial institution pays SDLT on completion or the substantial performance of that contract; but the lease to the party who is being financed and the eventual transfer of the interest by the financial institution to that party on repayment of the financing are exempt under subsections (3) and (4) respectively. Secondly, if the financial institution purchases the property from the counterparty whom it is financing, subsection (2) applies to exempt the transfer of the major interest in land to the financial institution and subsections (3) and (4) exempt the second transaction (the lease) and the further transaction (the re-transfer of the major interest in land to the counterparty). Because the arrangements for financing the purchase of the barracks involved PBL completing its purchase and its sale of the barracks to MAR on the same day in a connected transaction, PBL, as I have said, claimed sub-sale relief under section 45(3). Because MAR had purchased the barracks from PBL in the context of an Ijara arrangement, it claimed exemption under section 71A(2) for that purchase and a claim was also submitted on behalf of PBL for exemption under section 71A(3) for the lease to PBL. When HMRC amended PBLs return to assert a liability to pay SDLT of 38.36m, PBL appealed to the First-tier Tribunal (the FTT). Before the FTT the parties agreed that the combined effect of sections 45(3) and 71A was to exclude any liability to SDLT on the part of PBL or MAR in relation to the transactions unless the anti-avoidance provisions of section 75A applied to the transactions. The arguments before the FTT therefore concentrated on the meaning and application of section 75A, to which I turn later in this judgment. But when the appeal came before the Upper Tribunal (the UT), PBL changed its position. It continued to argue that it was not liable for SDLT on its purchase of the barracks from the MoD because of its entitlement to sub-sale relief under section 45(3). But it now argued that MAR was not entitled to exemption on its purchase of the barracks under section 71A(2) (para 14 above) because, on a proper understanding of the related provisions of the FA 2003, PBL was not the vendor of the barracks to MAR under that subsection. The tailpiece of section 45(3) (para 12 above) required that the completion of the sale by the MoD to PBL be disregarded and that tax was due on the notional contract created by section 45(3). Giving effect to that disregard and the notional contract meant that the vendor of the barracks was the MoD, and not PBL. The exemption in section 71A(2) therefore did not apply and MAR would have been liable to pay SDLT on the purchase price of 1.25 billion, if HMRC had not failed to so determine or to assess MAR within the six-year time limit since the transaction. This argument did not succeed before the UT (Morgan J and Judge Nowlan). Morgan J, with whom Judge Nowlan agreed in relation to section 71A held, at para 43, that the purpose of the section was to equate the position of a provider of an alternative form of finance (such as MAR), who acquires a chargeable interest, with the position of a funder who acquires a security interest (which is an exempt interest). He relied on section 45(5A) which I discuss in para 32 below, in interpreting the vendor in para 71A(2) as referring to PBL but also pointed out that his interpretation promoted the purpose of section 71A. If PBL were correct in its submission, SDLT would be paid on the level of funding provided by the financial institution and not on the price paid by the borrower for the land. He acknowledged that his interpretation meant that neither PBL or MAR was liable to pay SDLT in respect of the transactions unless section 75A applied, but considered the legislation to be flawed at the relevant time because the tailpiece of section 45(3) did not contain an exception to the disregard where the sub-sale was exempt from a charge under section 71A. The Court of Appeal (Patten, Lewison and Underhill LJJ) [2018] 1 WLR 368 disagreed with the Upper Tribunals interpretation of the relationship between section 45(3) and section 71A. Patten LJ began by observing, at para 28, that HMRCs approach by its reliance on section 75A produced a particularly inapt and harsh result because PBL would have to pay SDLT on the larger sum which MAR provided to it rather than on the purchase price which it paid to the MoD. Secondly, he held that PBL could not be the vendor in section 71A(2) because, as a result of the disregard of the transaction between the MoD and PBL in the tailpiece of section 45(3), the only contract by which MAR acquired the barracks for SDLT purposes was the secondary contract under that subsection. He referred to the Court of Appeals earlier judgment in DV3 RS LP v Revenue and Customs Comrs [2014] 1 WLR 1136 (DV3) in support of his analysis: vendor in section 71A(2) must be a reference to the person from whom MAR purchased the barracks; that person could not be PBL as, by virtue of the disregard, it had no chargeable interest so as to be regarded as entering into the secondary contract, which under section 45(3) was a contract for a land transaction. He rejected Mr Gammies submission on behalf of HMRC that section 71A was not addressing land transactions in the SDLT world but was framed to address transactions in the real world, and also his submission relying on section 45(5A). Thirdly, he considered that the scheme of section 71A was to limit SDLT in all cases to a single charge on the acquisition of the property from the third party vendor, whether the acquirer was the financial institution or its customer. Fourthly, he thought that it was unlikely that Parliament had intended to leave transactions, which fell within both of sections 45(3) and 71A, exempt from any SDLT charge and to have dealt with the problem by the anti-avoidance provisions of section 75A, which was introduced over a year later. The vendor under section 71A(2) was therefore the MoD, and not PBL, with the result that that subsection did not exempt MAR from the charge. Lewison LJ added two further points. First, he disagreed with the approach of the Upper Tribunal which equated the position of MAR with a traditional lender and saw the aim of section 71A as being that SDLT was to be paid by purchasers and not financiers. As under an Ijara arrangement the financial institution owned the asset for the duration of the lease, it was not surprising that it should be liable to pay SDLT on the purchase. Secondly, because section 75A did not apply until 20 months after section 71A had taken effect, the result of HMRCs approach was that no SDLT would have been payable on transactions which combined sub-sale relief and the section 71A exemption in that period. This provided a very strong context which made it inappropriate to apply an extended meaning of vendor in section 45(5A): para 49. I recognise the difficulty in interpreting the legislation which has been subjected to repeated incremental amendments and additions since 2003, as Parliament has struggled to optimise this new tax. But I have come to the conclusion that the Upper Tribunal was correct in concluding that PBL was the vendor under section 71A(2) and therefore that MARs purchase of the barracks from PBL was exempt from SDLT for the following four reasons. First, it is in my view significant that Parliament has chosen, when describing the alternative property finance transactions to be exempted from charge in section 71A, and also in sections 72, 72A and 73, not to use the language of land transaction and chargeable interest but to use what Mr Gammie described as the language of real world transactions. Parliament also adopted this practice in paragraphs 2-4 of Schedule 3, which exempt specified transactions from charge. Thus in section 71A(1)(a) the first transaction is described as the purchase of a major interest in land and in subsection (1)(c) the second transaction is described as the granting of a lease out of the major interest. This contrasts with the language of sections 42-45 which are concerned with the statutory constructs of land transactions, contracts for land transactions, and the acquisition and disposal of chargeable interests. As descriptions of real world transactions the provisions of section 71A match the paradigm descriptions of Ijara arrangements in para 4 above so that in the first example, when the financial institution purchases the property from a third party and then finances its customers acquisition by means of a lease and a contract to purchase, the institution pays SDLT on its purchase but not on the financing arrangements which follow, whereas in the second example, where the financial institution purchases the property from its customer, that purchase and the subsequent transactions are exempt. The distinctive treatment of the two examples is achieved by section 71A(2) which exempts the first transaction from charge if the vendor is the customer of the financial institution (or a financial institution which has previously provided Ijara finance to that customer). It appears to me that in enacting the section using real world terms, Parliament has sought to describe the two paradigms of Ijara finance. In the second example, in which subsection (2) exempts the first transaction, the customer may have purchased the major interest in land and paid SDLT on that purchase, or he may have received the major interest in land as a gift or through inheritance and therefore have incurred no charge to SDLT. It is not relevant to the application of section 71A(2) to ask whether or not the customer has incurred a liability to pay SDLT before entering into the Ijara arrangement. Subsection (2) requires one only to ask the real world question: who sold the major interest in land to the financial institution? If the answer to that question is the customer, no charge to SDLT would arise. In the present case, if one asks, who sold the barracks to MAR?, the answer is PBL. Secondly, this approach is consistent with the aim of section 71A, which the UT identified, of seeking to equate Ijara financing with conventional lending in the United Kingdom by taxing the purchaser of the property and exempting the financier. In conventional lending, security interests are exempt in all circumstances (section 48(2)). Section 71A operates as a self-contained statutory regime to achieve this result. As was stated in the Explanatory Notes to the original clauses 72 and 73 of the Finance Bill 2003 the aim was to place the amount of tax due on purchases by means of Islamic financing on a level footing with the amount due for purchases with conventional mortgage products. Thus in the case where the financial institution purchases from its customer, the whole transaction may be seen as the equivalent of a security transaction. In the case where the financial institution purchases from a third party, that purchase may be seen as a precursor of the equivalent of a security transaction effected by the lease and the conferring on the customer of the right to buy the property from the financial institution. Thirdly, there is nothing within section 71A which suggests that the exemption in subsection (2) will not apply when the sale by the customer to the financial institution is a sub-sale which takes place contemporaneously and in connection with the customers purchase of the major interest in land. What Parliament appears to have overlooked at the outset is the possibility of the combination of sub-sale relief with the exemption of Ijara arrangements. Fourthly, this interpretation has the benefit (subject to the operation in particular cases of section 75A which I discuss below) that, where the financial institution purchases the property from its customer, SDLT will not be charged on the amount which the financial institution provides its customer, which may in many circumstances be significantly less than the purchase price of the property, for example where the customer has provided a proportion of the purchase price of the land from its own resources. In some cases, as here, the amount which the financial institution contracts to provide may be significantly more than the purchase price of the property which the customer has paid. It is of note that the interpretation of section 71A(2) which the Court of Appeal has favoured in the context of a sub-sale has the effect of imposing a tax charge by reference to the amount which the financial institution provides the customer. This would not achieve the level footing which the section was designed to achieve. In DV3 the Court of Appeal was addressing relief under paragraph 10 of Schedule 15 to the FA 2003 which was available when a person transfers a chargeable interest to a partnership of which he is a partner. In that case the partner (A) purchased a lease from an insurance company (C) and transferred the lease to a newly created partnership (B) of which A and four others were the partners. Both contracts were completed on the same day. A claimed sub-sale relief under section 45(3) and also relief for B (the partnership) under paragraph 10 of Schedule 15. The claim for the Schedule 15 relief failed because the section 45(3) disregard prevented A from acquiring a chargeable interest from C, and paragraph 10 of Schedule 15 applies only if a partner transfers a chargeable interest to a partnership. Lewison LJ, when discussing the definition of land transaction in section 43(1), stated, at para 23: the fact that B acquires a chargeable interest as the result of an instrument giving effect to a transaction between him and A does not necessarily entail the proposition that the interest in As hands was itself a chargeable interest. If there is no land transaction, there cannot have been the acquisition of a chargeable interest. He continued at para 30: Paragraph 10 of Schedule 15 to the 2003 Act is not so much concerned with the acquisition of a chargeable interest by a partnership as the transfer by a partner of a chargeable interest. It looks at a transaction from the perspective of the transferor. It seems to me to be clear that a partner cannot transfer a chargeable interest to a partnership unless he has a chargeable interest to transfer. HMRC accept as correct the Court of Appeals analysis in DV3 but argue that the case casts no light on the correct interpretation of section 71A(2) because it is irrelevant to the operation of that subsection whether the completion of the sale from the MoD to PBL was a land transaction for the purpose of SDLT with the result that PBL acquired a chargeable interest. Equally, it is irrelevant to the interpretation of section 71A(2) whether or not the transaction between the customer and the financial institution is a land transaction. When the FA 2003 spoke of the vendor in section 71A and in the equivalent subsections in the other sections exempting alternative property finance, it was referring to the vendor in the real world transaction of the sale of the major interest in land. It was not concerned with whether or not the real world transaction was a land transaction for the purposes of SDLT. Accordingly, HMRC submit that section 43(4), which defines vendor in relation to a land transaction in Part 4 of the FA 2003 as the person disposing of the subject-matter of the transaction is not in point. For the reason set out in paras 24 and 25 above, I agree. It follows that the disregard in the tailpiece of section 45(3) has no bearing on the operation of section 71A(2). A consideration which influenced the Court of Appeal in reaching its view on section 71A(2) was that Parliament could not have intended to leave transactions which involved a sub-sale financed by an Ijara arrangement (and thus fell within both section 45(3) and section 71A) free of charge for over one year before it introduced the anti-avoidance provision of section 75A. I see the force of this point; it is without question a legitimate method of purposive statutory construction that one should seek to avoid absurd or unlikely results. But SDLT was a new tax created by the FA 2003 and, as I have said, required repeated amendments to make it effective. It is not surprising that lacunas may have existed in the early years of a new tax. In the early years of the tax, Parliament enacted amendments to close identified lacunas caused by the combination of sub-sale relief and exemptions. Thus section 45(5A) was inserted into the FA 2003 by section 296 of and paragraph 5 of Schedule 39 to the Finance Act 2004. It provided: In relation to a land transaction treated as taking place by virtue of subsection (3) - (a) references in Schedule 7 (group relief) to the vendor shall be read as references to the vendor under the original contract; (b) other references in this Part to the vendor shall be read, where the context permits, as referring to either the vendor under the original contract or the transferor. This provision would not have needed to define the vendor for the purpose of group relief in para (a) as it did if, consistently with the Court of Appeals reasoning, the disregard in the tailpiece to section 45(3) operated already to make the vendor a reference to the vendor under the original contract. Similarly, the insertion by the Finance (No 2) Act 2005 into the tailpiece of section 45(3) of the words of exception (ie except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of subsection (3) of section 73 (alternative property finance: land sold to financial institution and re-sold to individual)) would not have been required to impose a charge to SDLT. If the Court of Appeal were correct in holding that the vendor in section 71A(2) had to have a chargeable interest and that the tailpiece of section 45(3) prevented it from having such an interest, sections 72(2), 72A(2) and 73(2), which are similarly worded, would operate in the same way in the context of a sub-sale so that the vendor in each case could not be the customer. The parties have not explained to the court what prompted each of the various amendments, but Parliament may have been responding to particular schemes which had the effect of avoiding SDLT. HMRC explained in their written case that section 75A, which the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006 (SI 2006/3237) and section 71 of the Finance Act 2007 inserted into the FA 2003, was a response to the formulation of tax avoidance schemes which combined reliefs (including sub-sale relief) and exemptions in ways which Parliament had not intended. As will be clear when I turn to section 75A, it has a very broad ambit. The problem of tax avoidance by combining sub-sale relief and the exemptions for the various forms alternative property finance was capable of a more focussed resolution. While subsequent amendments are not a legitimate tool in ascertaining prior parliamentary intention, it is relevant to note that the problem of the combination of the sub-sale relief and those exemptions was eventually resolved by a simple expedient. In section 82 of and paragraph 2 of Schedule 21 to the Finance Act 2011 Parliament amended the exception in the tailpiece of section 45(3) to read: except in a case where the secondary contract gives rise to a transaction that is exempt from charge by virtue of any of sections 71A to 73 (which relate to alternative property finance) (new wording emphasised). This amendment, like those referred to in para 32, would not have been needed to create a charge to SDLT if the interpretation which the Court of Appeal favoured were correct. The courts adopt a purposive approach to the interpretation of taxing statutes following the guidance of the House of Lords in Barclays Mercantile Business Finance Ltd v Mawson (Inspector of Taxes) [2005] 1 AC 684. In accordance with that guidance, summarised by Lord Nicholls of Birkenhead at para 32, the court asks itself two questions. First, it must determine the nature of the transaction to which a statutory provision is intended to apply; and secondly it must decide whether the actual transaction answers to the statutory description. If I am correct about the self- contained nature of the provisions of section 71A, the answer to the first question is that the exemption in section 71A(2) applies to the first transaction of the Ijara arrangement in section 71A(1) where the customer sells a major interest in land to the financial institution. The question whether PBLs sale of the barracks to MAR answers that description is answered in the affirmative. A purposive construction will not always operate in favour of HMRC and against the taxpayer as MacNiven v Westmoreland Investments Ltd [2003] 1 AC 311 shows. Similarly, if there are lacunas in a statutory regime which enable tax avoidance, a purposive interpretation may not always remove them as the Court of Appeals judgment in Mayes v Revenue and Customs Comrs [2011] STC 1269 shows. I therefore conclude that, but for section 75A, the combination of the operation of sub-sale relief under section 45(2) and (3) and the exemption under section 71A(2) relieved the sale by the MoD to PBL and exempted the sale by PBL to MAR from a charge to SDLT. An argument against this approach, which has attracted Lord Briggs, is that section 71A(2) must be construed as exempting a transaction which would otherwise be a chargeable transaction under Part 4. The only transaction which is so chargeable, so the argument goes, is the completion of the notional secondary contract which section 45(3) creates, and section 45(5A)(b) gives instructions on the identification of the vendor in the notional land transaction. Because the identification of the vendor in section 45(5A)(b) depends on the context in which the word is used and that context would give rise to the avoidance of tax if vendor referred to the transferee because the combination of sub-sale relief and section 71A(2) would exempt both transactions, it is argued that the vendor in section 71A(2) must refer to the original vendor, ie the MoD. I do not agree. In relation to the first point, the statement that a transaction is exempt from charge, such as that in section 71A(2) referring to the first transaction, is an unqualified statement that a transaction of that description is free from a liability to pay the tax. That exclusion of liability is not removed if, for some extraneous reason such as the operation of sub-sale relief under section 45, the transaction in question would not have imposed a liability to SDLT: viz the first of my four reasons (paras 24 and 25 above). If that is correct, the second argument does not arise because operation of the exemption does not depend on section 45(5A)(b). In any event, if section 45(5A)(b) were relevant, (a) the context of the use of the word vendor was in relation to real world transactions and (b) the history of the amendment of the FA 2003 in the years before the transactions were carried out on 31 January 2008 suggests that HMRC were struggling to respond to schemes which exploited lacunas in the legislation. In that context the existence of a loophole in the tax legislation would not militate against the interpretation which I favour. This is not to say that a contextual construction of a statutory provision may not have regard to the consequences of a particular interpretation and lead one to prefer another interpretation, especially when the former interpretation would have absurd or unreasonable results. It is simply to say that in the early years of SDLT Parliament created a patchwork of provisions, which, for a while, allowed a transaction, which combined sub-sale relief and Ijara arrangements, what Lord Briggs correctly calls an unintended tax holiday. I recognise that the exclusion by the Finance (No 2) Act 2005 of the completion or substantial performance of the first contract from the section 45(3) disregard when the secondary contract would give rise to an exempt transaction under section 73(3) suggests that the draftsman in 2005 sought to impose a charge on the first transaction under section 73 while not addressing a similar problem in section 71A. But that indication of intention at that time is not sufficient in my view to outweigh the factors which have persuaded me to regard section 71A, which had been introduced earlier in 2005, as a self-contained statutory regime which confers exemption on real world transactions. Further, the different treatment in section 45(3) of the similarly-worded exemptions in sections 71A and 73 at the time of the relevant transactions has the result, on Lord Briggs approach which is focussed on avoiding tax loss, that vendor is interpreted differently under sections 71A(2) and 73(2). While section 45(5A)(b) may allow such an interpretation, I find HMRCs explanation of a patchwork of provisions and a lacuna a more persuasive explanation of the relevant provisions as they were then. Because, as a result of the combination of sections 45 and 71A(2), there is no SDLT charge on the sales between the MoD and PBL and between PBL and MAR, it is necessary to consider the correct interpretation and application of section 75A, to which I now turn. Section 75A (i) Whether and if so how it applies Section 75A is headed Anti-avoidance and provides: (1) This section applies where - (a) one person (V) disposes of a chargeable interest and another person (P) acquires either it or a chargeable interest deriving from it, (b) a number of transactions (including the disposal and acquisition) are involved in connection with the disposal and acquisition (the scheme transactions), and (c) the sum of the amounts of stamp duty land tax payable in respect of the scheme transactions is less than the amount that would be payable on a notional land transaction effecting the acquisition of Vs chargeable interest by P on its disposal by V. In subsection (1) transaction includes, in particular - (a) a non-land transaction, (2) any kind of arrangement whether or not it could an agreement, offer or undertaking not to take (b) specified action, (c) otherwise be described as a transaction, and (d) acquisition by P of the chargeable interest. a transaction which takes place after the (3) The scheme transactions may include, for example - the acquisition by P of a lease deriving from a a sub-sale to a third person; the grant of a lease to a third person subject to a (a) freehold owned or formerly owned by V; (b) (c) right to terminate; (d) take some other action; the exercise of a right to terminate a lease or to (4) Where this section applies - (a) any of the scheme transactions which is a land transaction shall be disregarded for the purposes of this Part, but (b) there shall be a notional land transaction for the purposes of this Part effecting the acquisition of Vs chargeable interest by P on its disposal by V. (5) The chargeable consideration on the notional transaction mentioned in subsections (1)(c) and (4)(b) is the largest amount (or aggregate amount) - (a) given by or on behalf of any one person by way of consideration for the scheme transactions, or (b) received by or on behalf of V (or a person connected with V within the meaning of section 839 of the Taxes Act 1988) by way of consideration for the scheme transactions. (6) The effective date of the notional transaction is - the last date of completion for the scheme (a) transactions, or if earlier, the last date on which a contract in (b) respect of the scheme transactions is substantially performed. (7) This section does not apply where subsection (1)(c) is satisfied only by reason of - (a) (b) sections 71A to 73, or a provision of Schedule 9. The breadth of section 75A was implicitly acknowledged by Parliament which in section 75C(11) and (12) empowered the Treasury to make an order, including an order with retrospective effect, which provides that section 75A is not to apply in specified circumstances. PBLs first argument, that section 75A could not apply because it had not been established that the parties entered into the transactions for the purpose of tax avoidance, failed before the FTT, the UT and the Court of Appeal. In my view the tribunals and the Court of Appeal reached the correct conclusion. The heading of the section, Anti-avoidance, is the only indication in the section which could support PBLs contention. The heading is relevant to assist an understanding as to the mischief which the provision addresses, but it says nothing as to the motives of the parties to the scheme transactions. There is nothing in the body of the section which expressly or inferentially refers to motivation. The provision was enacted to counter tax avoidance which resulted from the use of a number of transactions to effect the disposal and acquisition of a chargeable interest. It is sufficient for the operation of the section that tax avoidance, in the sense of a reduced liability or no liability to SDLT, resulted from the series of transactions which the parties put in place, whatever their motive for transacting in that manner. This is clear from subsection (1)(c) which compares the amount of SDLT payable in respect of the actual transactions against what would be payable under the notional land transaction in section 75A(4), by which P acquired Vs chargeable interest on its disposal by V. Section 75A does not identify who is V and who is P in relation to the transactions to which the section applies. As there is a number of transactions, it is possible that more than one person may be V and more than one person may be P. But Parliament has not conferred a discretion on HMRC to select whom they wish to treat as V or P. HMRC do not contend otherwise. In Vestey v Inland Revenue Comrs (Nos 1 and 2) [1980] AC 1170, in which the Revenue contended that they had a discretion to select whom among a class of beneficiaries it should assess as liable to tax, Lord Wilberforce identified the following principles as fundamental objections to that contention, at p 1172: Taxes are imposed upon subjects by Parliament. A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined. A proposition that whether a subject is to be taxed or not, or, if he is, the amount of his liability, is to be decided (even though within a limit) by an administrative body represents a radical departure from constitutional principle. It is necessary therefore for the courts to analyse the words of a broadly-worded anti- avoidance provision to identify the persons on whom Parliament has imposed this charge to tax. The words of section 75A by themselves do not disclose who is V and who is P in a particular case. But the mischief which the provision addresses and the context of the provision within Part 4 of the FA 2003 provide the answer. The court adopts the purposive approach which the House of Lords sanctioned in Barclays Mercantile Business Finance Ltd, to which I have referred in para 34 above. The explanatory notes on clause 70 of the Finance Bill 2007 explained that the provision was introduced to counter avoidance schemes which have been developed to avoid payment of SDLT. It appears to be drafted in deliberately broad terms to catch a wide range of arrangements which result in tax loss. The examples of scheme transactions which are set out in subsection (3), although merely examples, give an indication of some at least of the targets of the provision. The task is to identify where the tax loss has occurred as a result of the adoption of the scheme transactions in relation to the disposal and acquisition of the relevant interest or interests in land. This in turn involves identifying the person on whom the tax charge would have fallen if there had not been the scheme transactions to which subsection (1)(b) refers and which exploited a loophole in the statutory provisions. It is clear from (i) subsection (1)(a), which refers to P acquiring either Vs chargeable interest or a chargeable interest deriving from it, and (ii) subsection (3)(a), which refers to the acquisition by P of a lease deriving from a freehold owned or formerly owned by V (emphasis added), that the section may operate not only when P acquires the chargeable interest directly from V but also when P acquires a chargeable interest, such as a lease, which is derived from a chargeable interest which V formerly owned. Thus the section can cover a series of transactions by which V disposes of its chargeable interest which comes to be acquired by another person and P ultimately acquires a chargeable interest derived from it from that other person. Turning to the application of the section to the transactions in this case, it is agreed by the parties that V in subsection (1)(a) is the MoD; its chargeable interest was the freehold in the Chelsea Barracks. I agree. In the course of the scheme transactions, PBL did not acquire a chargeable interest, the freehold, when the contract between the MoD and it was completed on 31 January 2008 because the transaction fell to be disregarded under section 45(3); on the same day MAR acquired a chargeable interest, again the freehold, when its contract with PBL was implemented as a result of the completion of the notional transaction in section 45(3); and, on the same day, PBL acquired a chargeable interest, the lease, from MAR. The put and call options were designed to enable PBL to re-acquire the freehold in the barracks, a result which was the ultimate aim of the series of transactions summarised in para 5 above. But those options did not result in the acquisition of a chargeable interest on 31 January 2008. They were nevertheless a scheme transaction within subsection (1)(b) because they were involved in connection with the disposal and acquisition of a chargeable interest and subsection (2)(d) includes within the definition of transaction under subsection (1) a transaction which takes place after P acquires the chargeable interest. They are part of the context in which the scheme transactions, which led to Ps acquisition of a chargeable interest on 31 January 2008, fall to be analysed as they were the final stage of the transactions by which MAR was to finance PBLs acquisition of the freehold in the barracks. If the court were to confine its attention to subsection (1)(a) alone, either MAR or PBL could be P, the former because it acquired a chargeable interest on its acquisition of the freehold in the barracks and the latter because it acquired the lease of the barracks from MAR. But the court cannot so confine its attention. It must go on to analyse how the scheme transactions gave rise to the loss of tax. In the real world the nature of the transaction is clear: PBL acquired the barracks with the benefit of finance from MAR. The sub-sale to MAR and the lease back to PBL were transactions involved in connection with the disposal by MoD of its chargeable interest, the freehold in the barracks, and the acquisition by PBL of its chargeable interest, the leasehold interest. The loophole which has enabled the avoidance of tax is the combination of sub-sale relief under section 45(3) with the exemption conferred on Ijara financing when the customer of the financial institution sells its freehold interest in land to the institution and then leases back the land. The simple means of removing the loophole, which Parliament eventually identified in 2011, was to exclude from the disregard in the tailpiece of section 45(3) a case where the secondary contract was exempt because of sections 71A to 73. Thus it was PBL which obtained the benefit of the avoidance of tax in relation to the completion of its contract with MoD. I recognise that the method which Parliament subsequently chose to remove the tax loss cannot be decisive. There might have been other ways of removing the tax loss. For example, it might have been possible to amend section 71A(2) to remove the exemption of the sale transaction between the customer and the financial institution if the vendor had benefited from the section 45(3) disregard and thereby impose the burden on the financial institution. But, as Judge Nowlan stated in his impressive judgment (para 137), it is appropriate to have regard to the overall structure of SDLT which seeks to impose the tax on purchasers and not financiers. The amendment of section 45(3) rather than section 71A(2) had the advantage of preserving this structure by keeping intact the exemption of the two paradigms of Ijara financing to which I referred in para 4 above. If the opportunity for tax avoidance were removed by amending section 71A(2), the consequence would be that SDLT would be paid on the price which the financial institution paid its customer in the context of the Ijara financing which, as I have said, might differ significantly from the purchase price of the major interest in land. Thus I conclude, like Judge Nowlan, that the error obviously lay in the failure to disapply the section 45(3) disregard, an error which benefited PBL. Taking a purposive approach to the interpretation of section 75A, therefore, I conclude that PBL is P; and, because the completion of the contract between the MoD and PBL is disregarded under section 45(3), the chargeable interest which PBL acquires in section 75A(1) is the lease which it received from MAR. The parties advanced two alternative approaches to the identification of P, which I comment on briefly to explain why I cannot accept either approach. First, PBL submits that the court should adopt a sequential approach and identify as P the first person who acquires a chargeable interest. As the completion of the MoD-PBL contract is disregarded under section 45(3), MAR is that person. But there is no justification in the wording of section 75A for the adoption of a sequential approach, when applying the section to the transactions which in fact took place, which stops the search at the first person to acquire a chargeable interest. One would thereby remove from consideration the leaseback and the grant of the options which were part of the contractual scheme which the section is designed to address. That approach appears to me to be inconsistent with the purpose of section 75A, which is to prevent a tax loss which otherwise would occur because of the totality of the connected transactions which have taken place in the real world. Secondly, HMRC submit that MAR could not be P because section 75A(7) disapplies section 75A if subsection (1)(c) is satisfied only by reason of sections 71A to 73. HMRC argues that, from MARs perspective, the only reason why MAR did not incur liability to SDLT on its acquisition of the freehold interest in the barracks from PBL was because of the exemption in section 71A. That may be so; but it is irrelevant. Subsection (1)(c) does not look at the question from the perspective of a party to one of the transactions. It sets up a comparison between the sum of SDLT payable on all of the connected transactions and that payable on the notional transaction. Subsection (7) would disapply section 75A in relation to the transactions in para 5 above only if the section 71A exemption were the sole reason why the amounts of SDLT payable on those transactions is less than the amount payable on the notional transaction. The first of those transactions was the completion of the MoD-PBL contract and the reason why the sum payable on that transaction was nil was because of the section 45(3) disregard. Thus subsection (7) would not disapply section 75A. PBL advanced a refinement of this approach in its written case, namely that if one adds up all of the SDLT which would have been charged if there had been no sub-sale relief and no exemption for the Ijara finance, it is only the section 71A exemption which takes the tax due on the scheme transactions below that due on the notional transaction in the subsection (1)(c) balance. Subject to its challenge on the quantum of the charge on the notional transaction, which I discuss below, PBL presents the sums payable on the four transactions in para 5 above, if there were no sub-sale relief and no section 71A exemption, as follows: (i) 38.36m in respect of the MoD-PBL transfer; (ii) 50m in respect of the PBL-MAR transfer; (iii) 16.41m in respect of the lease granted by MAR to PBL; and (iv) 0 for the option to purchase, A total of 104.77m If 50m is payable for the notional transaction, PBL argues that it is only the section 71A exemption (50m plus 16.41m) which takes the sums payable in respect of those transactions below the sum payable on the notional transaction (ie 104.77m - 66.41m = 38.36m). I do not accept this approach. I consider that the purpose of subsection (7)(a) is to exclude the application of section 75A where the only cause of the tax loss which the section counters is the exemptions available under sections 71A to 73. Those alternative property finance provisions involve a series of transactions which otherwise might themselves be scheme transactions under section 75A(1)(b) and it is clearly not the purpose of the section to strike at transactions which go no further than to achieve the intended exemption of alternative property finance. Where, as here, the combined effect of section 45(3) and section 71A is to diminish the SDLT payable below that payable on the notional transaction, section 75A must take effect. I conclude (i) that PBL is P under section 75A(1)(a), (ii) that the requirements of subsection (1)(b) also are met because the scheme transactions are those listed in para 5(4) above, and (iii) addressing the first side of the balance which subsection (1)(c) mandates, that the sum of SDLT payable in respect of the scheme transactions is nil. It is then necessary to consider the other side of the subsection (1)(c) balance. It will be recalled that subsection (4) requires that the scheme transactions which are land transactions be disregarded and establishes in their place a notional transaction by which P acquires Vs chargeable interest on its disposal by V. That notional transaction involves PBL acquiring MoDs freehold interest in the barracks. Under subsection (6) the effective date of that notional transaction is 31 January 2008. I turn then to the chargeable consideration on this notional transaction. ii) The actual consideration Subsection (5) provides, so far as relevant, that the chargeable consideration on the notional transaction is the largest amount (or aggregate amount) given by any one person for the scheme transactions. HMRC assert that that sum is the 1.25 billion which was the purchase price which MAR contracted to pay to PBL for the purchase of the freehold in the barracks. SDLT, which is chargeable at 4% on that figure, results in a liability of 50m. PBL contests this. It points out that the Ijara arrangement was brought to an end on 1 March 2010, at a time when the fourth tranche of the consideration under the PBL-MAR sale agreement (US$378,670,740) had not been paid. Before the FTT, PBL argued that MAR had therefore given consideration of only 970m and not the higher figure of 1.25 billion. PBL now asserts that the sterling equivalent of the amount which it had drawn down was approximately 847m, because paragraph 9 of Schedule 4 to the FA 2003 requires the sterling equivalent to be calculated at the effective date of the transaction (ie 31 January 2008). The higher figure of 970m was, PBL asserts, based on an erroneous calculation of the sterling equivalent of each of the US$ draw downs on its own draw down date. If the consideration which MAR actually paid to PBL for the conveyance to it of the freehold in the barracks was only 847m, the largest amount given by one person for the scheme transactions was the 959m paid by PBL to the MoD. In my view it is not necessary for this court to determine what is the correct sterling equivalent of the sums which MAR actually paid to PBL as I am persuaded, for the reasons set out below, that HMRC are correct that the consideration for MARs purchase of the barracks from PBL was 1.25 billion, but that PBL may claim a refund for the part of that consideration which was never paid. Mr Gammie does not dispute that it was open to PBL to make that claim. PBL asserts that it made that claim after the FTT handed down its decision. The starting point is paragraph 1(1) of Schedule 4 to the FA 2003 which defines the chargeable consideration in these terms: The chargeable consideration for a transaction is, except as otherwise expressly provided, any consideration in money or moneys worth given for the subject-matter of the transaction, directly or indirectly, by the purchaser or a person connected with him. This provision might appear, by itself, to support PBLs case. But section 51 addresses contingent consideration. It provides so far as relevant: (1) Where the whole or part of the chargeable consideration for a transaction is contingent, the amount or value of the consideration shall be determined for the purposes of this Part on the assumption that the outcome of the contingency will be such that the consideration is payable or, as the case may be, does not cease to be payable. (4) This section has effect subject to - section 80 (adjustment where contingency ceases or consideration is ascertained) Section 80, which provides for the adjustment of a return where a contingency ceases or the consideration is ascertained, provides so far as relevant (as amended by sections 299 and 326 of and Schedule 42 to the Finance Act 2004): (1) Where section 51 (contingent, uncertain or unascertained consideration) applies in relation to a transaction and - in the case of contingent consideration, the (a) contingency occurs or it becomes clear that it will not occur, or (b) in the case of uncertain or unascertained consideration, an amount relevant to the calculation of the consideration, or any instalment of consideration, becomes ascertained, the following provisions have effect to require or permit reconsideration of how this Part applies to the transaction (and to any transaction in relation to which it is a linked transaction). (2) If the effect of the new information is that a transaction becomes notifiable, or that additional tax is payable in respect of a transaction or that tax is payable where none was payable before - (a) within 30 days. (4) If the effect of the new information is that less tax is payable in respect of a transaction than has already been paid - the purchaser must make a return to [HMRC] the purchaser may, within the period allowed for (a) amendment of the land transaction return, amend the return accordingly; after the end of that period he may (if the land (b) transaction return is not so amended) make a claim to [HMRC] for repayment of the amount overpaid. (Emphasis added in sections (2)(a) and 4(a) & (b)) PBL submits that because section 51 is subject to section 80 and section 80 requires reconsideration of the manner in which the SDLT code applies, it was incumbent upon HMRC or the courts to amend the land transaction return to reflect the actual chargeable consideration and thus the SDLT payable. On that basis PBL asserts that the FTT erred in allowing HMRC to amend their statement of case to claim that the amount of SDLT which was payable was 50m. But this is to mis- read section 80. Subsection (1) speaks of the following provisions having effect to require or permit reconsideration. The use of the disjunctive conjunction is significant. Subsection (2) requires the purchaser to make a return where tax has been underpaid; but subsection (4), which applies where tax is overpaid, permits the taxpayer to amend the return or to claim the repayment. This statutory asymmetry has the effect that section 51 operates to tax the contingent consideration and, under section 80, the taxpayer has to take the initiative to obtain repayment if new information shows that less tax is payable than has been paid. There is no scope for the application of the Bwllfla principle, that where facts are available they are to be preferred to prophecies (Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426), where Parliament has laid down the process by which the correct amount of SDLT which is payable is ascertained. I conclude therefore that, subject to the human rights challenge, HMRC are correct in their assertion that the chargeable consideration for the notional transaction (section 75A(4) and (5)) is 1.25 billion and the SDLT due thereon is 50m. HMRCs calculation of that sum as the SDLT due is however subject to the right to claim under section 80. PBL recorded in its written case (footnote 134) that it made such a claim shortly after the decision of the FTT and that HMRC opened an inquiry into that claim, which has been left in abeyance pending the outcome of this appeal. As HMRC has not addressed this matter, I need say no more. (iii) Section 75B and the human rights challenge In the UT Morgan J interpreted section 75B, to which I will turn, as enabling the tribunal to determine that the chargeable consideration on the notional transaction under section 75A was the 959m which PBL had paid the MoD for the freehold of the barracks and not the 1.25 billion which MAR had contracted to pay to PBL. PBL accepts that on a black-letter reading of section 75B, where the financial institution provides more finance than the price which the customer pays for the land, the section 75A charge on the notional transaction will take account of the whole of the amount payable for the chargeable interest which the financial institution acquires. But it asserts that the manner in which section 75B is drafted indirectly discriminates against those of Islamic faith who may be expected to adopt Sharia financing techniques. Under conventional mortgage financing, SDLT would have been payable on the consideration for PBLs acquisition of the freehold in the barracks from the MoD (959m) and the security transaction would have been exempt, notwithstanding that the financial institution had provided additional finance. By contrast, if Sharia compliant finance is obtained, the additional sums provided by the financial institution would be subjected to the SDLT charge. PBL argues that the transactions fall within the ambit of article 9 of the European Convention on Human Rights (ECHR) (in particular the freedom to manifest ones religion) and of Article 1 of Protocol 1 (A1P1) (the entitlement to the peaceful enjoyment of ones property and the right not to be deprived of ones possessions except in the public interest). Article 14 of the ECHR requires public authorities to secure the enjoyment of such rights and freedoms without discrimination on a ground such as religion. PBL submits that section 3(1) of the Human Rights Act 1998 requires the court to interpret section 75B in a manner which is compatible with article 14 read with article 9 and A1P1, and so to eliminate discrimination against those of the Islamic faith. Section 75B provides (so far as relevant): (1) In calculating the chargeable consideration on the notional transaction for the purposes of section 75A(5), consideration for a transaction shall be ignored if or in so far as the transaction is merely incidental to the transfer of the chargeable interest from V to P. (2) A transaction is not incidental to the transfer of the chargeable interest from V to P - (a) if or in so far as it forms part of a process, or series of transactions, by which the transfer is effected, or (c) if it is of a kind specified in section 75A(3). (3) A transaction may, in particular, be incidental if or in so far as it is undertaken only for a purpose relating to - the construction of a building on property to (a) which the chargeable interest relates, the sale or supply of anything other than land, or (b) (c) a loan to P secured by a mortgage, or any other provision of finance to enable P, or another person, to pay for part of a process, or series of transactions, by which the chargeable interest transfers from V to P. In subsection (3) - (a) paragraph (a) is subject to subsection (2)(a) to (c), (b) paragraph (b) is subject to subsection (2)(a) and (c), and (c) paragraph (c) is subject to subsection (2)(a) to (c). (4) (5) The exclusion required by subsection (1) shall be effected by way of just and reasonable apportionment if necessary. In this section a reference to the transfer of a chargeable (6) interest from V to P includes a reference to a disposal by V of an interest acquired by P. Absent the question of ECHR compatibility, I am satisfied that section 75B does not assist PBL. Morgan J in the UT sought to use section 75B to avoid what he saw as an unreasonable result by two means. First, he accepted PBLs submission that subsections (1) and (6) refer to the acquisition by P of the chargeable interest disposed of by V and that interest in this case could only be the freehold as V (the MoD) did not dispose of the leasehold. Thus the only transfer which was relevant in section 75B was the transfer of the freehold from the MoD to PBL, to which the sub-sale by PBL to MAR was incidental. Secondly, he interpreted the words in so far as in subsection (1) as authorising the apportionment of the consideration which MAR provided to PBL for the freehold between (a) the sum which reimbursed PBL for the price which it paid the MoD for the freehold and (b) the sum which MAR agreed to provide to enable PBL to pay any SDLT which was due and to fund other expenditure. He referred to PBLs submission that one could achieve this by reading into subsection (1) after the words in so far as the additional words the payment of the consideration or but said that it was not necessary to do so. I disagree on both points, for reasons which are essentially the same as those which Judge Nowlan advanced. In my view both section 75A and section 75B are difficult provisions to interpret and to apply to particular transactions. In summary, section 75A has been drafted in broad terms to catch a range of tax avoidance schemes and prevent unintended tax losses by the use within a series of transactions of a combination of reliefs and exemptions; and section 75B reduces the chargeable consideration of the notional transaction in section 75A(4) by excluding incidental transactions in that series of transactions from the section 75A(5) calculation. Looking at the matter in more detail, one starts with the chargeable consideration on the notional transaction in section 75A(5), which is calculated by reference to the scheme transactions which are the actual transfer or transfers by which a chargeable interest moves from V to P or P acquires a chargeable interest deriving from it (section 75A(1)(a)). That chargeable consideration, as I have said, is the largest amount (or aggregate amount) given by any one person by way of consideration for the scheme transactions. Section 75B is framed to remove from those actual transactions (ie the scheme transactions of section 75A(1)(b)) any transactions which in accordance with its provisions are to be treated as incidental. To achieve this, the reference in section 75B(1) to the transfer of the chargeable interest from V to P is a reference to the actual transfer or transfers which are the subject of section 75A(1)(a) and (b). Support for this view comes from (a) subsection (6) and (b) subsection (2). Subsection (6) (a reference to the transfer of a chargeable interest from V to P includes a reference to a disposal by V of an interest acquired by P) makes clear that subsection (1) covers a case where P acquires from another party the interest which V has disposed of. Thus section 75B could be applied to the circumstance where, within the scheme transactions, V sold the freehold in land to B who sold on that freehold to P. Subsection (2) is framed to place limits on the scope of subsection (1). Subsection (2)(a), which provides that a transaction is not incidental if or in so far as it forms part of a process or series of transactions, by which the transfer is effected, is a reference to the scheme transactions in section 75A(1)(b) in so far as they form part of the process by which the relevant disposal and acquisition or acquisitions are made. Subsection (2)(c) provides that a transaction is not incidental if it is of a kind specified in section 75A(3). That includes (in section 75A(3)(a)) the acquisition by P of a lease deriving from a freehold owned or formerly owned by V and (in section 75A(3)(b)) a sub-sale to a third person. To give effect to subsection (2) and achieve coherence both within section 75B and between that section and section 75A, the transfer of the chargeable interest from V to P in section 75B(1) and (6) must extend to the transactions to which section 75A(1)(a) and (b) and (3) refer, including the sub-sale to the third person under section 75A(3)(b) (ie PBLs sale to MAR) and the acquisition by P of an interest derived from the chargeable interest which V has disposed of under section 75A(3)(a) (ie the leasehold interest which MAR gave to PBL). This interpretation is wholly consistent with the purpose of section 75B which is to reduce the consideration given for the transactions in section 75A(1)(b) which are to be taken into account in the section 75A(5) calculation of the consideration on the notional transaction. I therefore conclude that the transactions which transfer the chargeable interest from V to P in section 75B(1) include both the sub-sale to MAR and the grant by MAR of the lease to PBL. I am also not persuaded by the second argument which Morgan J favoured, namely that the words in so far as in section 75B(1) required the tribunal to apportion the 1.25 billion consideration which MAR paid between the purchase price of the barracks and other finance. Those words in subsection (1) appear to be addressing a composite transaction which in part is necessary for the disposal and acquisition, to which section 75A(1)(a) refers, and in part serves some other, incidental, purpose, such as any of those identified in subsection (3). That cannot assist PBL in this case because of the overriding effect of subsection (2). It is arguable that subsection (2)(a) may not provide an answer, for as PBL points out, it uses the same if and in so far as formulation as subsection (1). But subsection (2)(c) is unqualified and prevents the sub-sale to MAR from being incidental because that transaction was of a kind specified in section 75A(3), ie a sub-sale to a third person. Any appeal to the terms of section 75B(3)(c) is excluded by subsection (4)(c) which overrides it by the operation of the exclusion in subsection (2)(a) and (c). I therefore conclude that the 1.25 billion consideration which MAR contracted to pay to PBL is the relevant consideration under section 75A(5)(a) unless section 3 of the Human Rights Act 1998 requires the court to adopt a more expansive interpretation of incidental transactions in section75B(1). PBLs argument in support of its challenge under article 14 of the ECHR (para 66 above) is that if a conventional lender were to advance sums to its customer in excess of the purchase price of the land, the purchaser would pay SDLT on the purchase price and the financiers security interest would be disregarded under section 48. In a section 75A exercise, section 75B(3)(c) would treat the security transaction (a transaction undertaken only for a purpose relating to - a loan to P secured by a mortgage) as incidental to the transfer of the land from the seller to the customer and therefore outside the calculation of the chargeable consideration for the notional transaction under section 75A(5). But if, as in this case, the financial institution using an Ijara arrangement were to provide funds in excess of the purchase price, section 75A(5) would operate to penalise it by using the larger funding as the measure of the chargeable consideration on the notional transaction. This, says PBL, amounts to unjustified discrimination on the ground of religion contrary to article 14 read with article 9 of the ECHR and A1P1. As I have said, PBL invites the court to read into section 75B(1) the words the payment of the consideration or after in so far as so as to enable the consideration given by the financial institution for the purchase of land from its customer at the first step of an Ijara arrangement to be allocated proportionately between the funding of the land purchase on the one hand and the funding of other expenditure by the customer on the other so that only the former would count towards the chargeable consideration on the notional transaction under section 75A(5). The FTT did not have to consider the merits of this challenge because it concluded that PBL had not established that it had entered into the Sharia compliant financing for religious reasons and that it had therefore not proved that it suffered discrimination on the ground of religion. Neither the UT nor the Court of Appeal had to address the argument because the UT by the presiding members casting vote held that the chargeable consideration was 959m and the Court of Appeal held that section 75A did not apply. I note in passing however that, but for the expiry of a time limit for HMRC, the Court of Appeals decision would have imposed a liability on MAR of 50m on the chargeable consideration of 1.25 billion, and in accordance with standard practice in Ijara arrangements the charge would have fallen on PBL by means of a tax indemnity. I have come to the view that this court does not need to consider the ECHR challenge in detail because the matter can be determined on the simple bases (a) that any discriminatory effect is objectively justified and (b) that, in any event, PBL is not a victim. There is in this case no need to delve into the question whether the FTT was correct in holding that it had not been established that there was any discriminatory treatment. If one were, for the sake of argument, to accept that section 75A had had the potential to give rise to indirect discrimination on the prohibited ground of religion, in cases where the financial institution using Sharia compliant financing had provided funds to its customer beyond what was needed to fund the purchase of land, one would still need to consider whether the provision giving rise to the discriminatory treatment was objectively justified. HMRC advances as justification (a) the need to frame section 75A in broad terms to deal with the lacunas which were giving rise to tax loss and (b) the safety valve created by section 75C(11) and (12) which empowers the Treasury to disapply section 75A in specified circumstances, including making provision with retrospective effect. Thus HMRC argue that if the provision were shown to give rise to a systemic or frequent infringement of ECHR rights, Parliament had provided the mechanism by which such infringements could be avoided. In addition, section 75A(7) disapplies section 75A where the requirements of subsection (1)(c) are satisfied only because of the use of alternative property finance. Paradigm forms of Ijara arrangements are therefore protected. It is the tax loss occasioned by the combination of sub-sale relief and the alternative property finance which has given rise to the section 75A(5) charge in this case. That circumstance cannot recur after section 45(3) was amended in 2011. There is no evidence of any widespread use before 2011 of Ijara arrangements by means of a sub-sale to the financial institution and involving the provision of funds in excess of the purchase price of the land, as occurred in this case. And it is that combination which is the basis of the allegation of discrimination. The fact that a broadly worded provision may on occasion have a harsh effect on an alternative property finance transaction which is structured in a particular way is not sufficient to establish unjustified discrimination under article 14 of the ECHR. In any event, it is not disputed that PBL has a claim under section 80 for the repayment of any amount which is overpaid. If, as appears to be the case, the sterling equivalent of the consideration, which MAR actually paid to PBL for the barracks before the Ijara arrangement was brought to an end, was less than the 959m which PBL paid to the MoD, it is the latter figure which is the chargeable consideration under section 75A(5)(a). In that event, PBL is paying no more than it would have paid if it had used a conventional form of loan financing. It is therefore not a victim of discriminatory treatment. interpretation of section 75B for which PBL argues. I therefore do not accept that article 14 of the ECHR can support the Procedural challenges (a) The wrong return challenge PBL submits that HMRC are in any event not entitled to pursue their claim for the SDLT because they had no power to amend the SDLT return, lodged on its behalf, relating to the completion of the contract of 5 April 2007 between the MoD and PBL (para 7 above), because it was not a return relating to the notional transaction under section 75A. PBL argues that the return, which referred to the section 45(3) disregard, was not strictly necessary but was submitted on its behalf in order to have the purchase of the barracks entered onto the Land Register. It submits that HMRC, while entitled to inquire into that return under section 76 of and paragraph 12 of Schedule 10 to the FA 2003 in relation to the sale by the MoD to PBL, had no power to amend the return in order to impose a liability to SDLT on the separate, notional transaction. The only avenues which had been open to HMRC to impose a liability to SDLT on the notional transaction, it submits, were to make a determination under paragraph 25 of Schedule 10, because no return had been lodged in respect of the notional transaction, or to make a discovery assessment under paragraph 28 of that Schedule. As the six-year time limit for either the determination or the assessment had now expired, HMRC could no longer seek payment of any SDLT due on a notional transaction. I do not accept that submission. The answer lies in the terms of paragraph 13 of Schedule 10, which sets out the scope of the inquiry which HMRC can make under paragraph 12 of that Schedule, and HMRCs powers on completion of the inquiry under paragraph 23. Paragraph 13 provides so far as relevant: (1) An inquiry extends to anything contained in the return, or required to be contained in the return, that relates - to the question whether tax is chargeable in (a) respect of the transaction, or (b) to the amount of tax so chargeable. The relevant information contained in the return included information about the sale of the barracks by the MoD to PBL. To my mind, the fact that the information in the return was provided to HMRC in relation to a transaction (the MoD-PBL sale), which was to be disregarded under both section 45(3) and section 75A(4), does not limit the scope of the inquiry. HMRC were entitled to inquire into the tax consequences of that sale. The powers of HMRC on completion of the inquiry are set out in paragraph 23 of Schedule 10 which provides: (1) An inquiry under paragraph 12 is completed when [HMRC] by notice (a closure notice) inform the purchaser that they have completed their inquiries and state their conclusions. (2) A closure notice must either - state that in the opinion of [HMRC] no (a) amendment of the return is required, or (b) make the amendments of the return required to give effect to their conclusions. HMRC were entitled to inquire into that sale and, on ascertaining that it was a part of a series of transactions which gave rise to a section 75A charge, to amend the return to reflect the tax due on the notional freehold acquisition under section 75A(5). Any obligation on PBL to submit a return in relation to the notional transaction does not limit the scope of HMRCs power to inquire into the MoD-PBL sale or their power to amend the return under paragraph 23. I therefore reject this procedural challenge. (b) Case management challenges It is not the normal practice of this court to review case management decisions of the FTT which have been upheld by the Upper Tribunal as involving no error of law. Having rejected the argument that HMRC were not entitled to amend PBLs SDLT return in relation to the purchase of the freehold from the MoD, it is not necessary to decide whether the FTT should have granted PBL permission to amend its notice of appeal to put forward that argument. The other procedural challenge is PBLs challenge to the FTTs decision to allow HMRC to amend its case to argue that the chargeable consideration was 1.25 billion and not 959m. It is hard to see how the FTT could have decided otherwise. Under paragraph 22(3) of the Stamp Duty Land Tax (Appeals) Regulations 2004 (SI 2004/1363) the FTT is bound to increase the amounts of tax due if the taxpayer has been undercharged: see (by way of analogy in relation to section 50(7) of the Taxes Management Act 1970) Glaxo Group Ltd v Inland Revenue Comrs [1996] STC 191. But, again, having reached the view that PBL has a claim for repayment of overpaid SDLT under section 80, there is no need to address this case management decision. A different approach? Before the hearing, the court drew the attention of counsel to the Observations in Bulletin No 78 to Emmet and Farrand on Title (September 2016). The authors there suggested that the courts might have found a simpler solution to the issues raised in this case if they had had regard to the equitable maxim that The test of a mortgage is in substance, not form. If a transaction is in substance a mortgage, equity will treat it as such, even if it is dressed up in some other guise, as by the documents being cast in the form of an absolute conveyance (Megarry and Wade, The Law of Real Property, 8th ed (2012), para 25.085). The authors suggested that the transfer of the Chelsea barracks to MAR in the Ijara transaction should be viewed in English law as a mortgage, with the result that PBL should have been registered as proprietor of the freehold and have paid SDLT on its purchase and MAR should have been registered as the proprietor of a charge, a security interest exempt from SDLT under section 48. Both HMRC and PBL submitted written observations in response to this request. Neither party disputed that Ijara was a method of financing PBLs purchase and development of the Chelsea barracks. Indeed, the Ministry of Defence had accepted that the Ijara was in the nature of a mortgage and this was reflected in the Deed of Clarification entered into between the Secretary of State for Defence, PBL and Qatari Diar Real Estate Investment Co. But the purpose of this clarification was to ensure that the provisions in the contract of sale between the MoD and PBL providing for overage in the event of a sale on by PBL would not apply to the sale to MAR. Neither party accepts that, for this or any other reason, the transactions between PBL and MAR were in substance a mortgage and should be treated as such. They were real transactions, albeit inextricably linked, and intended to take effect in accordance with their terms, and there is no reason for this court to treat them any differently. In particular, there is no need to protect the interests of PBL, as there used to be to protect the interests of mortgagors who might otherwise be prevented from recovering their property. Furthermore, if the effect of treating these linked transactions as a mortgage were that the rental payments made by PBL were to be regarded as interest on money advanced to finance the purchase and development, this would run counter to their whole purpose, which was to comply with the Islamic prohibition of lending money at interest. As PBL argues, the issue of the substance of a transaction is a fact sensitive matter and the burden of proving that the substance is other than the form falls upon the party suggesting it. In the Upper Tribunal, Morgan J was alive to the possibility that in some circumstances, a transaction which takes the form of an absolute transfer coupled with an option for the transferor to re-acquire the property from the transferee can be analysed as being in substance a funding transaction under which the transferee has advanced funds to the transferor and so that the transfer is by way of security only (para 26). But no-one had suggested that before the tribunal and further evidence would have been necessary had they done so. In those circumstances, and where neither party supports the alternative approach, it would be quite unfair of this court to pursue it. In any event, whatever might be the case in other contexts, it is clear from the terms of FA 2003 that Parliament did not intend to confer exemption from SDLT on an Ijara transaction by treating it as the creation of a security interest under section 48, but instead conferred exemptions under section 71A by recognising the substance of each of the three transactions within an Ijara. Thus, it would be contrary to the legislative scheme in FA 2003 to treat MAR as exempt under section 48 on the basis that it had acquired a security interest. That is a sufficient answer to the point. Conclusion Stamp Duty Land Tax (SDLT) is a relatively new tax, designed to generate broadly the same revenue stream as its venerable predecessor, Stamp Duty, which had become so easily avoided that it had acquired the unhappy reputation, among those who could afford skilled advice, of being a voluntary tax. Introduced in Part 4 of the Finance Act 2003, SDLT was designed around a wholly new conceptual approach to the identification of the chargeable event in a sale of land. Generally speaking it was no longer the stamping of a conveyance, but rather the completion or substantial performance of a contract for the sale of an interest in land in the UK, which Part 4 calls a land transaction. It was hoped that this new start would close off many of the loopholes through which advisers had previously been able to guide their clients. It is no surprise that, in its infancy, SDLT proved to have its own I would allow the appeal. unintended loopholes. During its first decade it has therefore been the subject of frequent tweaking and revision. Land may be sold and purchased by a chain of contracts, all made before the completion of any of them. This may occur for example in a rising market, where the first buyer B turns the property to a subsequent buyer C, for an immediate profit derived from the higher price payable under the second contract. The second contract is usually called a sub-sale. The first and second contracts may be completed by a transfer by the original seller A to C, or by simultaneous transfers from A to B and from B to C. The second contract may be a separate contract of sale, or an assignment to C of Bs rights under the first contract. The SDLT scheme is designed to avoid double taxation of sub-sales, that is charging the completion of both the AB purchase and the BC purchase or assignment to a full charge to tax. It does so by taxing neither the AB nor the BC purchase separately, but rather by taxing an artificial deemed land transaction, constituted by the notional completion of what is called a secondary contract, which contains elements of both. This treatment of sub-sales appears in section 45. Using the ABC example, section 45(3) tells you that the purchaser under the secondary contract is C, and that the consideration is a combination of the consideration payable under the AB and BC purchases. Subsection (5A) rather enigmatically explains that the identity of the vendor under the deemed land transaction to which the secondary contract gives rise is either A or B, depending on the statutory context in which it matters. It was never the objective of Stamp Duty, and is not the objective of SDLT, that it should tax the financing of the purchase of land. In the UK this is usually done by lending at interest on the security of a mortgage. Mortgages are exempt from SDLT. But an increasing number of the purchasers of land in the UK finance their acquisition by forms of finance which do not offend against the Sharia prohibition of usury (a prohibition once applied in Christendom, but abolished in the UK in the early 19th century). This may be because the purchaser is an individual of the Muslim faith, or (as here) because the purchaser wished to use a finance institution which itself carries on its business in accordance with Sharia principles. Sharia law does not prohibit the taking of security, but it does forbid the payment of interest in connection with the lending of money. Over time a variety of alternative financing structures were developed, in which the commercial return to the finance house was provided by something other than the payment of interest on a loan. In the present case the structure chosen, called Ijara, involved the acquisition of the freehold interest in property by the finance house (the bank), its lease to the finance customer (the customer), and the grant of put and call options which would enable the customer to acquire the freehold reversion from the bank. The commercial return for the bank lay initially in the rentals payable under the lease, and then (once exercised) in the amount payable under the options, which in effect capitalised the outstanding rental stream under the lease. Originally the lease and the transfer of the freehold under the options were exempted from SDLT by section 72 of the Finance Act 2003, later replaced, for land in England, by section 71A. The acquisition of the freehold by the bank was also exempted by section 71A(2), if but only if the vendor under that transaction was the customer. Thus if the customer had already purchased the property (and paid SDLT on that purchase), or inherited it, but wished to refinance by an Ijara structure, the first relevant finance transaction would be a sale of the property by the customer to the bank. It needed to be exempted from tax if the objective of making Ijara finance free from SDLT was to be achieved. Conversely, if the finance was being provided to fund the purchase, then the first relevant transaction would be the purchase of the property, usually by the bank direct from the third party seller. In that case there was no reason to exempt that purchase from SDLT. Although the bank had to pay the tax, the customer would indemnify the bank under a tax indemnity included in the terms of the Ijara financing. Viewed separately, the provisions for relief from the double taxation of sub- sale chains and for the exemption of alternative Sharia-compliant financing structures broadly achieved their objectives. All the intractable problems in the present case, which have divided the courts below, and divide the members of this court, derive from a structure for the simultaneous purchase of land and its Sharia- compliant financing which also involves a sub-sale. For particular reasons concerned with the nature of the marketing of Chelsea Barracks, and the desire of its seller, the Ministry of Defence (MOD), for a delayed completion, the Sharia compliant finance house (MAR) selected by the buying customer PBL could not make the original purchase from MOD. Instead PBL contracted to purchase from MOD, with MAR as a sub-purchaser. The result of using a sub-sale in connection with Ijara financing was that, for SDLT purposes, the MOD / PBL and the PBL / MAR transactions were both replaced by a secondary contract by reason of section 45(3), the completion of which gave rise to a land transaction which would have been chargeable to SDLT, unless excluded from charge under section 71A(2) because it was part of Sharia compliant alternative financing. That much is common ground. The critical question on this appeal is whether that land transaction was exempted from a charge to SDLT by section 71A(2) of the Finance Act 2003. Lord Hodge thinks that it was exempt, with the result that the series of transactions which began with the transfer by MOD to PBL and ended with the lease by MAR to PBL, coupled with the put and call options, was entirely tax-free, subject only to the effect of section 75A. If that were the effect of section 71A(2) then I would agree with all his conclusions as to the consequences, and with all his reasons for those conclusions. I also agree with his conclusion that the transactions are not to be treated as giving rise to a loan on mortgage security. In my view however the transfer to MAR was not exempt, because PBL was not the vendor under the relevant land transaction within the combined meaning of sections 45(5A)(b) and 71A(2). The vendor was MOD. Thus the condition in section 71A(2)(a) was not satisfied. MAR was therefore chargeable to SDLT on its purchase of Chelsea Barracks. In that respect I agree with the conclusion of the Court of Appeal, although my reasoning is not the same as theirs. In setting out my own reasons I gratefully adopt Lord Hodges summary of the facts, and do not need to set out again the relevant statutory provisions. The operative parts of section 71A are subsections (2), (3) and (4). Each of them exempts from charge to tax specific land transactions. Each has specific conditions which must be satisfied, even if the conditions of the gateway into section 71A, in subsection (1), are all satisfied, as they were in this case. But the common feature of subsections (2), (3) and (4) is that they apply, if at all, only to land transactions which would otherwise be chargeable under Part 4. In an ordinary Ijara financing which satisfied the gateway conditions in subsection (1), the purchase of the major interest by the institution (called the first transaction in subsection (1)(a)) would itself be a chargeable land transaction, regardless whether the vendor was the person to whom the lease was to be granted, or a third party. It would then be exempted under section 71A(2) only if the vendor was that person. The identity of the vendor would be readily apparent. It would be the person disposing of the subject-matter of the transaction: see section 43(4). In the context of a purchase effected (as here) by a Land Registry Transfer, it would be the transferor under that transfer. In the present case, but for the matter I am about to describe, that would have been PBL. But where, as here, the purchase by the institution takes place under a contract by way of a sub-sale to which section 45(1) applies, then the institution is not treated as having entered a land transaction at all by virtue of that purchase, let alone a chargeable land transaction: see section 45(2). This is because the agreement to purchase is a transfer of rights within the meaning of the last sentence of section 45(1) and the institution is the transferee. The ordinary consequence of the completion of that purchase laid down by section 44(3) (namely that the contract and its completion is treated as a single land transaction) is displaced by section 45(2) and (3). The contract is replaced by the statutory construct called a secondary contract under which the transferee institution is the purchaser, but the vendor is not identified. The secondary contract is not, on its own, a land transaction but, when it is completed by a conveyance, the secondary contract and its completion are together treated as a land transaction: see again section 44(3). I will call it, for short, the completed secondary contract. The identity of the vendor under that land transaction, wherever it matters elsewhere in Part 4, is regulated by section 45(5A)(b). The reference to the vendor in section 71A(2) is plainly within the contemplation of the phrase other references in this Part to the vendor in section 45(5A)(b). Thus, where there is a sub-sale, the vendor under section 71A(2) is either the vendor under the original contract (here MOD) or the transferor under the transfer of rights (here PBL), depending on the context. The relevant context, for present purposes, is a sub-sale under section 43, coupled with an Ijara finance structure compliant with section 71A(1), and the determination whether exemption is to be available under section 71A(2) for the completed secondary contract. In this context it is plain that this is the relevant land transaction, by analogy with the reference in the tail-piece to section 45(3) to exemption in section 73(3). It speaks of a case where the secondary contract gives rise to a land transaction that is exempt from charge by virtue of subsection (3) of section 73. That section exempts another kind of alternative finance structure. In a section 45 context, the scheme of Part 4 treats the alternative contract, rather than the real world contract which it replaces, as giving rise to the land transaction qualifying (or not qualifying as the case may be) for exemption under section 73. The same must be true of section 71A, which confers exemption in a very similar way. So, what choice, as between MOD and PBL is permitted by this context? There are considerations which may be said to pull both ways. In favour of PBL is the fact that it was the vendor under the real world contract by which MAR agreed to buy the Barracks, and the transferor under the Land Registry transfer by which the freehold interest was actually transferred to MAR. In favour of MOD is the fact that, if the completion of the original contract between MOD and PBL is to be disregarded under section 45(3), then PBL never received from MOD the chargeable interest which is deemed to be transferred to MAR by the completion of the secondary contract. Thus the person disposing of that chargeable interest (the subject matter of the transaction under section 43(4)) can only have been MOD, so that MOD is the only candidate as vendor in this context, under section 45(5A). The first of these considerations persuaded the Upper Tribunal, where the issue first arose for decision. The second persuaded the Court of Appeal. In this court the main battle between counsel has centred on the question whether the relevant context is one which calls to be resolved by a real world or an SDLT-world analysis. In my view neither of those ways of looking at the matter is decisively better than the other. The issue arises precisely at the point where the two worlds collide. Treating either MOD or PBL as vendor may loosely be said to be permitted by the context, if the contest is simply between those parallel worlds. Section 71A(1) sets out what appear to be real world conditions for the exemption of Ijara finance structures from SDLT. But the land transaction which either is or is not to be exempted by section 71A(2) is a pure SDLT construct, namely that notional land transaction to which the secondary contract imposed by section 43 gives rise. But there cannot be two vendors, nor is the taxpayer or HMRC free to choose between two available permitted candidates. The application of section 45(5A) to the context of section 71A(2) must produce a single answer in each case, although the context will not always lead to the same result. In my opinion there is a much more powerful third factor which provides a decisive answer to that question, namely an appreciation of the consequences. If the vendor is to be PBL then, subject only to section 75A, the combined sub-sale and Ijara financing means that the whole transactional structure by which Chelsea Barracks was purchased from MOD is exempted from SDLT. By contrast, if MOD is to be the vendor, there is a single charge to SDLT. The first outcome cannot have been one which Parliament intended. The second outcome accords with the overall purpose of Part 4 to charge SDLT on purchases of land in the UK, with the avoidance of double taxation on a sub-sale, and with the general objective of section 71A, namely to exempt those who use Sharia compliant alternative finance from incurring SDLT where finance by a loan on mortgage security would not do so. A choice, under section 45(5A) which, in this context, produces an unintended tax holiday for all the participants in the purchase, viewed as a whole, is simply not one permitted by the context, where the alternative choice produces a result broadly in accordance with the purpose of the legislation. I must now address some of the contrary arguments. The first is that a statutory requirement to have regard to the context does not permit regard to be had to the consequences. I respectfully disagree. A hallmark of the modern contextual approach to the construction of a contract is that a choice which produces a result which the parties cannot have intended is to be rejected if there is a less unsatisfactory alternative. I can see no reason why the same approach is inapplicable to the construction of a statute. On the contrary it is frequently used: see Bennion on Statutory Interpretation, section 9.6, In re British Concrete Pipe Associations Agreement [1983] 1 All ER 203, per Sir John Donaldson MR at p 205 and, in the context of a taxing statute, Fry v Inland Revenue Comrs [1959] Ch 86, per Romer LJ at p 105. The only distinction in the present case is that the need to make a contextual choice is expressly required by the plain meaning of the statute itself, namely section 45(5A)(b). But that is a distinction without a difference. The second, and main, argument is that section 71A itself commands a real- world approach to the identification of the vendor, because the transaction looking for a vendor in subsection (2) is the first transaction described in real world terms by subsection (1)(a). Since it is the same first transaction which is exempted by subsection (2) then any issue as to the satisfaction of the vendor condition must be addressed by a real world test as to who is the vendor, treating the first transaction as the real world sale by PBL to MAR, not the notional land transaction to which the secondary contract gives rise. This argument treats section 45(5A) as not being engaged at all, because it is not the completed secondary contract that is looking for a vendor. This is the argument which has persuaded Lord Hodge. I agree that both subsections (1)(a) and (2) describe the same transaction. That is the clear purpose of linking them by a common definition. But in my view the use of that link works the other way. Subsection (2) is plainly designed, and is only of any use, to exempt from tax land transactions which would otherwise be chargeable to SDLT. Usually they will be real world transactions but, in the present case because of the sub-sale, the relevant land transaction is a statutory construct, namely the completed secondary contract. If subsection (2) is not dealing with that land transaction, but some different transaction, then it simply misses its target altogether. If that is right, then the effect of the linking definition is that section 71A(1)(a) must also be dealing in this context with the completed secondary contract, if its language will bear that construction. There is nothing in the language of section 71A(1) which makes subsection (1)(a) inapposite as a reference to the completed secondary contract, where that is what section 45 requires. Subsection (1) speaks of arrangements under which certain transactions take place. Where (as here) the relevant arrangements include provision for a simultaneous sub-sale, then the first transaction to which SDLT might otherwise be chargeable is necessarily a completed secondary contract. Focus on the very similar language of section 73 is compelling. Section 73(1) also speaks of arrangements under which transactions take place. In fact the second transaction there described always takes place by way of sub-sale (because the same interest is the subject matter of both), so that the second transaction being exempted from charge by section 73(3) will always be a completed secondary contract. And this is what section 45(3) says in unambiguous express terms when it refers to section 73(3). For this real world argument to have real force it would be necessary to re- write section 71A(2) as follows: The first transaction and any land transaction to which a secondary contract gives rise where the first transaction is by way of sub-sale is exempt from charge if the vendor under the first transaction is But it makes no sense to re-write the subsection in that way just to produce a result which gives rise to an unintended tax holiday, if the ordinary meaning of the words enacted does no such thing. The next argument is that there cannot be a choice of the vendor under the original contract (here MOD) because, where there is a simultaneous sub-sale, the effect of section 45(3) is to disregard the original contract altogether, including its vendor. There are in my view two objections to that argument. The first is that section 45(3) does not require the original contract itself to be disregarded, but only its substantial performance or completion. The contract itself remains visible, together with its vendor. The second more serious objection is that section 45(5A) assumes that the vendor under the original contract remains an available choice, precisely where section 43(3) brings a completed secondary contract into deemed existence, and disregards the performance or completion of the original contract. Indeed it is only where there is a completed (or performed) secondary contract that it was thought necessary to provide a special means for the identification of its vendor. It may be suggested that, under section 45(3), there can be both a completed secondary contract and a performed or completed original contract which is not disregarded, for example where the two are not simultaneous and connected, or where section 73(3) applies, but this is not why section 45(5A) was introduced. Its main target was precisely the unintended potential tax holiday which would arise where there was a sub-sale, because of a disregard of the original completed contract and an exemption for the sub-sale, eg because of the simultaneous potential application of group relief. It is next said that what I have described as the compelling consequences in terms of an unintended tax holiday do not arise, because section 75A comes to the rescue of the public purse. I accept that, if need be, it does so on the facts of this case, which occurred after it came into force. But 20 months passed between the introduction of section 45(5A) and section 75A, during which, if facts such as these did give rise to a tax holiday, the Revenue was entirely unprotected. There are in my view powerful reasons why the construction and application of section 45(5A) should be undertaken without reference to the fact that, much later, section 75A floated into view, as a plank in a shipwreck. First, the exercise of construction and application of section 45(5A) ought to be based upon a perception of the intention of Parliament when enacting it. That is, by the same token, why the re-casting of section 45(3) in 2011, in a way that solved the present difficulties by removing the disregard of the completed original contract where the sub-sale was exempted by section 71A, cannot be prayed in aid in interpreting section 45 in its earlier form. Secondly, the impetus for enacting section 75A was not a perception that sections 45(3) and 71A, working together, produced a tax holiday. Section 75A was, by its title, primarily designed to deal with tax avoidance schemes, although I accept that it was cast in wide enough terms to provide the Revenue with a rescue from the tax holiday to which linking Ijara finance to a sub-sale might give rise. Thirdly it is counter-intuitive, to say the least, to adopt a construction and application of section 45(5A) which then gives rise to a further set of difficulties in the application of section 75A, when there is an alternative approach that does nothing of the kind. This is, in my view, an a fortiori case where section 45(5A) expressly requires that choice to be made. Fourthly, if a construction of sections 45(5A) and 71A(2) before the introduction of section 75A does not produce an unintended tax holiday, then there is no reason why the earlier sections need be re-interpreted in the light of section 75A. A rather different and more detailed objection to the identification of MOD as the vendor under section 71A(2) is that its effect is to charge the wrong taxpayer with the wrong amount of tax. By this the proponents mean that the policy objectives of a single charge to tax, based upon the real purchase price for the Barracks, with Ijara structures being altogether exempt, would only truly be satisfied if PBL rather than MAR was liable, and SDLT was payable as a percentage of the price paid to MOD, rather than the inflated price stated in the PBL / MAR agreement, which was driven by financing considerations. This is precisely what the amendments to section 45 made in 2011 now do achieve. Even the section 75A solution charges the right taxpayer, albeit still with the wrong amount of tax. This objection has significant force at first sight but there are compensating matters which in my view largely deflate its effect. Dealing first with the identity of the taxpayer, an ordinary Ijara structure to finance a purchase imposes SDLT on the bank rather than on the customer. This is because the first relevant land transaction is a purchase by the bank from the third party seller. Section 71A(2) does not apply because the vendor is not the customer. There is no sub-sale, because (as is common ground) a purchase followed by a lease does not trigger section 45. In commercial reality, (as in the present case) the customer ends up footing the tax bill, because the bank takes a tax indemnity from the customer. The Ijara structure to which the exemption in section 71A(2) typically applies is a re-finance by a customer who has already purchased the property and paid SDLT on completion. There is, again, no sub-sale. An interpretation and application of section 45(5A) in a sub-sale context so as to charge SDLT on the bank therefore imposes the same consequence of taxing the bank as does an ordinary Ijara structure to finance a purchase where there is no sub-sale. In both cases, the usual tax indemnity imposes the ultimate tax burden on the customer. In the present case the evidence suggests that the sub-sale route was chosen because MOD decided to use a sealed bid process in which MAR would have found it difficult to participate, and because MOD wanted a delayed completion, while it re-billeted the troops in the Barracks. These are relatively unusual fact-specific matters which ought not to affect the issues of construction. The reason why, in the present case, the tax payable was (at least initially) greater than the specified percentage of the price payable to MOD is because MAR and PBL chose to include within the financing a large amount over and above that purchase price, structured as part of the purchase price payable by MAR to PBL on the sub-sale. The main element in the excess appears to have been the deferred payment of amounts needed by PBL to make early rental payments under the lease from MAR. Their commercial effect, in cash flow terms, was to give PBL an initial rent holiday, in broadly the same way as is often achieved under conventional mortgaged-backed finance by the bank lending an additional amount above the purchase price to fund early payments of interest. It is possible, although the evidence does not so state in terms, that this at least could have been a reason for constructing the Ijara finance by way of sub-sale, because the excess finance amounts could hardly have been payable to MOD, if MAR had purchased directly. After 2011 it would attract no additional SDLT if achieved by way of sub-sale, because the original purchase (here between MOD and PBL) would not be disregarded, and section 71A(2) would exempt the completed secondary contract. Before 2011, taxation of this additional finance amount appears to have been inevitable, whether by treating MOD as the vendor under section 71A(2), or under section 75A. This is, again, not an ordinary consequence of Sharia compliant financing. Where the finance amount is less than the full purchase price, a shared ownership structure was usually adopted, with different tax treatment which the court did not need to investigate. The Ijara structure used here was applied where the whole purchase price was being financed. In such cases the amount of tax paid by the bank will not differ substantially from the tax which would have been payable on the price paid to the third party seller. Ironically, substantially the same result may yet ensue here, because the Ijara structure was terminated early, before most of the excess finance amount had been paid. In such circumstances it is common ground that Part 4 permits a claim for repayment of the excess tax from the Revenue. This is because SDLT is paid up-front on contingent consideration on an assumption that the contingency will occur, and then reclaimed if it does not. In conclusion therefore, I have not been persuaded by any of the objections to construing and applying sections 45 and 71A of the Act in a way which, in the unusual context of a sub-sale coupled with an Ijara financing structure, leads to SDLT being payable by MAR on the consideration payable under the completed secondary contract by which it acquired a chargeable interest in the Chelsea barracks under a chargeable land transaction, and all the other transactional parts of the structure being either disregarded or exempt. Of the only two interpretations of the relevant statutory provisions (from which I would exclude section 75A for the reasons given), that is the one which broadly achieves, rather than wholly frustrates, what must have been the underlying purpose of Part 4 in the relevant context. If MAR cannot now be made to pay, which the Revenue do not accept, and this leads to the shocking consequence that the public purse gets nothing from this large transaction by way of SDLT, that will only be because, in the words of Mr Thomas QC for PBL, the Revenue have been relentlessly pursuing the wrong taxpayer. It is a sad irony that, at all stages until the appeal to the Upper Tribunal, both parties appear to have thought that the only candidate as the taxpayer was PBL, but it is of no consequence to the outcome. In my view the Court of Appeal reached the right answer, and I would therefore dismiss the appeal. |
The question on this appeal is whether a bingo promoter is entitled to a refund of Value Added Tax (VAT) paid to the Commissioners of Her Majestys Revenue and Customs (HMRC) over many years on fees charged to customers for the right to play bingo. The question itself has only retrospective significance, as VAT on commercial bingo operations was replaced in 2003 by a separate bingo duty. But the appellants case also raises some broader issues about the assessment of VAT. The taxpayers operations The appellant company (which I shall refer to as the taxpayer) operates bingo clubs in Scotland. A customer who wishes to play bingo at one of its clubs pays a fee which entitles the customer to take part in a number of games of bingo, forming a session. On payment of the fee, the customer receives a book of cards. Each card contains a grid of numbers for one of the games in the session. The customer does not need to participate in every game. Cash prizes are paid to those who participate in games of bingo and win. As is well known, games of bingo are presided over by a caller who draws and announces random numbers. If the number called out is on a players card, the player marks it off. The game continues until one of the players has marked off on their card all the numbers required to win and announces that fact. The bingo club manager decides, after the sale of tickets for a particular session has concluded and immediately before the session begins, what the prize money for each game in the session will be save that some games, typically the jackpot game in the session, are played for fixed prizes advertised in advance. Such prizes tend to be consistent for the same sessions from week to week. VAT on bingo VAT is a tax charged on the supply of goods or services. There is a common system of VAT for member states of the European Union established by Council Directive (EC) 2006/112 of 28 November 2006 (the Principal VAT Directive). This directive continues to have effect in the United Kingdom during the transition period following the UKs exit from the European Union. The Principal VAT Directive replaced the Sixth Council Directive (Council Directive 77/388/EEC of 17 May 1977). It is sufficient to quote the relevant provisions of the Principal VAT Directive, as it made no changes from the Sixth Council Directive which matter for present purposes. The main UK national legislation is the Value Added Tax Act 1994 (the VAT Act) and the Value Added Tax Regulations 1995 (SI 1995/2518) made under that Act (the 1995 Regulations). The national legislation must be interpreted so far as possible in conformity with the underlying directive, which also creates rights that are directly enforceable by individuals against the state in so far as the national legislation has not implemented the directive or has not done so correctly: Marshall v Southampton and South West Hampshire Area Health Authority (Teaching) (Case C 152/84) [1986] QB 401, paras 46 47. Article 73 of the Principal VAT Directive provides: In respect of the supply of goods or services, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party Article 73 is implemented in the UK by section 19 of the VAT Act, which includes the following provisions: (2) If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration. (4) Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it. VAT is a tax on turnover, not profit. Thus, in the normal case the tax is charged on the full amount which the customer agrees to pay to the trader without any deduction for costs incurred by the trader in making the supply (although VAT on inward supplies to the trader can be deducted as input tax from the traders output tax in calculating the amount of tax payable to HMRC). In the case of commercial gambling, however, it has been recognised that it would be wrong to regard all the money received from participants by the organiser as consideration for the supply of a service. As pointed out by Jacobs AG in H J Glawe Spiel und Unterhaltungsgerate Aufstellungsgesellschaft mbH & Co KG v Finanzamt Hamburg Barmbeck Uhlenhorst (Case C 38/93) [1994] STC 543; [1994] ECR I 1679, paras 14 30, and Fischer v Finanzamt Donaueschingen (Case C 283/95) [1998] QB 833, paras 32 59, the basic activity of gambling involves money changing hands through placing bets and receiving winnings and does not involve the consumption or supply of any goods or service at all. What can be seen as a service is promoting and organising the activity and providing facilities for it. In so far as money received from customers by the promoter or organiser is paid out again to players as winnings, it cannot fairly be regarded as consideration for the supply of this service. It is therefore only the net sum retained by the promoter after deduction of winnings which may be included in the taxable amount for VAT purposes. That approach was endorsed by the court now known as the Court of Justice of the European Union (the CJEU) in the Glawe Spiel case, which concerned the application of the VAT regime to gaming machines. The machines contained two compartments. Coins inserted to play on the machine went into one compartment (the reserve), unless the reserve was full, in which case they went into the cash box. Coins paid out as winnings all came from the reserve. Coins which entered the cash box were retained by the operator for its own benefit. The machines were set up so that on average they paid out as winnings a pre determined proportion of the money inserted. The CJEU held that in these circumstances the taxable amount did not include the winnings paid out to players. To apply this principle to bingo, it is common ground that it is necessary to divide the fees charged by the promoter to customers into two components. One component is referred to as the stake. This is the contribution which each customer is treated as making towards the cash prizes paid out to the winners of games of bingo. The stake is outside the scope of the VAT regime. The other component is the participation fee. This is calculated by deducting the stake from the total fee received and is treated as the consideration obtained by the promoter in return for the supply to the customer of the right to play bingo for cash prizes. At all material times, VAT was payable on this component. The change in HMRCs guidance The background to the present dispute is a change in the guidance given by HMRC about how the participation fees on which VAT was payable should be calculated. Until 2007, leaflets and notices published by HMRC stated that bingo promoters should calculate the participation fees separately for each game in a session. This is referred to as the game by game basis of calculation. In 2007, the guidance changed. In February 2007, HMRC issued Business Brief 07/07 (the business brief), which stated that the participation fees treated as taxable turnover should instead be calculated on a session by session basis. The difference of approach matters for this reason. As mentioned, some bingo games are played for fixed prizes advertised or guaranteed in advance. If too few customers pay to attend a session, the proportion of the fee paid by each customer which is attributed to such a game may not be enough to fund the guaranteed cash prize. In that event the promoter will have to top up the prize money for that game from other funds. If participation fees are calculated on a game by game basis, the funds used to top up the prize money for any game will not reduce the taxable turnover for the session. If, on the other hand, participation fees are calculated on a session by session basis, then amounts used to top up the prize money for any game will reduce the taxable turnover for the session (unless and to the extent that the total prize money paid out in the session exceeds the total fees received). Accordingly, if the game by game basis of calculation is used, the taxable consideration will potentially be higher than where the session by session basis is used. This is because, on the game by game approach, part of the prize money given out (that part which, for any individual game, is funded by participation fees attributable to other games in the session) is subject to VAT, whereas on the session by session approach this part of the prize money is not subject to VAT. The business brief As mentioned, the change of approach by HMRC was announced in the business brief, published in 2007, which aimed to clarify HMRCs policy on how to calculate for VAT purposes participation fees paid by cash bingo players. The key parts of the business brief said this: Calculating the VAT due When a player pays to participate in all or part of a bingo session, the supply made by the promoter is the right to participate in the number of games during that session for which they have received payment. As a player cannot participate in further sessions unless they make further payment, the supply to the player is completed when the session ends. In these circumstances the amount of VAT due on participation and session charges should properly be calculated on a session by session basis by deducting the stake money arising in each individual session from the total amount (less any admission fees) paid by players to participate in that same session. Where money from other sources is added to the stake money received in the session in order to meet guaranteed prizes, that additional money cannot be used to reduce the value for VAT of the participation and session charges paid for taking part in that session. Making claims or adjustments Bingo promoters that have calculated the VAT due on participation and session charges on a game by game basis, and who now find that they have done so incorrectly, may make a claim to HMRC for a repayment of any resulting overdeclaration, subject to the conditions set out in Notice 700/45 How to correct VAT errors or make adjustments or claims. In particular, businesses should note that: where the total of previous errors does not exceed 2,000 net tax, an adjustment may be made to your current VAT return; but where the total of previous errors exceeds 2,000 net tax a separate claim should be submitted to HMRC (in these cases the errors must not be corrected through your VAT returns). HMRC may reject all or part of a claim if repayment would unjustly enrich the claimant. Notice 700/45, to which cross reference was made in the business brief, gives general guidance on how to correct errors and make other adjustments to VAT returns and how to claim refunds of any VAT paid that was not due. At the relevant time the notice stated that any such claim or adjustment was subject to a time limit of three years. The legislative basis for the guidance in Notice 700/45 on claiming a refund of VAT paid that was not due was section 80 of the VAT Act. The version of section 80 in force at the relevant time (as amended by section 3 of the Finance (No 2) Act 1995) stated: Subsections (1A) and (1B) made further provision for the crediting and repayment of amounts that were not due. Section 80 continued: (1) Where a person (a) has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and (b) in doing so, has brought into account as output tax an amount that was not output tax due, the Commissioners shall be liable to credit the person with that amount. (2) The Commissioners shall only be liable to credit or repay an amount under this section on a claim being made for the purpose. (3) It shall be a defence, in relation to a claim under this section by virtue of subsection (1) or (1A) above, that the crediting of an amount would unjustly enrich the claimant. (4) The Commissioners shall not be liable on a claim under this section (a) (1) or (1A) above, or (b) (1B) above, to repay an amount to a person under subsection to credit an amount to a person under subsection if the claim is made more than three years after the relevant date. (4ZA) The relevant date is (a) in the case of a claim by virtue of subsection (1) above, the end of the prescribed accounting period mentioned in that subsection (7) Except as provided by this section, the Commissioners shall not be liable to credit or repay any amount accounted for or paid to them by way of VAT that was not VAT due to them. The taxpayers claims for repayment Until 2007, the taxpayer accounted for VAT on its bingo operations on a game by game basis in accordance with HMRCs published guidance. After the business brief was issued, the taxpayer made a claim under section 80 of the VAT Act for repayment of tax that would not have been payable had it calculated its taxable turnover on a session by session basis rather than a game by game basis. Because of the time limit in section 80(4), this claim was limited to output tax paid in the previous three years. The taxpayer was repaid the amount of tax that was not due in those years applying the session by session basis. In 2011 a First tier Tribunal (Tax Chamber) heard an appeal by another bingo club operator which had made a claim to be repaid output tax going back to 1996. As with the taxpayer in this case, that operator had calculated its taxable turnover on a game by game basis until HMRC published the business brief. The argument advanced in support of its claim was afterwards adopted by the taxpayer in the present case and I will consider it in more detail soon. In short, it was said that the change to a session by session basis of calculation had brought about a decrease in the taxable consideration received by the operator during the relevant period and that the operator was entitled to make an adjustment to its VAT return to reflect this reduction which was not subject to any time limit. The First tier Tribunal accepted this argument and allowed the appeal: see Carlton Clubs plc v Revenue and Customs Comrs [2011] UKFTT 542 (TC); [2011] SFTD 1209. In the light of this decision, the taxpayer in the present case made an adjustment of output tax in its VAT return for the period ending December 2012 in a sum of 460,630.36 by way of a credit to offset output tax brought into account in the years 1996 to 2004. The credit represented the amount of output tax that would not have been brought into account in those years if the session by session basis rather than the game by game basis of calculation had been used. The taxpayer explained its reasons for making this adjustment in a letter to HMRC dated 29 January 2013. On 21 March 2013 HMRC issued a decision declining to accept the adjustment and assessing the taxpayer for what it considered to be undeclared output tax in a corresponding amount. The proceedings below The taxpayer appealed against HMRCs decision and assessment to the First tier Tribunal (Tax Chamber), which allowed the taxpayers appeal, substantially adopting the reasoning of the tribunal in the Carlton Clubs case [2016] UKFTT 508 (TC). HMRC appealed to the Upper Tribunal (Tax and Chancery Chamber), which refused the appeal [2017] STC 1895; but its further appeal to the Inner House of the Court of Session was allowed by the First Division (Lord Carloway, Lord President, Lord Drummond Young and Lord Tyre) for reasons given in an opinion dated 13 December 2018: [2018] CSIH 78; [2019] STC 368. The Inner House accordingly reinstated HMRCs assessment of VAT. However, it granted the taxpayer permission to appeal to this court, noting that there are some 14 other cases pending which raise similar or related issues and are said to have a total value in the region of 30 to 40m. The taxpayers case The taxpayers case, presented with dexterity by Mr Roderick Cordara QC, has exhibited a somewhat protean quality but can, I think, be captured in the following contentions: i) The game by game and session by session methods were both lawful and correct methods of calculating output tax due on fees charged by the taxpayer for the right to play bingo for cash prizes and, as such, the taxpayers claim is not a claim for repayment of tax paid that was not due (which would be time barred under section 80 of the VAT Act). ii) Instead, the taxpayer has made an adjustment to its VAT return (to which no time limit applies) to reflect a decrease in consideration for the relevant supplies of services which has resulted from the change in the method of calculation. iii) The taxpayer is entitled to make such an adjustment as it was required or invited to do so by HMRC in the business brief. The statutory time limit The first and fundamental obstacle which the taxpayers claim faces is the time limit imposed by section 80 of the VAT Act. It is not disputed that the UK is entitled to set a time limit for making any claim to be credited or repaid tax that has been overpaid and that the time limit imposed by section 80 is valid and effective for this purpose. Hence it is not in dispute that, if the taxpayers claim for repayment of VAT accounted for between 1996 and 2004 falls within section 80, the claim is time barred. The taxpayer is therefore in the position of having to show, in order to succeed, that the output tax for which it accounted to HMRC on a game by game basis in those years was indeed due to HMRC. That is because if the amount which the taxpayer is claiming was not VAT due to [HMRC], then pursuant to section 80(4) and (7), HMRC is not liable to credit or repay that amount. This confronts the taxpayer with a dilemma. Clearly it does not wish to argue and does not argue that the approach set out by HMRC in the business brief was wrong and that the correct basis of calculation is the game by game basis and not the session by session basis. Such a contention, if correct, would defeat the taxpayers claim for repayment as it would mean that, for the years covered by the claim, tax has been correctly accounted for on the game by game basis. Worse than that, it would also mean that, by using the session by session basis of calculation for periods after 2004, the taxpayer has underpaid VAT and therefore owes money to HMRC. On the other hand, if the taxpayer accepts that, as stated in the business brief, VAT should properly be calculated on the session by session basis and not the game by game basis, then the taxpayer is in principle entitled to be repaid the amounts of output tax that were overdeclared in past years as a result of using the game by game method of calculation on the ground that such amounts were not due to HMRC. The taxpayer has indeed made a successful claim on this basis for the years 2005 to 2007. However, if this is the correct view, then the present claim relating to earlier years is time barred. The way in which the taxpayer seeks to escape this dilemma is by arguing that both methods of calculation are, in principle, correct and consistent with the applicable legislation. Accordingly, when the taxpayer was using the game by game method, it was paying output tax that was due; but it was also complying with the legislation and paying output tax that was due when it adopted the session by session method of calculation. To develop this argument, Mr Cordara QC drew a contrast between the normal case in which ascertaining a traders taxable turnover is a straightforward question of fact and a class of cases in which evaluative judgment is required. In the normal case the consideration obtained for a supply of goods or services is ascertained by identifying what, as a matter of fact, the customer agreed to pay for the supply. Sometimes, however, a single price is charged by a supplier which comprises a taxable element and a non taxable element (or element subject to a different rate of tax). This might be, for example, because a single price covers the supply of a service which is subject to VAT and another service which is exempt. In such cases some method of apportionment is needed to determine what part of the price paid by the customer is attributable to each element. This is often not an exact process. There may be no single right method of apportionment but two or more methods each of which is reasonable and legitimate. The present case falls into the category where the amount which the customer has agreed to pay needs to be split into two separate elements, one of which is taxable and the other not. The split is not one which has been agreed between the customer and the supplier. It requires an apportionment to be made based on an enquiry into the internal financial position of the suppliers business. Mr Cordara submitted that whether to take as the accounting unit for this purpose individual games of bingo, or bingo sessions, or all the games or sessions held in a week, or in a month, or in some other period, is a question to which there may be no one right answer. In relation to the taxpayers business, he argued, both the game by game basis and the session by session basis were reasonable and valid methods to adopt. It therefore cannot be said that, by accounting for VAT using the game by game method in line with HMRCs guidance at the time, the taxpayer brought into account as output tax any amount that was not due and which it is now seeking to claim back. In their written case counsel for HMRC did not appear to dispute that there was more than one lawful method of apportionment available to the taxpayer in this case. In oral argument Mr Thomson QC clarified HMRCs position as being that, while this may be so in principle, it was not true on the agreed facts of this case. For my part I think it clear that there can be only one correct method of calculating the taxable element of fees charged to customers for playing cash bingo and that, on the facts of the present case, this was the session by session method and not the game by game method. The correct method of calculation Counsel for the taxpayer was concerned to emphasise that deciding how to apportion a unitary price charged by a supplier into two elements for the purpose of calculating VAT can involve an exercise of evaluative judgment, as to which differences of view can exist within a spectrum of what is reasonable. This is undoubtedly true. But it does not follow that there must be more than one method of apportionment which the supplier may lawfully use. Although that is a possible conclusion for a court or tribunal to reach, in most cases where such a question is raised the court or tribunal can be expected to exercise its own judgment as to which method should be used. There is good reason for this. In matters of taxation consistency of approach is of critical importance. If the same exercise of apportionment may lawfully be carried out in more than one way, the result is likely to be that different taxpayers whose situations are identical will lawfully pay different amounts of tax. That offends the principle of equal treatment. It is also capable of distorting competition between businesses. In the case of a pan European system of taxation such as VAT, there is an additional consideration that recognising more than one method of apportionment as lawful could result in inequality in competition between businesses situated in different member states. This was a matter emphasised by the CJEU in MyTravel plc v Customs and Excise Comrs (Case C 291/03) [2005] STC 1617. That case concerned the apportionment for VAT purposes of a single price charged by a tour operator to customers for a package holiday which comprised services bought in from third parties (for example, hotel owners) and services provided by the tour operator itself (for example, where it used its own airline). In an earlier decision, Customs and Excise Comrs v Madgett and Baldwin (trading as Howden Court Hotel) (Joined Cases C 308/96 and C 94/97) [1998] STC 1189, the CJEU had considered two possible methods of making such an apportionment. One method treated the consideration attributable to each component as proportional to what it cost the operator to supply the service. The other method was based on the market value of each component, if sold separately. Both methods involved assumptions which were to some extent arbitrary. The court had ruled (at para 46 of the judgment) that: a trader may not be required to calculate the part of the package corresponding to the in house services by the actual cost method where it is possible to identify that part of the package on the basis of the market value of services similar to those which form part of the package. This could be read as giving the trader, where the market value of the in house services can be established, a choice of which method to use. In the MyTravel case, however, the CJEU held that this is not the position. The court ruled that a trader may not use the market value method at its own discretion according to whether this produces a lower tax liability than would result from using the actual cost method. Rather, the trader must use the market value method whenever possible unless the trader proves that the criterion of actual costs reflects the actual structure of the package (para 35 of the judgment). The reasons given (at paras 32 33 of the judgment) for not according traders the right to choose which method to use bear quotation: 32 The grant to taxable persons of such a right could have the consequence of allowing them to increase artificially the taxable amount subject to the lowest rate and of thus creating an inequality in competition between businesses, in favour of those which have established their business or have a fixed establishment in a member state which taxes certain transactions at very low rates or even zero rates them, as in the United Kingdom in relation to passenger transport. Such an interpretation could, therefore, run counter to the principle of neutrality of VAT. 33 As is apparent from the ninth recital in the preamble to the Sixth Directive, the Community legislature wished the taxable base to be harmonised so that the application of the Community rate to taxable transactions leads to comparable results in all the member states. This harmonisation is thus intended to ensure that situations similar from an economic or commercial point of view are treated identically as regards application of the VAT system. The harmonisation thus helps to ensure the neutrality of that system. The same aim of seeking to achieve harmonisation and a uniform basis of assessment such as will eliminate, as far as possible, factors which may distort competition is reflected in the fourth, seventh and eight recitals to the Principal VAT Directive. The only case cited on this appeal which proceeded on the basis that a taxable person had a right to choose between different lawful methods of apportionment is Victoria & Albert Museum Trustees v Customs and Excise Comrs [1996] STC 1016. In that case the trustees of a museum needed to apportion input tax on goods and services purchased for use in both their business and non business activities. Guidance published by HMRC stated that for this purpose there is no special method of apportionment and that any method could be used, provided that it produced a fair result and was used with the prior agreement of the local VAT office. Having used one method of apportionment for several years, the trustees obtained the agreement of their local VAT office to use a different method which was more advantageous to them. They then claimed a refund of the tax that would have been saved if the more favourable method had been used in earlier years, relying on a regulation which allowed an error in accounting for tax or in any return to be corrected. Turner J affirmed the finding of a tribunal that the trustees had not made an error when all that had happened was that they had chosen a method of assessment which did not provide the most favourable outcome. Whether or in what circumstances it is compatible with EU law to allow taxpayers a choice between methods of apportionment when calculating VAT was not a question considered in the Victoria & Albert Museum case, nor is it necessary to explore that question further here. The argument in the Victoria & Albert Museum case proceeded on the assumption that there was more than one lawful method of apportionment in accordance with the HMRC guidance applicable in that case. What the decision shows is that, if that is the position, it does not lead to the conclusion desired by the taxpayer. Where a lawful method has been adopted, the fact that another method could lawfully have been used does not in itself provide any basis for subsequently claiming a refund of tax that would have been saved if the alternative method had been used instead. In any event the facts of this case bear no relevant similarity to those of the Victoria & Albert Museum case. It has never been suggested in guidance issued by HMRC that bingo promoters had a discretion to choose between different methods of apportionment. Furthermore, contrary to what has been urged on the taxpayers behalf, the apportionment between taxable and non taxable elements of fees charged by bingo promoters to customers does not require an evaluative judgment. It is simply a matter of arithmetic and involves no exercise of judgment at all. Before a composite or package price is apportioned between taxable and non taxable elements, it is first necessary to identify the service or services in return for which the price is being charged. On the agreed facts of the present case, there can be no doubt about this. It is an agreed fact that what a customer who wishes to play bingo at one of the taxpayers clubs receives in return for payment of the fee charged is the right to participate in a session of bingo. That is reflected in the book of cards supplied to the customer at the time of payment. Whether customers choose to use all the cards they receive and play each game included in the session is up to them: there is no suggestion that any refund is available if a customer does not take part in a game; nor are cards sold separately for the individual games in a session. I recognise that the fact that a single composite price is charged is not decisive and there may be cases in which it better reflects commercial reality to regard customers who pay a single price as intending to purchase two or more distinct services: see Card Protection Plan Ltd v Customs and Excise Comrs (Case C 349/96) [1999] 2 AC 601, paras 29 31. However, in the present case I can see no reason and none has been advanced for going behind the pricing policy adopted by the taxpayer and treating the fee charged to participate in a session of bingo as if it were a bundle of separate fees charged for the rights to play separate games. On the contrary, such a division would fail to reflect the commercial reality that what a customer purchases and intends to purchase is the right to play all or any of the games which make up the session as he or she chooses. Once the relevant supply has been identified as the right to participate in a session, the apportionment of the fee charged to the customer into the separate components referred to as the stake and the participation fee does not involve any exercise of judgment. It is a simple arithmetical calculation. All that is required is to add up the total fees received for each session and deduct the total cash value of the prizes paid out in that session to arrive at the taxable consideration. That is an exercise which can yield only one correct answer. I therefore think it clear that on the agreed facts of this case the session by session basis was the only correct method of calculating taxable turnover. The game by game basis was an incorrect method to use because it wrongly treated customers as if they were paying separate fees to participate in individual games when in fact they were not. It follows that, in so far as the taxpayer accounted for more output tax and paid more VAT between 1996 and 2007 as a result of using the game by game basis of calculation than it would have done if the session by session basis had been used, the taxpayer accounted for and paid to HMRC tax that was not due. This should be a satisfactory conclusion for the taxpayer, as it means that the taxpayer was entitled under section 80 of the VAT Act to the refund of VAT for periods after September 2004 which it claimed. But the conclusion is not as munificent as the taxpayer would like, as it also means because of the time limit in section 80(4) that the taxpayer is not entitled to any refund of tax accounted for or paid to HMRC in any earlier period. That is a complete answer to taxpayers claim in these proceedings, but I will also address the further steps in the taxpayers argument. Alleged decrease in consideration The legislative provision on which the taxpayer has sought to found a claim for repayment of VAT without falling within section 80 of the VAT Act is article 90 of the Principal VAT Directive. This states: In the case of cancellation, refusal or total or partial non payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the member states. Although a contrary opinion was expressed by Lord Drummond Young in the Inner House, it is common ground on this appeal that there is no difference in meaning between the term price in article 90 and the term consideration used in article 73: see eg Finanzamt Bingen Alzey v Boehringer Ingelheim Pharma GmbH & Co KG (Case C 462/16) EU:C:2017:1006, para 45. The mechanism in UK national law for claiming repayment of VAT in cases covered by article 90 is contained in regulation 38 of the 1995 Regulations. Regulation 38 applies where there is an increase or a decrease in consideration for a supply which includes an amount of VAT, and the increase or decrease occurs after the end of the prescribed accounting period in which the original supply took place. In such circumstances the taxable person is required to adjust his VAT account in accordance with the regulation. Unlike where a claim for repayment of tax is made under section 80, there is no time limit for making an adjustment under regulation 38. The taxpayer argues that, where there has been a change from one method of calculating its tax liability (the game by game basis) to another method (the session by session basis) which produces a lower taxable amount, the adoption of the new method at any rate where it takes place in response to a relevant communication from HMRC involves a decrease in consideration (or reduction in the price) occurring after the accounting period in which the original supply took place. This accordingly requires an adjustment to be made under article 90 of the Principal VAT Directive and regulation 38 of the 1995 Regulations to reduce the amount of tax payable. I do not consider this a tenable interpretation of the legislation, essentially for reasons given by the Inner House. As the CJEU has observed on several occasions, the provision which is now article 90 of the Principal VAT Directive embodies one of the fundamental principles of the directive, according to which the basis of assessment is the consideration actually received by the taxable person. In accordance with that principle, the provision: requires the member states to reduce the taxable amount whenever, after a transaction has been concluded, part or all of the consideration has not been received by the taxable person. See Goldsmiths (Jewellers) Ltd v Customs and Excise Comrs (Case C 330/95) [1997] ECR 1 3801; [1997] STC 1073, paras 15 16; Freemans plc v Customs and Excise Comrs (Case C 86/99) [2001] 1 WLR 1713, para 33; Grattan plc v Revenue and Customs Comrs (Case C 310/11) [2013] STC 502, para 35. This may occur because part or all of the price is not in the event paid or because some form of rebate or refund is made by the supplier which reduces the consideration received after the supply has taken place. What is required, however, is a change in the consideration actually received by the supplier. No case has been cited in which it has been held that a change in the method used to calculate the taxable proportion of the consideration received falls within the scope of article 90. It is plain, in my view, that it does not. In such a case nothing has happened since the time of the supply to reduce the consideration actually received at that time. All that has happened is that the taxpayer has had second thoughts about how the consideration received at the time of the supply should be analysed for tax purposes. The position was well summarised by Lord Drummond Young in the Inner House, when he said (at para 61 of the judgment) that what is involved when a retrospective shift is made by a bingo promoter from a game by game to a session by session basis of calculation is not a decrease in consideration in the real world, as between a supplier and its customer, but is rather a re attribution of tax liability within the taxpayers internal accounts. I agree. A case heavily relied on by the taxpayer is Elida Gibbs Ltd v Customs and Excise Comrs (Case C 317/94) [1997] QB 499. This concerned coupon schemes operated by a manufacturer of toiletries under which consumers who presented a coupon (either cut out from a newspaper or magazine or distributed by the retailer) when buying a product in a shop received a discount off the purchase price. The prices charged by the manufacturer to wholesalers, and by wholesalers to retailers, were not affected by the coupon schemes. But retailers who accepted coupons from consumers could get the value of the coupons refunded to them directly by the manufacturer. The CJEU held that in calculating its taxable turnover the manufacturer could deduct the sums which it refunded, even though there was no direct contractual relationship between the manufacturer and the retailers to whom the sums were paid. The taxpayer emphasised that the CJEU in its judgment treated the predecessor provisions to articles 73 and 90 as expressions of the same underlying principle (of neutrality) and did not make it clear, or apparently think it necessary to specify, under which of those provisions the taxable amount was to be reduced. The taxpayer further emphasised that the reduction in the taxable amount recognised in the Elida Gibbs case did not involve any amendment of the contract or refund of money between the manufacturer and its customer (the wholesaler). This was said to show that in the present case there could likewise be a reduction in the taxable amount, and hence in the amount of VAT payable by the taxpayer, without any contractual amendment or refund of money to its customers. In my opinion, the decision in the Elida Gibbs case provides no assistance to the taxpayer. Although the CJEU was not asked to and did not decide in that case whether (the predecessor to) article 73 or article 90 was the applicable provision, it is clear from later decisions that it was the latter provision which applied and that the correct analysis is that the original taxable amount (ascertained when the goods were supplied by the manufacturer to its wholesaler customer) was subsequently reduced when coupons were accepted and refunds claimed and paid: see Freemans plc v Customs and Excise Comrs (Case C 86/99) [2001] 1 WLR 1713, paras 31 33 and 36; Finanzamt Bingen Alzey v Boehringer Ingelheim Pharma GmbH & Co KG (Case C 462/16) EU:C:2017:1006, paras 37 42. The fact that the refunds were paid, not to the manufacturers own customer but to a party further down the supply chain, was held not to matter. But it was fundamental to the courts reasoning in the Elida Gibbs case that the original taxable amount was not actually received by the manufacturer because part of that amount was subsequently repaid albeit directly to retailers rather than to its own customer. In the present case the supply chain does not extend beyond the taxpayers bingo playing customers and so the possibility of refunding part of the price to someone further down the supply chain does not arise. That feature of the Elida Gibbs case is therefore of no relevance. The essential point is that, unlike in the Elida Gibbs case, there has been no refund made to anyone by the taxpayer and accordingly article 90 is not engaged. It is worth noting in this context the reason why there is no time limit for making an adjustment under regulation 38 and the fact that this reason does not justify exempting from any time limit a claim of the present kind. Until it was revoked in 2009, regulation 38 used to contain a provision which said that it did not apply to any increase or decrease in consideration which occurs more than three years after the end of the prescribed accounting period in which the original supply took place. In General Motors Acceptance Corpn (UK) plc v Revenue and Customs Comrs (2003) VAT decision 17990 a tribunal held that this provision was ineffective because it was incompatible with the predecessor to article 90 of the Principal VAT Directive the reason being that imposing a limitation period has the effect of ousting the taxable persons basic right to be taxed on the consideration received by him and no more (see para 65). This is clearly right. It is right because no adjustment can be made under regulation 38 unless and until an event occurs, however long after the original supply was made, which reduces the consideration actually received by the taxable person. It would be contrary to principle if the taxable person was barred from making the necessary adjustment to its tax liability to take account of such an event by a time limit which had expired before the event occurred and the adjustment was capable of being made. That rationale, however, has no application in a case of the present kind where what is said to constitute a decrease in consideration does not depend on any event which has occurred since the supply of services was made. All that has happened is that the taxpayer has subsequently altered the way in which it has calculated its VAT liability. All the matters, however, on which the calculation of its liability is based (the amount of fees received from customers and the amount of the prize money paid out) were established when the original supply was made indeed even before each bingo session began. Nothing has happened since then which needs to be brought into account and which the taxpayer might have been prevented from bringing into account if there were a time limit. This is consistent with the fact that regulation 38 and article 90 are concerned with actual payments or changes in the liability to make payments which occur after a supply of goods or services has taken place and not with a mere subsequent change of accounting method. The effect of the business brief It would undermine the orderly management of the tax system and subvert the policy embodied in section 80 of the VAT Act if a taxable person could insist on adjusting its tax liability for all past years, without any limit in time, simply by deciding to adopt a different method of calculating the taxable element of the price charged to its customers. I noted earlier that, even if it had been true that the game by game method and the session by session method of calculating taxable turnover were both valid and lawful methods, the fact that the taxpayer switched after 2007 from one lawful method to another would not of itself give the taxpayer any right to recover the tax that it would have saved if it had previously used the session by session method. The basis on which the taxpayer has sought to found such a right is the publication by HMRC of the business brief. That document is said to have required or invited bingo promoters in the position of the taxpayer to make a retrospective adjustment to their VAT account by re calculating their output tax for all past years (without limit in time) using the session by session basis instead of the game by game basis of calculation. The way in which the taxpayers case was put before the tribunals and the Inner House was to argue that, although both methods of calculation were consistent with the applicable legislation, the taxpayer was required to use the method set out in the guidance published by HMRC at any given time. This guidance was said to contain directions as to the method of calculation to be used. Thus, it was said that initially directions given by HMRC required the taxpayer to calculate its taxable turnover on a game by game basis. But then, when the guidance changed, the taxpayer was required to calculate its taxable turnover using the session by session basis of calculation not only going forward but also retrospectively for all past periods. It is, however, a misconception to characterise guidance of the kind issued by HMRC in this case as capable of giving directions with which taxpayers are obliged to comply. As Lewison LJ explained in Leeds City Council v Revenue and Customs Comrs [2015] EWCA Civ 1293; [2016] STC 2256, para 4: The administration and collection of VAT in this country is under the management of HMRC (formerly the Commissioners for Customs and Excise). There are many problems of interpretation arising out of the VAT code and HMRC provide the public with their own interpretation of points of difficulty; and information about the practice they adopt in various areas. These are variously contained in notices, business briefs and the VAT manual. They are not law: they are no more than HMRCs interpretation of the law. HMRC are not of course infallible, and so Parliament has legislated for a system of tribunals to decide contested points. As and when cases are decided against HMRC they will often revise their opinion and inform the public accordingly. Sometimes, of course, HMRC disagree with a tribunal decision, in which event they may choose to appeal. The fundamental point that an administrative agency, such as HMRC, has no power (in the absence of specific statutory authority) to issue guidance which has legally binding force is qualified by the doctrine which protects legitimate expectations created by such a public body. There is no doubt that guidance formally published by HMRC is capable in some circumstances of generating an expectation on the part of a taxpayer that a particular policy or practice or course of action will be followed which the law will protect by preventing HMRC from acting in a way which will frustrate that expectation: see eg R (Davies) v Revenue and Customs Comrs [2011] UKSC 47; [2011] 1 WLR 2625, paras 25 29. It is not necessary on this appeal, however, to examine the precise contours of this doctrine, as it is clear that it has no relevance to the facts of this case. The taxpayer is not seeking to prevent HMRC from frustrating an expectation said to have been created by guidance published before 2007 that the game by game method could properly be used to calculate the amount of VAT payable. Such an argument might have been advanced if the game by game method had been more favourable to the taxpayer than another method which HMRC was now contending ought to be used. But the factual situation in this case is the direct opposite of that. The taxpayer is seeking to argue that the game by game method should not be used to calculate the tax that was payable in periods before 2007. Any legitimate expectation that the taxpayer is entitled to rely on the accuracy of pre 2007 guidance does not assist that argument. Accordingly, to suggest that the business brief required bingo promoters to use the session by session basis of calculation ascribes to guidance published by HMRC a status which it does not have. Such guidance is not capable of imposing on taxpayers an obligation to calculate tax in a particular way. It represents only HMRCs view or interpretation of the law and, if a taxpayer disagrees with HMRCs view, it can appeal from a decision or assessment based on that view to a tribunal whose function it is to give authoritative interpretations of the law (subject to any further appeal). In any case it is quite impossible to read the language of the business brief as instructing bingo promoters to make retrospective adjustments to their VAT returns. The section of the business brief (quoted at para 15 above) headed Making claims or adjustments says that bingo promoters who fall into the category described may make a claim for a repayment, not that they must to do so. In oral argument on this appeal Mr Cordara for the taxpayer accepted that the business brief merely invited and did not require bingo promoters who had in past periods calculated VAT on a game by game basis to seek a repayment. His submission was that this could be done as the heading of the relevant section of the business brief indicated in either of two ways: by making a claim or by making an adjustment. If a bingo promoter made a claim for repayment on the basis that it had paid tax which was not due, this would be governed by section 80 of the VAT Act, with its time limit on recovery. If on the other hand the promoter elected to make an adjustment under regulation 38 on the basis that there had been a decrease in consideration for the supply, then (as already mentioned) such an adjustment is not subject to any time limit. Having originally availed itself only of the first option, it is the latter invitation which the taxpayer has now chosen to accept. I have explained why, as a matter of law, the only basis on which a repayment of tax could properly be claimed or made in the circumstances of the present case is that the tax was not due because it was calculated on a game by game basis when it should have been calculated on a session by session basis, and that there is no legal basis on which an adjustment under regulation 38 could properly be made. Had HMRC invited bingo promoters to make such adjustments and offered to repay tax which it was not liable to repay, it seems to me that it would have been acting outside its powers. But, in any case, the business brief cannot reasonably be read as making such an invitation or offer. The only invitation made in the business brief was to bingo promoters who have calculated VAT on a game by game basis, and who now find that they have done so incorrectly, to make a claim to HMRC for a repayment of any resulting overdeclaration. Such a claim can only reasonably be understood as a claim under section 80 the VAT Act, made on the footing that the promoter had overpaid tax because it had used the game by game method of calculation when, as advised in the business brief, the amount of VAT due should properly be calculated on a session by session basis. The sole peg on which the taxpayer seeks to hang its contention that adjustments under regulation 38 were invited is the reference to adjustments in the section heading and in the cross reference to Notice 700/45. It is true that the subject matter of Notice 700/45 included adjustments under regulation 38 (although, unhelpfully for the taxpayers case, such adjustments were said in the notice to be subject to a time limit of three years). However, the notice provided entirely general guidance about how to correct VAT errors and make adjustments or claims and was not specifically concerned with bingo. The fact that it included an explanation of how to make an adjustment under regulation 38 therefore does not mean that HMRC in the business brief were inviting bingo promoters who had previously used a game by game basis of calculation to make an adjustment under regulation 38. There was no suggestion that everything covered by the notice was relevant to the claims for repayment which bingo promoters were invited to make. Nor does the fact that the heading refers to making claims or adjustments support such an inference. The reference to adjustments in the body of the section, to which this must relate, is in the first bullet point, which states that where the total of previous errors does not exceed 2,000 net tax, an adjustment may be made to your current VAT return. This kind of adjustment to correct small errors was provided for in regulation 34 of the 1995 Regulations (and was also explained in Notice 700/45). It was quite different from the kind of adjustment to reflect a decrease in consideration provided for in regulation 38. Moreover, as the second bullet point explained, where the total of previous errors exceeds 2,000 net tax a separate claim should be submitted to HMRC. This could only be a claim under section 80 of the VAT Act for repayment of tax paid in error when it was not due. That was yet further confirmed by the statement that HMRC may reject all or part of a claim if repayment would unjustly enrich the claimant. A defence of unjust enrichment is provided by section 80(3) in relation to claims under section 80 of the VAT Act. I therefore consider that the language of the business brief is entirely inconsistent with the taxpayers case and can only reasonably be read in the way that it was originally read by the taxpayer, as inviting (only) claims from bingo promoters for repayment of VAT which had been calculated incorrectly by using the game by game basis of calculation when the session by session basis ought to have been used, subject to the statutory time limit for such claims of three years. Conclusion For these reasons I can find no merit in the taxpayers arguments and would dismiss the appeal. |
The claimant, Lady Brownlie, is the widow of the distinguished international lawyer Sir Ian Brownlie QC. In January 2010, she and her husband were on holiday in Egypt, staying at the Four Seasons Hotel Cairo at Nile Plaza. Lady Brownlies evidence is that on a previous visit to the hotel, she had picked up a leaflet published by the hotel advertising safari tours which it provided. Before leaving England on the subsequent trip, she telephoned the hotel and booked with the concierge an excursion to Fayoum in a hired chauffeur driven car. The excursion took place on 3 January, and ended in tragedy. The car left the road and crashed. The passengers, in addition to Sir Ian and Lady Brownlie, were his daughter Rebecca, and Rebeccas two children. Sir Ian and Rebecca were killed. Lady Brownlie and the two children were seriously injured. Lady Brownlie subsequently began proceedings for (i) damages for personal injury in her own right, (ii) damages under the Law Reform (Miscellaneous Provisions) act 1934 in her capacity as Sir Ians executrix, and (iii) damages for bereavement and loss of dependency under the Fatal Accidents Act 1976 in her capacity as her late husbands widow. The First Defendant, Four Seasons Holdings Inc (Holdings), is the holding company of the Four Seasons hotel group. It is incorporated in British Columbia. The Second Defendant, Nova Park SAE (Nova Park) is an Egyptian company which was identified by Lady Brownlies solicitors as the owner of the hotel building. The claim form has not been served on Nova Park and, apart from the issue of the claim form, no attempt has been made to pursue the claim against them. Nor have they been represented at any stage. The present appeal is concerned only with the position of Holdings, which has applied to set aside the claim form and service thereof out of the jurisdiction so far as it relates to them. Before permission can be given for the service of originating process out of the jurisdiction, it is necessary for the claimant to establish (i) that the case falls within at least one of the jurisdictional gateways in CPR 6BPD, para 3.1, (ii) that she has a reasonable prospect of success, and (iii) that England and Wales is the proper place in which to bring the claim. The third of these conditions reflects the principle of forum conveniens, and there is no issue about it in this case. It is accepted that England is a proper place in which to bring the present claim if the first two conditions are satisfied. So far as the claim is founded on contract, Lady Brownlies application for permission to serve out was based on CPR 6BPD, para 3.1(6)(a) (the contract was made within the jurisdiction). So far as it was founded on tort, it was based on CPR 6BPD, para 3.1(9)(a) (damage was sustained within the jurisdiction). Holdings says, first, that Lady Brownlie has not established that the contract with the hotel was made in England, but that wherever it was made, it was not made with them. Their case is that they are a group holding company whose subsidiaries provide certain central services to hotels of the Four Seasons hotel chain but neither own nor operate them. Gateway (6)(a) does not therefore apply. Secondly, they say that gateway (9)(a) does not apply because the damage which is the basis of the claim in tort was not sustained in England. Thirdly, they say that Lady Brownlie does not satisfy the requirement of CPR 6.37(1)(b) that there should be a reasonable prospect of success. It is common ground that any relevant contract for the services of the car and driver was governed by Egyptian law. The evidential standard Some of the jurisdictional gateways in CPR 6BPD merely require that the claim should be of a particular character. For example it is a claim for an injunction regulating conduct within the jurisdiction. Others, including gateways 6(a) and 9(a) on which Lady Brownlie relies, depend on the court being satisfied of some jurisdictional fact. A relevant contract must, for example, have been made or breached in England or relevant damage sustained there. There are two closely related problems about this. The first is a legal one, namely that none of the laws established evidential standards satisfactorily meets the case. The second is a practical one, namely that some jurisdictional facts, for example the existence of the contract said to have been made or breached in England, may be in issue at trial if the case is allowed to proceed, when they will in all probability be determined on fuller material than is likely to be available at the interlocutory stage. The same is true of the more general requirement that if it proceeds the claimant should have a reasonable prospect of success. The leading modern cases are the decisions of the House of Lords in Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869 and Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438. Vitkovice was about the evidential standard to be applied to the applicability of the jurisdictional gateways. It concerned what was then RSC order 11, rule 1(e) (the claim is brought in respect of a breach committed within the jurisdiction of a contract made within or out of the jurisdiction). The Appellate Committee held that each element of the gateways factual requirements had to be established, namely the contract, the breach and its geographical location. However, it rejected the view expressed by Lord Goddard CJ in Malik v Narodni Banka Ceskoslovenska [1946] 2 All ER 663 that the evidential standard for establishing that one of the jurisdictional gateways applied was the civil burden of proof, on the ground that such a test in effect amounted to a trial of the action or a premature expression of opinion on its merits: see Lord Simonds, at p 879. It also rejected the suggestion that it was enough to show a prima facie case, because that test depended on the legal adequacy of the factual case advanced by the claimant. The application of such a test would not be consistent with the practice, which allowed a factual challenge to the evidence led by the claimant on the point. Lord Simmonds (p 880), with whom Lord Normand agreed, adopted from Counsel the expression a good arguable case, which appeared to him to import more than a prima facie case but less than a balance of probabilities. Lord Radcliffe, with whom Lord Tucker agreed, spoke of a strong argument or a strong case for argument (pp 883, 884, 885). In Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438, Lord Goff, with the agreement of the rest of the Committee, endorsed Lord Simmonds formulation as applied to the gateways, and suggested that Lord Radcliffes formulation meant the same thing. At the same time, he held that the existence of a reasonable prospect of success fell to be determined according to a lesser standard, namely that there should be a serious issue to be tried. This has been held to correspond to the test for resisting an application for summary judgment: Altimo Holdings and Investments Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804, para 71. Since Lord Goff considered that the evidential standard applicable to jurisdictional facts relevant to the availability of the gateway was derived from RSC order 11, rule 4(2) (No such leave shall be granted unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under this Order), he must also have thought that the standard was the same whether the jurisdictional fact in question would or would not be in issue at a trial on the merits. I think that that must be right, and equally true of the current rules, although the language of CPR 6.36, which limits the courts jurisdiction to cases falling within the gateways, is not precisely the same. An attempt to clarify the practical implications of these principles was made by the Court of Appeal in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547. Waller LJ, delivering the leading judgment observed at p 555: Good arguable case reflects that one side has a much better argument on the material available. It is the concept which the phrase reflects on which it is important to concentrate, ie of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction. When the case reached the House of Lords, Waller LJs analysis was approved in general terms by Lord Steyn, with whom Lord Cooke and Lord Hope agreed, but without full argument: [2002] AC 1, 13. The passage quoted has, however, been specifically approved twice by the Judicial Committee of the Privy Council: Bols Distilleries (trading as Bols Royal Distilleries) v Superior Yacht Services Ltd [2007] 1 WLR 12, para 28, and Altimo Holdings, loc cit. In my opinion it is a serviceable test, provided that it is correctly understood. The reference to a much better argument on the material available is not a reversion to the civil burden of proof which the House of Lords had rejected in Vitkovice. What is meant is (i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the Court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it. I do not believe that anything is gained by the word much, which suggests a superior standard of conviction that is both uncertain and unwarranted in this context. The correct defendant The choice of defendants in this case was difficult because of the diffused character of the Four Seasons hotel chain, and the complex and undisclosed contractual arrangements governing the relationship between individual hotels and the Four Seasons group. On 7 June 2010, Lady Brownlies solicitors Kingsley Napley wrote to the legal department of Four Seasons Hotels and Resorts in Toronto, outlining the basis of the proposed claim. They asserted that the contract was made with Four Seasons Hotel Group without specifying the particular entity to which they were referring. They invited them to accept liability or failing that to identify their defence and disclose certain documents. They received a reply from Ms Marilyn Waugh, Corporate Legal Adviser to Four Seasons Hotels and Resorts, saying that their letter had been passed to the Four Seasons Hotel Cairo at Nile Plaza. This was followed by a letter from a firm of lawyers in Cairo, dated 22 August 2010, acting for the Cairo hotel, who denied liability. They asserted that the driver was employed by an independent car hire company, the role of the hotel being simply to relay Lady Brownlies request to them. Accordingly, they said, the contract was made with the car hire company and the hotel was under no liability. Kingsley Napley eventually wrote back on 9 May 2011 to Ms Waugh in Toronto and to the Egyptian lawyers in Cairo saying that they did not accept this analysis. Their letter to the Cairo hotels lawyers asked for particulars of the relevant corporate entities: Your letter refers to both the Four Seasons Hotels and Resorts and the Four Seasons Hotel Cairo at Nile Plaza. We are unclear as to whether these are separate corporate entities, but if they are, please will you confirm which corporation was responsible for the contract whereby our client booked accommodation at the Hotel. Please will you also explain the status of these two corporate entities under Egyptian law, and their relationship with the parent company in Canada. The letter to Ms Waugh contained no corresponding request. It simply asked them to nominate solicitors to accept service, failing which they would serve the claim form on the Four Seasons Hotel in Park Lane, London. This elicited a response from Ms Waugh saying that Lady Brownlie should sue the car hire company. The claim form was issued in December 2012. Holdings was sued on the footing that it was the owner and the manager of the Cairo hotel business and the provider of the drivers services, or alternatively the agent for an undisclosed principal who provided the drivers services. In due course, an application was made to Master Yoxall for permission to serve it on Holdings out of the jurisdiction. This was supported by a witness statement in which that company was described as a corporate entity engaged, among other things, in the ownership and/or operation and/or organisation of a chain of international hotels which includes the Four Seasons Cairo at Nile Plaza Hotel, Cairo, Egypt. It exhibited draft Particulars of Claim in which that statement was repeated. It was alleged that the contract for the excursion was made with Holdings and that they were vicariously liable for the negligence of the driver of the car. Master Yoxall gave permission for service out. Service was effected on Holdings in Canada and, for good measure, on the Four Seasons Hotel in Park Lane, London. At this point, Messrs Kennedys came on to the scene, acting for Holdings. They applied to set aside the order of Master Yoxall. Mr Newman of that firm made a witness statement in which he said that hotels of the Four Seasons chains were owned by different owners, who entered into agreements with a number of Four Seasons entities covering licensing, management and advisory issues. The Cairo hotel was owned by Nova Park. Holdings was a management company which did not own either the Cairo or the Park Lane hotel and had no contractual relationship with either of them. Mr Donovan responded by reasserting that the contract was made with Holdings. The basis of this assertion was said to be that internet research suggested that Holdings was the parent company of the Four Seasons group, that it operated a central reservation system and website for the worldwide chain, and that it was the owner and licensor of the trade marks used by the Cairo hotel. Master Cook set aside the order for service out on the ground that in the face of Mr Newmans evidence these assertions were not enough to support the contention that Lady Brownlie had contracted with Holdings or that Holdings was vicariously liable for the driver of the car. On appeal from Master Cook, the matter came before Tugendhat J, who allowed the appeal and restored the order for service out. Tugendhat J was clearly irritated by the failure of any Four Seasons company to answer the question put to the lawyers for the Cairo Hotel in Kingsley Napleys letter of 9 May 2011 about the identity of the corporate entity responsible for taking the booking for Lady Brownlies excursion. His irritation may have coloured his assessment of the evidence. His reasons for allowing the appeal were, in summary, that Mr Newmans evidence that the Hotel was owned by Nova Park was not to be taken at face value, first because it was expressed in the present tense and did not necessarily relate to the position in 2009 and, secondly, because he did not identify the source of his information. He concluded that in the absence of acceptable evidence about who owned the Cairo hotel, the inferences of Kingsley Napley were enough to support the case that Holdings was vicariously liable for the negligence of the driver. He observed that having failed to supply acceptable evidence, Four Seasons Hotels and Resorts could have no complaint if the court ignored points that might be made at trial. The judges reasoning on this point was endorsed by the Court of Appeal, but I confess to finding it rather unsatisfactory. On the face of it, even assuming that individual Four Seasons hotels used a central reservation system operated by Holdings and centrally owned trade marks owned by Holdings, that would not identify Holdings as the owner or operator of the hotel or the employer of the concierge who took the booking. It is true that Mr Newmans evidence was technically defective, but ultimately the party who would lose by discarding it was Lady Brownlie. If Holdings did not own or operate the hotel, this would inevitably become apparent at trial, with the result that her claim would be dismissed after a great deal of additional delay and expense. This would be in the interest of neither party, and certainly not in the interests of justice. For that reason, this court took the exceptional course of inviting Mr Palmer QC, who appeared for Holdings, to take instructions on the precise distribution of corporate responsibility for the operation of the Cairo hotel and to serve more circumstantial evidence on the point in a form which complied with the rules. The result was a witness statement of Ms Barbara Henderson, Vice President, Corporate Finance of an associated company of Holdings, setting out the position in detail, with supporting exhibits. It is entirely clear from this material that Holdings is a non trading holding company. It neither owns nor operates the Cairo hotel, which has at all material times been owned by Nova Park, a company with no corporate relationship to any Four Seasons company. A Dutch subsidiary of Holdings called Four Seasons Cairo (Nile Plaza) BV entered into an agreement with Nova Park to operate the hotel on behalf of Nova Park, although at the material times the actual operator was an Egyptian subsidiary of Holdings, FS Cairo (Nile Plaza) LLC, which assumed the contractual obligations of the operator by assignment. Other subsidiaries of Holdings supplied advice and specific services such as sales, marketing, central reservations and procurement, and licensed the use by Nova Park of the Four Seasons trade marks. It follows that on the information now available, which substantially corresponds to that given more summarily in Mr Newmans witness statement before Master Cook, there is no realistic prospect that Lady Brownlie will establish that she contracted with Holdings, or that Holdings will be held vicariously liable for the negligence of the driver of the excursion vehicle. Lady Brownlies claim does not satisfy the specific factual requirements of the gateways. A fortiori, it does not satisfy the general requirement that there should be a reasonable prospect of success. Since Holdings was not party to the relevant contract, it is unnecessary to deal with the question where that contract was made, which may in due course have to be determined as against other parties. But I think it right to draw attention to the artificial nature of the issue as the law currently stands. The argument on the point turned on the question who uttered the words which marked the point at which the contract was concluded and where the counterparty was physically located when he or she heard them. This is the test which has for many years been applied where the contract was made by instantaneous exchanges, eg by telephone: see Entores v Miles Far East Corpn [1955] 2 QB 327 (CA). It differs from the test applied to contracts made by post, which are complete when and where the letter of acceptance is posted: Adams v Lindsell (1818) 1 B & Ald 681, Dunlop v Higgins (1848) 1 HLC 381. These rules were adopted for reasons of pragmatic convenience, and provide a perfectly serviceable test for determining whether a contract has been concluded at all. However, their deployment for the purpose of determining when or where a contract was made is not at all satisfactory. It depends on assumptions about the point at which an offer is accepted or deemed to be accepted, which are particularly arbitrary when the mode of communication used is instantaneous (or practically so). It also gives rise to serious practical difficulties. The analysis of an informal conversation in terms of invitation to treat, offer and acceptance will often be impossible without a recording or a total recall of the sequence of exchanges and the exact words used at each stage, in order to establish points which are unlikely to have been of any importance to either party at the time. This may be unavoidable under the current wording of gateway 6(a). But the whole question could profitably be re examined by the Rules Committee. The claims in tort In those circumstances, the correct interpretation of the tort gateway in CPR 6BPD, para 3.1(9)(a) does not arise, and anything that may be said on the subject is obiter. If there had been sufficient reason for treating Holdings as the owner and operator of the hotel, I would in any event have held that the order for service out could not stand so far as it concerned the claims in tort. In the case of the claim for bereavement and loss of dependency under the Fatal Accidents Act 1976, the reason is that that Act operates as part of the proper law of the tort, and has no application to a tort which is not governed by English law: Cox v Ergo Versicherung AG [2014] AC 1379. Since it is accepted that the proper law governing the drivers negligence was that of Egypt, Lady Brownlies claim under the Act of 1976 has no prospect of success. The only sustainable pleaded claims are her claims on behalf of her husbands estate and in respect of her own injuries. It may well be that other claims, including a claim for bereavement and loss of dependency, will be available to her under Egyptian law, but as matters stand no such claims are advanced. The more difficult question is whether the English court has jurisdiction in respect of the claims for damages for personal injury caused by negligence. This depends on whether the claim falls within PD6B, para 3.1(9), which currently permits the English court to assume jurisdiction if: (9) A claim is made in tort where (a) damage was sustained [or will be sustained] within the jurisdiction; or (b) damage [which has been or will be] sustained results from an act committed [or likely to be committed] within the jurisdiction. I have placed square brackets around the words which were added by amendment with effect from 1 October 2015. Leaving aside the statutory causes of action under the Fatal Accidents Act 1976, the losses claimed are (i) funeral, memorial, repatriation and probate expenses and reimbursement of the cost of the holiday, claimed on behalf of Sir Ian Brownlies estate; (ii) medical expenses occasioned by Lady Brownlies injuries; and (iii) non pecuniary damage for Lady Brownlies pain, suffering and loss of amenity. All of these can loosely be described as after effects of the accident. It may be assumed that they were experienced, at least in part, in England. Accordingly, the question at issue on this appeal is whether, when a tortious act results in personal injury or death, damage is limited to the direct damage, ie the physical injury or death, or extends to the indirect damage, ie the pecuniary expenditure or loss resulting. On the latter view, the English court would have jurisdiction. The 2015 amendment extends the test to prospective torts and prospective damage, but will not affect the question what damage means in this context. Rules substantially similar to CPR 6BPD, para 3.1(9)(a) have been interpreted in Canada and New South Wales as extending jurisdiction to the court of the place where the financial consequences of physical damage were experienced: see, as to Canada, Skyrotors Ltd v Carrire Technical Industries (1979) 102 DLR (3d) 323 (Ont) and Vile v Von Wendt (1979) 103 DLR (3d) 356 (Ont CA); and as to New South Wales Challenor v Douglas [1983] 2 NSWLR 405 and Flaherty v Girgis [1984] 1 NSWLR 56, [1985] 4 NSWLR 248. These decisions have been followed in England. In Booth v Phillips [2004] 1 WLR 3292 Nigel Teare QC, sitting as a deputy judge of the Queens Bench Division, held that jurisdiction in respect of a fatal accident in Egypt was properly established in England by virtue of the fact that the widows loss of dependency under the Fatal Accidents Act 1976 and the cost of the deceaseds funeral had been sustained in England where she lived. This decision was followed by Tugendhat J in Cooley v Ramsey [2008] ILPr 27 and applied to non fatal injuries sustained in a road accident in Australia but leading to significant care costs in England, where the claimant lived. Both cases were followed by Haddon Cave J in Wink v Croatia Osiguranje DD [2013] EWHC 1118 (QB) (unreported), by Sir Robert Nelson in Stylianou v Toyoshima [2013] EWHC 2188 (QB) (unreported) and by Stewart J in Pike v Indian Hotels Co Ltd [2013] EWHC 4096 (QB) (unreported). The English cases were all decided at first instance, and they have been questioned on appeal. In Erste Group Bank AG (London Branch) v JSC VMZ Red October [2015] EWCA Civ 379, paras 104 105, the Court of Appeal considered that they gave an extraordinarily wide effect to the tort gateway and expressed serious misgivings as to whether they were right, but did not decide the point. In the present case, the Court of Appeal effectively overruled them. I think, although for somewhat different reasons, that they were right to do so. The main reason given by Arden LJ, giving the leading judgment in the Court of Appeal, was based on an analogy with article 4 of the Rome II Regulation EC 864/2007 on the Law Applicable to Non contractual Obligations. Article 4 provides: Unless otherwise provided for in this Regulation, the law applicable to a non contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur. The argument, which Arden LJ accepted, was that article 4 demonstrated that damage was confined to direct damage for the purpose of choice of law, and the same concept should be applied to questions of jurisdiction. It is common ground that the effect of this provision is that the present claim is governed by Egyptian law. But I am not persuaded that Rome II has any bearing on the construction of the jurisdictional gateways in the Practice Direction or indeed the corresponding provision of the Brussels Convention and Regulations governing the position as regards EU domiciled defendants. It is undoubtedly convenient for the country of the forum to correspond with that of the proper law. It is also true that both jurisdiction and choice of law can broadly be said to depend on how closely the dispute is connected with a particular country. But there is no necessary connection between the two. The Practice Direction contemplates a wide variety of connecting factors, of which the proper law is only one and that one is relevant only to contractual liabilities. For the purpose of identifying the proper law, damage is limited to direct damage because article 4 of Rome II says so in terms. It does this because there can be only one proper law, and the formulation of a common rule for all EU member states necessarily requires a more or less mechanical technique for identifying it. By comparison, indirect damage may be suffered in more than one country and jurisdiction in both English and EU law may subsist in more than one country. There is, however, a more fundamental reason for concluding that in the present context damage means direct damage. It concerns the nature of the duty broken in a personal injury action and the character of the damage recoverable for the breach. There is a fundamental difference between the damage done to an interest protected by the law, and facts which are merely evidence of the financial value of that damage. Except in limited and carefully circumscribed cases, the law of tort does not protect pecuniary interests as such. It is in general concerned with non pecuniary interests, such as bodily integrity, physical property and reputation which are inherently entitled to its protection. Of these, bodily integrity has been described as the first and most important: Parkinson v St James and Seacroft University Hospital NHS Trust [2002] QB 266, at para 56 (Hale LJ). Where these interests are deliberately or negligently injured, the tort is complete at the time of the injury, notwithstanding that damage is an essential element of it. This is the basis of the rule that all the damage flowing from bodily injury or damage to property must be claimed in one action, which may be brought as soon as the claimant has been injured or his property damaged. And, although damage is an essential element of the cause of action in tort, the limitation period in respect of any damage flowing from the breach will run from that time. I would readily accept that that damage as that word is used in the rule is not necessarily limited to the damage which serves to complete a cause of action in tort. But the two concepts are clearly related, even if they are not coterminous. These points may be illustrated by reference to tortious damage to physical property, another interest which is inherently protected by the law of tort. The law in this area has been largely made in the context of collisions at sea and, more recently, damage to road vehicles. The measure of damages in a collision action is the resulting diminution in the value of the ship and its earning potential. The damage is sustained as soon as the collision occurs, notwithstanding that at that stage there has been no out of pocket pecuniary loss or expense. The cost of repair is no more than the prima facie measure of the diminution of value of the ship. The injury to the ships earning potential arising from the physical damage is represented by the amount of the earnings lost or the cost of hiring a replacement in order to avoid loss of earnings. These points were made by Lord Hobhouse in Dimond v Lovell [2002] 1 AC 384, 406 in the context of collision damage to a car: Mrs Dimond was at the time of the accident the owner and person in possession of her car. It was damaged. Its value was reduced. This can be expressed as a capital account loss. This loss can be measured as being the cost of making good the damage plus the value of the loss of its use for a week. Since her car was not unrepairable and was not commercially not worth repairing, she was entitled to have her car repaired at the cost of the wrongdoer. Thus the measure of loss is the expenditure required to put it back into the same state as it was in before the accident. This loss is suffered as soon as the car is damaged. If it were destroyed by fire the next day by the negligence of another, the second tortfeasor would only have to pay damages equal to the reduced value of the car and the original tortfeasor would still have to pay damages corresponding to the cost of putting right the damage which he caused to the car. These questions are liable to arise in relation to any damaged chattel and have long ago received authoritative answers in cases concerning ships: The Glenfinlas (Note) [1918] P 363; The Kingsway [1918] P 344; The London Corpn [1935] P 70. It follows that if the property is damaged in country A, that is where the damage to the interests protected by the law of tort is sustained, notwithstanding that the repairs may be carried out in country B or the loss of earnings suffered in country C where the ship would have proceeded to load cargo and earn freight, or country D where the freight would actually have been paid. At an emotional level, it might be thought to belittle the gravity of bodily injury suffered by a human being to treat it as analogous to physical damage to a mere chattel or the profits derived from it. But the analysis is essentially the same. The law protects the claimants bodily integrity from deliberately or negligently inflicted harm. The damage to that interest is suffered as soon as the bodily injury has occurred, even if subsequent events are relevant to determine the pecuniary measure of that damage. Thus, until the position was altered by statute in 1982, a right to damages for loss of expectation of life was held to accrue at the moment of the accident although the victim was killed. It was therefore to be recoverable for the benefit of the estate under the Law Reform (Miscellaneous Provisions) Act 1934: Rose v Ford [1937] AC 826. As Lord Roche put it (at p 857), the initial bodily injuries [carry] with them from the outset a diminished expectation of life. The same principle was applied to damages representing the loss of prospective earnings, before that too was changed by statute: Gammell v Wilson [1982] AC 27. In principle, the same must apply to pain, suffering and loss of amenity. These are consequences of greater or lesser duration which (to borrow Lord Roches phrase) are carried with the bodily injury sustained at the time of the accident. It follows, as in the case of damage to property, that the damage to the interest protected is sustained in country A where the claimant has been injured or killed. The pecuniary measure of that damage may depend on things that happened elsewhere. For example, medical or care costs may be incurred in country B, or earnings may be lost which would have been earned in country C or paid in country D, but the damage has not been sustained in these places. Where the interest protected by the relevant legal duty is a purely financial interest, the same distinction will usually fall to be made between the damage sustained by the interest which the law protects and the expenditure which is merely evidence of its amount. Where the relevant duty is not to cause a purely financial loss, the relevant interest may be located and damaged in more than one country, something which is conceptually harder to envisage in the case of bodily injury or injury to property. But the fact that the amount of that damage falls to be measured by expenditure which has been incurred somewhere else is irrelevant. Thus, if I carry on a single business in France and Germany, and an actionable conspiracy damages that business, the interest protected is the business, and it may sustain damage for the purpose of the rule in both countries. But the fact that I am an English company whose balance sheet suffers in England, or that I incur expenditure in England to make the damage to my business good, is of no relevance. This point may be illustrated by the facts of the European cases considered in para 29 below. It would have been possible for the draftsman of the Practice Direction to provide that damage should extend to the financial or physical consequences of the damage, but there is nothing in the language to suggest that he has done so, and two policy considerations which to my mind strongly suggest that nothing like that was intended. The first is that in different ways all the jurisdictional gateways in the Practice Direction are concerned to identify some substantial and not merely casual or adventitious link between the cause of action and England. This is a purpose which is better served by locating jurisdiction in the place where the relevant interest of the claimant was damaged than by asking where he or she experienced the effects of the damage. To revert to the example of a ship damaged in a collision, the physical damage sustained at the time of the collision has a real connection with the country in which it happened, whereas the connection with the country where it was repaired or would have earned freight is likely to be adventitious. In the context of personal injury, a principle which located damage in the place where the pecuniary consequences of the accident were felt or where any continuing pain, suffering or loss of amenity were experienced would in the great majority of cases confer jurisdiction on the country of the claimants residence. It would confer on the English courts what amounts to a universal jurisdiction to entertain claims by English residents for the more serious personal injuries suffered anywhere in the world. Yet that would be far too wide to be consistent with principle. English law has never asserted a jurisdiction for its courts on the basis of the English identity of the claimant, whether by virtue of residence, domicile or nationality. Personal connections between the parties and England are generally relevant to jurisdiction only in the case of the defendant, for example because the claim form can be served on him there or because CPR 6 BPD, para 3.1(1) applies by virtue of the defendants English domicile. This is the fundamental reason why I am unable to accept Baroness Hales analysis of this issue. It appears to me to produce a test for jurisdiction so wide as to conflict with the purpose of the rule. The second policy consideration concerns the history of the tort gateway and its relationship with article 5.3 of the Brussels Convention and Regulations. Article 5.3 is one of a number of provisions for special jurisdiction. It authorises proceedings in tort in the courts for the place where the harmful event occurred or may occur, notwithstanding the general rule that suit must be brought in the jurisdiction of the defendants domicile. The place where the harmful event occurred was interpreted by the Court of Justice in Handelskwerij G J Bier v Mines de Potasse dAlsace SA (Case C 21/76) [1978] 1 QB 708 as referring at the plaintiffs option either to the place where the damage was sustained or to the place (if different) where the act was done that gave rise to it. The issue in Bier arose out of the wrongful emission of pollutants into the Rhine in France which damaged the plaintiffs seed beds in the Netherlands. Since the physical damage and its financial consequences were all suffered in the Netherlands, it was unnecessary for the Court to consider what losses or expense were encompassed by the word damage. That question did, however, arise in Netherlands v Ruffer (Case C 814/79) [1995] ECR I 3807, where the Court of Justice adopted precisely the same distinction as I have done between the damage sustained by the interest which the law protects, and the expenditure which serves as the measure of that damage. The facts were that a barge had sunk, allegedly by the carelessness of its German domiciled owner, in waters that were deemed for the relevant purpose to be part of Germany. The Dutch state sought to claim in its own courts the cost of raising and disposing of the wreck. It argued that the harmful event had occurred in the Netherlands because that was where it had incurred the cost of disposal and suffered the financial losses associated with it. Advocate General Warner, at p 3836, rejected that contention because (i) the cost of disposal merely quantified a loss consisting in the blockage of the waterway; and (ii) acceptance of the argument would be tantamount to holding that under the Convention a plaintiff in tort had the option of suing in the courts of his own domicile, which would be quite inconsistent with the scheme of article 2 et seq of the Convention. The Court was able to deal with the matter without reference to this point. In Socit Commerciale de Rassurance v Eras International Ltd (The Eras Eil Actions) [1992] 1 Lloyds Rep 570, 591, however, Mustill LJ, delivering the judgment of the Court of Appeal, treated the Advocate Generals analysis as unanswerable and equally applicable to the tort gateway under the Rules of the Supreme Court. In Dumez France SA v Hessische Landesbank (Case C 220/88) [1990] ECR I 49, the Court of Justice adopted the same analysis. The plaintiffs had sought to recover in France the loss which they claimed to have sustained there as a result of the insolvency of their German subsidiaries, said to have been caused by the defendants wrongful acts in Germany. The Court of Justice held that the damage had been sustained in Germany. The harm alleged to have occurred in France was merely the indirect consequence of the financial losses initially suffered by their subsidiaries (para 13). The Court expanded and clarified this statement in Marinari v Lloyds Bank Plc (Case C 364/93) [1996] QB 217. Mr Marinari sought to sue the defendant bank in Italy for the act of staff at its Manchester branch in impounding certain promissory notes which he had deposited with them, asserting that he had suffered the financial consequences in Italy, where he was domiciled. The Court rejected this contention, holding that damage in article 5.3 cannot be construed so extensively as to encompass any place where the adverse consequences of an event that has already caused actual damage elsewhere can be felt. Consequently, that term cannot be construed as including the place where, as in the present case, the victim claims to have suffered financial damage consequential on initial damage arising and suffered by him in another contracting state. (paras 14 15) It is fair to say that the construction of the Brussels Convention and Regulations depends in part on policy considerations which are irrelevant in the context of the English rules governing jurisdiction over non EU defendants. Both the Convention and the English rules recognise the possibility that there may be more than one eligible jurisdiction for a given dispute. But the Brussels Convention and Regulations are a code for allocating jurisdiction between EU member states. Acceptance of jurisdiction allocated in accordance with them is mandatory, and not merely permissive as it is under the English rules. Nonetheless, I consider that the principle adopted by the Court of Justice should be followed for two reasons. The first is that they embody an analysis of what constitutes damage which, like Mustill LJ in the Eras Eil Actions, I regard as unanswerable. It is not so much a proposition of law as the application of basic logic to the facts. The second reason is that in its current form, the jurisdictional gateway in the English rules for claims in tort was deliberately drafted so as to assimilate the tests for asserting jurisdiction over persons domiciled in an EU member state and persons domiciled elsewhere. Before 1987, service out of the jurisdiction was permitted by RSC order 11, rule 1(1)(h) where the action was founded on a tort committed within the jurisdiction. This expression was interpreted as referring to the place where in substance the wrongful act was done: Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458. The location of the damage (if different) was irrelevant. Under the pre 1987 rules, the English court would plainly not have had jurisdiction to hear Lady Brownlies claims in tort. Article 5.3 of the Brussels Convention, as interpreted by the Court of Justice, was broader. In relation to actions against persons domiciled in the EU, it conferred special jurisdiction on the courts of the place where the damage was sustained as well as the place where the wrongful act was done. Effect was given to the Brussels Convention in England by the Civil Jurisdiction and Judgments Act 1982 and by amendments to the Supreme Court Rules (SI 1983/1181) which were expressed to take effect when the Act came into force (in the event, 1 January 1987). The changes effected by these instruments might have been limited to the cases covered by the Convention, which did not extend to actions brought against persons domiciled outside the EU. In fact, they were not. The new rules of court expanded the tort gateway in RSC order 11 so as to correspond with article 5.3 of the Convention as interpreted in Bier. The new RSC order 11, rule 1(1)(f) provided that jurisdiction could be exercised in a non Convention case where the claim is founded on a tort and the damage was sustained or resulted from an act committed within the jurisdiction. Although the language changed when the gateways were transferred to a Practice Direction in 2000, the substance of the rule remained the same, except for the omission of the definite article before damage. That omission appears fairly clearly to have been intended to exclude the suggestion that all the damage had to be sustained within the jurisdiction, thus allowing for the possibility that jurisdiction might be founded on the occurrence of some of the damage in England. At any rate, the result is that RSC order 11, rule 1(1)(f) and the corresponding provisions of CPR 6BPD, para 3(9)(a) have generally been construed in the light of the case law of the Court of Justice: see Metall und Rohstoff AG v Donaldson, Lufkin and Jenrette Inc [1990] 1 QB 391, 424 (CA); Socit Commerciale de Rassurance v Eras International Ltd (The Eras Eil Actions) [1992] 1 Lloyds Rep 570, 589 (Mustill LJ); Bastone & Firminger Ltd v Nasima Enterprises (Nigeria) Ltd [1996] CLC 1902 (Rix J); ABCI v Banque Franco Tunisienne [2003] 2 Lloyds Rep 146, at paras 41, 43 (Mance LJ). It would be strange if the effect of expanding the gateway to match the wider special jurisdiction authorised in Convention cases had been to make it very much wider than even the Convention authorised. Tugendhat J in Cooley v Ramsey and Haddon Cave J in Wink v Croatia Osiguranje rejected the two policy considerations which I have described because they considered that the risk that the gateway would be too wide could be managed through the courts overriding discretion jurisdiction as to forum conveniens. The scheme of the Brussels Convention and Regulations is different, it is said, because its mandatory character excludes discretion: see Owusu v Jackson (Case C 281/02) [2005] QB 801. That view of the matter derives energetic support from Professor Briggs in his book Civil Jurisdiction and Judgments, 6th ed (2015), para 4.73, and in various articles. Indeed, Professor Briggs has gone further, proposing that in the light of my own comments in Abela v Baaderani [2013] 1 WLR 2043, the time has come to downgrade and eventually abolish the jurisdictional gateways and make forum conveniens (and presumably reasonable prospect of success) the sole criteria for service out: see Service out in a shrinking world [2013] LMCLQ 415. In my opinion, this approach is contrary to principle, and is not warranted by anything that was said in Abela v Baaderani. The jurisdictional gateways and the discretion as to forum conveniens serve completely different purposes. The gateways identify relevant connections with England, which define the maximum extent of the jurisdiction which the English court is permitted to exercise. Their ambit is a question of law. The discretion as to forum conveniens authorises the court to decline a jurisdiction which it possesses as a matter of law, because the dispute, although sufficiently connected with England to permit the exercise of jurisdiction, could be more appropriately resolved elsewhere. The main determining factor in the exercise of the discretion on forum conveniens grounds is not the relationship between the cause of action and England but the practicalities of litigation. The purpose of the discretion is to limit the exercise of the courts jurisdiction, not to enlarge it and certainly not to displace the criteria in the gateways. English law has never in the past and does not now accept jurisdiction simply on the basis that the English courts are a convenient or appropriate forum if the subject matter has no relevant jurisdictional connection with England. In Abela v Baaderani, I protested against the importation of an artificial presumption against service out as being inherently exorbitant, into what ought to be a neutral question of construction or discretion. I had not proposed to substitute an alternative, and equally objectionable, presumption in favour of the widest possible interpretation of the gateways simply because jurisdiction thus conferred by law could be declined as a matter of discretion. Conclusion I would allow the present appeal and declare that Holdings not being the owner or operator of the Four Seasons Hotel at Nile Plaza Cairo, or vicariously liable for the driver of the car, the court has no jurisdiction to try any of the claims presently made in this action. In those circumstances it is unnecessary to make any order on the cross appeal which Lady Brownlie has brought against the Court of Appeals order that there was no jurisdiction to entertain her claims in tort for personal injury to herself and on behalf of Sir Ians estate. The parties should make submissions in writing on the form of order and on costs within 21 days. I would remit all other consequential matters to the High Court, so as to enable Lady Brownlie to make such applications as she may be advised to join additional parties, amend the draft Particulars of Claim or seek other relief. I express no opinion, even tentative, about the prospects of any such applications. LADY HALE: As we agree that this action cannot continue against the current defendant, everything which we say about jurisdiction is obiter dicta and should be treated with appropriate caution. For what it is worth, I agree (1) that the correct test is a good arguable case and glosses should be avoided; I do not read Lord Sumptions explication in para 7 as glossing the test; and (2) that the action in tort is governed by Egyptian law and so the Fatal Accidents Act 1976 cannot apply to it, although Egyptian law may in fact allow for a similar claim, should permission ever be given to plead it. Also for what it is worth, (3) this is not the place to cast doubt upon the longstanding rule in Entores Ltd v Miles Far East Corpn [1955] 2 QB 327, nor could the Rules Committee change that rule by changing the rules relating to jurisdiction in contractual claims; but it could consider avoiding the factual problem which has arisen in this case by adopting a broader formulation of the rule in CPR 6BPD, para 3.1(6)(a); the inclusion of contracts made by or through an agent trading or residing within the jurisdiction in para 3.1(6)(b) suggests that this would not be wrong in principle. Above all, however, (4) I wish to sound a note of special caution as to the correct interpretation of the gateway for claims in tort, contained in para 3.1(9) of the Practice Direction, which currently reads (the words in square brackets having recently been added): 3.1 The claimant may serve a claim form out of the jurisdiction with the permission of the court under rule 6.36 where (9) A claim is made in tort, where (a) damage was sustained [, or will be sustained,] within the jurisdiction; or the damage which has been [or will be] sustained (b) results from an act committed, or likely to be committed, within the jurisdiction. Although this has been done many times before, it may be helpful to trace the genesis of this rule. Before the advent of the Civil Procedure Rules 1998, service out of the jurisdiction was governed by the Rules of the Supreme Court, order 11, rule 1(1)(f). Before the Civil Jurisdiction and Judgments Act 1982 came into force, this referred only to cases founded on a tort committed within the jurisdiction. It was amended, with effect from the date when that Act came into force, to read The claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction. This broadened the gateway, because the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1968, to which the United Kingdom acceded in 1978, and which was incorporated into United Kingdom law by the 1982 Act, provided a special jurisdictional rule, in article 5.3, that a person domiciled in a contracting state could be sued in another contracting state in matters relating to tort, delict or quasi delict in the courts for the place where the harmful event occurred; in Bier v Mines de Potasse dAlsace (Case C 21/76) [1978] 1 QB 702, the European Court of Justice had interpreted this phrase to refer both to the place where the damage occurred and the place of the event giving rise to it, so that the claimant could choose between them; it appears that the words harmful event were deliberately chosen because it was not considered appropriate for the Convention to be specific between the two. In that case, damage had been done to horticultural nurseries in the Netherlands by the discharge into the Rhine of saline waste from operations in France. In Bier, the damage was all sustained in one place. In Dumez France SA v Hessische Landesbank (Case C 220/88) [1990] ECR I 49, the French Companies were complaining of financial losses suffered because of the insolvency of their German subsidiaries, brought about by the suspension of construction projects in Germany allegedly because the defendant German banks had cancelled loans to finance the projects. The European Court of Justice pointed out that article 5.3 was an exception to the general rule that defendants were to be sued in their country of domicile. The aim of the Convention was to avoid a multiplicity of jurisdictions, with the heightened risk of irreconcilable decisions creating problems for the mutual recognition and enforcement of judgments. So article 5.3 did not permit a claimant claiming for damage, which was the consequence of harm suffered by other persons who were the direct victims of the harmful act, to bring proceedings in the place where the claimant sustained the damage. In Marinari v Lloyds Bank plc (Case C 364/94) [1995] ECR I 2715, the Grand Chamber affirmed both Bier and Dumez and took the latter a stage further. The claimant brought proceedings in Italy alleging financial loss and damage to his reputation caused when the defendant bank reported him to the police in England because promissory notes he had lodged with them appeared suspicious; this led to his arrest and the confiscation of the promissory notes. The court held that article 5.3 did not cover every place where adverse consequences of an event which had already caused actual damage elsewhere could be felt. It did not refer to the place where the victim claimed to have suffered financial loss consequential on actual damage arising and suffered by him in another member state. The Brussels Convention was replaced by Council Regulation (EC) No 44/2001 (the Brussels I Regulation) which was in turn replaced by Regulation (EU) No 1215/2012 (the recast Brussels I Regulation). Article 7.2 repeats the wording of article 5.3 of the Convention. Marinari is still the authoritative interpretation of where the harmful event occurred in European law. It goes without saying, however, that we are not here concerned with a claim which is governed by the jurisdictional rules of European law. We are dealing with a claim against a defendant who is not domiciled in a member state, which is therefore governed by the jurisdictional rules of the law of England and Wales, now contained in the Civil Procedure Rules 1998 (CPR). Under the CPR, the equivalent rule to RSC order 11(1)(f) was contained in CPR 6.20(8): a claim is made in tort, where (a) damage was sustained within the jurisdiction; or (b) the damage sustained resulted from an act committed within the jurisdiction. The definite article was omitted from (a), in line with the holding of the Court of Appeal in Metall und Rohstoff AG v Donaldson Inc [1990] 1 QB 391, at p 437, that (a) did not require all the damage to be sustained in England; it was enough if some significant damage had been sustained here; and similarly that (b) did not require that all the acts constituting the tort be committed in England; it was enough if the tort was in substance committed here. Neither the Rules of the Supreme Court nor the Civil Procedure Rules required that permission be given to serve out of the jurisdiction if the relevant gateway applied; there was always a discretion not to do so, exercised in accordance with the principles laid down in Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460. In the CPR, this was reflected in rule 6.21(2A): the court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim. There is a consistent line of first instance decisions holding that, in a case which is not governed by the European jurisdictional rules, a claim in tort may be brought in England if damage is suffered here as a result of personal injuries inflicted abroad. The first is Booth v Phillips [2004] EWCA 1437 (Comm), a decision of Nigel Teare QC (as he then was). This was a widows claim in negligence for her own loss of dependency and the funeral expenses of the estate of her deceased husband who had died while working as chief engineer on a vessel in Egypt. The judge rejected the argument that damage referred to the damage which completed the cause of action. This was not what the rule said. The words used should be given their ordinary and natural meaning, namely, harm which has been sustained by the claimant, whether physical or economic (para 35). Dropping the definite article reflected the decision in Metall that it was enough that some significant damage had been sustained here. He also rejected the argument that this was improbably wide, because the court had also to be satisfied that it was appropriate, in Spiliada terms, to exercise jurisdiction. It does not appear that any argument based upon the Brussels Regulation was advanced in Booth, but it was advanced most vigorously, as it happens by Mr Howard Palmer QC, before Tugendhat J in the next case, Cooley v Ramsay [2008] EWHC 129 (QB). He accepted that RSC order 11, rule 1(1)(f) had been changed to give effect to the 1982 Act, but Parliament had not fully assimilated the rules relating to non party states with those relating to the European member states. It had left in the significant difference that there was no discretion in the Convention and the Regulation, but there was such a discretion under the CPR. The object of the Convention and Regulation was to provide a clear and certain attribution of jurisdiction, but the CPR were more flexible. Hence a claimant who was severely disabled, with continuing needs for care, support and medical attention in this country as a result of a road accident in New South Wales, could bring his claim here. By the time of the next case, the CPR had been amended. CPR rule 6.36 now refers to the various jurisdictional gateways set out in Practice Direction 6BPD CPR (no doubt to increase flexibility), but rule 6.37(3) repeats the rule that the court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim. In Harty v Sabre International Security Ltd [2011] EWHC 852 (QB), the claimant was severely injured in a road accident in Iraq while working as a security consultant with the defendant. The defendant did not challenge the gateway, no doubt anticipating that MacDuff J would follow Booth and Cooley, and so the argument focussed on the discretion. In the next case, Wink v Croatia Osiguranje DD [2013] EWHC 1118 (QB), where the claimant had been seriously injured in a road accident while on holiday in Croatia, a spirited attack upon the correctness of Booth and Cooley was mounted before Haddon Cave J, arguing that 6BPD should be interpreted consistently with European law, so that in a claim where both direct and indirect damage is alleged it is only the place where the direct damage is sustained which is relevant. The judge pointed to a number of obvious problems with this argument: there are no such limiting words in 6BPD, para 3.1(9)(a); the natural and ordinary meaning of damage is any damage; the defendants argument was tantamount to saying that damage was sustained only where the injury occurs, which is plainly not so in many cases; it was this construction rather than that in Booth which required re writing (paras 33 35). Agreeing with the comprehensive analysis in Cooley, he held that the two schemes in the Regulation and the Rules were fundamentally different in structure and policy (para 41). In Stylianou v Toyoshima [2013] EWHC 2188 (QB), the claimant was very severely injured in a road accident in Western Australia and repatriated six weeks later. This time, the defendants argued that Booth and Cooley were incorrect, because they were decided before Regulation (EC) 864/2007 of the European Parliament and Council on the law applicable to non contractual obligations (the Rome II Regulation) came into force. Article 4.1 provides that the applicable law shall be the law of the country in which the damage occurs, irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occurred. Sir Robert Nelson rejected the argument that the CPR should be interpreted in the same way. He pointed out that article 2.1 of the Rome II Regulation provides that damage shall cover any consequence arising out of the tort/delict , so that article 4.1 was expressly excluding what would otherwise be included in the word damage. There was no reason to interpret damage in the CPR as in the specific article 4.1 rather than in the general article 2.1. In any event, Rome II was not about jurisdiction and did not override the CPR. The courts discretion was a valuable safety valve rendering unnecessary a narrow definition of damage (para 53). Trying another tack, the defendant in Erste Group Bank AG (London Branch) v JSC VMT Red October [2003] EWHC 2926 (Comm), argued that the judges in Cooley and Wink had failed to appreciate that the Rules Committee was intending to mirror the Brussels Convention as interpreted by Professor Jenard in his preparatory report. Flaux J rejected that argument as hopeless: the consistency argument had been rejected because the English rules were wider and that would not have been affected by anything that Professor Jenard had said (para 147). This was an action, inter alia, for the torts of conspiracy and interference with contract allegedly resulting in the failure of a Russian company to meet its obligations under a loan agreement. The case was taken to the Court of Appeal: [2015] EWCA Civ 379. Were it not for the string of first instance decisions to the contrary, the Court would have regarded as very attractive the submission that the tort gateway was intended to reflect the European jurisprudence (para 103) and expressed very serious reservations as to whether those decisions were right. But they preferred not to decide the point as they did not need to do so, having found that the damage was all sustained in New York. Finally, in Pike v Indian Hotels [2013] EWHC 4096 (QB), where the claimants had been injured trying to escape from the Taj Mahal Palace in Mumbai during the terrorist attack, Stewart J agreed with Sir Robert Nelsons comprehensive demolition of arguments based on European Union law and held that outside the European context the previous decisions were correct. It is clear from reading these first instance decisions that each of these judges was not slavishly following the decisions which preceded his own. They carefully considered and rejected the ever more sophisticated arguments against them but clearly considered that they were correct. So do I. In the first place, I entirely agree with Lord Sumption that the argument based on the Rome II Regulation, accepted by the Court of Appeal in this case, should be rejected. Applicable law and jurisdiction are two different matters. There is no necessary coincidence between the country with jurisdiction and the country whose law is applicable. It is accepted that in this case Egyptian law is applicable to the tort claims. Furthermore, there can only be one applicable law, whereas even in European law there can often be more than one country with jurisdiction. Indeed, I see no reason to think that those who framed the RSC and CPR intended them precisely to mirror the interpretation later given to the Brussels Convention. The language used in the Rules, although no doubt intended to widen the gateway so as to encompass the cases covered by the Brussels Convention, is quite different from the language of the Convention. The Dumez and Marinari decisions came afterwards, to restrict the scope of the language used in the Convention, but they do not override the language of the Rules in non EU cases. They are of no help in construing Rules which have remained in essentially the same language ever since. If the Rules Committee had wanted to assimilate the Rules after the decisions in Booth and Cooley, they could easily have done so, and now more easily, as the gateways are contained in a Practice Direction rather than a Rule. It is also necessary to bear in mind the difference between the two schemes. The European scheme deliberately eschews any discretion in favour of clear and certain rules, in the context of a scheme which governs, not only jurisdiction, but also recognition and enforcement of the resulting judgments. No doubt that is why the Court of Justice was anxious to restrict the scope of the Bier decision by drawing the direct/indirect distinction. That is not a feature of the English scheme, which retains the valuable safety valve of discretion, a discretion which need not be limited to the Spiliada principles, but can concentrate on the real question, which is the proper place for the resolution of the dispute (as Professor Briggs puts it). I also have great difficulty with the approach to damage adopted by Lord Sumption. He appears to equate damage in the Rule with the damage which completes the cause of action. It is true that damage is an essential component of some torts, such as the tort of negligence and the economic torts, so that it is necessary to know if and when the cause of action is complete for purposes such as limitation. But damage is not an essential part of every cause of action in tort. There are many torts which are actionable per se, without proof of damage: trespass to the person, trespass to goods, libel and some slanders are the obvious examples. There is no particular reason to think that completion of the cause of action is what the framers of the Rules had in mind when they used the word damage. They are more likely to have had the ordinary and natural meaning of the word in mind. I would be very reluctant to disagree with the several first instance judges who held that this refers to the actionable harm caused by the wrongful act alleged. In this they have the support of a very distinguished Court of Appeal in New South Wales, in Flaherty v Girgis (1985) 63 ALR 466, where Kirby P and Samuels JA agreed with McHugh JA, construing a similar jurisdictional rule, that damage, therefore, is to be contrasted with the element necessary to complete the cause of action; it includes all the detriment, physical, financial and social which the plaintiff suffers as a result of the tortious conduct of the defendant (p 482). Furthermore, it is quite clear that damage can be suffered by the same person in more than one place, just as the wrongful acts can be committed in more than one place. The Court of Appeal in Metall must have been right to say that the Rules contemplated the possibility of there being jurisdiction in more than one place. Nor do I find the distinction between direct and indirect damage easy to draw in all cases. If I am seriously injured in a road accident, the pain, suffering and loss of amenity that I suffer are all part of the same injury and in cases of permanent disability will be with me wherever I am. I do, of course, take the point that the claimant should not be in the position of choosing where to bring the claim. But in my view the discretion should be robust enough to prevent that. It is looking for a substantial reason to allow a claim against a foreign defendant to be brought in the courts of this country and the courts have always treated such cases with caution. And it is important to bear in mind that, in a tort claim, the applicable law will be the law of the country where the events took place. I was for a while attracted by a middle course, which would restrict damage to the continuing bodily (physical or psychological) effects of the wrongful act, because these are part and parcel of the initial injury, but excluding consequential financial losses. But it is difficult to find a warrant for that in the language used and in some torts the damage is wholly financial, so that separating out the direct and the consequential would be even more difficult. In the end, therefore, I would adopt the ordinary and natural meaning of the language used in the Rules. LORD WILSON: judgment of Lord Sumption with which she agrees. It may, however, be appropriate for it to be no part of the actual decision of this court today that, as a majority of us considers, the claimants claims for personal injury both to herself and, as his executrix, to her late husband (the two tort claims) fall within para 3.1(9)(a) of Practice Direction 6B in the Civil Procedure Rules (the CPR). For, had it been part of the decision, it would have been far reaching; and the need for the court at the hearing of this appeal to address other issues, in particular, in an exercise uncharacteristic of it, at last to extricate the facts which I agree with the judgment of Lady Hale and therefore with those parts of the have established the impossibility of any recovery against the particular company within the Four Seasons group which is presently sued, may have led to less full argument about the meaning of para 3.1(9)(a) than its importance requires. In para 22 above Lord Sumption refers to Regulation EC 864/2007 (the Rome II Regulation). It requires a member state which determines a claim in tort to apply the law there identified even when such is not the law of another member state. Were these two tort claims to proceed in our courts, it would require them to be determined by reference to Egyptian law. The law of a foreign state is more easily applied in the courts of that state; and in what I will call the appropriate forum inquiry, namely into whether our courts are clearly the appropriate forum for the trial of an action, also described in rule 6.37(3) of the CPR as the proper place in which to bring the claim, any requirement for it to apply foreign law will always be a negative factor and sometimes a powerful one: see the Spiliada case, cited at para 40 above at pp 478B and 48IH. But the Rome II Regulation is irrelevant to the existence of the jurisdiction of the courts of the member states; and I agree that the Court of Appeal was, with respect, wrong to hold otherwise. What, by contrast, can be relevant to the existence of the jurisdiction of the courts of member states is Regulation (EU) No 1215/2012 (the recast regulation). It recast Council Regulation (EC) No 44/2001, which in turn had replaced the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (the 1968 convention). Importantly, however, by article 4 the recast regulation governs the jurisdiction of those courts only when the defendant is domiciled in the EU. In relation to a case such as the present, in which the defendant is not so domiciled, article 6 of the regulation recognises that the jurisdiction of the courts of a member state is governed by its own law. Limited, as it therefore is, to the allocation of jurisdiction between the courts of member states in relation to claims against persons domiciled in the EU, the regulation is understandably prescriptive. A member state can, for example, rely on the fact that each of its fellow members is obliged by article 6 of the European Convention on Human Rights, and in relation to the assertion of rights under EU law by article 47 of the EU Charter of Fundamental Rights, to afford to litigants a fair hearing of their claims within a reasonable time; and there is, in the words of recital 26 to the regulation, mutual trust in the administration of justice in the Union. It permits no collateral attack upon its allocation of jurisdiction to the courts of one member state by reference to any conclusion that in all the circumstances it would be more appropriate for the case to proceed in the courts of another member state. Articles 4 and 5 are specific: a person domiciled in a member state may be sued in the courts of another member state only by virtue of the rules which then follow and, subject to them, he must be sued in the courts of the state in which he is domiciled. It has therefore been necessary for our procedural rules in respect of service of claims outside England (and, which will go without saying, also Wales) to be wide enough to permit service in circumstances in which the recast regulation and its predecessors have allocated jurisdiction to English courts to determine a claim against a person domiciled elsewhere in the EU. In 1978 the Court of Justice in Luxembourg determined the Bier case, cited and explained in para 29 above, which disclosed a rare situation in which an allegedly unlawful physical act in one member state caused direct physical damage only in a second member state. The courts construction of the location of the harmful event in what was then article 5(3) of the 1968 convention, namely that it had occurred in the second state as well as the first and that it was for the claimant to choose in which of them to bring his claim, therefore required an amendment, which came into force in 1987, to what was then rule 1(1)(f) of Order 11 of the Rules of the Supreme Court. The rule then began to provide for service out of the jurisdiction if, among other things, the damage was sustained within England as well as if it resulted from an act committed here. Our procedural rules for such service have therefore needed to be wide enough to enable us to comply with our duties under EU law. But it does not follow that, even if the natural construction of our rules indicates a wider gateway to service out of the jurisdiction in the case of a claim unconstrained by EU rules of jurisdiction, construction of them should be narrowed to the size of the gateway set by the EU rules, as interpreted by the Court of Justice. In the Metall und Rohstoff case, cited at para 30 above, the 1968 convention did not apply to the issue of the courts jurisdiction. The defendants were domiciled in the state of New York, and argued that, were any action to be brought against them, it should be brought there. But the Court of Appeal held that the English court had jurisdiction to determine one group of the various tort claims made against them. The court considered whether, for the purpose of rule 1(1)(f), the alleged torts within the group resulted from [acts] committed in England or alternatively in New York. It was enough, so the court held at p 449D, that as a matter of substance the acts were committed here. But the court also considered whether the damage was sustained in England or alternatively in Switzerland or Belgium. It observed at p 437C D: It was argued for [the second defendant] that since the draftsman had used the definite article and not simply referred to damage, it is necessary that all the damage should have been sustained within the jurisdiction. No authority was cited to support the suggestion that this is the correct construction of the Convention to which the rule gives effect and it could lead to an absurd result if there were no one place in which all the plaintiffs damage had been suffered. The judge rejected this argument and so do we. It is enough if some significant damage has been sustained in England. At p 449E the court proceeded to hold that significant damage, by which in the light of the above it meant a significant part of the damage, had indeed been sustained in England and that therefore the alternative ground for service out of the jurisdiction set by the rule also existed. Indeed in 2000, when rule 6.20(8) of the CPR replaced rule 1(1)(f) of Order 11, the definite article was removed from the words the damage was sustained in order to reflect the decision in the Metall case. The passage of the courts judgment in the Metall case set out above leads (and entitles) Lord Sumption at para 30 above to cite the case as exemplifying construction of rule 1(1)(f) and its successors in the light of the case law of the Court of Justice. But it is, I suggest, of greater significance that, as Lord Sumption explains in para 29 above by reference in particular to the judgment of the Grand Chamber in the Marinari case, the Court of Justice has rejected any suggestion that the requisite harmful event has occurred in a member state in circumstances in which only a significant part of the damage has been sustained there. If, unlike in the Bier case, damage is sustained in the state in which the causal act took place, the recast regulation does not confer jurisdiction upon the courts of a second state even if significant further damage is sustained there: see paras 14 and 15 of that judgment. Where, by contrast, the jurisdiction of the English court is not governed by EU law, the decision in the Metall case demonstrates that our rules create a gateway wider, as is now clear, than EU law would permit. I, for my part, would not interpret the word damage in para 3.1(9)(a) of Practice Direction 6B by reference to the damage which violates the interest protected by the law and which completes a cause of action in tort. The absence of the definite article demonstrates the contrary; and, in that it therefore has to be accepted (as Lord Sumption accepts in para 23 above) that damage for the purposes of the paragraph can be wider than the damage which violates the interest and which completes the cause of action, I find the relevance of the latter concept, whatever its importance in the substantive law of tort, to be elusive. It would, to put it at its lowest, be legitimate to interpret the word damage as extending to the secondary damage which the claimant and her husbands estate sustained in England and which flowed from the primary damage sustained in Egypt. Rule 1.2(b) of the CPR obliges a court which interprets another of its rules to seek to give effect to the overriding objective of enabling it to deal with cases justly. So, if an otherwise legitimate interpretation better serves the ends of justice, it ought in principle to be adopted. Take the case of Pike v The Indian Hotels Co Ltd cited in para 21 above. Mr Pike, an English tourist, was staying at the Taj Mahal Palace in Mumbai on the night of the terrorist attack in 2008. He suffered spinal injuries which rendered him paraplegic. Following his return home, he aspired to sue the operator of the hotel in England. Stewart J found at para 58 that, were Mr Pike to sue the operator in the courts of India, the case would not be concluded for 15 to 20 years; and he held at para 71 that it would therefore be a denial of justice to prevent him from suing the operator in England. The judge held that the word damage extended to the secondary damage sustained by him in England, which was also the proper place to bring the claim. The facts of Mr Pikes case were no doubt extreme but they illumine the injustice to which any narrow interpretation of the word damage can give rise. Is it possible that proponents of the narrow interpretation fail to invest due confidence in the appropriate forum inquiry? Is not that inquiry sufficiently muscular to exclude claims founded only on a tenuous amount of damage sustained in England? Lord Sumption contends in para 31 above that the main factor which determines such an inquiry is the practicality of litigation. But in the Spiliada case, cited at para 40 above, Lord Goff of Chieveley held at p 480B C that the court had to take into account the nature of the at p 474F G that the question was not one of mere practical i) convenience; ii) dispute as well as the legal and practical issues which it raised; and iii) at p 480G that the fundamental requirement was to identify the forum in which the case might suitably be tried in the interests of all the parties and of the ends of justice. The relevance of the jurisdiction of the courts of Ontario and New South Wales to entertain a claim in tort on the basis only of secondary damage sustained there is necessarily limited. But the long standing existence of the jurisdiction there should allay fears that a broader interpretation of para 3.1(9)(a) would encourage abuse. A claim which requires service of the form out of the jurisdiction will not lightly be brought, not least because of the likely complexity of attempts to enforce any judgment ultimately obtained; and a rigorous exercise of the appropriate forum inquiry should in my view yield the proportionate outcomes which all of us, on both sides of what in the present case reduces only to a discussion, no doubt intend that our law should achieve. LORD CLARKE: In so far as there are issues between Lady Hale and Lord Wilson on the one hand and Lord Sumption and Lord Hughes on the other, I prefer the reasoning of Lady Hale and Lord Wilson for the reasons they give. In particular, like Lady Hale and Lord Wilson, I prefer the reasoning in the various decisions of first instance judges to which they refer. In particular I agree with Lord Wilson in his para 64 that, in the absence of the definite article in para 3.1(9)(a) of Practice Direction 6B, it has to be accepted that damage for the purpose of the paragraph can be wider than the damage which violates the claimants interest and which completes the cause of action. There is no particular reason to think that completion of the cause of action is what the framers of the Rules had in mind when they used the word damage. They are more likely to have had the ordinary and natural meaning of the word in mind. I would be very reluctant to disagree with several first instant judges who held that this refers to actionable harm caused by the wrongful act alleged. In this they have the support of a very distinguished Court of Appeal in New South Wales, in Flaherty v Girgis (1985) 63 ALR 466, where Kirby P and Samuels JA agreed with McHugh JA, construing a similar jurisdictional rule, that damage, therefore, is to be contrasted with the element necessary to complete the cause of action; it includes all the detriment, physical, financial and social which the plaintiff suffers as a result of the tortious conduct of the defendant. Further, I agree with Lady Hales analysis of the various first instance decisions to which she refers. I would endorse the last three sentences of her para 52 as follows: |
The issue in this appeal is whether section 31(3)(d) of the Adoption and Children (Scotland) Act 2007 is within the legislative competence of the Scottish Parliament. It is contended on behalf of the appellant that the provision is incompatible with the Convention rights set out in Schedule 1 to the Human Rights Act 1998, that section 29(2)(d) of the Scotland Act 1998 therefore applies, and that the provision is accordingly not law. The issue has arisen in the course of adoption proceedings in the Sheriff Court, in circumstances to which I shall return. The sheriff decided to refer the issue to the Inner House of the Court of Session, in accordance with paragraph 7 of Schedule 6 to the Scotland Act. The Inner House held that the provision was not incompatible with the Convention rights and was within the legislative competence of the Parliament: ANS and DCS v ML [2012] CSIH 38, 2012 SC 8. The present appeal is brought against that decision, in accordance with paragraph 12 of Schedule 6. The appellant is the mother of the child who is the subject of the adoption proceedings. She is opposed to the proposed adoption and has refused to give her consent. The first respondents are the prospective adoptive parents. The second respondent is the Lord Advocate, who has become a party to the proceedings in order to defend the lawfulness of the provision in issue. The legislation Section 31 of the 2007 Act is concerned with parental consent to adoption. Subsection (1) provides that an adoption order may not be made unless one of five conditions is met. The first condition is set out in subsection (2): (2) The first condition is that, in the case of each parent or guardian of the child, the appropriate court is satisfied (a) that the parent or guardian understands what the effect of making an adoption order would be and consents to the making of the order (whether or not the parent or guardian knows the identity of the persons applying for the order), or (b) that the parent's or guardian's consent to the making of the adoption order should be dispensed with on one of the grounds mentioned in subsection (3). Put shortly, the first condition will therefore be met where the court is satisfied that each parent or guardian of the child consents to the making of an adoption order, or that the parents or guardians consent should be dispensed with on one of the grounds mentioned in subsection (3). It is unnecessary for the purposes of the present appeal to consider the remaining conditions in detail. It is sufficient to note that they concern situations where the consent of parents or guardians, or dispensing with such consent, is no longer a live issue. Returning to the first condition, the grounds on which the parents or guardians consent to the making of the adoption order may be dispensed with are set out in subsection (3): (3) Those grounds are (a) that the parent or guardian is dead, (b) that the parent or guardian cannot be found or is incapable of giving consent, (c) that subsection (4) or (5) applies, (d) that, where neither of those subsections applies, the welfare of the child otherwise requires the consent to be dispensed with. Paragraphs (a) and (b) of subsection (3) are self explanatory. Paragraph (c) refers to subsections (4) and (5), which are in the following terms: (4) This subsection applies if the parent or guardian (a) has parental responsibilities or parental rights in relation to the child other than those mentioned in sections 1(1)(c) and 2(1)(c) of the [Children (Scotland) Act 1995], (b) is, in the opinion of the court, unable satisfactorily to (i) discharge those responsibilities, or (ii) exercise those rights, and (c) is likely to continue to be unable to do so. (5) This subsection applies if (a) the parent or guardian has, by virtue of the making of a relevant order, no parental responsibilities or parental rights in relation to the child, and (b) it is unlikely that such responsibilities will be imposed on, or such rights given to, the parent or guardian. A relevant order, for the purposes of subsection (5), is a permanence order which does not include provision granting authority for the child to be adopted: section 31(6). Section 31 has to be read along with other provisions of the 2007 Act. In particular, it is necessary to have regard to section 14, which is concerned with the considerations relevant to the exercise of powers under the Act. So far as material, it provides as follows: (1) Subsections (2) to (4) apply where a court or adoption agency is coming to a decision relating to the adoption of a child. (2) The court or adoption agency must have regard to all the circumstances of the case. (3) The court or adoption agency is to regard the need to safeguard and promote the welfare of the child throughout the child's life as the paramount consideration. (4) The court or adoption agency must, so far as is reasonably practicable, have regard in particular to (a) the value of a stable family unit in the child's development, (b) the child's ascertainable views regarding the decision (taking account of the child's age and maturity), (c) the child's religious persuasion, racial origin and cultural and linguistic background, and (d) the likely effect on the child, throughout the child's life, of the making of an adoption order. It is also necessary to have regard to section 28, which so far as material provides: (1) An adoption order is an order made by the appropriate court on an application under section 29 or 30 vesting the parental responsibilities and parental rights in relation to a child in the adopters or adopter. (2) The court must not make an adoption order unless it considers that it would be better for the child that the order be made than not. (3) An adoption order may contain such terms and conditions as the court thinks fit. Section 31(4) and (5) also has to be read along with the definitions of parental responsibilities and parental rights in sections 1(1) and 2(1) of the Children (Scotland) Act 1995, as amended. Section 1(1) provides: (1) a parent has in relation to his child the responsibility (a) to safeguard and promote the child's health, development and welfare; (b) to provide, in a manner appropriate to the stage of development of the child (i) direction; (ii) guidance, to the child; (c) if the child is not living with the parent, to maintain personal relations and direct contact with the child on a regular basis; and (d) to act as the child's legal representative, but only in so far as compliance with this Section is practicable and in the interests of the child. Section 2(1) provides: (1) a parent, in order to enable him to fulfil his parental responsibilities in relation to his child, has the right (a) to have the child living with him or otherwise to regulate the child's residence; (b) to control, direct or guide, in a manner appropriate to the stage of development of the child, the child's upbringing; (c) if the child is not living with him, to maintain personal relations and direct contact with the child on a regular basis; and (d) to act as the child's legal representative. Finally in this context, it is relevant to note the terms of article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms: 1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. The argument In the printed case, it was argued on behalf of the appellant that section 31(3)(d) was incompatible with the right of a parent to respect for her family life, as guaranteed by article 8. The provision applied only where neither section 31(4) nor section 31(5) applied: that is to say, where the court did not consider that the parent was unable satisfactorily to discharge her parental responsibilities or exercise her parental rights and was likely to continue to be unable to do so, or where the parent was not someone who was subject to an order removing parental responsibilities and rights and was unlikely to have such responsibilities or rights restored in the future. In other words, section 31(3)(d) was applicable only in circumstances in which the parent was able to fulfil her parental responsibilities satisfactorily or, if presently unable to do so, was not likely to continue to be unable to do so. In that situation, a provision which allowed a court to sever permanently the bond between parent and child, merely on the basis of an assessment of the childs welfare, failed to respect the rights of the parent under article 8. The dangers of a broad test of welfare had been identified by this court in In re S B (Children)(Care Proceedings: Standard of Proof) [2009] UKSC 17, [2010] 1 AC 678, para 7. Section 101(2) of the Scotland Act required a provision of an Act of the Scottish Parliament to be read as narrowly as was required for it to be within competence, if such a reading was possible. It was not however possible to read section 31(3)(d) of the 2007 Act as narrowly as was required in order for it to be compatible with the relevant case law of the European Court of Human Rights, as exemplified by Neulinger v Switzerland (2012) 54 EHRR 1087. In the course of the hearing, counsel for the appellant recognized that this argument faced a number of difficulties, to which I shall return. Ultimately, the submission was that an order based on section 31(3)(d) would not be made in accordance with the law, within the meaning of article 8(2). That was because the provision was lacking in precision and failed, in its terms, to reflect the requirements of article 8 as laid down in the case law of the European court. The correct approach to interpretation It sometimes seems that, whenever lawyers hear the words compatibility with the Convention rights, they reach for section 3 of the Human Rights Act. That response is however a mistake: since the object of section 3 is to avoid, where possible, action by a public authority which would be incompatible with the Convention rights and therefore unlawful under section 6, it follows that the special interpretative duty imposed by section 3 arises only where the legislation, if read and given effect according to ordinary principles, would result in a breach of the Convention rights (R (Hurst) v London Northern District Coroner [2007] UKHL 13, [2007] 2 AC 189). That conclusion also follows on constitutional grounds: the courts endeavour to ascertain and give effect to the intention of Parliament (or, in this case, the Scottish Parliament) as expressed in legislation. It is only if that intention cannot be given effect, compatibly with the Convention rights, that the courts are authorized by Parliament, in terms of section 3, to read and give effect to legislation in a manner other than the one which Parliament had intended. Accordingly, as Lord Hope observed in R (Wardle) v Crown Court at Leeds [2002] 1 AC 754, para 79, before having recourse to section 3 one must first be satisfied that the ordinary construction of the provision gives rise to an incompatibility. When an issue arises as to the compatibility of legislation with the Convention rights, it is therefore necessary to decide in the first place what the legislation means, applying ordinary principles of statutory interpretation. Those principles seek to give effect to the legislatures purpose. If language is used whose meaning is not immediately plain, the court does not throw up its hands in bafflement, but looks to the context in order to ascertain the meaning which was intended. The court will also apply the presumption, which long antedates the Human Rights Act, that legislation is not intended to place the United Kingdom in breach of its international obligations. Those international obligations include those arising under the Convention. If however the ordinary meaning of the legislation is incompatible with the Convention rights, it is then necessary to consider whether the incompatibility can be cured by interpreting the legislation in the manner required by section 3. Even if the legislation in question is an Act of the Scottish Parliament, it is section 3 which is relevant in the context of the Convention rights, rather than section 101 of the Scotland Act, for the reasons explained by Lord Hope in DS v HM Advocate [2007] UKPC 36, 2007 SC (PC) 1, paras 23 24. If the legislation can be construed in accordance with section 3 in a manner which is compatible with the Convention rights, then it will be within the competence of the Scottish Parliament so far as the Convention rights are concerned. If it cannot be so construed, then it will not be within competence. The background to the legislation In considering the interpretation of section 31(3)(d) of the 2007 Act, it may be helpful to begin by setting the provision in the context in which it was enacted. Under the previous law, set out in section 16 of the Adoption (Scotland) Act 1978 as amended, parental agreement to the making of an adoption order could be dispensed with on any of four grounds. The first was that the parent could not be found or was incapable of giving agreement: that ground corresponds to section 31(3)(b) of the 2007 Act. A second, put shortly, was that the parent had persistently failed, without reasonable cause, to fulfil specified parental responsibilities in relation to the child. A third ground, again put shortly, was that the parent had seriously ill treated the child. The residual ground for dispensing with parental consent, under section 16(2)(b) of the 1978 Act, was that the parent was withholding consent unreasonably: a ground whose interpretation and application had given rise to a considerable amount of litigation. The 2007 Act had its roots in the work of the Adoption Policy Review Group, carried out between 2001 and 2005 under the chairmanship of Sheriff Principal Graham Cox QC. In its Phase II Report (Adoption: Better Choices for our Children), published in 2005, the Group noted that the current Scottish grounds for dispensing with agreement had been criticized as complicated and difficult to apply. It noted that, in England and Wales, the grounds for dispensing with the parents agreement had been much the same as in Scotland, but had been radically changed by the Adoption and Children Act 2002. Section 52(1) of that Act provided only two grounds for dispensing with consent: that the parent or guardian could not be found or was incapable of giving consent, or that the childs welfare required the consent to be dispensed with. The Group stated (para 3.23): The grounds being introduced in England and Wales under the 2002 Act have the attraction of simplicity. It is also desirable in an issue such as adoption that the approach taken on both sides of the border should be broadly similar. There is, however, an issue about whether the welfare test gives sufficient weight to birth parents' interests. The Group believed that the test must be more stringent than whether the prospective adopters would give the child a better life than the birth parents (sometimes known as a beauty parade). The welfare of the child must require the birth parents' consent to be dispensed with. This test should be at least equivalent to that in article 8 of the European Convention on Human Rights (ECHR) which requires that any interference in private or family life must be in accordance with law and necessary to protect health or the rights and freedom of others. The Group considered that the test in the 2002 Act would be improved if it reflected article 8 more exactly. That conclusion was reflected in the Groups recommendation (para 3.24): The Group recommends that the current grounds for dispensing with the agreement of birth parents should be changed and that those in the 2002 Act should be adopted, amended to reflect the necessity test in article 8. These grounds are clear and straightforward and give due consideration and protection to the rights of birth parents. It is apparent therefore that the Group had article 8 of the Convention firmly in mind in making its recommendation. Its thinking was that the Scottish provision enabling the court to dispense with parental consent to the making of an adoption order should be based upon section 52(1) of the 2002 Act, subject to amendment designed to reflect more explicitly the requirements of article 8. In its response, also published in 2005, the Scottish Executive stated that it supported the recommendation and proposed to implement it through legislation (Secure and safe homes for our most vulnerable children: Scottish Executive Proposals for Action, page 15). It did so in the Adoption and Children (Scotland) Bill, subsequently enacted as the 2007 Act. In the Bill as introduced, the relevant provision (section 33(2)(b)) replicated section 52(1) of the 2002 Act: consent could be dispensed with only where the parent could not be found or was incapable of giving consent, or where the welfare of the child required the consent to be dispensed with. The Policy Memorandum which accompanied the Bill explained (para 18): The Bill introduces new grounds for dispensing with parental agreement to the child being placed for adoption. The existing grounds, set out at section 16(2) of the Adoption (Scotland) Act 1978, are considered to be too complicated and difficult to apply. The Bill will introduce simpler grounds based on the parent or guardian not being found or being incapable of giving consent, or the welfare of the child requiring that parental consent is dispensed with. This will make it a more straightforward process and will reinforce the fact that the welfare of the child is the paramount consideration when considering whether to dispense with the need for parental consent. The relevant section was however amended during its passage through the Scottish Parliament, to an extent which compromised the aim of simplicity. The amendments made at Stage 2 permitted the court to dispense with parental consent on the ground that the welfare of the child required it only if, in addition, one of the conditions set out in what became section 31(4) or (5) was also satisfied. At Stage 3 the section was further amended so as to take the form in which it was enacted: that is to say, the power of the court to dispense with consent where the welfare of the child required it was made applicable only where the power based upon section 31(4) and (5) could not be exercised, rather than being an additional condition for the exercise of the latter power. Introducing the Stage 3 amendment, the Minister stated that it widened the grounds on which consent could be dispensed with while still applying an appropriate test that respected the rights of the parents. The amendment, he explained, was designed to reduce the risk that the making of an adoption order would be delayed or would not take place at all because neither of the grounds set out in what are now subsections (4) and (5) quite fitted (Proceedings of the Scottish Parliament, 7 December 2006, col 30248). The interpretation and application of the legislation Returning to section 31 of the 2007 Act, the first point to note is that it is premised on the general need for parents to consent to the making of an adoption order. The default position is that, absent parental consent, an adoption order cannot be made. Section 31(2)(b) however confers a power, exercisable only by a court, to dispense with the consent of a parent on the grounds specified in section 31(3). The next point to note is that those grounds are specified in greater detail than in section 52(1) of the 2002 Act. As I have explained, that section provides only two grounds on which consent may be dispensed with, and the second of those grounds is expressed in general terms: (a) the parent or guardian cannot be found or lacks capacity (within the meaning of the Mental Capacity Act 2005) to give consent, or (b) the welfare of the child requires the consent to be dispensed with. Section 52(1)(b) of the 2002 Act applies in any situation where section 52(1)(a) does not: in other words, in any situation where the parents whereabouts are known and she is of full capacity. Section 31(3)(b) of the 2007 Act replicates section 52(1)(a) of the 2002 Act. Section 31(3)(c) then identifies two other specific circumstances, described in detail in subsections (4) and (5), where consent may be dispensed with: namely, where the parent is unable to discharge her parental responsibilities or to exercise her parental rights, and is likely to continue to be unable to do so; and where the parent has, by virtue of a permanence order, no parental rights and responsibilities, and it is unlikely that such responsibilities or rights will be imposed upon, or given to, her. Section 31(3)(d) then repeats the language of section 52(1)(b) of the 2002 Act. In its context, however, section 31(3)(d) has a narrower scope than the similarly worded English provision. It applies only where section 31(4) and (5) do not. It is therefore not, as in England and Wales, the general ground which the court has to consider when dealing with any parent whose whereabouts are known and who is of full capacity. Instead, it is relevant only when the court is dealing with a parent who, in addition to fulfilling those requirements, also falls within neither of the categories defined in section 31(4) and (5). In practice, adoption proceedings will usually be brought without the agreement of a parent in situations where either a permanence order has been made, in which event section 31(5) or section 31(7) will apply, or where parental rights and responsibilities have been suspended by a supervision requirement, in which event a question will arise under section 31(4) as to whether the suspension is likely to be lifted following a review. This practical context reinforces the relatively limited scope of section 31(3)(d), when compared with section 52(1)(b) of the 2002 Act. The provision is nevertheless of practical importance. In particular, it is possible to conceive of cases where a parent may have limited parental responsibilities and rights which he or she is capable of discharging and exercising, and where section 31(4) and (5) will therefore not apply. In Principal Reporter v K [2010] UKSC 56, 2011 SC (UKSC) 91, for example, a parent was granted parental rights and responsibilities only to the extent of becoming a relevant person in the childrens referral relating to the child. In NJDB v JEG [2012] UKSC 21 a parent continued to have parental rights and responsibilities, notwithstanding the withdrawal of contact with the child. A parent in those situations does not fall within the scope of section 31(4) or (5), but it is nonetheless possible that his or her consent to the making of an adoption order should be dispensed with, where the welfare of the child so requires. Equally, there may be cases where it is difficult for a court to determine whether a parent who is presently unable to discharge parental responsibilities or exercise parental rights will continue to be unable to do so, at least within the maximum period of time during which, in the childs interests, his or her future can reasonably be left in limbo: if, for example, the parent is a drug addict or alcoholic who is undergoing rehabilitation. In such a case, the test imposed by section 31(4) might not be met, but the welfare of the child could nevertheless require that an adoption order should be made. In that situation, section 31(3)(d) provides a basis upon which the court can properly dispense with parental consent. Section 31(3)(d) is a more complex provision than it might appear. In the first place, the word welfare has to be read in the context of section 14(3), which applies where a court is coming to a decision relating to the adoption of a child: section 14(1). The decision whether to dispense with parental consent is plainly a decision relating to the adoption of a child. In reaching its decision under section 31(3)(d), therefore, the court must regard the need to safeguard and promote the welfare of the child throughout the childs life as the paramount consideration, as required by section 14(3). Secondly, since a decision whether to dispense with parental consent falls within the scope of section 14(1), the court must have regard to the specific matters listed in section 14(4), so far as is reasonably practicable. As I have explained, those matters are (a) the value of a stable family unit in the child's development, (b) the child's ascertainable views regarding the decision (taking account of the child's age and maturity), (c) the child's religious persuasion, racial origin and cultural and linguistic background, and (d) the likely effect on the child, throughout the child's life, of the making of an adoption order. Thirdly, section 31(3)(d) empowers the court to dispense with the parents consent only if it is satisfied that the welfare of the child requires it. The word requires imposes a high test. That is so as a matter of ordinary English: to say that something is required means that it is not merely desirable or reasonable, but that it is necessary. That ordinary meaning is appropriate in the context of section 31(3)(d), for several reasons. First, the making of an adoption order against the wishes of a parent is a very serious intervention by the state in family relationships. It follows that the court will not lightly authorize such intervention. It did not require the Convention to teach us that. The point was made in Axa General Insurance Ltd, Petitioners [2011] UKSC 46, 2011 SLT 1061, para 153, that legislation has to be construed bearing in mind the societal values which Parliament can be taken to have intended it to embody. As Lord Hoffmann stated in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131, the courts presume that even the most general words were intended to be subject to the basic rights of the individual. This point is also reflected in the observations made by this court in In re S B (Children) (Care Proceedings: Standard of Proof) [2009] UKSC 17, [2010] 1 AC 678, paras 6 7: In this country we take the removal of children from their families extremely seriously it is not enough that the social workers, the experts or the court think that a child would be better off living with another family. That would be social engineering of a kind which is not permitted in a democratic society. It follows that legislation authorizing the severing of family ties between parents and their children will not readily be construed as setting anything less than a test of necessity. Section 31(3)(d), in stipulating that the welfare of the child must require that parental consent be dispensed with, is consistent with such a test. There must, in other words, be an overriding requirement that the adoption proceed for the sake of the childs welfare, which remains the paramount consideration. The court must be satisfied that the interference with the rights of the parents is proportionate: in other words, that nothing less than adoption will suffice. If the childs welfare can be equally well secured by a less drastic intervention, then it cannot be said that the childs welfare requires that consent to adoption should be dispensed with. That requirement is consistent with section 28(2), which prohibits the court from making an adoption order unless it considers that it would be better for the child that the order be made than not. As the Court of Appeal observed in relation to section 52(1)(b) of the 2002 Act in In re P (Children) (Adoption: Parental Consent) [2008] EWCA Civ 535, [2009] PTSR 150 (para 126): What is also important to appreciate is the statutory context in which the word requires is here being used, for, like all words, it will take its colour from the particular context. Section 52(1) is concerned with adoption and what therefore has to be shown is that the child's welfare requires adoption as opposed to something short of adoption. A child's circumstances may require statutory intervention, perhaps may even require the indefinite or long term removal of the child from the family and his or her placement with strangers, but that is not to say that the same circumstances will necessarily require that the child be adopted. They may or they may not. The question, at the end of the day, is whether what is required is adoption. Secondly, the 2007 Act was intended to operate in the context of the Convention rights established by the Human Rights Act, and the duty of courts and other public authorities, under section 6 of that Act, not to act in a way which is incompatible with those rights. It must therefore have been intended that section 31(3)(d) of the 2007 Act would be construed and given effect by the courts in a manner which complied with the Convention right of parents to respect for their family life. That intention entails that the word requires should be construed in the manner which I have described, since that construction reflects the requirements of the Convention as established in the jurisprudence of the European court. Indeed, the use of the word requires in section 52(1)(b) of the 2002 Act, from which it was borrowed for section 31(3)(d) of the 2007 Act, echoes the language used by the European court, as the Court of Appeal explained in In re P (Children) (Adoption: Parental Consent) (paras 124 125): In assessing what is proportionate, the court has, of course, always to bear in mind that adoption without parental consent is an extreme indeed the most extreme interference with family life. Cogent justification must therefore exist if parental consent is to be dispensed with in accordance with section 52(1)(b). Hence the observations of the Strasbourg court in Johansen v Norway (1996) 23 EHRR 33 . That was a case where the court had to consider a permanent placement with a view to adoption. It said, at para 78: These measures were particularly far reaching in that they totally deprived the applicant of her family life with the child and were inconsistent with the aim of reuniting them. Such measures should only be applied in exceptional circumstances and could only be justified if they were motivated by an overriding requirement pertaining to the child's best interests. This is the context in which the critical word requires is used in section 52(1)(b). It is a word which was plainly chosen as best conveying, as in our judgment it does, the essence of the Strasbourg jurisprudence. And viewed from that perspective requires does indeed have the connotation of the imperative, what is demanded rather than what is merely optional or reasonable or desirable. The formulation used by the European court at para 78 of its Johansen v Norway judgment (an overriding requirement pertaining to the childs best interests) is one which it has repeated in identical or similar language in subsequent judgments. A recent example is R and H v United Kingdom (2011) 54 EHRR 28, concerned with the law of adoption in Northern Ireland. Thirdly, the 2007 Act is also to be construed, as I have explained, in accordance with the presumption that it is not intended to place the United Kingdom in breach of its international obligations. The relevant international obligations include those arising under the Convention. That is therefore a further reason for interpreting the test imposed by section 31(3)(d) as one which calls for an overriding requirement: a test, in other words, of necessity and proportionality. It is also in accordance with international law that the welfare of the child should be the paramount consideration. That appears, for example, from article 21 of the United Nations Convention on the Rights of Child: States Parties that recognize and/or permit the system of adoption shall ensure that the best interests of the child shall be the paramount consideration. It is also reflected in the preamble to the European Convention on the Adoption of Children (Revised, 2008) (Recognising that the best interests of the child shall be of paramount consideration). The same principle is also implicit in article 8 of the European Convention on Human Rights, as the European court has made clear on many occasions. In the recent adoption case of Pontes v Portugal (Application No 19554/09) (unreported) given 10 April 2012, for example, the court stated (para 94): La Cour le rpte avec force, dans les affaires de ce type, lintrt de lenfant doit passer avant toute autre considration. Compatibility with the Convention rights It is necessary next to consider whether, so construed on the basis of ordinary principles of statutory interpretation, section 31(3)(d) of the 2007 Act is incompatible with the Convention rights. That assessment calls for an examination of the relevant case law both of domestic courts and of the European court. The requirements of the Convention in relation to dispensing with parental consent to the making of an adoption order were fully considered by the Court of Appeal, in relation to section 52(1)(b) of the 2002 Act, in In re P (Children) (Adoption: Parental Consent). The judgment of the court was extensively cited by the Lord President when delivering the opinion of the Inner House in the present case, and I shall follow his example: it is a judgment which merits such citation. The court stated (paras 119 123): 119 Plainly article 8 is engaged; and it is elementary that, if article 8 is not to be breached, any adoption order made without parental consent in accordance with section 52(1)(b) of the 2002 Act, must be proportionate to the legitimate aim of protecting the welfare and interests of the child. As Hale LJ said in In re C and B (Care Order: Future Harm) [2001] 1 FLR 611, para 33: under article 8 of the Convention both the children and the parents have the right to respect for their family and private life. If the state is to interfere with that there are three requirements: first, that it be in accordance with the law; secondly, that it be for a legitimate aim (in this case the protection of the welfare and interests of the children); and thirdly, that it be necessary in a democratic society. Necessary takes its colour from the context but in the 120 Strasbourg jurisprudence has a meaning lying somewhere between indispensable on the one hand and useful, reasonable or desirable on the other hand. It implies the existence of what the Strasbourg jurisprudence calls a pressing social need. Hale LJ continued, at para 34: the that intervention has There is a long line of European Court of Human Rights jurisprudence on that third requirement, which emphasises to be proportionate to the legitimate aim. Intervention in the family may be appropriate, but the aim should be to reunite the family when the circumstances enable that, and the effort should be devoted towards that end. Cutting off all contact and the relationship between the child or children and their family is only justified by the overriding necessity of the interests of the child. 121 She reiterated that in In re O (Supervision Order) [2001] 1 FLR 923 , adding, at para 28, that Proportionality, therefore, is the key 122 To the same effect is the judgment of Thorpe LJ in In re B (Care: Interference with Family Life) [2003] 2 FLR 813, para 34: where the application is for a care order empowering the local authority to remove a child or children from the family, the judge in modern times may not make such an order without considering the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950 article 8 rights of the adult members of the family and of the children of the family. Accordingly he must not sanction such an interference with family life unless he is satisfied that that is both necessary and proportionate and that no other less radical form of order would achieve the essential end of promoting the welfare of the children. 123 That last observation reflects the well established principle that, particularly in the context of public law proceedings, the court should adopt the least interventionist approach. As Hale J said in In re O (Care or Supervision Order) [1996] 2 FLR 755, 760: the court should begin with a preference for the less interventionist rather than the more interventionist approach. This should be considered to be in the better interests of the children unless there are cogent reasons to the contrary. More recently, the European court has itself considered the compatibility with article 8 of a decision to dispense with parental consent, taken under section 52(1)(b) of the 2002 Act. In YC v United Kingdom (Application No 4547/10) (unreported) given 13 March 2012, the court collated at para 134 a number of different ways in which, in its previous judgments, it had sought to explain the requirements of necessity and proportionality in relation to adoption orders made against the wishes of the parents: The Court reiterates that in cases concerning the placing of a child for adoption, which entails the permanent severance of family ties, the best interests of the child are paramount (see Johansen vs Norway (1996) 23 EHRR 33, para 78; Kearns vs France (2008) 50 EHRR 33, para 79; and R and H v United Kingdom (2011) 54 EHRR 28, paras 73 and 81). In identifying the child's best interests in a particular case, two considerations must be borne in mind: first, it is in the child's best interests that his ties with his family be maintained except in cases where the family has proved particularly unfit; and second, it is in the child's best interests to ensure his development in a safe and secure environment (see Neulinger v Switzerland (2010) 54 EHRR 1087, para 136; and R and H, cited above, paras 73 74). It is clear from the foregoing that family ties may only be severed in very exceptional circumstances and that everything must be done to preserve personal relations and, where appropriate, to rebuild the family (see Neulinger, cited above, para 136; and R and H, cited above, para 73). It is not enough to show that a child could be placed in a more beneficial environment for his upbringing (see K and T v Finland (2001) 36 EHRR 18, para 173; and TS and DS v United Kingdom (Application No 61540/09) (unreported) given 19 January 2010). However, where the maintenance of family ties would harm the child's health and development, a parent is not entitled under article 8 to insist that such ties be maintained (see Neulinger, cited above, para 136; and R and H, cited above, para 73). In its YC judgment, the European court attached particular significance to the list of factors to which courts and adoption agencies must have regard when exercising their powers under section 52(1)(b) of the 2002 Act, as set out in section 1(4) of the Act. In that regard, the court stated (para 135): The identification of the child's best interests and the assessment of the overall proportionality of any given measure will require courts to weigh a number of factors in the balance. The court has not previously set out an exhaustive list of such factors, which may vary depending on the circumstances of the case in question. However, it observes that the considerations listed in section 1 of the 2002 Act broadly reflect the various elements inherent in assessing the necessity under article 8 of a measure placing a child for adoption. In particular, it considers that in seeking to identify the best interests of a child and in assessing the necessity of any proposed measure in the context of placement proceedings, the domestic court must demonstrate that it has had regard to, inter alia, the age, maturity and ascertained wishes of the child, the likely effect on the child of ceasing to be a member of his original family and the relationship the child has with relatives. The decision with which the case of YC was concerned, taken in accordance with section 52(1)(b) of the 2002 Act, was held to be compatible with article 8. Decisions taken in accordance with section 31(3)(d) of the 2007 Act, construed and applied as I have explained, should be no less compatible. Such decisions have a legitimate aim, namely to protect the welfare of children. If the provision is interpreted in the manner I have explained, such decisions also meet the requirements of necessity and proportionality. They will be made only where the court is satisfied that there is an overriding requirement that the adoption should proceed, for the sake of the childs welfare, and that nothing less than adoption will suffice. In considering the child's welfare, and in assessing the overall proportionality of an order under section 31(3)(d), the court will apply section 14(2) and (3), and will have regard in particular to the matters listed in section 14(4). Two of those matters correspond to factors which are listed in section 1(4) of the 2002 Act and were mentioned by the European court: the age, maturity and ascertained wishes of the child are covered by section 14(4)(b), and the likely effect on the child of ceasing to be a member of his original family is covered by section 14(4)(d). One would equally expect a court exercising powers under section 31(3)(d) of the 2007 Act to take into account the remaining matter mentioned by the European court, namely the relationship the child has with relatives, since that is one of the circumstances of the case, and it is plainly relevant to the likely effect on the child of the making of an adoption order. It is therefore a matter which falls within the ambit of section 14(2) and (4)(d). Emphasis was placed by counsel for the appellant upon the European courts statement that family ties may only be severed in very exceptional circumstances. That is not a legal test, but an observation about the rarity of the circumstances in which the compulsory severing of family ties will be in accordance with article 8. The Scottish population statistics for 2010 indicate that there were then 911,794 children aged under 16 (General Register Office for Scotland, Mid 2010 Population Estimates Scotland). Information provided to the court by the Scottish Executive indicates that 406 adoption orders were made that year. There are no statistics available for the number of cases where a court made an order dispensing with parental consent. Such cases might include a number where the parent in question had died or was incapable of giving consent. They would also include an appreciable number where the parent could not be found: where, for example, a child who had lost all contact with one biological parent was adopted by a step parent. Most of the cases where parental consent was dispensed with under section 31(3)(c) or (d) are likely to have been amongst the cases where children were adopted from care, which totalled 218 in 2009/10. Even if parental consent had been dispensed with in all 218 cases, the number would amount to 0.02% of children: in other words, one child in 5000. In reality, the number can be expected to have been lower than that. It appears therefore that orders dispensing with consent to the making of an adoption order, against the wishes of a parent, are indeed made only in exceptional circumstances. It remains to consider the contention that an order made under section 31(3)(d) is not in accordance with the law, within the meaning of article 8(2), because the provision is so imprecisely expressed that it lacks legal certainty. This contention must be rejected. It is important to recognize at the outset that the meaning of statutory language involves more than simply the bare words of the provision in question. In the first place, the language used in section 31(3)(d) has to be interpreted in the light of its statutory context. Section 14, in particular, clarifies the meaning of the word welfare as used in section 31(3)(d). It indicates the matters to which the court must in particular have regard when applying section 31(3)(d), and the consideration which the court must treat as paramount. Section 28(2) further clarifies the circumstances in which an adoption order may be made. The wider context of the legislation, including the duty of courts and other public authorities to act compatibly with Convention rights under the Human Rights Act, is a further aid to its interpretation, as I have explained. Furthermore, section 31(3)(d) must be construed, like all other legislation in this country, in accordance with well established principles of statutory interpretation. I have discussed the relevant principles, including the presumption that legislation is not intended to conflict with the values of our society, including respect for basic individual rights, or with the United Kingdoms international obligations. The application of those principles makes it plain, if there were otherwise any doubt about the matter, that the word requires in section 31(3)(d) is to be understood as meaning that there must be an overriding requirement, for the sake of the childs welfare over his or her lifetime, that the consent of the parent be dispensed with, and that the childs welfare requires nothing less than the making of an adoption order: a test, in other words, of necessity. All that said, section 31(3)(d) leaves much to the judgment of the sheriff hearing the individual case. He is not as tightly constrained, in his appreciation of the circumstances of the case, as a court may be in some other contexts where legislation has been drafted with greater specificity. That however reflects the nature of the subject matter of the provision. It is impossible to spell out exhaustively the particular circumstances in which an order dispensing with parental consent may be necessary. A number of specific circumstances are described in section 31(3)(a) and (b), and in subsections (4) and (5). Section 31(3)(d) is intended to confer a residual power which can be used in such other circumstances as may arise: it is, in effect, a safety net. It is unrealistic to expect that a provision of that nature will spell out the precise circumstances in which it may appropriately be employed. The use of general language in such a context is not inconsistent with the Convention rights. The approach adopted by the European court is illustrated by the case of Kuijper v Netherlands (2005) 41 EHRR SE 266, which concerned the adoption of a child against the wishes of one of her parents. One of the complaints made was that the adoption was not in accordance with the law, as the relevant legislation was lacking in legal certainty. In rejecting the complaint, the court stated at page 277: As regards the applicant's argument that the Arts 1:228 and 3.13 of the Civil Code and their application in practice fell short of the requirement of foreseeability, the Court considers that it is a logical consequence of the principle that laws must be of general application that the wording of statutory provisions is not always precise. The need to avoid excessive rigidity and to keep pace with changing circumstances means that many laws are inevitably couched in terms which, to a greater or lesser extent, are vague. However clearly drafted a legal provision may be, its application in practice involves an inevitable element of judicial interpretation and assessment of facts, which do not by itself make a legal provision unforeseeable in its application. On many occasions and in very different spheres the Court has held that it is in the first place for the national authorities, and in particular the courts, to construe and apply the domestic law (see, for example, Winterwerp v Netherlands (1979) 2 EHRR 387 at [46]; Iglesias Gil v Spain (2003) 40 EHRR 3 at [61]; and Slivenko v Latvia: (2003) 39 EHRR 24 at [105]). Accordingly, an issue of foreseeability could only arise under the Convention if the national courts' assessment of the facts or domestic law was manifestly unreasonable or arbitrary. Applying that approach in the context of section 31(3)(d) of the 2007 Act, I have explained why that provision is inevitably couched in terms which are to some extent imprecise. Interpreted and applied in the manner which I have explained, however, it is not unforeseeable in its application. An issue of foreseeability should not therefore arise, provided the court interprets the provision correctly and bases its decision upon a reasonable assessment of the facts. The procedure in the present case I have not yet said anything about the circumstances of the present case, as they have no bearing on the issue of law which the court has to decide. It would not however be appropriate to part with this case without making some observations about the procedure followed. I should emphasise at the outset that my observations are not intended to be critical of the sheriff who heard the case. It is clear that in making the reference he acted in the manner which he thought was likely to minimize delay. It also appears from the reference that he received no encouragement from the parties, other than the Lord Advocate, to adopt a different course. With the benefit of hindsight, however, it is apparent that there are lessons to be learned from this case about how devolution issues should be handled when they arise in the course of proceedings of this kind. More generally, considering this appeal soon after the case of NJDB v JEG [2012] UKSC 21, where this court was critical of the procedure followed in a dispute over contact, it is difficult to avoid the impression that further efforts require to be made to encourage active and firm judicial case management of family proceedings in the Sheriff Court. These adoption proceedings began in November 2009, when the child was 2 years old. He is now 5 years old, and the proceedings have not yet reached their conclusion. That is a very unfortunate state of affairs. He has been living with the respondents throughout that period. His mother, the appellant, has had no contact with him, and has been unable to fulfil the role of his mother. Equally, unless and until the proceedings are concluded in their favour, the respondents have to hold back from treating him fully as their son: he is not their child, and they do not know whether he ever will be. He has only one childhood, and it is rapidly passing. The appellant and the respondents have only one opportunity to fulfil the role of parents towards this child during his childhood. The delay can only be causing anguish to all the individuals involved. The damaging consequences of delay in the determination of adoption proceedings have long been well known. The longer the proceedings unfold, the stronger the attachments which the child is likely to form with the prospective adopters, and they with the child. The child may identify wholly with the new family. It may be profoundly damaging to the child if the court does not endorse that new identity. The protracted uncertainty may itself be damaging and distressing. In the interests of the welfare of the child, and out of common humanity towards all the individuals involved, it is imperative that unnecessary delay should be avoided. The duty to avoid undue delay in the determination of disputes of this nature, in order to comply with the obligations imposed by article 8, has also been made clear many times by the European court. As is obvious, undue delay in the determination of adoption proceedings may have irreversible effects upon the child, and may in any event bring about the de facto determination of the issue. Parliament recognized, in section 25A of the 1978 Act, the need to avoid delay in particular when it is sought to dispense with parental consent to the making of an adoption order: the court was required under that provision, with a view to determining the question without delay, to draw up a timetable for the proceedings and to give directions designed to ensure that the timetable was adhered to. There is no equivalent provision in the 2007 Act, but the importance of avoiding delay is instead reflected, as I shall explain, in Practice Notes and rules of court. The importance of avoiding delay was one of the points emphasised by the Adoption Policy Review Group in their Phase II Report. They stated in particular that it was essential that as little time as possible should elapse between a formal decision by an adoption agency that a child should be adopted, and the decision of the court to grant or refuse the application for an adoption order (para 7.4). One of their consequent recommendations was that all sheriffdoms should have a Practice Note with guidance for sheriffs and practitioners (para 7.2). That recommendation resulted in the promulgation of Practice Notes on the application of the 2007 Act, designed to ensure that proceedings under the Act were conducted expeditiously. In relation to proceedings in the Court of Session, the provisions of chapter 67 of the Rules of Court have a similar objective. Since the present case has been dealt with at Dumbarton Sheriff Court, the applicable Practice Note is that issued by the Sheriff Principal of North Strathclyde (Practice Note No 1, 2009: Adoption and Children (Scotland)Act 2007: Guidance for Sheriffs and Practitioners). It states at para 3: Minimum of delay It shall be the duty of the court to secure that all applications 3. and other proceedings under the Act are dealt with as expeditiously as possible and with the minimum of delay. Such applications and proceedings require the co operation of all concerned and active and firm case management by the sheriff throughout their course. In the present case, as I have said, the adoption petition was lodged in November 2009. A proof was held during September and October 2010. Fourteen days of evidence were led. I would observe in passing that it is difficult to understand why fourteen days of evidence should have been necessary, if the guidance given in the Practice Note was followed. That guidance includes, for example, the following: 20. The parties should therefore apply their minds to the question whether any evidence might be appropriately presented in the form of an affidavit or other document and the sheriff should encourage them to decide that question at the pre proof hearing. The sheriff should also encourage the use of affidavits to cover non contentious (or indeed contentious) issues where that would save the time of witnesses and the court. 21. Where the author of a report or the maker of a statement which has been or is to be lodged is to be called as a witness, the sheriff may order that the report or statement is to be held to be equivalent to the witnesss examination in chief, unless for special reasons he or she otherwise directs. 22. The sheriff should discourage the unnecessary use of expert witnesses. If expert evidence is essential, the sheriff should encourage the joint instruction of a single expert by all parties. 24. At a proof it should be borne in mind that there is a heavy responsibility on the parties representatives to exercise all reasonable economy and restraint in the presentation of the evidence and in their submissions to the court (Lothian Regional Council v A 1992 SLT 858 at 862B). The sheriff may therefore exercise his or her existing common law power to intervene to discourage prolixity, repetition, the leading of evidence of unnecessary witnesses and the leading of evidence on matters which are unlikely to assist the court to reach a decision. That guidance is particularly important in cases where it is sought to dispense with parental consent under section 31(3)(c) or (d). In such cases, courts may be presented with voluminous social work notes, with allegations of alleged failures by the birth parents going back over several years, and with competing assessments of their future prospects. There may also be expert evidence. In the absence of firm judicial control, following the guidance in the Practice Note, there may be very extensive examination and cross examination. The consequence is likely to be protracted proceedings focused primarily upon the past history of the parents rather than the future of the child. Following the fourteen days of evidence, in November 2010 the sheriff began to hear the submissions of the parties representatives. According to the agreed chronology, counsel for the appellant intimated her intention to raise a devolution issue on the third day of submissions (a period of time which again seems surprisingly long, particularly bearing in mind the encouragement given in the Practice Note, at para 25, to the advance submission of draft findings in fact and skeleton arguments). A minute setting out the devolution issue was lodged three days later. The sheriff allowed it to be received, and referred the issue to the Inner House. We are informed that he did so without having completed the hearing of parties submissions on the evidence led at the proof, and without making any findings on the evidence or reaching any decision. It is common ground that, once the reference has been determined, the case will have to return to the sheriff. He will then have to receive further evidence albeit perhaps very limited on developments since 2010, hear the parties submissions, and issue his judgment. It is impossible to predict when the question of the childs possible adoption will be finally determined. If a devolution issue was to be raised as to the compatibility of section 31(3)(d) of the 2007 Act with the Convention rights, that should have been done far earlier than it was. The relevant procedure is governed by the Act of Sederunt (Proceedings for Determination of Devolution Issues Rules) 1999 (SI 1999/1347). Article 4 provides: It shall not be competent for a party to any proceedings to raise a devolution issue after proof is commenced, unless the sheriff, on cause shown, otherwise determines. It is also relevant to note what is stated in the Practice Note at para 19: Legal issues At a pre proof hearing the sheriff should ask the parties if there are any questions of admissibility of evidence or any other legal issues, including any questions under the European Convention on Human Rights, that are likely to arise at the proof. If so, the sheriff should consider whether they could with advantage be determined at this hearing rather than at the proof. Alternatively, the sheriff may adjourn the pre proof hearing to another date in order to enable any such issue to be argued and determined. If a legal issue is not raised at the pre proof hearing, the sheriff may refuse to allow it to be raised at the proof except on cause shown. The issue not having been raised at the proper time, the sheriff was under no obligation to allow it to be raised on the seventeenth day of the proof. It is not apparent from the terms of his reference whether he understood that cause had to be shown for permitting the issue to be raised late, or gave any consideration to the question whether such cause had in fact been shown. The reference appears to proceed on the basis that the devolution issue having been raised, it had to be determined, and that the only procedural question which the sheriff had to decide was whether he should refer the issue to the Inner House or determine it himself. Given the stage at which the issue was raised, and having regard to the Act of Sederunt and to the guidance given in the Practice Note, notably in paragraphs 3 and 19, the sheriff could appropriately have refused to allow the issue to be raised: indeed, it is difficult to see how he could appropriately have done otherwise, given the nature of the proceedings and the stage which they had reached. He would then have allowed parties to complete their submissions, and would have issued his determination. He might then have refused the application, or granted it on the basis that parental consent could be dispensed with under section 31(3)(c) of the 2007 Act. In either event the issue sought to be raised would have become academic. If alternatively he had granted the application on the basis that consent could be dispensed with under section 31(3)(d), the appellant might then have sought to raise the devolution issue on appeal. She might not have been permitted to do so. If however she had been, and if (contrary to what in fact occurred) she had succeeded in persuading the appellate court that section 31(3)(d) was not law, then the sheriffs decision would have been quashed. One way or another, the application would in all likelihood have been determined by now. Having however allowed the devolution issue to be raised, the sheriff could then have determined it himself. If he was minded to refer it to the Inner House, he could have asked to be addressed on it before deciding whether it raised a point of real substance which merited a reference. If he had done so, I find it difficult to imagine that a reference would have been made. The minute raising the devolution issue was based on the proposition that welfare was not a Convention compliant ground for dispensing with parental consent to adoption, since it was vague and did not call for exceptional circumstances. No significance was attached to the word requires, in section 31(3)(d), or to the provisions of sections 14 and 28. No mention was made in the minute of the duty of courts to act compatibly with Convention rights under section 6 of the Human Rights Act, or of the interpretative duty arising (if need be) under section 3 of that Act. The submissions lodged by the Lord Advocate in response to the minute referred (among other authorities) to the judgment of the Court of Appeal in In re P (Children) (Adoption: Parental Consent) [2008] EWCA Civ 535, [2009] PTSR 150, in which the relevant issues were fully addressed. It is difficult to believe that, if the contentions advanced in the minute had been tested, they could have survived scrutiny. LORD HOPE I agree, for all the reasons that Lord Reed gives, that the appeal should be dismissed. I am grateful too to Lord Carnwath for his helpful comments on the use of judgments of the Strasbourg court. It is disappointing to find, despite repeated directions in rules of court and practice notes that adoption proceedings are to be conducted as expeditiously as possible, there are still cases in which this fundamental principle is not being applied in practice. It needs to be stressed that the responsibility for conducting the proceedings as expeditiously as possible rests on the parties representatives as well as on the sheriff or the presiding judge. Effective case management is not a process that can be conducted in a vacuum. It is the duty of the court to manage cases of this kind actively from the outset, by encouraging the taking of steps that will minimise delay and by giving directions as to how the proceedings are to be conducted. But it is the duty of the parties too, and their legal advisers, to do everything they can to help the court to secure its objective. Not sitting back and waiting for the other party to act, co operating with each other where possible, giving positive assistance in the setting of timetables and limiting the opportunity for delay both between each stage in the process and during the hearings themselves are just some examples of steps that they may take to assist the court. I would like therefore to add my own strong endorsement of the point that Lord Reed makes in para 50 of his judgment that this case indicates that further efforts require to be made to strengthen the practice of case management of family proceedings in the Sheriff Court. While the primary responsibility rests, of course, on the judiciary, practitioners too at all levels should be brought into this process. Experience has shown that it is not enough to make rules and to give directions. Advice and training as to how they should be implemented may be just as important if they are to be applied effectively. LORD CARNWATH (WITH WHOM LORD WILSON AGREES) I agree that the appeal should be dismissed for the reasons given by Lord Reed. I only wish to add a short comment on the use made in argument of authorities from the European Court of Human Rights. We were referred to numerous cases dating back over more than twenty years, dealing with the rights of children and parents in similar contexts. They offer slightly different formulations and different shades of emphasis. Many of the cases contain summaries of the previous case law, but again there are differences in the way they are presented. In general little help is likely to be gained by detailed comparative or historical analysis. In the present case, as Lord Reed has shown, the relevant Strasbourg principles are readily apparent from the most recent cases, and the leading UK authorities, as cited in his judgment. The risks are well illustrated by reference to the judgment on which Lord Davidson principally relied, Neulinger and Shuruk v Switzerland (2011) 54 EHRR 1087. The critical passage reads as follows: 134. In this area the decisive issue is whether a fair balance between the competing interests at stake those of the child, of the two parents, and of public order has been struck, within the margin of appreciation afforded to States in such matters (see Maumousseau and Washington, cited above, 62), bearing in mind, however, that the childs best interests must be the primary consideration (see, to that effect, Gnahor vs France, Application no. 40031/98, 59, ECHR 2000 IX), as is indeed apparent from the Preamble to the Hague Convention, which provides that the interests of children are of paramount importance in matters relating to their custody. The childs best interests may, depending on their nature and seriousness, override those of the parents (see Sahin v Germany [GC], Application no. 30943/96, 66, ECHR 2003 VIII). The parents interests, especially in having regular contact with their child, nevertheless remain a factor when balancing the various interests at stake (ibid, and see also Haase vs Germany, Application no. 11057/02, 89, ECHR 2004 III (extracts), or Kutzner vs Germany, Application no. 46544/99, 58, ECHR 2002 I, with the numerous authorities cited). 135. The court notes that there is currently a broad consensus including in international law in support of the idea that in all decisions concerning children, their best interests must be paramount (see the numerous references in paragraphs 49 56 above, and in particular Article 24 (2) of the European Unions Charter of Fundamental Rights). As indicated, for example, in the Charter, [e]very child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents, unless that is contrary to his or her interests. 136. The childs interest comprises two limbs. On the one hand, it dictates that the childs ties with its family must be maintained, except in cases where the family has proved particularly unfit. It follows that family ties may only be severed in very exceptional circumstances and that everything must be done to preserve personal relations and, if and when appropriate, to rebuild the family (see Gnahor, cited above, 59). On the other hand, it is clearly also in the childs interest to ensure its development in a sound environment, and a parent cannot be entitled under Article 8 to have such measures taken as would harm the childs health and development (see, among many other authorities, Elsholz v Germany [GC], Application no. 25735/94, 50, ECHR 2000 VIII, and Marlek v the Czech Republic, Application no. 8153/04, 71, 4 April 2006). (emphasis added) The essence of Lord Davidsons argument was that the Scottish statute did not properly incorporate the tests laid down in that judgment, particularly the two limbs described in the two italicised passages in paragraph 136. With the assistance of his Junior, Miss Maria Clarke, he proposed two alternative versions of sub section (3)(d) of section 31 designed to remedy that deficiency. The statutory version (see Lord Reed para 6) reads: (d) that, where neither of those subsections applies, the welfare of the child otherwise requires the consent to be dispensed with. The proposed alternatives were: that neither of (d) those subsections applies and. , notwithstanding the non application of (4) and (5), the parent is particularly unfit or harm will result to the childs health and development by the exercise of parental responsibilities or parental rights in relation to the child. or (d) that neither (4) nor (5) applies but the parent is particularly unfit or would cause harm to the child in the event of residence or contact. The only significant difference appears to be in the relative of simplicity of the latter. As I understand it, both suggested drafts are designed to bring the precision said to be lacking in the statute (see Lord Reed para 45ff). The wording reflects the apparently mandatory and exclusive character implied by the word dictates. I cannot accept this approach. For the reasons given by Lord Reed the search for undue precision in this area of the law is inappropriate, as indeed recognised by the European court (Lord Reed para 48). In this case, it also gives unjustified weight to the detailed drafting of the passage in question. This can be illustrated by reference to the preceding paragraphs, dealing with the primacy of the interests of the child. Thus, paragraph 134 begins by asserting that the childs best interests must be the primary consideration, which proposition is equated with the words of the Hague Convention (the interests of the children are of paramount importance in matters relating to their custody). However, this is followed by a statement that the childs best interests may, depending on their nature and seriousness, override those of the parents There is an apparent difference of emphasis between saying that the childs interests are of paramount importance, and saying that they merely may, depending on their nature and seriousness override those of the parents. The authority referred to for the latter proposition is Sahin v Germany (2003) 36 EHRR 43, a case decided in October 2001. The particular paragraph (42) is in the following terms: The Court further recalls that a fair balance must be struck between the interests of the child and those of the parent and that in doing so particular importance must be attached to the best interests of the child which, depending on their nature and seriousness, may override those of the parent. In particular the parent cannot be entitled under article 8 of the Convention to have such measures taken as would harm the childs health and development. The context was that the finding of a violation of the fathers rights when he was refused contact, principally because of the profound dislike of him developed by the mother, and without anyone seeking the views of the child. In that context one can understand why the legal test was put as it was, but it may not fit readily into the analysis in Neulinger. For the purposes of the present case it is unnecessary to go further into that debate. As Lord Reed has shown (para 37), the most recent Strasbourg cases leave no material room for ambiguity. Thus, R (H) v UK (2011) 54 EHRR 2 (a decision given in May 2011) confirms that in all decisions concerning children their best interests must be paramount; or in Pontes v Portugal (10th April 2012, cited by Lord Reed) the interest of the child doit passer avant tout autre consideration. Similarly, the apparently mandatory nature of the paragraph 136 tests is not supported by comparison with more recent authority. In YC v UK, (13 March 2012, cited by Lord Reed at para 40), the same two factors are referred to citing Neulinger, but they are described no longer as tests dictated but as considerations to be borne in mind. Yet again, in Uyanik v Turquie (Application no. 60328/09, decision 3 May 2012 para 52) the various aspects (les intrts concurrent en jeu) are brought together, again citing Neulinger, but leaving no doubt as to their relative weight: lintrt suprieur de lenfant devant toutefois constituer la consideration dterminante Cela tant, lintrt des parents, notamment bnficier dun contact rgulier avec lenfant, reste un facteur dans la balance des diffrents intrts en jeu. I cite these various examples not by way of criticism of the Strasbourg Court. Such variations are unsurprising bearing in mind that the judgments may be given by different chambers of the Strasbourg Court. Their primary task is to outline the main principles and apply them to the facts of the case before them, not to establish any new proposition of law, or even to offer authoritative restatement of existing law. There are many decisions of the Court of Appeal in England or the Court of Sessions in Scotland, of which the same could be said. Neulinger, unlike the others, was a Grand Chamber decision and to that extent would normally be treated as having greater authority. However, the passages relied on were largely designed to summarise earlier authority, and on examination, and in the light of their treatment in later cases, cannot bear the formulaic significance attributed to them by the appellants submissions. |
Siblings can be as important as parents in the lives of those who have them. While parents have been likened to the doctors doing their ward rounds to see the bigger picture, siblings have been likened to the nurses: they are there every day. These siblings are often fellow travellers through adversity or significant life events; they can act as a source of support for some children and a source of conflict for others. For these reasons, siblings are a potentially powerful influence on development (White & Hughes, Why Siblings Matter: The Role of Brother and Sister Relationships in Development and Wellbeing (2018)). These appeals concern the role of siblings in the procedures by which childrens hearings in Scotland make compulsory supervision orders (CSOs). The principal issue concerns the procedures required to make sure that public authorities comply with the obligation in article 8 of the European Convention on Human Rights (ECHR) to show respect for the private or family life established between a sibling and a child who might be the subject of a CSO. Although the procedures are very different in different parts of the United Kingdom, the applicable Convention rights are the same. The potential importance of sibling relationships to the welfare of children is not in dispute. What is in dispute is how that importance should be reflected in the childrens hearings procedure: specifically, should those siblings who want it be accorded the same status as parents as relevant persons in the proceedings? Or will something more flexible suffice? The proceedings which have led to these appeals have revealed that there has hitherto been a gap in the legislation and the guidance given on this matter. In this judgment when we refer to sections of an Act we are referring to the Childrens Hearings (Scotland) Act 2011 (the 2011 Act) unless we state otherwise. The childrens hearings system There are no less than 17 grounds for referring a child to a childrens hearing (2011 Act, section 67(2)). Broadly speaking, they cover three different types of situation: where a child is at risk of harm from a lack of parental care or of physical or sexual abuse; where a child has committed a criminal offence; and where a child is misbehaving in some other way, such as abusing alcohol or drugs or not going to school. There are about 2,500 volunteer panel members who sit on childrens hearings. Childrens hearings are conducted by a panel of three members, one of whom is selected to be the chairing member. The hearings are designed to be child friendly and to be conducted in a manner which prizes informality, minimises the numbers involved at a hearing and avoids legalistic procedures. The hearing is conducted as a discussion. It is not like a court of law; there is no cross examination of witnesses. Panel members are not lawyers but are skilled and experienced in communicating with children and understanding their needs. The aim is to achieve what the UN Committee on the Rights of the Child, General Comment No 12 (2009) (para 34) describes as child appropriate proceedings. The 2011 Act transferred the administration of childrens hearings from local authorities to national bodies. It established the role of National Convener, who appoints the members of the Childrens Panel and appoints the members of a childrens hearing, and the chairing member, from amongst the members of the Panel. The National Convener is empowered to provide advice to childrens hearings about any matter arising in relation to their functions, including legal advice and advice about procedural matters (section 8), but he cannot direct or guide a hearing in carrying out its functions (section 9). We refer to the guidance which is relevant to these appeals in para 35 below. The 2011 Act also established Childrens Hearings Scotland, a corporate body set up to assist and facilitate, but not to direct or guide, the National Convener in carrying out his or her functions (sections 11 and 12). This involves facilitating, in keeping with national standards set by the National Convener, the recruitment, training and quality assurance of the Childrens Panel. The Principal Reporter and the Scottish Childrens Reporter Administration (SCRA) operate a national reporter service, give training to reporters, and provide the administration of the childrens hearings. A reporter decides whether to refer a child to a childrens hearing for it to determine whether to make a CSO, arranges the childrens hearings and issues notifications, invitations to attend and the papers for the hearings. The reporter also keeps a record of proceedings at the childrens hearing, supports the hearing to maintain a fair process and conducts court proceedings relating to the childrens hearing. The Principal Reporter and the SCRA provide guidance to the reporters in the exercise of their functions. Although called a supervision order, a CSO may contain any of the requirements listed in section 83(2). These include a requirement as to where the child is to reside, which can result in the child being removed from the family home and placed in foster care or some other residential setting identified by the childrens hearing. They also include a direction regulating contact between the child and a specified person or class of persons, a requirement that the child comply with any specified condition, and a requirement that the implementing local authority carry out specified duties in relation to the child. The relevant local authority (the implementation authority) is responsible for making sure that there is compliance with the CSO and that the child obtains such help as is needed. CSOs last for up to one year and can be continued on review for further periods of up to a year at a time until the child is 18 years old (section 83(1) and (7)). The procedure for the making of a CSO can be summarised briefly. The reporter compiles grounds of referral. There is then a grounds hearing before the childrens hearing (section 69) at which the grounds are explained to the child and to relevant persons (section 90). If the child and the relevant persons accept the grounds, a CSO may be made at the grounds hearing or else at a further childrens hearing. If the child or any of the relevant persons reject the grounds of referral, the reporter takes the case to the sheriff court to establish the grounds, and if the sheriff holds that the grounds are established, the case returns to a childrens hearing to decide whether to make a CSO. If the child or any relevant person is unable to understand any of the grounds, the case must be referred to the sheriff court or the referral discharged on that ground (section 94). In advance of any hearing relating to a CSO, the reporter is required to provide details of the date, time and place of the hearing to among others the referred child, any relevant persons (sections 81 and 200) and also any individual who has had significant involvement in the upbringing of the child (Childrens Hearings (Scotland) Act 2011 (Rules of Procedure in Childrens Hearings) Rules 2013, rule 22 (SSI 2013/194) (the 2013 Rules)). In certain cases, the childrens hearing will appoint a safeguarder whose role is to prepare reports on matters relevant to the hearing and to make recommendations as to the referred childs best interests. The reporter also notifies the safeguarder of such hearings. Central to the challenges which are the subject of these appeals are the definition of the relevant person and the concept of a deemed relevant person which we describe at paras 14 to 16 below. The focus of these appeals is on the article 8 rights of siblings of the referred child. But it is important to bear in mind that the referred child also has article 8 rights. And whenever they come to any decision about a child, the childrens hearing, a pre hearing panel, and a court must regard the need to safeguard and promote the welfare of the child throughout the childs childhood as the paramount consideration (section 25(2)). The primary focus of the childrens hearing must therefore be on the welfare of the child who is the subject of the proceedings, although it is, of course, the duty of the hearing to act compatibly with the Convention rights. The relevant person and the deemed relevant person Section 78(1) names the people who have a right to attend a childrens hearing. Among those listed is a relevant person in relation to the child. Section 200 defines who is a relevant person in relation to a child. Those persons include a parent or guardian having parental responsibilities or parental rights in relation to the child (section 200(1)(a)) and others on whom parental responsibility is conferred by statute, including the Children Act 1989 (which applies in England and Wales). The Scottish Ministers are given a power under section 200(1)(g) to make an order specifying that another person is to be a relevant person, but that power has been exercised to date only in relation to a parent, or person with parental responsibilities under the law in Northern Ireland (Childrens Hearings (Scotland) Act 2011 (Review of Contact Directions and Definition of Relevant Person) Order 2013 (SSI 2013/193), article 3). But sections 79 to 81 provide a mechanism by which a person may be deemed to be a relevant person in relation to a child. If the individual, the child or a relevant person in relation to the child requests, the Principal Reporter must refer the matter for determination by a pre hearing panel of three members selected by the National Convener. By section 81(3) the pre hearing panel is bound to deem the individual a relevant person if it considers that the individual has (or has recently had) a significant involvement in the upbringing of the child. When an individual, who has been deemed a relevant person, has ceased to have significant involvement in the childs upbringing, there is a procedure by which a pre hearing panel can determine that that person is no longer to be deemed to be a relevant person (sections 79(5A) and 81A). The status of relevant person (or deemed relevant person) confers a right to be notified of and an obligation to attend a childrens hearing. It is a criminal offence to fail to attend if required to do so (section 74(4)). The status also gives access to the papers before the childrens hearing. A relevant person can accept or not accept the grounds for referral at a grounds hearing. The status allows the person to have legal representation and to make submissions to the panel, and it gives the person a right of appeal from a decision of the childrens hearing and a right to seek a review of a contact direction or a CSO. It is clear that the statutory scheme confers the right to be deemed a relevant person only on a person who has, or has recently had, a significant involvement in the childs upbringing. In most cases that would not include a sibling; and that is the gravamen of the appellants complaint. The factual background i) The circumstances of ABC and XY ABC is a 16 year old. He has a younger brother, DEF, aged nine and two older sisters. ABC and DEF were made the subjects of a CSO in 2016 and were accommodated by different foster carers. Until then both ABC and DEF had lived together in a family unit. DEF remains subject to a CSO but has remained in contact with ABC. On 7 September 2017 there was a childrens hearing concerning DEF. ABC did not receive an invitation to the hearing and was not asked to provide his views in advance of the hearing. ABC attended the hearing without having given any prior indication of his wish to do so. He was not given an opportunity to speak at the hearing and was then made to leave the hearing. There is a dispute of fact, which we cannot, and have not been asked to, resolve, as to whether his exclusion was the result of a confrontation at the hearing. The childrens hearing made contact directions allowing ABC direct contact with his brother for a minimum of once a fortnight for a minimum of two hours and prohibiting telephone contact. ABC then lodged an incompetent appeal against the decision of the childrens hearing. At the request of his solicitors, the Principal Reporter invited ABC to produce written information for the next hearing to consider. ABC and his solicitor were permitted to attend the next childrens hearing on 5 December 2017 and the chairperson of the hearing exercised discretion under section 78(2)(a) to allow ABC to express his views. XY is a 24 year old. He has three sisters who are now aged 17, 16 and 14. He and his sisters were removed from the care of their parents under a child protection order in 2012 and were made subject to CSOs in 2013. At the date of the hearing of his appeal the circumstances were as follows. XY was allowed supervised contact with his siblings once a month. He and his parents wished to have the family reunited. The eldest sister did not wish XY to become a relevant person in her case. The second eldest sister did, and so did the youngest sister but her safeguarder remained of the view that it is not in her best interests that XY become a relevant person in her case. In August 2017 a pre hearing panel, acting under section 81, refused XYs application to be a deemed relevant person in relation to his sisters. That decision was overturned by the sheriff but, on an appeal by the eldest sister to the Sheriff Appeal Court, the decision of the pre hearing panel was restored in relation to her. In 2018 a childrens hearing, acting under section 81A, determined that XY should not continue to be a deemed relevant person in relation to the two younger sisters. The hearing again refused to deem him a relevant person in respect of his eldest sister. XY appealed unsuccessfully to the sheriff and his appeal by stated case to the Inner House under section 164(1) was refused. As a result, XY is no longer a deemed relevant person in relation to any of his siblings. ii) The claims by ABC and XY ABC has raised an application for judicial review claiming that the decisions of the childrens hearings on 7 September and 5 December 2017 were unlawful. He seeks, among other remedies, a declarator that (a) the definition of a relevant person in section 200, (b) the mechanism by which a person can be deemed to be a relevant person in section 81 and (c) the provisions for the review of a contact direction in section 126 are all incompatible with his rights under article 8 of the ECHR, are outside the legislative competence of the Scottish Parliament and are therefore not law. ABC argues that his rights under article 8 of the ECHR mean that he should have the following procedural rights in the childrens hearing proceedings. First, he is to be notified of a childrens hearing and informed whether a CSO is being sought and if contact directions may be made. Secondly, he is to be provided with all of the papers which are to be considered at the childrens hearing. Thirdly, he has a right to attend the childrens hearing and be legally represented at it. Fourthly, he has the right to make representations. Fifthly, he has a right to appeal or seek a review of the decision of the childrens hearing. Sixthly, he has a right to require the childrens hearing to review its direction as to contact between siblings after three months. He also seeks a mandatory direction to the chairing member of a childrens hearing to adjourn a hearing if a sibling of the child has not been notified of the hearing. In his written case he explained why he sought access to the written material before the hearings: The reports to which ABC was not given access will have greatly informed both childrens hearings and will have been central to the decisions made. Matters such as DEFs health, development, welfare, educational development, his current care arrangements, the local authority view on his contact with others, including ABC, as well as formal recommendations as to the need for continued measures of supervision, whether DEF should remain accommodated in foster care and the nature and extent of his contact with all the members of his family including ABC. In a judgment dated 31 July 2018 ([2018] CSOH 81) the Lord Ordinary (Lady Wise) relied on dicta in the judgment of this Court in Principal Reporter v K [2010] UKSC 56; 2011 SC (UKSC) 91; [2011] 1 WLR 18 to read down section 81(3) to extend the people to be deemed a relevant person to include persons whose established family life with the child may be interfered with by the hearing and whose rights require the procedural protection of being a relevant person. On that basis she was not persuaded that the decisions of the childrens hearings were unlawful and refused the orders which ABC sought. ABC appealed to the Inner House. The First Division of the Inner House (the Lord President, Lord Drummond Young and Lord Malcolm) in an opinion delivered by Lord Malcolm on 27 November 2018 ([2018] CSIH 72) refused the reclaiming motion but recalled the Lord Ordinarys interlocutor in so far as it declared that words were to be read in to section 81(3). The First Division held that the ECHR did not require that ABC be afforded the status of a relevant person or the opportunity to apply for such status. They held that decisions affecting the article 8 rights of a relative other than a parent would not generally require the same level of involvement as that of a parent. They held that fairness might require that a sibling be given the opportunity to provide written information to a childrens hearing but that only exceptionally would a siblings attendance at the childrens hearing be required. They concluded that the provisions of the 2011 Act and the supporting regulations were sufficiently flexible to allow the legitimate interests of family members who were not relevant persons to be taken into account in the childrens hearing and were sufficient to protect ABCs article 8 rights. ABC, with the support of his parents, appeals to this Court with the permission of this Court granted on 27 June 2019. XY also appeals to this Court with the permission of this Court granted on 16 July 2019. XYs appeal is made under section 98 of and paragraph 13(b) of Schedule 6 to the Scotland Act 1998 against the determination of a devolution issue. He challenges the lawfulness of the provisions (sections 81(3) and 81A(3) of the 2011 Act) which govern the right to be a deemed relevant person. He argues that those provisions are not compatible with his rights under articles 6 and 8 of the ECHR and therefore not within the legislative competence of the Scottish Parliament under section 29(1) and (2)(d) of the Scotland Act 1998, unless one can read them down under section 3 of the Human Rights Act 1998 to render them compatible. XY has attended some childrens hearings concerning his siblings and has made written representations to other hearings. There is a factual dispute as to whether he has been invited to all of the relevant childrens hearings. But, again, that is not something that this Court can resolve. His appeal is supported by his parents and one of his siblings and is opposed by another sibling. His appeal to the Inner House against the sheriffs judgment to uphold the decision of the childrens hearing that he should not be accorded the status of a relevant person in relation to any of his sisters was heard by the First Division comprising the same judges as those who heard ABCs reclaiming motion. In a short Opinion of the Court dated 27 March 2019 ([2019] CSIH 19) delivered by Lord Malcolm, the First Division founded on their opinion in ABCs appeal and the opinion of the same Bench in DM v Locality Reporter [2018] CSIH 73; 2018 SLT 1308 (again a judgment delivered by Lord Malcolm) to hold that there was no merit in XYs appeal. In a short postscript the First Division expressed their and the safeguarders shared concern about the privacy rights of the children if XY were to be given the status of a relevant person, about the number of people who would attend the childrens hearings, and about the disputatious nature of the hearings which had been held. The problem which the challenges have identified The challenges which ABC and XY have mounted have revealed concerns about whether the childrens hearing system has been and is operated in a way that gives adequate protection to the legitimate interests of siblings and other family members, such as aunts, uncles and grandparents, who do not have a significant involvement in the upbringing of the child, to preserve a family relationship with the child and indeed to the legitimate interest of the child in preserving a family relationship with siblings and other relatives. The respondents in these appeals accept that these are legitimate interests. But they do not accept that it is necessary to afford the status of relevant person in order to respect them. What is the right and what is the test? In our view article 8 of the ECHR provides the appropriate framework for analysis in these cases. Article 8 includes procedural as well as substantive rights: the decision making process leading to measures of interference must be fair: McMichael v United Kingdom (1995) 20 EHRR 205, para 87. We are not persuaded that the requirement of a fair hearing under article 6 of the ECHR adds anything to that right in these cases. Under article 8(1) everyone has the right to respect for his private and family life. Public authorities may only interfere with that right in the circumstances laid down in article 8(2). The first question, therefore, is whether siblings enjoy private or family life together. The general principles were summarised recently by the European Court of Human Rights in Nazarenko v Russia (2019) 69 EHRR 6, para 56: The Court reiterates that the notion of family life under article 8 of the Convention is not confined to marriage based relationships and may encompass other de facto family ties. The existence or non existence of family life for the purposes of article 8 is essentially a question of fact depending upon the real existence in practice of close personal ties [referring to K v Finland (2003) 36 EHRR 18, para 150]. That case concerned the mothers husband, who had thought himself the father of the child until the couple divorced. There are not many cases concerning other relatives. In Lazoriva v Ukraine (Application No 6878/14) (unreported) 17 April 2018, which concerned an aunt who wished to become the childs guardian, the court pointed out that: Close relationships short of family life would generally fall within the scope of private life (see Znamenskaya v Russia, no 77785/01, para 27, 2 June 2005). Cases concerning siblings are few and far between, but an instructive example is Akin v Turkey (Application No 4694/03) (unreported) 6 April 2010. A married couple had two children, a boy and a girl, aged 11 and 6 when the couple divorced. The court awarded custody of the boy to the father and of the girl to the mother and ordered that the children should swap places for a few weeks each year. The father and son complained that this meant that the children were never together under the same roof. The court considered that family life existed between the siblings (and in any event this was not disputed). The original court order constituted an interference but the failure of later court hearings to put this right, during which they did not have due regard to the best interests of the family, constituted a violation of the States positive obligation to maintain and develop family ties. The Akin case reminds us that article 8 imposes both negative and positive obligations not to interfere in family life without justification and to take positive steps to maintain and develop family ties. In both cases, the case law under article 8 emphasises the authorities obligation to have regard to the best interests of the child (see Maslov v Austria [GC] [2009] INLR 47 (Application No 1638/03) 23 June 2008, para 82). And the decision making process must be such as to show that the authorities had a sufficient evidentiary basis for their decisions and that the interested parties, including the children themselves, were able to express their views (see, eg, Havelka v Czech Republic (Application No 23499/06) (unreported) 21 June 2007). However, the role of a parent, involving, in the absence of intervention by public authorities, the right to decide how a child is to be brought up, is qualitatively different from the role of most siblings. As noted above, a siblings role can be very important to the well being and development of a child. But where a child is being cared for away from the family, what matters is the maintenance and development of the relationship between the siblings, whether through placing them together or through staying in regular contact with one another. In the context of a childrens hearing respect is shown to that interest if, in the particular circumstances of the case, the sibling is enabled to have an involvement in the decision making process, seen as a whole, to a degree sufficient to protect his or her interest: W v United Kingdom (1988) 10 EHRR 29, para 64; McMichael v United Kingdom (above) para 87; Lazoriva v Ukraine (above) para 63; SJP and ES v Sweden (Application No 8610/11) (unreported) 28 August 2018, para 92. The required degree of involvement in the decision making process depends upon the relationship or bond between the applicant and the referred child and the applicants role, if any, in the childs life. In Boyle v United Kingdom (1995) 19 EHRR 179, para 46, the European Commission of Human Rights recognised that a denial of contact with a child would generally be an interference with a parents right to respect for family life but that that would not necessarily be the case where other close relatives were concerned so long as a restriction of access does not deny a reasonable opportunity to maintain the relationship. The central question in these appeals is therefore whether the 2011 Act and related subordinate legislation, if operated sensibly, afford the appellants a sufficient opportunity to take part in the decision making process, without their being given the status of a relevant person, or whether only the conferral of that status will suffice. Measures taken to respect a family members family life In response to the appellants contention that their interest in maintaining family life will be properly respected only if they are given the status of a relevant person, Mr Moynihan for the Principal Reporter and Ms Dunlop for the Lord Advocate submit that the legislation is compatible with article 8 of the ECHR if it is operated sensibly. Mr Moynihan and Ms Dunlop submit, correctly in our view, that the Court when assessing the operation of the childrens hearing system should look not only to the regime set out in the 2011 Act and related subordinate legislation but also to the requirements of the common law and the procedural rights under article 8 of the ECHR which govern the behaviour of the relevant public officials. They accept that these challenges have resulted in changes of practice in relation to childrens hearings. It is now the practice for notice of hearings to be given to the siblings of a child if they are sufficiently mature, for invitations to attend a hearing to be sent to a sibling and for the chairing member of the hearing to exercise her or his discretion to allow the sibling to attend the hearing. Under section 78(2)(a) the chairing member can allow a person to attend the hearing if that persons attendance is necessary for a proper consideration of the matter and under section 78(2)(b) and (3) the chairing member also has a discretion to allow such attendance unless the child or a relevant person in relation to the child objects. The SCRAs Practice Direction 3 concerning relevant persons advises reporters when arranging a hearing to consider whether there is anyone other than a relevant person and a person who may be deemed to be a relevant person whose attendance is likely to be necessary under section 78(2)(a) (para 9.1). Since 2019, para 9.2 of the Practice Direction has also stated as follows: In particular, the reporter is to invite anyone who has (i) established family life and an ongoing relationship with the child and (ii) sufficient age and maturity to participate in the hearing where: the hearing is likely to consider including a contact direction about them in a CSO for the first time or to vary a contact direction about them in a CSO, or the person has made clear that they want the hearing to consider their contact with the child. The paragraph goes on to recognise that it will be for the chairing member of the hearing to decide whether and when the individual is allowed to attend the hearing. Para 9.3 deals with situations where it was not foreseen that a hearing would consider a contact direction or where a person was not of sufficient age and maturity to be invited. In those circumstances the reporter is directed to invite the hearing to satisfy itself that it has the views of the person in relation to their contact or, if not, that the person has been given an opportunity to provide their views. The direction states that the hearing can defer the decision to allow the person to give their views directly or indirectly. Mrs Scott drew the Courts attention to sections 8 and 9 of the 2011 Act (see para 7 above). Section 8 empowers the National Convener to provide advice to childrens hearings including legal advice and advice about procedural matters. This has the aim that the hearing should not have to rely on the Principal Reporter or the legal representative appearing before it for such advice. Section 9, which protects the independence of childrens hearings, confirms that it is for the members of the childrens hearing to make the relevant decisions in carrying out their functions. But, as the respondents submitted, a reporter would advise a childrens hearing against refusing to hear or otherwise obtain the views of a sibling of sufficient age and maturity. These measures do not give a sibling access to the papers which have been given to the members of the childrens hearing and the relevant persons. But at a hearing after the grounds of referral have been accepted, the chairing member is required to inform every person present at the hearing of the substance of any relevant document: sections 91, 119 and 138 and rule 60(2)(a) of the 2013 Rules. To allow these procedures to work effectively, it is necessary that the decision makers have adequate information about the family members and the history of their involvement or contact with the child. Childrens Hearings Scotland has updated its Childrens Hearing Practice and Procedure Manual in September 2019. The Manual has in Part 2 a chapter 8 entitled Maintaining important relationships. At para 8.26 it states: Para 8.27 states: There is no statutory requirement for a childrens hearing to think about sibling contact in the same way as they must consider contact with those with parental responsibilities who are relevant persons for the purposes of childrens hearings. Panel members should have information about a childs relationships with their brothers and sisters and give careful consideration to how these relationships can be maintained and protected. The key considerations of the hearing will be: Identifying all the childs brothers and sisters, including those who have had a similar role in the childs life, such as children brought up in the same placement; The views of the children about their relationships and existing contact provisions; Promoting face to face contact where possible; The practical and emotional capacity of carers to facilitate contact; How contact can be achieved in as relaxed and natural manner as possible. Under section 17(6) of the Children (Scotland) Act 1995 (the 1995 Act), a child who is subject to a CSO or an interim CSO in respect of which the local authority is the implementation authority is a looked after child. Under section 17(1) it is the duty of the authority to safeguard and promote the welfare (which is to be their paramount concern) of any child whom they are looking after in a manner prescribed by the Secretary of State (now the Scottish Ministers). Section 17(3) requires the authority, before making any decision about a child they are looking after or proposing to look after, so far as reasonably practicable to ascertain the views of the child, as well as of the parents and others with parental responsibility and any other person whose views the authority consider relevant. The Looked After Children (Scotland) Regulations 2009 (SSI 2009/210) require the local authority to carry out an assessment of a child whom they look after or whom they are about to look after and, in so doing, to obtain details of a childs siblings and their contact with the child (regulations 3 and 4 and Schedule 1, paragraphs 7 and 8). The result of that assessment is a childs plan which must include arrangements for contact between the child and others, including any person whose views the local authority consider relevant to the matter to be decided (regulation 5 and Schedule 2, paragraph 7). Section 66(4) of the 2011 Act empowers the Principal Reporter, when investigating whether a child needs protection, guidance, treatment or control, to require the local authority to provide a report on a child, which could include relevant information about his or her siblings or other matter relating to the child which the Principal Reporter specifies. On reaching the view that it is necessary for a CSO to be made in respect of a child, the Principal Reporter has power to request further information from the local authority (section 69(4) and (5)). The Principal Reporter has a further opportunity to obtain a report from the implementation authority when arranging a childrens hearing to review a CSO (section 137(4) and (5)). Since 2013 it has been a statutory requirement that when making, varying or continuing a CSO in relation to a child, the childrens hearing must consider whether to include in the CSO a contact direction (section 29A). The Principal Reporters Practice Direction, Childrens Hearings Scotlands Practice and Procedure Manual and the statutory provisions to which we have referred provide mechanisms by which the childrens hearings can show respect for the family life of family members who are not entitled to the status of relevant person. The parents and the referred child can also make representations on behalf of members of the wider family in order to protect their article 8 interests: Principal Reporter v K (above), para 68. Family members who have or have recently had a significant involvement in the upbringing of the child, whether siblings, aunts, uncles or grandparents have the right to be deemed a relevant person under section 81(3) and they also have the right to call for a review of a contact direction: section 126 and article 2 of the Childrens Hearings (Scotland) Act 2011 (Review of Contact Directions and Definition of Relevant Person) Order 2013 (SSI 2013/193). Finally, when the grounds have been accepted by the child and each relevant person, the childrens hearing can direct the release of documents under rule 61(1)(g) of 2013 Rules so far as is necessary to enable the hearing to decide whether to make a CSO and if so the measures to be included in that order. Therefore, there is a range of measures which can be used to ensure that the relevant public authorities the childrens hearings themselves, the reporters and the local authorities comply with their duty to act compatibly with the article 8 rights of family members. We agree with the respondents that those measures should work if the childrens hearings are conducted in a practical and sensible manner and in compliance with the guidance given by the Principal Reporter and Childrens Hearings Scotland. It is, of course, a great help if there can be continuity of membership, or at least of the chairing member, between the pre hearing panel where procedural decisions are often made and the hearing itself. But the appellants contend that their rights will be adequately protected only if they have the right to obtain the status of a relevant person. Mrs Scott criticises the measures which we have described as a hotchpotch. Principal Reporter v K Both ABC and XY found on statements made by this Court in Principal Reporter v K (above) in support of their challenges. The case concerned the article 8 rights of an unmarried father of a child in respect of whom he did not have parental rights or responsibilities. The father claimed that the provisions of the 1995 Act, which then contained the definition of a relevant person, must be read compatibly with article 8 of the ECHR so as to include him and thereby afford him a proper opportunity to take part in the decision making process concerning his child at childrens hearings. In the judgment of the Supreme Court, delivered by Lord Hope and Lady Hale, his claim was upheld. The Court held (para 48): a parent (or other person) whose family life with the child is at risk in the proceedings must be afforded a proper opportunity to take part in the decision making process. As currently constituted the childrens hearing system violated the article 8 right of this father (and indeed of his child) and risks violating the rights of others in the same situation. From this it can be seen that the Courts focus was on the article 8 rights of the father and the child and extended to others only if they were in the same situation. The Court went on in para 60ff to consider how to cure the violation of those rights. The solution set out in para 69 was to interpret section 93(2)(b)(c) of the 1995 Act, which set out a part of the definition of who was a relevant person, so that the words which we italicise below were included in the statutory definition: any person who appears to be a person who ordinarily (and other than by reason only of his employment) has charge of, or control over, the child or who appears to have established family life with the child with which the decision of a childrens hearing may interfere. Giving a literal and non contextual interpretation to the inserted words would mean that every person who had established family life with the child would be a relevant person. Mr Moynihan and Ms Dunlop submit that the solution which this Court adopted in Principal Reporter v K requires to be read in its context of the article 8 rights of an unmarried father who did not have parental rights in domestic law and that the Court was addressing the rights of the parent and the child. In reading down the then current statutory provision the Court was not creating a statutory formula which could be applied across the board. We agree with this submission and with the First Divisions analysis of this Courts approach in Principal Reporter v K in paras 14 17 of its clear and succinct opinion in ABCs case. We agree with the First Divisions reading of the judgment that the reading down of the statutory provision which then governed was intended to be limited to unmarried fathers and to a limited class of others with a significant involvement in the upbringing of the child (para 17). As the First Division stated, this approach was later enacted in section 81(3). It is important to recognise that there are differences between the relationship of a parent and a child and the relationship between a sibling and a child. People who have parental responsibilities are treated as relevant persons because of those responsibilities and people who have a significant role in the upbringing of a child also have the right to be deemed a relevant person. As the European Court of Human Rights stated in Haase v Germany (2005) 40 EHRR 19, para 82, the mutual enjoyment by parent and child of each others company constitutes a fundamental element of family life. The parents and other people who have a significant involvement in the upbringing of the child are those who make decisions for the child. It is those decisions which are now being made by the public authorities through the CSO. The interference with the article 8 rights of such people is qualitatively different from the interference with the article 8 rights of siblings, which normally will be concerned with maintaining their relationship with the referred child, whether through contact or (if they are both the subject of CSOs) through being placed together. The conferment of the status of relevant person is an acknowledgement of the gravity of the interference with the family life of the child and the parents and others with that significant involvement in the childs upbringing. But there are several other reasons why it is not appropriate for a sibling, who has not taken on such responsibility for the upbringing of a child, to be given the status of a relevant person. As we have said, being a relevant person involves an obligation to attend a childrens hearing which can be enforced through the criminal law (section 74). It would not be appropriate to impose that obligation on every sibling. Each relevant person has the power to agree or not to agree the grounds of a referral. Again, that power is not obviously appropriate to a sibling who has not had a significant involvement in the upbringing of the child; and it could result in unnecessary and disruptive referrals to the sheriff court if the status of relevant person were to be so extended. A relevant person has comprehensive access to the papers before the childrens hearing. These may give a detailed account of the childs life, including confidential information about the childs education and health, any abuse that the child may have suffered, and possibly about the childs involvement in criminal activity or other anti social behaviour. The information may include details of and adverse comments concerning the problems and behaviour of the parent or parents. A childrens hearing may withhold information about the referred child from a person if its disclosure to that person would be likely to cause significant harm to that child: section 178. But the childs confidentiality is not otherwise protected. Nor is there such protection for the parents and others. Public authorities have to show respect for the article 8 rights, including the privacy rights, of everyone involved. Article 8(2) recognises that public authorities may legitimately interfere with a persons rights to family life for the protection of the rights and freedoms of others. The rights to privacy of the referred child, the parents and others must also be respected. The views of the child are an important consideration in the decision making process (section 27). There are matters relating to a child, such as adverse school reports, health problems and involvement in criminal activity, about which a parent may need to know, but not every sibling. Indeed, in XYs case, one of his younger sisters has objected to his becoming a relevant person in order to preserve her privacy. While XY has abandoned his claim to be made a relevant person in relation to that sister, the point of principle remains. Similarly, there are matters concerning a parent or parents about which the panel need to know but which may not be suitable to be divulged to one of their children. In ABCs case, his father has expressed concern about ABC having access to confidential information concerning him. In our view, the requirement to respect the privacy of others, the concerns about the dissemination of sensitive information, and the statutory requirement on the chairing member to take all reasonable steps to keep to a minimum the number of persons present at a childrens hearing at the same time (section 78(4)), all militate against reading down the statutory definition of a relevant person so as to confer the status of relevant person on anyone who appears to have established family life with the referred child with which a decision of the childrens hearing may interfere. In our view, article 8 of the ECHR does not require the public authorities to give a sibling, who has not, and has not recently had, a significant involvement in the upbringing of the child, the status of a relevant person. Thus, for reasons which are essentially the same as those of the First Division, we are satisfied that the challenges to the legislative competence of the Scottish Parliament in enacting the relevant provisions of the 2011 Act must fail. We nonetheless acknowledge that the initiation of these challenges has served to uncover a gap in the childrens hearings system which has had to be adapted to meet the requirements of article 8 in relation to siblings and other family members. There is now a clear recognition of the interest of both the child and the sibling in maintaining a sibling relationship through contact (or through placement if both are subject to CSOs) in most cases. The nature of the sibling relationship will vary from family to family and there needs to be a nuanced approach which addresses the extent of family life in that relationship, the home circumstances, how far the interests of the parents, the sibling and the child coincide and the possibility that the child, the parents and other siblings may have article 8 rights which are in conflict with those of the sibling. There needs, in short, to be a bespoke enquiry about the childs relationship with his or her siblings when the childrens hearing is addressing the possibility of making a CSO. To make effective the rights of the sibling and other family members with a similar interest in maintaining contact with a child, it is necessary both that the relevant public authorities are aware of those interests and that the siblings and family members are informed of the nature of the proceedings concerning the child and of their rights in relation to the proceedings. Each person involved in the process the Principal Reporter, the Childrens Panel members, the local authority, the social worker preparing a care plan, and the safeguarder need to be aware of those interests if the system is to operate compatibly with the article 8 rights of siblings and other family members. We have described in paras 32 to 40 above the arrangements now in place by which this may be achieved. It is for the public authorities involved to address whether further steps are desirable to protect the relevant article 8 interests. But we are persuaded that the legislative scheme of the 2011 Act can be operated in accordance with those rights. The orders sought It follows that a declarator as to legislative incompetence should not be made, for there is no such incompetence. Nor is it necessary to make any other order in ABCs case. It may be that the childrens hearing on 7 September 2017 did not adequately respect his article 8 procedural rights to have his views taken into account, but the matter was rectified in December 2017 and the contact directions have been the subject of later review decisions to which he has been able to contribute by written submission or by attendance at the childrens hearing. On each occasion, his contact with his younger brother has been preserved. Conclusion We would dismiss these appeals. |
It is now well established that an employment contract is subject to an implied term that the employer and employee may not, without reasonable and proper cause, conduct themselves in a manner likely to destroy or seriously damage the relationship of confidence and trust between them: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20. In Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518, the claimant sought to rely on an alleged breach of this implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for damages for the manner of his dismissal. But the House of Lords refused to extend the implied term to allow an employee to recover damages for loss arising from the manner of his dismissal because (per all members of the House except Lord Steyn) such a development of the law would be contrary to the intention of Parliament that there should be such a remedy, but that it should be limited by the statutory code regarding unfair dismissal now to be found in the Employment Rights Act 1996 (the 1996 Act). Some regarded the decision in Johnson as contentious: see, for example, Deakin and Morris Labour Law, 5th ed (2009), at para 5 45. At para 36 of Mr Bothams written case, Mr Reynold QC invited the court to depart from Johnson, but this suggestion was not developed in the written case or in oral argument. Indeed, it was reaffirmed by the majority of the House of Lords in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2004] UKHL 35; [2005] 1 AC 503 (Eastwoods case). Loss arising from the unfair manner of a dismissal is not therefore recoverable as damages for breach of the implied term of trust and confidence: it falls within what has been called the Johnson exclusion area. The principal questions that arise in these two appeals are (i) whether the reasoning in Johnson applies so as to preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract; and if so (ii) whether the claims made by Mr Edwards or Mr Botham fall within the Johnson exclusion area. It is submitted on behalf of Mr Edwards and Mr Botham that the first question should be answered in the negative and that their claims for damages should be assessed in accordance with orthodox common law principles. In Mr Edwards case, the Court of Appeal (Ward, Lloyd and Moore Bick LJJ) accepted this submission and in Mr Bothams case, Slade J did not. By a consent order dated 31 August 2010, the Court of Appeal (Pill LJ) reversed the decision of Slade J. The case of Mr Edwards The Chesterfield Royal Hospital NHS Foundation Trust (the Trust) was established on 1 January 2005 as an NHS Foundation Trust and acquired the rights and liabilities of its predecessor, the Chesterfield and North Derbyshire Royal Hospital NHS Trust. Mr Edwards had been employed by the Trusts predecessor as a consultant trauma and orthopaedic surgeon pursuant to a contract which incorporated the terms of its letter to Mr Edwards dated 2 June 1998. Para 2 of the letter referred to the Trust terms and conditions of employment copies of which could be seen at the Medical Personnel Office. Para 8 stated that the employment was subject to three months notice on either side. Para 13 stated that in matters of professional misconduct, Mr Edwards would be subject to a separate procedure which had been negotiated and agreed by the Local Negotiating Committee. By letter dated 22 December 2005, disciplinary proceedings were instituted against Mr Edwards arising from allegations that he had undertaken an inappropriate internal examination of a female patient and had then denied that the examination had taken place. It is his case that the applicable procedure at that time was that set out in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9). Annex B to HC(90)9 sets out in detail the procedures which authorities should use when handling serious disciplinary charges, for example, where the outcome of disciplinary action could be the dismissal of the medical or dental practitioner concerned (para 1). A disciplinary hearing was held on 9 February 2006. On 10 February, the disciplinary panel decided that Mr Edwards should be summarily dismissed from his employment on grounds of gross personal and professional misconduct. This decision was confirmed by a letter dated 16 February which set out in detail the panels findings and the reasons for its decision. Mr Edwards appeal against this decision was dismissed on 24 April 2006. On 12 May 2006, Mr Edwards started unfair dismissal proceedings before the Sheffield Employment Tribunal. The matters on which he relied as giving rise to the alleged unfairness of his dismissal included that the disciplinary panel had been inappropriately constituted. His case was that his contract of employment entitled him to have a panel including a clinician of the same medical discipline as himself and a legally qualified chairman. The disciplinary hearing of 9 February was chaired by the Trusts medical director who was not legally qualified and the panel did not include an orthopaedic or trauma surgeon. Mr Edwards had always maintained that, if the panel had been properly constituted, it would not have made incorrect findings and he would not have been dismissed. Prior to the pre hearing review before the tribunal, Mr Edwards withdrew his claim for unfair dismissal and it was dismissed by order of the tribunal on 17 August 2006. The Trust referred the complaints against Mr Edwards to the General Medical Council (GMC). The GMCs Investigation Committee decided not to refer the matter to a Fitness to Practise Panel and the complaint was closed. In the result, Mr Edwards was not subjected to any practising restrictions by the GMC arising out of the subject matter of the Trusts disciplinary investigation. By a claim issued on 15 August 2008, Mr Edwards issued proceedings in the High Court against the Trust in which he claimed damages for breach of his employment contract and its wrongful termination. By his particulars of claim, he alleges that the termination of his contract was wrongful and in breach of contract in a number of procedural respects. It is not necessary to refer to them all. They include the plea that the panel had not been properly constituted. Other allegations are that he was denied a fair hearing with legal representation before a properly constituted and unbiased panel; the Trust caused or permitted the Investigator of the allegations to become a witness and the effective prosecutor to become an adjudicator; and he was denied the right to cross examine the key witnesses who were called to give evidence against him. His case is that, if the panel had included a clinician of the same discipline as himself, it would not have reached the erroneous conclusions it did and the Claimants contract would not have been wrongfully terminated. The preliminary schedule of loss alleged that, but for his dismissal, Mr Edwards would have continued to work in his role as a consultant orthopaedic surgeon with the Trust until his retirement in 2022 and that he had suffered loss of earnings (including future earnings) in excess of 3.8 million. By an application notice issued on 17 February 2009, the Trust applied to the court for an order that Mr Edwards claim for damages for loss in respect of a period in excess of his three months contractual notice period be struck out under CPR 24.4. District Judge Jones acceded to the application. Mr Edwards appealed. Nicol J [2009] EWHC 2011 (QB) allowed the appeal, but only to the extent of holding that, subject to liability for breach of contract being established, in addition to compensation for the three months period of his contractual notice, Mr Edwards was also entitled to compensation for the additional period that it would have taken to conduct the disciplinary procedure if it were conducted and completed with reasonable expedition (the so called Gunton extension). In allowing this additional compensation, the judge was applying the Court of Appeal decision in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448. Mr Edwards appealed to the Court of Appeal. The lead judgment was given by Moore Bick LJ. It was recorded at para 44 of his judgment that Mr Edwards was now advancing two discrete claims of breach of contract, namely (i) a claim of wrongful dismissal (termination of the contract without notice) and (ii) a claim that the Trust had failed to carry out the proper disciplinary procedure. The failure to carry out the proper disciplinary procedure was alleged to have resulted in the findings of misconduct which damaged his reputation. It was said that, even if Mr Edwards had continued in his employment with the Trust after the disciplinary process had concluded, he would still have suffered difficulty in obtaining (a) private work (b) expert witness work and (c) employment in a different NHS hospital in the event that he chose to leave Chesterfield Hospital. The focus of the hearings before the Court of Appeal and the Supreme Court was on the claim for damages for loss of reputation resulting from the panels findings. The Court of Appeal held that this second claim did not fall within the Johnson exclusion area and that Mr Edwards was in principle entitled to recover whatever damages he could prove he had suffered as a result of the Trusts failure to carry out the proper disciplinary procedure and that he was not limited in respect of that cause of action to compensation for the three months period or the three months period plus the Gunton extension. Mr Sutton QC submitted to us that Mr Edwards should not be permitted to advance the second claim because it had not been pleaded in the particulars of claim. There is some force in the submission that it had not been pleaded. But the pleading point was not taken before the Court of Appeal. The validity of the second claim was the subject of detailed submissions in the Court of Appeal. It is too late for objection to be taken now. At each stage of these proceedings, it has been accepted by the Trust that the court should proceed on the assumption that Mr Edwards will succeed in establishing all the allegations he makes in the particulars of claim. The case of Mr Botham Mr Botham was employed by the Ministry of Defence (MOD) as a youth community worker from 1988 until 30 September 2003. His employment was terminable on three months notice. He was suspended from work on 10 December 2002 and on 4 June 2003 charged with gross misconduct: it was alleged that he had behaved inappropriately in relation to two teenage girls. Following disciplinary proceedings, on 30 September 2003 he was summarily dismissed for gross misconduct. Because his dismissal was for gross misconduct in relation to young people, he was placed on the list of persons deemed unsuitable to work with children kept by the Department of Education and Skills pursuant to the Protection of Children Act 1999 (POCA). Mr Botham brought a claim for unfair dismissal and wrongful dismissal in the Southampton Employment Tribunal. By its liability judgment dated 17 May 2007, the tribunal found that he had been unfairly dismissed and that his summary dismissal was in breach of contract. The conclusion of unfair dismissal was based on a number of findings including that the MOD had committed breaches of the express and implied terms of the contract of employment. The express terms were set out in the Discipline Code contained in the MODs Personnel Manual and contained various requirements in relation to the disciplinary procedures that were to be followed. After a remedies hearing on 19 October 2007, in its judgment dated 7 November 2007 the tribunal awarded Mr Botham damages for wrongful dismissal in the sum of approximately 7,000 based on loss of salary and benefits for the three months notice period; a basic award for unfair dismissal of 1,989 (after a 55% reduction for contributory fault); and a compensatory award for unfair dismissal of 53,500 (after a 55% reduction for contributory fault and the operation of the statutory cap). Mr Bothams name had been removed from the unsuitable person POCA register on 27 July 2007. The MODs appeal against liability was dismissed by the Employment Appeal Tribunal on 6 October 2008. On 21 April 2009, Mr Botham issued proceedings in the High Court seeking damages for breach of the express terms of his contract of employment. In his particulars of claim he relies on a number of findings that were made by the tribunal in its liability judgment that, in conducting the disciplinary process, the MOD failed to comply with several provisions of the Discipline Code. The alleged breaches are (i) failing to establish the relevant facts before proceeding with the disciplinary action; (ii) failing sufficiently or at all to define the charge, set out the facts to support the charge and to provide and list any documentary evidence; (iii) recommending dismissal without a proper investigation of the facts; and (iv) causing or permitting the Deciding Officer to make reference to other unsubstantiated allegations or suspicions of other offences. His case is that by reason of these breaches of contract, he was dismissed from his employment, suffered a loss of reputation, was placed on the POCA register and was precluded from further employment in his chosen field. His claim for damages includes a claim for loss of future earnings. His claim was dismissed by Slade J [2010] EWHC 646 (QB). She noted at para 57 of her judgment that all the breaches of contract relied on by Mr Botham were alleged to have resulted in Mr Bothams dismissal and the damages claimed were consequential on the dismissal. Accordingly, the claim fell within the Johnson exclusion area and the damages were not recoverable. Mr Botham appealed to the Court of Appeal. In view of the decision of the Court of Appeal in the case of Mr Edwards, on 1 September 2010 and by consent, Pill LJ allowed Mr Bothams appeal and granted the MOD permission to appeal to the Supreme Court. Does the reasoning in Johnson preclude recovery of damages for loss arising from the unfair manner of a dismissal in breach of an express term of an employment contract? It is necessary to start with some background. The statutory right to claim compensation for unfair dismissal was first introduced by the Industrial Relations Act 1971 (the 1971 Act). It is clear from the report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (Cmnd 3623) (the Donovan report) that the 1971 Act was intended to enhance the protection of employees. The Donovan report stated at para 522: An employee has protection at common law against wrongful dismissal, but this protection is strictly limited; it means that if an employee is dismissed without due notice he can claim the payment of wages he would have earned for the period of notice. Beyond this, the employee has no legal claim at common law, whatever hardship he suffers as a result of his dismissal. Even if the way in which he is dismissed constitutes an imputation on his honesty and his ability to get another job is correspondingly reduced he cannotexcept through an action for defamationobtain any redress (see the decision of the House of Lords in [Addis v Gramophone Co Ltd [1909] AC 488]). As the Donovan report stated, the relevant common law position was that stated in Addis. There has been much debate as to whether the headnote to the law report of the decision in Addis accurately reflects the decision of the majority of the House of Lords: see, for example, per Lord Steyn in Mahmud at pp 50 51 and again in Johnson at paras 1 to 5 and 15 and 16. The headnote is in these terms: Where a servant is wrongfully dismissed from his employment the damages for dismissal cannot include compensation for the manner of the dismissal, for his injured feelings, or for the loss he may sustain from the fact that the dismissal of itself makes it more difficult for him to obtain fresh employment But as Lord Nicholls said at para 2 in Eastwoods case, by the time of the Donovan report, it was settled law that an employee was not entitled to recover damages in respect of the manner of his dismissal. The protection at common law was strictly limited. The employer was entitled to bring the contract of employment to an end without cause. The Donovan report recommended that the law should be changed and that statute should establish machinery to safeguard employees against unfair dismissal. Parliament gave effect to this recommendation in the 1971 Act. The relevant provisions are now contained in Part X of the 1996 Act. An employee has the right not to be unfairly dismissed. The remedies for unfair dismissal are set out in Chapter II of Part X. A complaint may be made to an employment tribunal. If the tribunal upholds the complaint, it may make an order for reinstatement or re engagement or an award of compensation for unfair dismissal. But Parliament placed significant limitations on the ability of an employee to complain of unfair dismissal and on the remedies available where unfair dismissal is proved. The most striking of these are: (i) complaints of unfair dismissal must be brought within a period of three months and time will only be extended where timely presentation of the claim is not reasonably practicable (section 111); (ii) subject to exceptions for automatically unfair dismissals, the normal rule is that, in order to qualify to bring an unfair dismissal claim, an employee must have been continuously employed for not less than one year ending with the effective date of termination; (iii) there is a statutory cap on the level of the compensatory award which can be made by an employment tribunal (for dismissals on or after 1 February 2011 the cap is 68,400); and (iv) the employment tribunal has the power to reduce an employees compensation for unfair dismissal if it is satisfied that he has contributed to his dismissal by conduct which can be characterised as culpable or blameworthy (Nelson v British Broadcasting Corporation (No 2) [1980] ICR 110, 121 per Brandon LJ). It can be seen, therefore, that Parliament decided to give a remedy that was strikingly less generous than that which the common law would give for a breach of contract in the ordinary way. As Lord Nicholls said in Eastwoods case at paras 12 and 13, Parliament has addressed the highly sensitive and controversial issue of what compensation should be paid to employees who are dismissed unfairly. In fixing the limits on the amount of compensatory awards, Parliament has expressed its view on how the interests of employers and employees, and the social and economic interests of the country as a whole, are best balanced in cases of unfair dismissal. In Johnson, the employee claimed common law damages for breach of the implied term of trust and confidence. He alleged that, because of the manner in which he had been dismissed, he had suffered a mental breakdown and was unable work. His claim was struck out as disclosing no reasonable cause of action. The ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal. Lord Nicholls (para 2) was unwilling to create a new common law right covering the same ground as the statutory right not to be unfairly dismissed since it would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims. He added that it would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals, not the ordinary courts of law. Lord Hoffmann also regarded the statutory background as determinative of the question whether the new common law right should be created. He concluded (para 58) that for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of Parliament that there should be such a remedy but that it should be limited in application and extent. Lord Millett was of the same opinion. At para 80, he said that the creation of the statutory right made the development of the common law for which the employee contended both unnecessary and undesirable. He made the same points as those made by Lord Nicholls and Lord Hoffmann and added: even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos. All coherence in our employment laws would be lost. Lord Bingham agreed with Lord Hoffmann and Lord Millett and dismissed the appeal for the reasons they gave. Only Lord Hoffmann in Johnson considered the question of what the position would be if the manner of the dismissal was in breach of express terms of the contract of employment. He said: 60. There is one further point. During the argument there was some discussion of whether the provisions for disciplinary hearings were express terms of Mr Johnson's contract and what the consequences would be if they were. No such express terms were pleaded and Mr Faulks, who appeared for Mr Johnson, was not enthusiastic about doing so. Nevertheless, it may be useful to examine the matter in a little more detail. 61. Section 1(1) of the 1996 Act provides that upon commencing employment, an employee shall be provided with a written statement of particulars of employment. This includes, but is not limited to, the terms and conditions of employment concerning various matters, including the length of notice which the employee is obliged to give and entitled to receive to terminate his contract of employment (section 1(4)(e)). Section 3(1) then provides that a statement under section 1 shall include a note. specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee. 62. Consistently with these provisions, Mr Johnson was written a letter of engagement which stated his salary and summarised the terms and conditions of his employment, including the notice period. Apart from the statement that in the event of gross misconduct, the company could terminate his employment without notice, it made no reference to disciplinary matters. It was however accompanied by the employee handbook, which the letter of engagement said outlines all the terms and conditions of employment. This was divided into various sections, the first being headed Employment terms and conditions. These made no reference to the disciplinary procedure, which appeared in a subsequent section under the heading Other procedures. There one could find the various stages of the disciplinary procedure: formal verbal warning, written warning, final written warning, culminating in dismissal, as well as the separate procedure for summary dismissal in cases of serious misconduct. 63. So did the disciplinary procedures constitute express terms of the contract of employment? Perhaps for some purposes they did. But the employee handbook has to be construed against the relevant background and the background which fairly looms over the disciplinary procedure is Part X of the 1996 Act. The whole disciplinary procedure is designed to ensure that an employee is not unfairly dismissed. So the question is whether the provisions about disciplinary procedure which (to use a neutral phrase) applied to Mr Johnson's employment were intended to operate within the scope of the law of unfair dismissal or whether they were intended also to be actionable at common law, giving rise to claims for damages in the ordinary courts. 64. Section 199(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 gives Acas power to issue Codes of Practice containing such practical guidance as it thinks fit for the purpose of promoting the improvement of industrial relations. By section 207, a failure to comply with any provision of a Code is not in itself actionable but in any proceedings before an industrial tribunal any provision of the Code which appearsrelevant to any question arising in the proceedings shall be taken into account in determining that question. In 1977 Acas issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment. It explained why it was important to have disciplinary rules and procedures which were in writing and readily available to management and employees. It said in paragraph 4: The importance of disciplinary rules and procedures has also been recognised by the law relating to dismissals, since the grounds for dismissal and the way in which the dismissal has been handled can be challenged before an industrial tribunal. 65. In paragraph 10 it listed what disciplinary procedures should include. The Unisys procedures have clearly been framed with regard to the Code of Practice. 66. My Lords, given this background to the disciplinary procedures, I find it impossible to believe that Parliament, when it provided in section 3(1) of the 1996 Act that the statement of particulars of employment was to contain a note of any applicable disciplinary rules, or the parties themselves, intended that the inclusion of those rules should give rise to a common law action in damages which would create the means of circumventing the restrictions and limits which Parliament had imposed on compensation for unfair dismissal. The whole of the reasoning which led me to the conclusion that the courts should not imply a term which has this result also in my opinion supports the view that the disciplinary procedures do not do so either. It is I suppose possible that they may have contractual effect in determining whether the employer can dismiss summarily in the sense of not having to give four weeks' notice or payment in lieu. But I do not think that they can have been intended to qualify the employer's common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable. Parliament has legislated on the subject of the disciplinary procedures applicable to contracts of employment on a number of occasions and in different ways. I shall start with sections 1 and 3(1) of the 1996 Act. Section 1 obliges an employer to provide the employee with a written statement of particulars of employment. Section 3(1) provides: (1) A statement under section 1 shall include a note (a) specifying any disciplinary rules applicable to the employee or referring the employee to the provisions of a document specifying such rules which is reasonably accessible to the employee, (aa) specifying any procedure applicable to the taking of disciplinary decisions relating to the employee, or to a decision to dismiss the employee, or referring the employee to the provisions of a document specifying such a procedure which is reasonably accessible to the employee. Section 3(1)(aa) was introduced on 1 October 2004 by section 35(2) of the Employment Act 2002 (the 2002 Act). As is stated in Deakin and Morris (loc cit) at para 4.24: even if, in principle, contract and [the] statement [required by section 1] are conceptually discrete, in practice one or both of the parties may regard the statement as being equivalent to a contract in both form and effect. Where the statement favours the employee, it represents strong prima facie evidence of the contract terms and the written particulars place a heavy burden on the employer to show that the actual terms of contract are different from those which he has set out in the statutory statement: per Browne Wilkinson J in System Floors (UK) Ltd v Daniel [1982] ICR 54, 58. In so far as the statement specifies the disciplinary rules, it favours the employee because these rules are designed to ensure that the employee is not unfairly dismissed. The effect of sections 1 and 3(1), therefore, is that Parliament has decided, at least in most cases, that contractual force should be given to applicable rules and procedures. But Parliament has gone further than merely providing that if an employer has applicable disciplinary rules and procedures, they will normally have contractual effect. It has recognised that a breach of disciplinary rules and procedures in the course of a dismissal process is relevant to the question whether the dismissal is unfair. It has from time to time adopted different statutory mechanisms to encourage or enforce compliance with appropriate disciplinary procedures in order to protect employees from dismissals which are procedurally unfair. Thus, in 1977, ACAS issued a Code of Practice entitled Disciplinary Practice and Procedures in Employment. Para 4 explained the importance of disciplinary rules and procedures which were in writing and readily available to management and employees: see para 64 of Lord Hoffmanns speech in Johnson. The 1977 Code was revised in 1997. Section 207 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act) provides that any provision of a Code of Practice which appears to be relevant to any question arising in unfair dismissal proceedings shall be taken into account in determining that question. This is the point that was discussed by Lord Hoffmann at paras 64 and 65 of his speech. The 2002 Act introduced statutory dispute resolution procedures: see section 29 and Schedule 2. The dismissal and disciplinary procedures prescribed by Schedule 2 were similar to the ACAS procedures. Section 30 provided: (1) Every contract of employment shall have effect to require the employer and employee to comply, in relation to any matter to which a statutory procedure applies, with the requirements of the procedure. (2) Subsection (1) shall have effect notwithstanding any agreement to the contrary, but does not affect so much of an agreement to follow a particular procedure as requires the employer or employee to comply with a requirement which is additional to, and not inconsistent with, the requirements of the statutory procedure. Section 31 provided that if, in the case inter alia of unfair dismissal proceedings, it appeared to the employment tribunal that a claim to which the proceedings related concerned a matter to which one of the statutory procedures applied, and the statutory procedure was not completed before the proceedings began by reason of a failure of the employer or employee to comply with the requirements of the procedure, then the tribunal was required to increase or reduce any award in accordance with the provisions of section 31(2) or (3) (as the case may be). Section 34 introduced a new section 98A into the 1996 Act. It provided: (1) An employee who is dismissed shall be regarded for the purposes of this Part as unfairly dismissed if (a) one of the procedures set out in Part 1 of Schedule 2 to the Employment Act 2002 (dismissal and disciplinary procedures) applies in relation to the dismissal, (b) the procedure has not been completed, and (c) the non completion of the procedure is wholly or mainly attributable to failure by the employer to comply with its requirements. Pursuant to the powers conferred by section 31(6), the Secretary of State made the Employment Act 2002 (Dispute Resolution) Regulations 2004 (SI 2004/752). These were detailed regulations inter alia about the application of the statutory procedures and what constituted compliance with a requirement of a statutory procedure. These procedures proved to be unduly complicated. It was concluded by the Government that they carried an unnecessarily high administrative burden for both employers and employees and have had unintended negative consequences which outweigh their benefits: Better Dispute Resolution: A Review of Employment Dispute Resolution in Great Britain (the Gibbons Review) DTI, March 2007, p 8. The Government therefore decided to return to reliance on an ACAS Code of Practice, but provided for tribunals to have a discretion to adjust awards by up to 25% in the event of non compliance with the Code. Accordingly, sections 29 33 and 34(2) and Schedule 2 of the 2002 Act were repealed by the Employment Act 2008 (the 2008 Act) and the 2004 Regulations lapsed upon the repeal. Section 3 of the 2008 Act introduced a new section 207A into the 1992 Act. It provides that, if in the case inter alia of unfair dismissal proceedings it appears to an employment tribunal that the claim concerns a matter to which a relevant Code of Practice applies and the employer or employee has unreasonably failed to comply with the Code in relation to that matter, then the tribunal may, if it considers it just and equitable to do so, increase or reduce any award it makes to the employee by no more than 25%. A relevant Code of Practice means a Code of Practice which relates exclusively or primarily to procedure for the resolution of disputes. Relevant Codes of Practice have been issued by ACAS from time to time. Thus, for example, the 2003 Code states that it: provides practical guidance to employers, workers and their representatives on The statutory requirements relating to disciplinary and grievance issues; What constitutes reasonable behaviour when dealing with disciplinary and grievance issues; Producing and using disciplinary and grievance procedures. The April 2009 Code states that it sets out the basic requirements of fairness that will be applicable in most cases; it is intended to provide the standard of reasonable behaviour in most instances. To summarise, under section 207 of the 1992 Act, any non compliance with the ACAS Code of Practice relevant to a question arising in unfair dismissal proceedings was to be taken into account in determining that question. Under the 2002 Act, Parliament adopted the direct approach of introducing mandatory dispute resolution procedures and, if a statutory procedure had not been completed for reasons attributable to the employer, providing for the employee to be regarded as unfairly dismissed and for an adjustment of awards in unfair dismissal proceedings. Under the 2008 Act, Parliament reverted to the earlier model (but with modifications) of providing that an unreasonable failure to comply with a relevant Code of Practice may be reflected in the amount of an award of compensation for unfair dismissal. The important point is that in each case, Parliament linked a failure to comply with disciplinary or dismissal procedures with the outcome of unfair dismissal proceedings. To adopt the language of Lord Hoffmann at para 63 of Johnson, the provisions about disciplinary procedure were intended to operate within the scope of the law of unfair dismissal. It follows that, if provisions about disciplinary procedure are incorporated as express terms into an employment contract, they are not ordinary contractual terms agreed by parties to a contract in the usual way. At para 38 of his judgment, Moore Bick LJ said whether the parties intend the provisions relating to disciplinary procedures to sound in damages depends on the true construction of the contract. As a general proposition, this is obviously true. But in the present context, it ignores the statutory link between the provisions about disciplinary procedures and the law of unfair dismissal. The question remains whether, if provisions about disciplinary procedure are incorporated into a contract of employment, they are intended to be actionable at common law giving rise to claims for damages in the ordinary courts. Parliament intended such provisions to apply to contracts of employment inter alia in order to protect employees from unfair dismissal and to enhance their right not to be unfairly dismissed. It has specified the consequences of a failure to comply with such provisions in unfair dismissal proceedings. It could not have intended that the inclusion of these provisions in a contract would also give rise to a common law claim for damages for all the reasons given by the House of Lords in Johnson for not extending the implied term of trust and confidence to a claim for damages for unfair manner of dismissal. It is necessarily to be inferred from this statutory background that, unless they otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages. In these circumstances, I agree entirely with para 66 of Lord Hoffmanns speech. The unfair dismissal legislation precludes a claim for damages for breach of contract in relation to the manner of a dismissal, whether the claim is formulated as a claim for breach of an implied term or as a claim for breach of an express term which regulates disciplinary procedures leading to a dismissal. Parliament has made certain policy choices as to the circumstances in which and the conditions subject to which an employee may be compensated for unfair dismissal. A dismissal may be unfair because it is substantively unfair to dismiss the employee in the circumstances of the case and/or because the manner in which the dismissal was effected was unfair. The manner may be unfair because it was done in a humiliating manner or because the procedure adopted was unfair inter alia because the agreed disciplinary procedure which led to the dismissal was not followed. It may be unfair because defamatory findings were made which damage the employees reputation and which, following a dismissal, make it difficult for the employee to find further employment. Any such complaint was intended by Parliament to be adjudicated on by the specialist employment tribunal subject to the various constraints to which I have referred. Parliament did not intend that an employee could choose to pursue his complaint of unfair dismissal in the ordinary courts, free from the limitations carefully crafted by Parliament for the exercise of this statutory jurisdiction. Lord Phillips agrees that (at any rate in the absence of express agreement) damages are not recoverable for breach of an express term of an employment contract as to the manner of dismissal. He reaches this conclusion by applying and extending the Addis principle (ie as a matter of common law), presumably, for reasons of principle or policy. But the statutory dimension and the link between contractual disciplinary procedures and the statutory law of unfair dismissal cannot be ignored. I think that Lord Phillips implicitly recognises this. This is because he concludes that to permit a claim for damages for failure to comply with a disciplinary code leading to dismissal would undermine the decisions in Johnson and Eastwood. I agree. But those decisions are based on the intention of Parliament derived from the unfair dismissal legislation. I need to deal with the suggestion that was made during the argument (accepted by Lady Hale and Lords Kerr and Wilson) that claims such as those made by Mr Edwards and Mr Botham would have been available as common law claims for breach of contract before the enactment of the 1971 Act and that neither that statute nor its successors should be interpreted as having taken away existing rights enjoyed by employees. The answer to this argument is that the right to claim damages in respect of the manner of a dismissal did not exist before the 1971 Act: see paras 20 and 21 above. I accept that there has been debate as to what Addis decided. It is not necessary to enter into this debate. It is, however, clear that the Donovan report which inspired the 1971 Act stated that the law was as summarised in the headnote to the law report to Addis and Lord Nicholls expressed the same view at para 2 in Eastwoods case. In any event, at the very least it was not clear whether an employee could claim damages for the unfair manner in which he was dismissed. No example was cited to us of any case decided before the 1971 Act in which an employee was awarded damages for breach of contract for the unfair manner in which he had been dismissed. In these circumstances, I cannot accept that an application of the reasoning in Johnson should be rejected because it involves saying that the 1971 Act took away an employees existing rights and that this could not have been intended by Parliament. That is not to say that an employer who starts a disciplinary process in breach of the express terms of the contract of employment is not acting in breach of contract. He plainly is. If that happens, it is open to the employee to seek an injunction to stop the process and/or to seek an appropriate declaration. Miss ORourke QC submitted that, if in such a situation there is a breach of contract sufficient to support the grant of an injunction but (for whatever reason) the employee does not obtain an injunction, it is anomalous if the normal common law remedy of damages is in principle not available to him. The short answer to this submission is that an injunction to prevent a threatened unfair dismissal does not cut across the statutory scheme for compensation for unfair dismissal. None of the objections based on the co existence of inconsistent parallel common law and statutory rights applies. The grant of injunctive or declaratory relief for an actual or threatened breach of contract would not jeopardise the coherence of our employment laws and would not be a recipe for chaos in the way that, as presaged by Lord Millett in Johnson, the recognition of parallel and inconsistent rights to seek compensation for unfair dismissal in the tribunal and damages in the courts would be. Miss ORourke relies on the Court of Appeal decision in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 and in particular the House of Lords decision in Skidmore v Dartford and Gravesham NHS Trust [2003] UKHL 27; [2003] ICR 721 and on the Court of Appeal decision in Gunton [1981] Ch 448 in support of the conclusion reached by the Court of Appeal in the present case. In Saeed at para 12, Hale LJ said that if an employee thinks that the employer has chosen the wrong disciplinary procedure, then he can try to have it changed in advance or seek damages after the event. This was not a dismissal case and in any event it pre dates Johnson. Understandably, it does not engage with the reasoning in Johnson and therefore it does not shed light on the issue that arises on these appeals. Skidmore is an unfair dismissal case. It was held that the employer had adopted the wrong disciplinary procedures and the employees unfair dismissal claim was remitted to an employment tribunal. At para 15, Lord Steyn said that it was for the employer to decide which disciplinary route should be followed, but that the decision should be in accordance with the contract. If a non conforming decision was taken and acted upon, there is a breach of contract resulting in the usual remedies. Lord Steyn expressed his agreement with what Hale LJ had said in Saeed. But these observations were obiter dicta. The question of what remedy would be available to the employee if a non conforming decision was taken was not in issue in that case. No doubt that is why Johnson was not cited to the House and not mentioned by Lord Steyn and why he did not grapple with the relationship between the statutory code which regulates unfair dismissal claims and common law claims for damages for breach of contract. Although great respect should always be paid to any observations of Lord Steyn, I do not think that it would be right to place weight on these dicta. Gunton was a wrongful dismissal case. The claimant was employed under a contract of service terminable on one months notice. Regulations prescribing a procedure for the dismissal of an employee on disciplinary grounds were incorporated into his contract. The employer gave one months notice of termination, but without first having followed the prescribed disciplinary procedure in all respects. It was held by the Court of Appeal by a majority that the employee could not lawfully be dismissed on a disciplinary ground until the procedure had been properly carried out and that his dismissal was accordingly wrongful. The measure of damages for wrongful dismissal was loss of wages up to the date on which the contract could properly have been determined by the employer (on an application of the least onerous principle: see McGregor on Damages, 18th ed (2010), at para 8 094.) It was held that the period by reference to which damages were to be assessed was a reasonable period for carrying out the disciplinary process plus one month: see per Buckley LJ at p 470 and per Brightman LJ at p 474. Miss ORourke submits that the case of Gunton is an example of damages being awarded for breach of a disciplinary process leading to a dismissal. In my view, this submission is based on a misreading of the case. It was a conventional wrongful dismissal case involving the breach of a term relating to a notice of termination. It was held that it was not open to the employer to give one months notice without first undertaking the disciplinary process properly. As Brightman LJ put it at p 474, the failure to undertake the process properly meant that the notice was invalid and a nullity. It was not a claim for damages for breach of the disciplinary process. It was a claim for wrongful dismissal for purporting to terminate the contract on the basis of an invalid notice. In my view, there is nothing in this case which is inconsistent with the Johnson principle. I would, therefore, hold that the reasoning in Johnson is a bar to a claim for damages for breach of an express term of an employment contract as to the manner of a dismissal. The demarcation boundary But that is not an end to the enquiry because the question remains in any given case whether the claim falls within the Johnson exclusion area or not. The issue of where the boundary is to be found was considered in Eastwood [2005] 1 AC 503. Lord Nicholls gave valuable guidance at paras 27 to 33: 27. Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward. The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly. An employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal. 28. In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed and it arises by reason of his dismissal. Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29. Exceptionally this is not so. Exceptionally, financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal. Financial loss flowing from suspension is an instance. Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment. In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal. In respect of his subsequent dismissal he may of course present a claim to an employment tribunal. If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over. 30. If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary. Particularly in cases concerning financial loss flowing from psychiatric illnesses, some of the practical consequences are far from straightforward or desirable. The first and most obvious drawback is that in such cases the division of remedial jurisdiction between the court and an employment tribunal will lead to duplication of proceedings. In practice there will be cases where the employment tribunal and the court each traverse much of the same ground in deciding the factual issues before them, with attendant waste of resources and costs. 31. Second, the existence of this boundary line means that in some cases a continuing course of conduct, typically a disciplinary process followed by dismissal, may have to be chopped artificially into separate pieces. In cases of constructive dismissal a distinction will have to be drawn between loss flowing from antecedent breaches of the trust and confidence term and loss flowing from the employee's acceptance of these breaches as a repudiation of the contract. The loss flowing from the impugned conduct taking place before actual or constructive dismissal lies outside the Johnson exclusion area, the loss flowing from the dismissal itself is within that area. In some cases this legalistic distinction may give rise to difficult questions of causation in cases such as those now before the House, where financial loss is claimed as the consequence of psychiatric illness said to have been brought on by the employer's conduct before the employee was dismissed. Judges and tribunals, faced perhaps with conflicting medical evidence, may have to decide whether the fact of dismissal was really the last straw which proved too much for the employee, or whether the onset of the illness occurred even before he was dismissed. 32. The existence of this boundary line produces other strange results. An employer may be better off dismissing an employee than suspending him. A statutory claim for unfair dismissal would be subject to the statutory cap, a common law claim for unfair suspension would not. The decision of the Court of Appeal in Gogay v Hertfordshire County Council [2000] IRLR 703 is an example of the latter. Likewise, the decision in Johnson v Unisys Ltd [2003] 1 AC 518 means that an employee who is psychologically vulnerable is owed no duty of care in respect of his dismissal although, depending on the circumstances, he may be owed a duty of care in respect of his suspension. 33. It goes without saying that an interrelation between the common law and statute having these awkward and unfortunate consequences is not satisfactory. The difficulties arise principally because of the cap on the amount of compensatory awards for unfair dismissal. Although the cap was raised substantially in 1998, at times tribunals are still precluded from awarding full compensation for a dismissed employee's financial loss. So, understandably, employees and their legal advisers are seeking to side step the statutory limit by identifying elements in the events preceding dismissal, but leading up to dismissal, which can be used as pegs on which to hang a common law claim for breach of an employer's implied contractual obligation to act fairly. This situation merits urgent attention by the Government and the legislature. The question in each case is, therefore, whether or not the loss founding the cause of action flows directly from the employers failure to act fairly when taking steps leading to dismissal and precedes and is independent of the dismissal process (Lord Nicholls at para 29). In other words, the court must decide whether earlier events do or do not form part of the dismissal process (Lord Steyn at para 39). This is a fact specific question. As Lord Nicholls observed at paras 15 and 30 to 33, drawing the boundary line in this way leads to unsatisfactory and anomalous results. One of these is that an employer may be better off dismissing an employee than suspending him. But this is the inevitable consequence of the interrelation between the common law and statute. The unfair dismissal legislation occupies the unfair dismissal territory to the exclusion of the common law, but it does not impinge on any cause of action which is independent of a dismissal (such as a common law claim for damages for suspension in breach of contract). It is instructive to see how the House of Lords approached this question in the Eastwood case itself. The case of Eastwood v Magnox concerned two employees (Mr Eastwood and Mr Williams) both of whom pursued claims for unfair dismissal before the tribunal which were compromised. They both then started proceedings in the county court claiming that they had suffered personal injuries in the form of psychiatric illnesses caused by a deliberate course of conduct by certain individuals using the machinery of the dismissal process. On the assumed facts, the House of Lords held that these claims were independent of the dismissal process and did not fall within the Johnson exclusion area. The claimants had acquired a cause of action for breach of contract before their dismissal. On the other hand, as we have seen (para 24 above) in Johnson itself, the claim was for damages for the mental breakdown that the claimant alleged that he had suffered as a result of the manner and the fact of his dismissal: that claim did fall within the Johnson exclusion area. The third case considered by the House of Lords in the Eastwood case was that of Mr McCabe. Mr McCabe lodged a complaint of unfair dismissal with a tribunal on the grounds that his dismissal was in breach of the relevant disciplinary procedures. He was awarded compensation and then started proceedings in the High Court against the employer claiming damages inter alia for breach of contract. The primary complaint in his statement of claim as originally served was that by reason of the councils failure to investigate the allegations properly and to conduct the disciplinary hearings properly and his dismissal he had sustained psychiatric illness. But later (and in response to the decision in Johnson), he sought to amend his statement of claim by limiting the focus of his complaint to the period before his dismissal, that is to the period of his suspension and to the employers failure to carry out a proper investigation of the allegations against him. On the assumed facts on which the amended claim was based, the House of Lords held that Mr McCabes cause of action had accrued before his dismissal and was independent of it. Do the present cases fall outside the Johnson exclusion area? Mr Edwards It is accepted by Miss ORourke that Mr Edwards claim for unfair dismissal falls within the Johnson exclusion area. But she submits that his claim for damages for loss of reputation consequent on the findings of misconduct made by the disciplinary panel does not. She contends that these findings resulted from the fact that (in breach of the contractual disciplinary procedures) the disciplinary panel was not properly constituted and acted in a manner which was procedurally unfair. This breach, she submits, occurred independently of the dismissal. The undisputed facts are that Mr Edwards disciplinary hearing was held on 9 February 2006. He was notified of his summary dismissal on the following day. The decision was confirmed in a long letter from the chairman of the disciplinary panel dated 16 February which set out in detail the allegations and the panels findings. The complaint is that the panels erroneous conclusions flowed from these findings. The findings and conclusions were first published in the letter which was sent six days after the decision to dismiss had been communicated to Mr Edwards and were contained in the letter which confirmed his dismissal. In my view, it is impossible to divorce the findings on which Mr Edwards seeks to found his claim for damages for loss of reputation from the dismissal when they were the very reasons for the dismissal itself. In these circumstances, Mr Edwards claim for damages for loss of reputation is not one of those exceptional cases to which Lord Nicholls referred in Eastwood where an employers failure to act fairly in the steps leading to a dismissal causes the employee financial loss. This claim does not arise from anything that was said or done before the dismissal. It is not independent of the dismissal. It arises from what was said by the Trust as part of the dismissal process. It follows that I cannot accept the distinction made by Lord Kerr and Lord Wilson between the findings or reasons for the dismissal and the dismissal itself. I agree with what Lord Mance says about that. Mr Botham The case pleaded at para 20 of the particulars of claim is that as a result of the MODs breaches of contract, Mr Botham foreseeably, was dismissed from employment, and was caused (wrongly) to suffer loss and damage to his reputation and to be precluded from further employment in his chosen field and to be placed on the register of persons deemed unsuitable to work with children. The damages claimed include loss of earnings and other benefits from the date of dismissal. The statement of facts and issues agreed for the purposes of the appeal state that Mr Botham was placed on the register as a consequence of the dismissal for gross misconduct (para 5) and the relief sought by him includes damages on the grounds that his dismissal and his inclusion on the POCA precluded him from further employment as a youth community worker (para 15(3)). In my view, this case is a fortiori that of Mr Edwards. In Mr Edwards case, it is alleged that the damages for loss of reputation were caused by the erroneous findings made by the panel, rather than the dismissal. Mr Botham goes further and says that the damages he claims for loss of reputation were caused by the dismissal itself. For the reasons already given, it falls within the Johnson exclusion area. That was the view of Slade J and I agree with it. The consent order made by the Court of Appeal on 31 August 2010 should therefore be set aside. Conclusion on the main issue in relation to Mr Edwards and Mr Botham It follows that I would allow the appeals by the Trust and the MoD. In both cases, the employment was terminated by dismissal. Had they both been suspended, the position would have been completely different. As it is, their claims are for damages arising from what was said in the course of the dismissal process and must be rejected for the reasons that I have given. As I have said (para 10 above), Nicol J held that, subject to liability for breach of contract being established, the maximum amount of damages recoverable by Mr Edwards for wrongful dismissal was compensation for the three months notice period and the Gunton extension period. There was some discussion before us as to whether Gunton was correctly decided. The point was described as difficult by Staughton LJ in Boyo v Lambeth London Borough Council [1994] ICR 727 at 747H 748A. But in view of my conclusion on the main issue, this point does not arise and I do not find it necessary to express a view on whether Gunton was correctly decided. Claims by Mr Botham for costs as damages Cost of legal representation in the disciplinary proceedings Mr Botham had the benefit of legal assistance in the disciplinary proceedings. It is common ground that, in view of the nature of the charge against him, it was reasonable and foreseeable that he would obtain such assistance. Mr Reynold QC submits that, since the charge was preferred in circumstances which constituted a breach of the express terms of the contract of employment, Mr Botham is entitled to his legal costs on ordinary principles as loss flowing from the breach. I reject this submission largely for the reasons given by Ms Outhwaite QC and the judge. At para 6 of its remedies judgment, the Employment Tribunal made a finding that Mr Bothams culpable conduct was the sole reason for the disciplinary procedure. It follows that the cost of legal assistance during the disciplinary process was caused by Mr Bothams culpable conduct in triggering the disciplinary process and did not arise out of a breach of contract by the MOD. Furthermore, Parliament designed the Tribunal system so that there was no need for legal representation and, therefore, litigation costs are not normally recoverable. It would be odd if an employee was entitled to recover costs for legal representation for the disciplinary proceedings before his employer, but could not recover costs for legal representation before the Employment Tribunal itself. Litigation costs before the Employment Tribunal and the Employment Appeal Tribunal Mr Reynold submits that, but for the breaches of contract, the costs of legal representation before the Employment Tribunal and the Employment Appeal Tribunal would not have been incurred. Mr Botham is, therefore, entitled to recover these costs as damages for breach of contract on normal common law principles. I would also reject this submission again largely for the reasons given by Ms Outhwaite and the judge. The unfair dismissal claim arose necessarily out of the dismissal and, for the reasons given earlier, fell within the Johnson exclusion area. Legal costs were incurred because Mr Botham had been dismissed. A claim in respect of these costs falls within the Johnson exclusion area and is not recoverable as damages for breach of contract for the same reasons as damages are not recoverable for loss of earnings and benefit. Every unfair dismissal claim involves at the very least an alleged breach of the implied term of trust and confidence, and probably involves an alleged breach of express contractual terms as well. If the court were to award damages for legal representation in dismissal proceedings, such claims would arise following all unfair dismissal claims. This would defeat Parliaments statutory regime which was intended to provide a fast, cost free resolution to dismissals which are alleged to be unfair by a specialist tribunal. All such claims would result in satellite litigation to recover litigation costs. Nor would there be any reason to confine such satellite litigation to successful claims for unfair dismissal. Mr Botham chose to bring a claim for unfair dismissal before the Employment Tribunal. Having elected to bring a claim in a forum where no costs are usually awarded, he should bear the cost consequences of having done so. There are strong policy reasons for awarding costs only in exceptional circumstances. The statutory regime should not be circumvented so as to allow a damages action for costs. Conversely, the MOD had no choice of forum. It responded to the claim after the forum had been chosen by Mr Botham. If the MOD had successfully defended the unfair dismissal claim, it too would not have been able to recover its costs. Overall conclusion For the reasons that I have given, I would allow the appeal of the Trust in the case of Mr Edwards and of the MOD in the case of Mr Botham. LORD PHILLIPS When initially I saw in draft the judgment of Lord Dyson, my reaction was that it was so plainly right in the result that my inclination was simply to add my agreement to it. The judgments of Lady Hale and Lord Kerr have, however, caused me to give further consideration to this difficult area of the law. While I have not changed my mind as to the result, the route by which I have reached it is not on all fours with that of Lord Dyson. For that reason I am adding my judgment to those of Lord Dyson and Lord Mance. Each of the claimants was dismissed from his employment after a disciplinary hearing. Each disciplinary hearing should have complied with a disciplinary code that had contractual force. Each hearing failed to comply with the code. Each claimant alleges that as a consequence of this the relevant tribunal wrongly made findings of misconduct that have inhibited him from obtaining alternative employment and thus caused him financial loss. Each claimant has sought to recover this loss in an action in the High Court for breach of contract. I shall describe each of these claims as a stigma claim. Mr Edwards has combined his stigma claim with what is now a separate claim for wrongful dismissal. He has brought no proceedings other than these two claims. Mr Botham initially commenced proceedings in the Southampton Employment Tribunal, pursuant to legislation that I shall describe compendiously as unfair dismissal legislation. He successfully claimed compensation for both wrongful dismissal and unfair dismissal. His damages for the former were limited to three months salary and benefits, in respect of the period of notice of which he was deprived. His compensation for the latter was reduced to reflect a finding of 55% contributory fault and the effect of the statutory cap. Mr Botham then commenced his stigma claim in the High Court. Neither claim succeeded at first instance. Each was held to be precluded because it fell within the so called Johnson exclusion area. Mr Edwards appealed successfully to the Court of Appeal, after which Mr Botham made a similar appeal, which was allowed by consent. Two questions arise. (1) Are the stigma claims outside the Johnson exclusion area because they are discrete from and independent of the claims for wrongful dismissal? (2) Are the stigma claims outside the Johnson exclusion area because they are claims for breaches of express, and not implied, contractual terms? The majority answers both questions in the negative. Lady Hale answers the second question in the affirmative, and holds that the judgments of the Court of Appeal were correct for this reason. Lord Kerr and Lord Wilson consider that the first question is critical. So far as Mr Edwards is concerned, his stigma claim is sound because it is discrete and independent of the claim for wrongful dismissal. Mr Bothams claim is, however, for loss consequential on his dismissal. In these circumstances his claim is invalid. Lord Dyson holds that each stigma claim arises out of the manner of the claimants wrongful dismissal. I agree with him. If that conclusion is correct it is, I believe, common ground that each claim must fail if Lord Hoffmanns obiter dicta in Johnson were correct. Lord Dyson has set out at para 1 of his judgment the implied term upon which the claim in Johnson was founded (the trust and confidence implied term). The majority in Johnson, Lord Steyn dissenting on the point, held that this implied term had no application to the manner of dismissal of an employee by his employer. This was because Parliament had made alternative provision for this situation by the unfair dismissal legislation. Lord Hoffmann alone expressed the view that, even if the manner of dismissal involved the failure to comply with a disciplinary code that had contractual effect, no claim at common law could be based upon that failure. The vital question in the present case is whether Lord Hoffmann was correct. That question might well have been raised in Eastwood. There also the trust and confidence implied term was invoked to found common law claims by employees who had been dismissed after disciplinary hearings that had been improperly conducted. Each of the employees claimed that the hearings had caused them psychiatric damage prior to dismissal. The employers sought to rely on the Johnson exclusion. No one suggested that the claims could be founded on breaches of express contractual obligations in relation to the disciplinary hearings. Instead, the claims were held to be viable on the basis that they fell outside the Johnson exclusion area in as much as their causes of action preceded and were independent of their subsequent dismissals. Lord Steyn devoted a lengthy concurring speech to the suggestion that there might be good reason to reconsider Johnson. He did not suggest that it could simply be finessed by bringing a claim for failure to comply with the relevant disciplinary codes. In Johnson at para 66, when dealing with the intention of Parliament when passing section 3(1) of the 1996 Act, Lord Hoffmann observed that the disciplinary procedures could not have been intended to qualify the employers common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable. The intention of which he spoke was both that of Parliament and that of the parties themselves. This is echoed by a passage in the judgment of Lord Dyson, when applying Lord Hoffmanns reasoning in the present case. Lord Dyson sets out at para 26 of his judgment the critical passage from the speech of Lord Hoffmann in Johnson. He then expands on the Parliamentary history of the requirement that disciplinary procedures should be incorporated in contracts of employment. He demonstrates that Parliament also provided that failure to comply with those procedures should have specific consequences in unfair dismissal proceedings. Lord Dyson at para 38 observes that disciplinary procedures incorporated into an employment contract are not ordinary contractual terms. At para 39 he concludes that it is necessarily to be inferred from the statutory background that, unless the parties otherwise expressly agree, the parties to an employment contract do not intend that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages. Thus, on Lord Dysons analysis, no claim to damages can be founded on breach of a disciplinary code that is incorporated into the contract because it is to be inferred that the parties have so agreed. This echoes Lord Hoffmanns reference to the intention of the parties themselves. Courts often refer to the intention of Parliament. When they do so the intention is usually implied or imputed. The courts ascribe to Parliament an intention that the relevant legislation will bear a meaning that is rational and coherent. The intention is thus somewhat artificial. It is even more artificial in the present context to impute to every party to a contract of employment the same intention that Lord Hoffmann and Lord Dyson have ascribed to Parliament in relation to the effect of disciplinary codes. While this may be a legitimate approach to making sense of this area of the law, I believe that there is a more satisfactory route that leads to the conclusion that Lord Dyson has reached in this case. This case is about remoteness of damage. That is what Addis was about. In Addis the plaintiff was employed to manage a business in Calcutta on terms that entitled him to 6 months notice. He was given 6 months notice, but immediately replaced, with the result that he returned to England. His claim for breach of contract succeeded before judge and jury. The jury awarded him 600 for wrongful dismissal. In the House of Lords the principal issue was as to the measure of damage to which he was entitled. There were a number of problems. First it was not clear whether the breach of contract lay in constructively dismissing the plaintiff without notice, or in refusing to let him act as manager during the notice period. Significantly, Lord Loreburn LC held at p 490 that it made no difference. The damages were the same on either footing. The second problem was that it was not clear on what bases the jury had awarded 600 damages. Lord Atkinson at pp 494 and 496 and Lord Collins at pp 497, 498 and 501 considered the case on the footing that the jury might have purported to award exemplary damages. The majority of their Lordships considered, however, that the case raised the issue of principle of whether it was open to the jury to award damages for the consequences of the dismissal in so far as these extended beyond direct financial loss. They considered whether damages could be awarded in respect of injury to feelings or the fact that the dismissal of itself made it more difficult to obtain fresh employment see Lord Loreburn at p 491, Lord Atkinson at p 493, Lord Collins at p 497 and Lord Shaw of Dumferline at p 504. It is particularly material in the present context that they considered whether wrongful dismissal could give rise to a claim for stigma damages. The majority held that it could not. The reason for this was that such a head of loss, together with any claim for distress or injury to feelings, was properly the subject of a claim in tort rather than in contract see Lord James of Hereford at p 492, Lord Atkinson at p 496, Lord Gorell at p 502 and Lord Shaw at pp 503 and 504. Thus Addis was not a case about the scope of the contractual duty of an employer, but a case about the measure of damage recoverable for breach of the employers contractual duty. As Lord Dyson points out at para 19, the 1971 Act was passed on the basis that the law had not changed since Addis. That was the first of a series of statutes, set out by Lord Dyson, that put in place a complex scheme that provided a specifically limited remedy for employees for unfair dismissal that took account of the circumstances of the dismissal, including procedural unfairness and, in particular, any failure to comply with the procedural code that the legislation required to be incorporated in the contract. In the meantime the common law relating to contracts of employment developed in a manner favourable to employees, both by the development of implied obligations on the part of the employer and by recognising heads of damage that could be recovered both in tort and in contract that had not been recognised at the time of Addis. One such obligation arose under the trust and confidence implied term. In Mahmud the House of Lords held that this implied term could give rise to stigma damages. Stigma damage constituted a novel head of damage for breach of a contract of employment. The stigma damages recognised in Mahmud were not caused by wrongful dismissal. Stigma damages cannot be awarded for wrongful dismissal without reversing Addis. In Addis at p 500 Lord Collins summarised, with approval, an observation of Lord Coleridge CJ in Maw v Jones (1890) 25 QBD 107 as follows: dismissal with an imputation might well be thought by a jury to hurt the plaintiffs prospects of finding another situation, and on that ground alone might give a legal claim to consequential damages within the ordinary rule. The majority held, however, that stigma damages could not be recovered as a head of damage flowing from wrongful dismissal. Johnson was decided on the premise that Addis remained good law see Lord Millett at para 68 although he did go on at para 70 to raise the question of whether Mahmud might have changed the position. Addis was not challenged in Eastwood. Addis has not been challenged in the present case. Until Addis is reversed it remains the law that stigma damages cannot be recovered for wrongful dismissal. The stigma effect can, however, be taken into account in a claim under statute for unfair dismissal. If the courts in developing the common law principles of measure of damage can exclude a claim for stigma damages for breach of contract that consists of wrongful dismissal, it is equally open to them to exclude such a head of claim for breach of contract that consists of a failure to comply with a disciplinary code. The question in this case is whether this Court should do so. If this Court follows the reasoning of the House of Lords in Johnson and in Eastwood this question must be answered in the affirmative. The chain of causation linking a failure to follow a disciplinary procedure with stigma is more tenuous than the chain of causation linking wrongful dismissal with stigma. If the law does not permit recovery of stigma damages in the latter case, it makes no sense to permit it in the former. More generally, to permit such a claim based on a failure to comply with a disciplinary code leading to dismissal undermines the decisions of the House of Lords in Johnson and Eastwood. The same is not true of Gunton, if that case was rightly decided, for that case applied the same restrictive approach to measure of damage as Addis. On my reading of Lady Hales judgment, I am inclined to suspect that her quarrel is not simply with Lord Hoffmanns obiter dicta, it is with Addis, with Johnson and with Eastwood. If so, she stands shoulder to shoulder with Lord Steyn. They may both be right. It may be that this area of the law merits fundamental review. That is not, however, the battleground on which this Court was invited to tread. The issue before this Court is narrower. It is whether the reasoning in the latter two cases can be subverted by applying to a claim for breach of a disciplinary code a head of damage that the law does not presently permit to be advanced in a claim for wrongful dismissal. I agree with Lord Dyson and Lord Mance that the answer to that question is no. Accordingly, I would allow each of these appeals. LORD MANCE I agree with Lord Dysons reasoning and conclusions. Mr Bothams case, as pleaded in paragraph 20 of his particulars of claim and as Slade J said in paragraphs 17 18, 25, 29 and 66 of her judgment, is that the Armys breach of contractual terms relating to the implementation of the disciplinary procedure laid down in the Army Discipline Code led to his wrongful dismissal, which in turn led to his alleged loss (save the costs of disciplinary proceedings). Lord Dyson concludes, and I agree, that such a claim is unsustainable in the light of the decision in Johnson v Unisys Ltd [2003] 1 AC 518, the dicta of Lord Hoffmann in that case at para 66, and the further considerations relating to the common law and statutory position mentioned by Lord Dyson at paras 19 to 48. The law would be incoherent otherwise. Lord Phillips prefers an analysis according to which the present case is governed by a principle of remoteness which he derives from Addis v Gramaphone Co Ltd [1909] AC 488. That case establishes that an employee cannot recover damages for injured feelings, mental distress or damage to his reputation, arising out of the manner of his dismissal: Johnson v Unisys Ltd, para 44, per Lord Hoffmann. But it is questionable whether this is a principle of remoteness, as opposed to causation: see eg Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, 51D E, per Lord Steyn and Johnson v Unisys Ltd, paras 39 and 44, citing McLachlin J s dictum in Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1, 39 that A wrong arises only if the employer breaches the contract by failing to give the dismissed employee reasonable notice of termination in support of a conclusion that the only loss caused by a wrongful dismissal flows from a failure to give proper notice or make payment in lieu. Put another way, a dismissal is wrongful where there is such a failure (and, of course, no basis for summary dismissal). Other circumstances (such as the reasons for the failure, the employers state of mind or the impact on the employee) are simply irrelevant to the breach or the loss recoverable for it. The respondent employees case on the present appeals is that the disciplinary procedures which they say were prescribed were, in contrast, by their nature intended to give then contractual protection against unfair dismissal, meaning dismissal for unfair reasons or in an unfair manner. On this basis, they submit, there is no reason to treat as irrecoverable any financial loss caused to them by stigma resulting from improper disciplinary procedures leading to unfair findings. I see the argument, but its acceptance would, as Lord Phillips points out, undermine the decisions of the House of Lords in both Johnson and Eastwood v Magnox Electric plc [2004] UKHL 35; [2005] 1 AC 503. These decisions were in turn based upon a consideration of the legal position resulting from Parliaments introduction of a statutory scheme relating to and providing carefully delimited remedies for unfair dismissal. Just as the employees argument depends upon the rationale for the prescribed disciplinary procedures, namely to avoid unfair dismissal, so the answer to it depends upon the existence of a statutory scheme providing remedies for unfair dismissal. Employers and employees when contracting, in particular when introducing prescribed disciplinary procedures, must be taken to have in mind the statutory scheme relating to unfair dismissal, and to contemplate that scheme as providing the relevant remedies in the event of unfair dismissal. It does not seem to me artificial to ascribe such an intention to them, any more than it did to Lord Hoffmann in Johnson, paras 63 and 66. They cannot have intended that procedures put in place to avoid the need to invoke the statutory scheme should in fact circumvent and make irrelevant the careful limitations of that scheme. Parties could by express agreement attach a different significance to the prescribed disciplinary procedures. But, in the absence of express contrary agreement, the Johnson exclusion area must be taken to cover both loss arising from dismissal and financial loss arising from failures in the steps leading to such dismissal, unless the loss claimed can be regarded as occurring quite independently of the dismissal, as the psychiatric loss claimed by the claimants in Eastwood could be. There are further potential objections to Mr Bothams proposed case. It depends upon the propositions (a) that one alleged breach of contract or duty can be said to have caused the commission of another breach of contract or duty by the same person or entity, and (b) that where recovery for the latter breach is limited, a claim may, by relying on the former breach as causing the latter breach, avoid the limit. Both propositions are in my view open to question. First, so far as the failure to take proper disciplinary steps can be separated from the dismissal, then it constituted not a reason for dismissing, but a reason for not dismissing. The dismissal was a fresh decision, which the employer ought not to have taken and without which there would have been no loss. But, second, assuming the first point in Mr Bothams favour, any loss that he suffered flowed from the wrongful or unfair dismissal, and was recoverable either as compensation for breach of contract or for unfair dismissal, subject in either case to the relevant limits. If the wrongful or unfair dismissal is to be attributed causatively to the prior failure to take proper disciplinary steps, I find it difficult to see why or how the damages recoverable for the prior failure should or could exceed the compensation recoverable for the later dismissal. However, these points were not fully developed in argument, and I express no further view on them. Reference was made in argument to the decision in King v University Court of the University of St Andrews [2002] IRLR 252, where the University had employed the claimant on terms that it was entitled . for good cause shown to terminate the appointment of the employee by giving three months notice in writing. The claimant claimed on two bases, first, a breach of the alleged express term not to terminate his employment except on good cause shown, and, secondly, a breach of an alleged implied term of trust and confidence consisting in an alleged failure to act fairly and reasonably in investigating whether good cause was shown. The issue before Lady Smith concerned the second basis of claim. She distinguished Johnson on the basis that the University was only entitled to terminate the claimants appointment by three months notice for good cause shown, and she held that this involved the implication that there should, before any dismissal, be a prior hearing and investigation, fairly conducted in accordance with a mutual duty of trust and confidence. Whether any and if so what damages could be recovered on that basis, in circumstances where the claimant had been dismissed (and the only damages pleaded were alleged to follow from the dismissal) was not discussed. In any event, the decision, at first instance on a preliminary issue, concerned a contract very different to the present, in particular a contract containing express term which was treated as involving an obligation not to dismiss save for good cause shown. The decision does not assist on the issues now before the Supreme Court. Mr Edwardss written case identifies the issue as being whether a person who suffers damage as a result of findings of personal or professional misconduct leading to dismissal and loss of professional status that were made against him in disciplinary proceedings conducted in breach of contract, but which would not otherwise have been made, can recover damages at large (para 30); and the question for the Supreme Court as being whether damages flowing from a breach of an express term of an employment contract, anterior to and separate from dismissal, are in any way restricted; and, if so, on what basis (para 31). In para 67 it accepts that there will be a burden on Mr Edwards to prove that if the procedure had been followed, no dismissal would have resulted, but suggests that, even if this could not be shown, he might still recover limited damages of an unspecified nature. In para 95 it also asserts that the disciplinary findings would still have caused him recoverable damages, by way of restricted future working opportunities, even if they had not been followed by his dismissal by the Trust. These ways of putting the case depart from or expand upon the pleaded particulars of claim, as I read them. While I agree that that should not itself be an absolute bar to their pursuit, I would myself have wished to have a draft amended pleading, before any decision to permit their pursuit. As, however, I have come to the conclusion that they cannot succeed, this is unnecessary. The fact is that Mr Edwards was dismissed on the basis of and contemporaneously with the disciplinary findings about which he seeks to complain. In so far as his claim consists of loss allegedly suffered by dismissal, it falls directly within the exclusion area which was recognised in Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 and which I have referred to in paragraphs 90 to 94 above. But, in my opinion, it is quite unrealistic in this context to seek to differentiate any of the loss he has allegedly suffered from his dismissal. Any breach of disciplinary procedure did not cause of itself identifiably separate loss or illness, as was alleged in Eastwood v Magnox Electric Ltd. [2004] UKHC 35, [2005] 1 AC 503, where (a) Mr Williams claimed that he had suffered stress related illness caused by a long campaign of deliberate harassment independently of his subsequent dismissal, and (b) Mr McCabes claim was for psychiatric injury caused by events occurring before any dismissal. Where the findings reached in the disciplinary proceedings and the dismissal are, as in the present case, a part of a single process, the remedy for any unjustified stigma lies, short of circumstances establishing a claim for defamation, in the restoration of reputation which may in the ordinary course be expected to result from a successful claim for wrongful or unfair dismissal. Since writing this judgment, I have read Lord Kerrs judgment, with which Lord Wilson agrees, by which they would allow the Ministry of Defences appeal in the case of Mr Botham, but dismiss the Trusts appeal in the case of Mr Edwards, as well as Lady Hales judgment, by which she would dismiss both appeals. Essentially, Lord Kerr would permit Mr Edwards to recover damages for any reputational damage from the adverse findings accompanying his dismissal that he can show would have flowed from such findings even if they had not been accompanied by dismissal. On this approach, although the alleged breach in failing to follow the correct investigatory process could not give rise to damages for dismissal (other than damages in lieu of notice), it could give rise to damages in respect of financial loss caused by the reasons given for the dismissal. I am unable to agree with this suggested distinction. The reasons given were part and parcel of the dismissal. The reasons would be very relevant to a claim for unfair dismissal, as Lord Dyson explains in para 40. But they fall to be dealt with in that context, rather than by a claim for damages (at least in the absence of actionable defamation). The contrary approach advocated by Lord Kerr would outflank both the rule in Addis set out by Lord Dyson in para 20 and the Johnson exclusion as explained in Johnson itself and in Eastwood, as well in paras 90 to 94 above. Bearing in mind the modern prevalence of disciplinary procedures (required under section 3(1) of the Employment Rights Act 1996 to be noted in any employees written statement of particulars of employment), it could also make commonplace what Lord Nicholls identified in para 29 in Eastwood as exceptional. Further, on Lord Kerrs approach, damages could not and would not be awarded by reference to what actually happened. The dismissal would have to be discounted. Damages would be awarded on a hypothesis of adverse findings issued independently of any dismissal that is, either without any disciplinary measure at all or in conjunction with some different measure such as suspension. This would involve an enquiry which was both speculative and unreal. Quite apart from the difficulty of an assumption that the same findings would have been made without dismissal, how would one sensibly assess whether any and what loss would have been suffered from the findings if there had been no dismissal? The exercise would also involve, to an even greater degree, distinctions regarding causation and consequences of the sort that Lord Hoffmann found problematic in Johnson at paras 48 and 54. As Lord Nicholls made clear in Eastwood at para 32, the applicability of the Johnson exclusion and so the recoverability of loss may depend upon whether an employer dismisses the employee, as opposed (for example) to simply suspending him. The fact of dismissal can make all the difference. Here, whatever the correct disciplinary process may or should have been, it required the employer to explain the reasons if dismissal was the outcome. When applying the Johnson exclusion, the dismissal and the reasons accompanying it cannot be distinguished in the manner proposed. If there was a failure in the disciplinary process, it led to both, and, if the law is to be coherent, both must fall within the Johnson exclusion. Lady Hales approach would treat damages as recoverable at large for any breach of any contractually provided disciplinary procedure, irrespective of whether dismissal followed or led to the loss claimed. For reasons indicated in paras 90 to 94 above, I do not agree with that approach. The case of an employee with an express contractual right not to be dismissed save for cause is not before us, and gives rise to different issues to those which are. Damages for wrongful dismissal in breach of such a contract would on the face of it be measured on the basis that the contract would have continued unless and until the employee left, retired or gave cause for dismissal (in relation to the prospects of all of which an assessment would have to be made), but questions would no doubt also arise as to whether the employee had accepted or had to accept the dismissal and/or had to mitigate or had mitigated his or her loss. In view of my conclusion on the main issues, it is unnecessary to express any view about the decision of the Court of Appeal in Gunton v Richmond on Thames London Borough Council [1981] Ch 448, or in particular the so called Gunton extension, whereby the damages awarded for wrongful dismissal in that case were calculated by adding the one months contractual notice period to a notional period which a proper disciplinary process would have taken. The Trust did not appeal against Nicol Js decision to award Mr Edwards damages in accordance with the Gunton extension. Before the Supreme Court the Trust simply put a question mark in principle against the correctness of the extension. Mr Edwards and Mr Bothams Cases sought to distinguish Gunton on its facts as well as to draw some support, for a proposition that damages can be recoverable at large, from the recovery under the Gunton extension of damages calculated by reference to the notional period of a proper disciplinary process. I do not think that Gunton lends any real weight to that contention. Indeed, the claimant in Gunton was by amendment seeking damages continuing until his normal retirement age (subject only to the contingencies of redundancy or dismissal under a proper disciplinary process). These he was not awarded. The reasoning upon which the Gunton extension was based appears to operate independently of what would or might have been the outcome of a proper disciplinary process. It is not binding upon us. The extension may be difficult to reconcile with Lord Hoffmanns view in Johnson, para 66, that any contractual disciplinary procedures cannot have been intended to qualify the employers common law power to dismiss without cause on giving such [ie due contractual] notice. But, assuming it to be correct, it neither compels nor leads to any different conclusion to that which I have reached on the central issues whether Mr Edwards and Mr Botham can recover damages at large for the breaches of disciplinary procedures which they allege. I therefore agree with Lord Dyson that both the appeal of the Trust in the case of Mr Edwards and the appeal of the Ministry of Defence in the case of Mr Botham be allowed. LADY HALE In my view the Court of Appeal reached the right conclusions for the right reasons and both appeals should be dismissed. As the majority take a different view, I shall be brief. But I should perhaps declare an interest, as the only member of this court to have spent a substantial proportion of her working life as an employee rather than as a self employed barrister or tenured office holder. There is no reason at all to suppose that, in enacting the Industrial Relations Act 1971, Parliament intended to cut down upon or reduce the remedies available to employees whose employers acted in breach of their contracts of employment. Quite the reverse. Parliament intended to create a new statutory remedy for unfair dismissal which would supplement whatever rights the employee already had under his contract of employment. Parliament did that because most employees had very few rights under their contracts of employment. In particular, although many employees had a reasonable expectation that they would stay in their jobs unless and until there was a good reason to dispense with their services, most of them had no legal right to do so. The 1971 Act gave them the right not to be dismissed without what appeared at the time to be a good reason, determined after a fair process. They were to be compensated, within modest limits, not principally for their hurt feelings but for the loss of their job. That the main target of the new jurisdiction is the loss of the job is borne out by the later inclusion of the remedy of reinstatement. The common law would not normally give damages for the loss of a job. Then, as now, the great majority of contracts of employment gave both the employer and the employee the right to terminate their relationship on giving the prescribed period of notice. So if the employer terminated the relationship summarily, without giving the required period of notice, he would be liable to compensate the employee for that which he would have received had his contract been kept and no more: Addis v Gramophone Company Ltd [1909] AC 488, per Lord Atkinson at p 496. In other words, he would get his pay during the period of notice which he should have had and any contractual commission or bonus which he would have earned during that period. The majority of the House of Lords in Addis decided that the wrongfully dismissed employee was not entitled to any extra damages, either for the injury to his feelings caused by the way in which he had been dismissed or for the fact that his dismissal might make it more difficult for him to get another job. Lord Collins disagreed: he thought that damages for wrongful dismissal might include compensation for the difficulty caused in getting another job. But he was in a minority of one. The majority view was that the employee was entitled to the normal measure of damages in contract, to be placed in the position in which he would have been had his contract been properly performed, and any consequential loss within the contemplation of the parties, but no more. In short, there was no right to be compensated for the longer term consequences of the loss of a job. But let us suppose a contract of employment where the employer is only entitled to dismiss the employee for good cause. Rightly or wrongly, most University teachers employed under the contracts of employment which were current in the 1960s believed that they could only be dismissed for cause. If judges, instead of being office holders, were employed under contracts of employment, they could only be dismissed for cause. Under such a contract, if the employer dismisses the employee without good cause, the employee is entitled to be compensated for the consequences of the loss of the job. Obviously, the calculation of damages will have to take account of contingencies such as the possibility of good cause arising in the future. This is the application of the ordinary principles of the law of contract. However, a great many contracts of employment, perhaps now the vast majority, fall between these two extremes. They couple the right of either party to terminate it on giving a certain period of notice with a provision that, if the employer wishes to terminate it on disciplinary grounds, he must follow a prescribed procedure. Such contracts could be analysed in a number of ways. First, the contract could mean that the employee can be dismissed on notice for non disciplinary grounds, such as incapacity or redundancy or indeed for any other reason the employer might have for wanting to dismiss him; but that, if the employer wants to dismiss him on disciplinary grounds, he can only do so by following the required procedure. Failure to follow this procedure correctly would lead to damages for loss of the job. That was the result reached by the trial judge in Gunton v Richmond upon Thames London Borough Council [1981] Ch 448. Second, the contract could mean that if the employer wants to dismiss the employee on disciplinary grounds, he can only do so after following the prescribed procedure, but that having followed the prescribed procedure and irrespective of the result, he remains entitled to dismiss the employee by giving the usual period of notice. Thus the employee is entitled only to damages for the period during which the correct disciplinary process would have been taking place, plus the contractual notice period on top of that (presumably on the assumption that whatever findings the disciplinary process might have reached would not have justified a summary dismissal). That is the result reached by the Court of Appeal in Gunton (the difference of opinion in the Court of Appeal was as to the effect of a repudiatory breach of contract by the employer whether it automatically brought the contract to an end or whether it only did so if accepted by the employee, an important point which does not arise in this case but does arise in another which may shortly come before this Court). A third analysis is that the contract could mean that the employer always remains free to dismiss on giving the required period of notice, with or without following the contractual disciplinary process, so the employee is only ever entitled to the Addis measure of damages. The two cases before us both fall into that ambiguous category. There is a contractual notice period but also a contractual disciplinary process which (we must assume in Mr Edwards case) was not complied with. But in neither case are we concerned with damages for loss of the job as such. Mr Botham made a successful claim for unfair dismissal to the employment tribunal. Mr Edwards withdrew his. Both are concerned with the adverse consequences of the factual findings of a disciplinary process conducted in breach of contract. In Mr Edwards case, those findings are said to have made it impossible for him to obtain another post as an NHS consultant and to have adversely affected his earnings in private practice. In Mr Bothams case, those findings meant that the resulting dismissal had to be reported to the Department of Education and Skills, so that for a while he was placed on the register of people deemed unsuitable to work with children (the POCA list). These are losses which flow from the breach of contractually agreed disciplinary processes. Why should they not be recoverable in the ordinary way? Lord Phillips says that it is a matter of remoteness. These are not losses which fall within the reasonable contemplation of the parties when they make the contract. I have difficulty with that. Why include disciplinary processes within the employment contract if you do not expect that they will influence the employers decision? The losses flowing from the breach of a contractually agreed disciplinary process are much more directly related to the breach of contract than are the losses flowing from the dismissal as such, especially where the employer was entitled to dismiss whenever he wanted provided that he gave the contractual notice. There were no such contractually agreed processes in Addis, so the cases are readily distinguishable. But for the others in the majority, it is said that such damages would fall within the so called exclusion area created by the House of Lords decision in Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518, as further examined and explained in the House of Lords decision in Eastwood v Magnox Electric plc [2004] UKHL 35, [2005] 1 AC 503. Both of those cases concerned alleged breaches of the term, now implied into all contracts of employment, that neither party will, without good cause, conduct themselves in a manner calculated to destroy or seriously damage their relationship of mutual trust and confidence. Arnold J is generally credited as the first to recognise the existence of this implied term in Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84. If the employer acted in breach of the term, the employee was entitled to treat himself as constructively dismissed and thus to take advantage of the remedies for unfair dismissal which Parliament had now provided. Lord Nicholls explained in Eastwood v Magnox, at p 325, that this development of the common law was prompted by the 1971 Act, to enable employees to regard themselves as dismissed if their employers had conducted themselves in a way which no employee could be expected to tolerate. In Johnson v Unisys Ltd, the majority of the House of Lords decided that the implied term of trust and confidence did not give the employee a right of action for damages at common law resulting from the manner in which he had been dismissed. The House was persuaded that Parliament had provided the limited remedy of unfair dismissal to cover that ground and it would be wrong to develop the common law to circumvent the limits which Parliament had laid down. In Eastwood v Magnox Electric, on the other hand, the House recognised that if the employee could establish a cause of action for breach of the implied term independently of the dismissal, then that was not excluded by the statutory regime. However, as Lord Nicholls explained, at para 30, If identifying the boundary between the common law rights and remedies and the statutory rights and remedies is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary. He went on to illustrate the difficulties and anomalies, not least that an employer might have to pay full compensation to an employee who was suspended in breach of the implied term but only the statutorily limited compensation to an employee who was dismissed: see Gogay v Hertfordshire County Council [2000] IRLR 703. This case is ample demonstration of the wisdom of Lord Nicholls words. The majority have held that the Johnson exclusion area covers the breach of express as well as implied terms in an employment contract and that the particular losses claimed here fall within the exclusion area. Lord Kerr and Lord Wilson also hold that the exclusion area extends to breach of express terms as well as the implied term; but they hold that it only extends to damage resulting from the dismissal itself, and not to damage resulting from the findings of the wrongful disciplinary process rather than the dismissal. This enables them to distinguish between Mr Edwards and Mr Botham. Mr Edwards is claiming for the adverse consequences of the findings made against him rather than for his dismissal as such. Mr Botham is claiming for the adverse consequences of being placed on the POCA list, which could only happen because of his dismissal. It is understandable to wish to distinguish between the two, as Mr Bothams claim is designed to circumvent the tribunals finding of contributory fault. It seems to me, however, that it has long been recognised that the law of contract is defective in not recognising the concept of contributory fault in certain circumstances: see, for example, the Law Commissions Report on Contributory Negligence as a Defence in Contract (1993, Law Com No 219). The solution to problems like that is principled and comprehensive law reform. We have seen how the Johnson exclusion area has been productive of anomalies and difficulties. There is no reason at all to extend it any further than the ratio of that case. As the Court of Appeal held in this case, it should be limited to the consequences of dismissal in breach of the implied term of trust and confidence. The House of Lords was persuaded that the common law implied term, developed for a different purpose, should not be extended to cover the territory which Parliament had occupied. In fact, the territory which Parliament had occupied was the lack of a remedy for loss of a job to which the employee had no contractual right beyond the contractual notice period. Parliament occupied that territory by requiring employers to act fairly when they dismissed their employees. But there was and is nothing in the legislation to take away the existing contractual rights of employees. There was and is nothing to suggest that Parliament intended to limit the entitlement of those few employees who did and do have a contractual right to the job, the right not to be dismissed without cause. It is for that reason that I am afraid that I cannot agree that the key distinction is between the consequences of dismissal and the consequences of other breaches. The key distinction must be between cases which must rely on the implied term to complain about the dismissal and cases which can rely on an express term. I am uncertain as to how the majority would regard the case of an employee with the contractual right only to be dismissed for cause. Like Lord Kerr, I am puzzled as to how it can be possible for an employee with a contractual right to a particular disciplinary process to enforce that right in advance by injunction but not possible for him to claim damages for its breach after the event. And I am also puzzled why it should make a difference if the right to claim damages is expressly spelled out in the contract. I would have dismissed both appeals. LORD KERR (WITH WHOM LORD WILSON AGREES) The Report of the Royal Commission on Trade Unions and Employers Associations 1965 1968 (the Donovan Report) was commissioned because of the perceived inadequacy of the law relating to dismissal of employees. This much, at least, is uncontroversial in this case. But how did it set about making recommendations to deal with those inadequacies? Did it recommend, and more particularly, did its offspring, the Industrial Relations Act 1971, provide, a comprehensive and exclusive scheme for the compensation of those who had been improperly dismissed from employment? Or was the 1971 Act a statute simply designed to provide wrongly dismissed employees with greater rights than the then only available claim in respect of their dismissal viz for wages that they would have earned during the notice period, while leaving intact any other contractual rights that might have been available to them? An insight into the essential purpose of the Donovan report can be obtained from a number of its passages, albeit that they do not speak directly to the issue that has been starkly expressed above. Paragraph 522 of the report (quoted by Lord Dyson at para 19 of his judgment) sets the scene. Beyond a claim for wrongful dismissal (with the limited redress that afforded) an employee had no rights whatever in relation to the circumstances in which he was dismissed. The only action that he could take about the manner of his dismissal, where that involved an imputation on his honesty, was for defamation. This was a situation which the Donovan report considered could no longer be tolerated. Those who were unfairly dismissed, because of the potentially massive impact that such an event had on their lives, needed to have something more to compensate them beyond the few weeks or even months wages that they would have earned during a notice period. The scene thus set is emphatically in the realm of dismissal from employment and the impact that dismissal has on the future fate of the dismissed employee. That theme emerges strongly from para 526 of the report: In practice there is usually no comparison between the consequences for an employer if an employee terminates the contract of employment and those which will ensue for an employee if he is dismissed. In reality people build much of their lives around their jobs. Their incomes and prospects for the future are inevitably founded in the expectation that their jobs will continue. For workers in many situations dismissal is a disaster. For some workers it may make inevitable the breaking up of a community and the uprooting of homes and families. Of course, at the time that this was written, contractual provisions in relation to disciplinary procedures, if not unheard of, were certainly not the staple of most contracts of employment. It is not surprising, therefore, that there was no reference to the consequences of a failure on the part of employers to adhere to such provisions, whether in relation to the termination of employment or as regards the disadvantages that an employee might suffer in terms of future employability, even if he was not dismissed. Significantly, there is no suggestion in the report that its authors contemplated a complete charter for all claims arising from dismissal from employment. On the contrary, the statement in para 529 that it [is] urgently necessary for workers to be given better protection against unfair dismissal strongly suggests that the primary purpose of the proposals for a change in the law was to enlarge the remedies available to employees rather than to confine the remedies to a single unitary system. Indeed, at para 551 the report states ideally, the remedy available to an employee who is found to have been unfairly dismissed is reinstatement in his old job. The committee actually considered whether the remedy for unfair dismissal should be confined to reinstatement. That stance would sit oddly with the notion that the legislation was designed to be a charter that would bring the curtain down on all manner of claims by employees following their dismissal. Now it is true that at para 553 it is stated: The labour tribunal should normally be concerned to compensate the employee for the damage he has suffered in the loss of his employment and legitimate expectations for the future in that employment, in injured feelings and reputation and in the prejudicing of further employment opportunities. (emphasis supplied). But, although at first sight this might be thought to indicate that actions for reputational damage should be subsumed into the unfair dismissal claim, I do not consider that this was the reports intention. Obviously, the fact that one has been dismissed from employment, whatever the circumstances of the dismissal, can carry a disadvantage in terms of future employability. It is right that this should be reflected in the recoverable compensation where the dismissal is unfair. But that circumstance does not alone warrant the conclusion that breach of a term of the contract which leads to a finding that there has been misconduct on the part of the employee and which leads in turn to dismissal cannot have contractual consequences beyond the enhancement of a claim for unfair dismissal. As a matter of elementary contract law, a term which binds an employer to a particular form of disciplinary hearing, if breached, will give rise to a claim on the part of the employee for the consequences of the breach. Indeed, the employers in these cases concede that such a term would found an application for an injunction to restrain its breach. But it is argued that when one comes to a remedy following the breach (as opposed to in anticipation of it) a claim for damages is not viable because of the effect of the 1971 Act and succeeding statutory provisions. It is conceivable that legislation can have the effect of removing or nullifying a contractual right and it will be necessary to examine the basis on which it is said that this has occurred in the present context. It is important, however, to start with the clear understanding, that, absent any such legislative intervention, there can be no question of terms in an agreement in relation to the conduct of disciplinary hearings being different from other contractual terms. This is so, in my view, whether they have become incorporated into the contract as a result of statutory requirement or are the product of independent agreement between the parties to the contract. Nothing in the 1971 Act suggests that Parliament intended to restrict an employees rights under his contract of employment. If, at the time of the enactment of that legislation, an employees contract of employment included a term that his employer would conduct disciplinary proceedings against him according to a particular set of rules and if, in breach of that term, the employer failed to adhere to those rules, any loss suffered by the employee in consequence would surely be compensatable on a breach of contract claim. As Hale LJ said in Saeed v Royal Wolverhampton Hospitals NHS Trust [2001] ICR 903 at para 12: The employer who is contemplating disciplinary action against an employee has to decide which procedure should be followed. If the employee thinks that the employer has made the wrong choice, he can try to have it changed in advance or seek damages after the event. The court will have to perform its usual task of construing the contract and applying it to the facts of the case. I did not understand either of the employers in these appeals to challenge the correctness of that statement of the law although it is, of course, right, as Lord Dyson has pointed out in para 44, that Saeed was decided before Johnson (Johnson v Unisys Ltd [2003] 1 AC 518). It will be necessary to say something presently about the effect that the later decision may have had on the reasoning in the earlier case but, for present purposes, Saeed is important authority for the proposition that breach of a contractual term in relation to the conduct of a disciplinary hearing could be relied on by an employee in a claim for damages. Lord Dyson has observed that Saeed was not a dismissal case but that does not affect the essential point. There is nothing unusual about breach of such a term giving rise to a claim for damages. The importance of Saeed to the present appeals lies in its recognition that the contractual right to a particular form of disciplinary proceeding is no different from other contractual rights. Ms Outhwaite QC suggested that a claim based on such a contractual right, if pursued after dismissal, would involve the creation of a new cause of action. I do not accept that. It is a perfectly conventional claim in contract involving the breach of an agreed term giving rise to loss on the part of the employee. If one accepts that there is a claim in contract if there is no termination of employment, an impossibly anomalous situation arises if the claim cannot be pursued when the employment is terminated. Suppose that someone who was the subject of disciplinary proceedings had an offer of extremely remunerative employment and that this was withdrawn as the result of adverse findings in the disciplinary proceedings but those findings did not result in his dismissal, would he be entitled to seek damages for the loss of his prospective new employment? Why not? If he has a contractual right to a properly constituted tribunal and can show that such a tribunal would not have made the findings that were instrumental in the offer of employment being withdrawn, can he not say that the failure to constitute a proper tribunal was a breach of a duty owed to him under contract? And if he can show that, as a direct consequence of that breach, he suffered a loss, can he not maintain an action for compensation for breach of contract? This does not represent a novel action or a novel development of the common law. It is merely the application of settled principles of contract law to a particular set of circumstances. Moreover, if an employee can maintain such an action if he is not dismissed, why should he not be able to maintain it if he is dismissed? The loss of the chance of more remunerative employment does not, in the mooted example, flow from the dismissal; it is the direct consequence of the adverse findings. There is no logical reason to draw a distinction between the situation where he has not been dismissed and that where he has been. The employers in these appeals attempt to confront this anomaly by saying that an injunction can be obtained and the employees legal rights should be confined to that. But what is the legal or juridical basis for that assertion? As a matter of first principle, an injunction is available on the basis that a legal wrong is anticipated. If that legal wrong materialises, why should it not be actionable at the suit of the person who could have obtained the injunction? This point, albeit in a somewhat different context, was expressed by Lord Nicholls in Eastwood and another v Magnox Electric plc and McCabe v Cornwall County Council and another [2005] 1 AC 503. In that case one of the claimants, having obtained the statutory maximum compensation for unfair dismissal, sought damages for psychiatric injury caused by the defendant employers suspension of him and its failure to inform him of allegations made against him or to carry out a proper investigation of those allegations. This was said to represent a breach of the necessary relationship between employer and employee of trust and confidence and breach of the employers duty to provide a safe system of work. At para 27 Lord Nicholls said: If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. In the present appeals, on Mr Edwards case, he had a contractual right to have his disciplinary hearing conducted by a tribunal constituted as stipulated in Disciplinary procedures for Hospital and Community Medical and Dental Staff (HC(90)9). At what point did this right (which for the purposes of the appeal, we must assume existed) give rise to a cause of action? Mr Edwards claims that there was a breach of the contractual right as soon as the wrongly constituted panel was convened. Did the cause of action arise then? Or did it first materialise when the decision to dismiss him was taken? It might be argued that Mr Edwards suffered no loss until he was summarily dismissed but this seems to me to take too narrow a view of the position. The Trust accepts that, if the facts as he asserts them are established, Mr Edwards could have applied for an injunction to prevent the tribunal from considering his case. That (rightly made) concession must proceed on the premise that, on those facts, he already had a cause of action at that stage. On Lord Nicholls analysis in Eastwood, therefore, if Mr Edwards can establish his case on the pleaded factual assertions, he had a cause of action at law before his dismissal which should remain unimpaired by his subsequent dismissal. Mr Bothams case is somewhat different. In the agreed Statement of Facts and Issues in his case it is stated that [a]s a consequence of the dismissal for gross misconduct, Mr Botham was reported to the Department of Education and Skills and was placed on the register of persons deemed unsuitable to work with children (emphasis supplied). The reputational damage suffered by Mr Botham is therefore directly linked to his dismissal rather than any defect in the procedures which led to it. The employers in both cases argue, however, that both involve claims for damages arising from the unfair manner of their dismissal and that the reasoning in the Johnson and Eastwood cases preclude such claims. It is therefore necessary to look more closely at both decisions. As Lord Dyson has pointed out (in paras 19 21), the background to the 1971 Act and the Donovan report was that at common law an employee was not entitled to recover damages in respect of the manner of his dismissal. Moreover, an employee could only recover damages if he was actually dismissed. If he had chosen to leave employment because of mistreatment by his employer, he could not maintain an action for wrongful dismissal. In mitigation of the harshness of this rule, the courts developed the concept of the implied term of mutual trust and confidence which, shortly stated, stipulates that an employment contract is subject to the implied term that the parties to it may not conduct themselves in a manner likely to destroy the confidence and trust that is essential to the relationship of employer and employee: Mahmud v Bank of Credit and Commerce International SA [1998] AC 20. It was the concept of the implied term of mutual trust and confidence which predominated in Johnson. The claimant sought to rely on such a term to promote a claim at common law relating to the manner of his dismissal. He alleged that because of the way in which he had been dismissed, he had suffered a mental breakdown and was unable to work. His claim was therefore inextricably, indeed uniquely, linked to the manner of his dismissal. And the manner of his dismissal was in turn said to be unlawful because it was in breach of the implied term of mutual trust and confidence. The issues which the House of Lords had to squarely face, therefore, were (i) whether the implied term of mutual trust and confidence could be used as a foundation for a claim that focused exclusively on the manner in which the employee was dismissed; and (ii) whether a common law action claiming damages could be maintained on that basis, notwithstanding that Parliament had legislated to provide a comprehensive code for compensation of unfair dismissal claims. In dismissing the employees appeal, Lord Nicholls said in para 2 that a common law right embracing the manner in which an employee is dismissed cannot satisfactorily coexist with the statutory right not to be unfairly dismissed. At para 47 Lord Hoffmann suggested that it would be jurisprudentially possible to imply a term which would give a remedy in Mr Johnsons case but he doubted the wisdom of doing so. This was not the basis on which he dismissed the appeal, however. His reasons for doing so are contained in para 54: The remedy adopted by Parliament was not to build upon the common law by creating a statutory implied term that the power of dismissal should be exercised fairly or in good faith, leaving the courts to give a remedy on general principles of contractual damages. Instead, it set up an entirely new system outside the ordinary courts, with tribunals staffed by a majority of lay members, applying new statutory concepts and offering statutory remedies. Many of the new rules, such as the exclusion of certain classes of employees and the limit on the amount of the compensatory award, were not based upon any principle which it would have been open to the courts to apply. They were based upon policy and represented an attempt to balance fairness to employees against the general economic interests of the community. At para 79 Lord Millett suggested that, if the 1971 Act and subsequent legislation in this field had not been enacted, the courts might well have developed the law by imposing a more general obligation upon an employer to treat his employee fairly even in the manner of his dismissal. He explained why this had not been necessary in para 80: the creation of the statutory right has made any such development of the common law both unnecessary and undesirable. In the great majority of cases the new common law right would merely replicate the statutory right; and it is obviously unnecessary to imply a term into a contract to give one of the contracting parties a remedy which he already has without it. In other cases, where the common law would be giving a remedy in excess of the statutory limits or to excluded categories of employees, it would be inconsistent with the declared policy of Parliament. In all cases it would allow claims to be entertained by the ordinary courts when it was the policy of Parliament that they should be heard by specialist tribunals with members drawn from both sides of industry. And, even more importantly, the coexistence of two systems, overlapping but varying in matters of detail and heard by different tribunals, would be a recipe for chaos. All coherence in our employment laws would be lost. Lord Dyson has suggested that the ratio of Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to recover damages for loss arising from the manner of his dismissal (para 24). Moore Bick LJ in the Court of Appeal in Edwards case cast it in slightly different terms. At para 23 of his judgment he said: the ratio is that the common law does not imply into a contract of employment a term that the employer will not act unfairly towards the employee in relation to his dismissal and that the courts are not at liberty to develop the common law implied term of trust and confidence in order to give rise to such an obligation. I would prefer to express the ratio in terms that more clearly recognise the two separate aspects of the decision. In the first place, the House of Lords rejected the notion that the implied term of mutual trust and confidence had any role in determining the nature of the employers obligations at the time of the dismissal of the employee. Secondly, it concluded that compensation for loss flowing from the manner in which an employee is dismissed must be sought within the statutory scheme devised by Parliament in the 1971 Act and continued in successor enactments. It seems to me that it is the latter of these two which is the more relevant to the issues that arise on this appeal. Importantly, I do not construe anything in the opinions in Johnson as casting doubt on the correctness of Hale LJs statement in Saeed that choice of the wrong form of disciplinary action can give rise to a claim for damages. Indeed, para 44 of Lord Hoffmanns speech would appear to contemplate precisely that type of action. He was there discussing the effect of Addis v Gramophone Co Ltd [1909] AC 488 (in which it had been held that if the way in which an employee was dismissed constituted an imputation on his honesty he could not except through an action in defamation obtain any redress). On that subject, Lord Hoffmann said this: if wrongful dismissal is the only cause of action, nothing can be recovered for mental distress or damage to reputation. On the other hand, if such damage is loss flowing from a breach of another implied term of the contract, Addiss case does not stand in the way. (emphasis supplied) A claim for breach of contract arising from the employers selection of the wrong form of disciplinary proceeding need not be a claim for unfair or wrongful dismissal. The choice of the wrong procedure might lead to dismissal but if the employer is contractually bound to follow a particular route, his failure to do so will give rise to a cause of action which can be entirely independent of any claim in respect of termination of employment. The two aspects of the Johnson decision are reflected in the opinions of the House of Lords in the later cases of Eastwood and McCabe. Perhaps significantly, at para 8 of his opinion, Lord Nicholls characterised the claim in Johnson as one which relied on breach of the trust and confidence implied term, not as a foundation for a statutory claim for unfair dismissal or as a foundation for a claim for damages unrelated to dismissal, but as a foundation for a claim at common law for unfair dismissal. It is clear from this and other statements made by Lord Nicholls that reliance on the implied term in a claim for damages unrelated to dismissal would be viable. It was because Mr Johnson's claim was founded on the fact that he had been dismissed, and the trust and confidence implied term could not be applied to dismissal itself that it was bound to fail see para 10 of Eastwood. In the most important part of his speech in Eastwood (at least, so far as the present appeals are concerned) in paras 27 29, Lord Nicholls discussed what he described as the boundary line drawn by the Johnson decision. I have already quoted from para 27 (at para 135 above). It is now necessary to set this passage out in full: The boundary line 27 Identifying the boundary of the Johnson exclusion area, as it has been called, is comparatively straightforward. The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly. An employees remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal. 28 In the ordinary course, suspension apart, an employers failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed and it arises by reason of his dismissal. Then the resultant claim for loss falls squarely within the Johnson exclusion area. 29 Exceptionally this is not so. Exceptionally, financial loss may flow directly from the employers failure to act fairly when taking steps leading to dismissal. Financial loss flowing from suspension is an instance. Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre dismissal unfair treatment. In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal. In respect of his subsequent dismissal he may of course present a claim to an employment tribunal. If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over. A number of important principles can be distilled from these paragraphs: i) If a cause of action is in existence before dismissal, it is not extinguished by subsequent dismissal. As I understand Lord Nicholls opinion, that statement holds true even if the dismissal is consequent on the state of affairs that gave rise to the cause of action; ii) If financial loss occurs (as it normally will in a dismissal situation) from the dismissal itself, such loss is not recoverable other than by a claim for unfair dismissal. Although Lord Nicholls does not address the question directly (since he did not need to do so), it seems to me to be consistent with his opinion that, to be thus excluded, the financial loss must flow solely from dismissal; iii) Where financial loss flows directly from an employers failure to act fairly (or by his failure to abide by the terms of the contract of employment) even though that failure relates to steps taken which lead to dismissal, it is recoverable at the suit of the employee other than by an unfair dismissal claim. Of course, Lord Nicholls was careful to point out that if an employee brings proceedings in court and before the tribunal, he cannot recover overlapping heads of loss twice over but he did not suggest that separate claims arising from the same set of circumstances could not be brought. The same set of circumstances can give rise to an unfair dismissal claim and a claim for breach of contract. Mr Edwards experience perfectly exemplifies this. On his case, the adverse findings made by the wrongly constituted tribunal led to his dismissal but they also caused the reputational damage which, he says, causes his ongoing financial loss. It is a fundamental error, his counsel argues, to conclude that, because the findings led to the dismissal, the financial loss caused by the findings must be subsumed in his unfair dismissal claim. On that argument I believe that Miss ORourke is entirely right. Lord Dyson has said in para 39 of his judgment that Parliament could not have intended that the incorporation of provisions in relation to disciplinary procedures into contracts of employment would give rise to a common law claim for damages. It is not clear why this should be so. Contractual terms, whether they are the product of incorporation or independent agreement, should have contractual force. And if it is the case that breach of a contractual term, whether or not it has been incorporated by statute, can give rise to a cause of action which is quite separate and distinct from an unfair dismissal claim, why should it be assumed that Parliament intended to take away the right to such a cause of action? Lord Dyson says that this is to be necessarily inferred from the statutory background but this, with respect, is a circular argument, depending as it does on the proposition that Parliament intended that the legislation relating to unfair dismissal should provide a comprehensive charter for all claims made by an employee following dismissal. In a further passage in para 39 Lord Dyson states that unless the contracting parties expressly agree they are to be taken as not having intended that a failure to comply with contractually binding disciplinary procedures will give rise to a common law claim for damages. Thus, if they do agree that terms of the contract should have normal contractual force and record that agreement, a common law claim for damages is feasible but if they fail to expressly state that they intend that a contractually binding term should have conventional contractual force, then it is to be treated as unenforceable by the normal route of a claim for damages. This seems a curious result and I am unable to understand on what basis it can be reached unless for some unstated public policy reason. And if it is the case that the proposition is underpinned by a public policy consideration, it seems highly curious that it can be displaced by the express agreement of the parties. In Mr Edwards case Lord Dyson has said that it is impossible to divorce the findings on which he seeks to found his claim for reputational damage from the dismissal when the findings which allegedly caused the reputational damage also constituted the reasons for the dismissal (para 55). In my respectful view, this conflates two quite distinct and readily separable sets of consequences. The findings, on Mr Edwards case, were the reasons that he was dismissed. But, quite independently of the dismissal, those findings, according to Mr Edwards, also did enormous damage to his reputation. Lord Dyson appears to accept (in para 59) that if Mr Edwards had not been dismissed but had merely been suspended, and had been able to establish the facts needed to sustain his claim for reputational damage, he would have had a perfectly viable claim for breach of contract. In such a scenario, the reputational damage claim would not have depended on the fact of suspension; it would have had a quite separate existence. I cannot accept that it does not have an equally separate existence from the fact of dismissal. As I have said, however, (at para 137 above) Mr Bothams case is different. It is accepted that the reputational damage which he is alleged to have suffered was inextricably linked to the fact of his dismissal. His cause of action in respect of that reputational damage did not exist before he was dismissed, therefore. Such financial loss as he may have suffered as a consequence is the result of his dismissal. I consider, therefore, that compensation for damage to his reputation could only have been sought as part of his unfair dismissal claim. For these reasons, I would dismiss the appeal in Mr Edwards case but allow the appeal in the case of Mr Botham. |
On 27 November 2008, at the Crown Court in Isleworth, the respondent, Aloke Varma, pleaded guilty to three offences of being knowingly concerned in the fraudulent evasion of duty, contrary to section 170(2)(a) of the Customs and Excise Management Act 1979. The offences were committed on 24 October 2007 and 3 and 13 April 2008. On each occasion the defendant was stopped at Gatwick Airport and found to be in possession of a quantity of tobacco which he had brought into the United Kingdom without payment of the relevant import duties. Following his pleas of guilty, the matter was adjourned for sentence. I take these facts from the agreed statement of facts and issues. On 15 January 2009 His Honour Judge Katkhuda (the judge), exercising his powers under section 12 of the Powers of Criminal Courts (Sentencing) Act 2000, sentenced Varma to a conditional discharge for a period of two years. In deciding that this was the appropriate sentence, the judge referred to Varmas psychological problems and facial neuralgia. Confiscation proceedings under Part 2 of the Proceeds of Crime Act 2002 (the 2002 Act) were postponed. The confiscation hearing was held on 3 April 2009. The judge found the value of the defendants benefit to be 7,257.86 and the available amount to be 1,500. Each of these figures had been agreed between the parties. A confiscation order was made in the sum of 1,500, which was ordered to be paid by 31 March 2010, with a term of imprisonment of 45 days in default of payment. On 13 July 2009 Varma sought leave to appeal out of time against the confiscation order. He relied on R v Clarke [2009] EWCA Crim 1074, [2010] 1 WLR 223, in which the Court of Appeal (comprising Hooper LJ, Cox J and the Recorder of Nottingham) held in a reserved judgment that the Crown Court does not have the power to make a confiscation order against a defendant following conviction for an offence if he or she is made the subject of an absolute or conditional discharge in respect of that same offence. The essential reasoning was that it was inappropriate to punish a defendant by imposing a confiscation order in a case in which (by virtue of the fact that a conditional discharge had been imposed) the court thought that punishment was inexpedient. Varmas appeal was heard on 10 June 2010, together with three similar cases. The defendant in each of the four cases before the Court of Appeal had pleaded guilty in the Crown Court to one or more offences, had received a conditional discharge and had been made the subject of a confiscation order under the 2002 Act. The ground of appeal in each case was that, following Clarke, the Court had no power to make a confiscation order. According to the agreed statement of facts and issues, oral argument was constrained by the Court of Appeals clear indication that it wished to focus on whether it was bound by Clarke. On 8 July 2010 the Court of Appeal (Lord Judge CJ, Goldring LJ and Rafferty, Wilkie and King JJ) handed down their judgment in each of the four appeals: R v Magro, R v Brissett, R v Smith and R v Varma [2010] EWCA Crim 1575, [2011] QB 398. The Court of Appeal held that, following the decision in Clarke, the Crown Court did not have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge in respect of that offence. Giving the judgment of the court, Lord Judge CJ made clear (at para 29) that, but for the decision in Clarke, the court would have reached a contrary conclusion. On this basis, the Court of Appeal extended time to appeal in the case of Varma, allowed the appeal against sentence and quashed the confiscation order. The court held that a point of law of general public importance was involved in their decision and certified the following question: Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? This court subsequently granted permission to appeal. The three remaining applications for leave to appeal against sentence were adjourned pending the outcome of this appeal. As agreed in the statement of facts and issues, the issue which arises for consideration in this appeal is whether the Crown Court has power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence. The statutory framework provides: Section 12 of the Powers of Criminal Courts (Sentencing) Act 2000, (1) Where a court by or before which a person is convicted of an offence . is of the opinion, having regard to the circumstances including the nature of the offence and the character of the offender, that it is inexpedient to inflict punishment, the court may make an order either (a) discharging him absolutely; or (b) if the court thinks fit, discharging him subject to the condition that he commits no offence during such period, not exceeding three years from the date of the order, as may be specified in the order . (7) Nothing in this section shall be construed as preventing a court, on discharging an offender absolutely or conditionally in respect of any offence, from making an order for costs against the offender or imposing any disqualification on him or from making in respect of the offence an order under section 130, 143 or 148 below (compensation orders, deprivation orders and restitution orders). As is apparent, there is no reference in subsection (7) to confiscation orders. At the date when section 12 of the 2000 Act came into force, section 2(6) of the Drug Trafficking Act 1994, repeating section 1(6) of the Drug Trafficking Offences Act 1986, provided: No enactment restricting the power of a court dealing with an offender in a particular way from dealing with him also in any other way shall by reason only of the making of an order under this section restrict the Crown Court from dealing with an offender in any way the court considers appropriate in respect of a drug trafficking offence." Similar provision was made, with necessary alterations to the language, to deal with non drug trafficking offences, by section 72(6) of the Criminal Justice Act 1988. Section 14 of the 2000 Act provides: (1) Subject to subsection (2) below, a conviction of an offence for which an order is made under section 12 above discharging the offender absolutely or conditionally shall be deemed not to be a conviction for any purpose other than the purposes of the proceedings in which the order is made and of any subsequent proceedings which may be taken against the offender under section 13 above. (3) Without prejudice to subsections (1) and (2) above, the conviction of an offender who is discharged absolutely or conditionally under section 12 above shall in any event be disregarded for the purposes of any enactment or instrument which (a) imposes any disqualification or disability upon convicted persons; or (b) authorises or requires the imposition of any such disqualification or disability. (6) Subsection (1) above has effect subject to section 50(1A) of the Criminal Appeal Act 1968 and section 108(1A) of the Magistrates' Courts Act 1980 (rights of appeal); and this subsection shall not be taken to prejudice any other enactment that excludes the effect of subsection (1) or (3) above for particular purposes. Section 6 of the Proceeds of Crime Act 2002, as amended, provides: (1) The Crown Court must proceed under this section if the following two conditions are satisfied. (2) The first condition is that a defendant falls within any of the following paragraphs (a) he is convicted of an offence or offences in proceedings before the Crown Court; (3) The second condition is that (a) the prosecutor asks the court to proceed under this section, or (b) the court believes it is appropriate for it to do so. (a) it must decide whether the defendant has a criminal lifestyle; (b) if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct; (4) The court must proceed as follows (c) if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct. (5) If the court decides under subsection (4)(b) or (c) that the defendant has benefited from the conduct referred to it must (a) decide the recoverable amount, and (b) make an order (a confiscation order) requiring him to pay that amount. (6) But the court must treat the duty in subsection (5) as a power if it believes that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct. (7) The court must decide any question arising under subsection (4) or (5) on a balance of probabilities. Section 13 of the 2002 Act provides: (1) If the court makes a confiscation order it must proceed as mentioned in subsections (2) and (4) in respect of the offence or offences concerned. (2) The court must take account of the confiscation order before (a) it imposes a fine on the defendant, or (b) it makes an order falling within subsection (3). (3) These orders fall within this subsection (a) (compensation orders); (b) (forfeiture orders); (c) (deprivation orders); (d) (forfeiture orders). (4) Subject to subsection (2), the court must leave the confiscation order out of account in deciding the appropriate sentence for the defendant . Section 14 of the 2002 Act provides: (1) The court may (a) proceed under section 6 before it sentences the defendant for the offence . or (b) postpone proceedings under section 6 for a specified period. (11) A confiscation order must not be quashed only on the ground that there was a defect or omission in the procedure connected with the application for or the granting of a postponement. (12) But subsection (11) does not apply if before it made the confiscation order the court (a) imposed a fine on the defendant; (b) made an order falling within section 13(3); (c) made an order under section 130 of the Sentencing Act (compensation orders). Section 15 of the 2002 Act provides: (1) If the court postpones proceedings under section 6 it may proceed to sentence the defendant for the offence (or any of the offences) concerned. (2) In sentencing the defendant for the offence (or any of the offences) concerned in the postponement period the court must not (a) impose a fine on him, (b) make an order falling within section 13(3), or (c) make an order for the payment of compensation under section 130 of the Sentencing Act. (3) If the court sentences the defendant for the offence (or any of the offences) concerned in the postponement period, after that period ends it may vary the sentence by (a) imposing a fine on him, (b) making an order falling within section 13(3), or (c) making an order for the payment of compensation under section 130 of the Sentencing Act. (4) But the court may proceed under subsection (3) only within the period of 28 days which starts with the last day of the postponement period. (7) The postponement period is the period for which proceedings under section 6 are postponed. Statutory construction In my opinion the question whether the Crown Court has power to make a confiscation order under Part 2 of the 2002 Act in a case where the court has given the defendant an absolute or conditional discharge depends upon the true construction of sections 6 and 13 to 15 of that Act. I have reached the clear conclusion that there is, not only such a power, but in most cases a duty to make such an order for the reasons set out below. It is first important to have regard to the duties imposed upon the court by section 6. Those duties are contained in section 6(1), (4), (5) and (7). The duties are absolute, subject to subsection (6), which qualifies subsection (5). By subsection (1), the court must proceed under the section if the two conditions in subsections (2) and (3) are satisfied. Subsection (2)(a) is satisfied if the defendant is convicted. Subsection (3) is satisfied if, as in this case, the prosecutor asks the court to proceed under the section. If the prosecutor does not ask the court to proceed under the section, subsection (3) will also be satisfied if the court believes that it is appropriate to do so. There was no argument in this case as to the correct approach of the judge in such a case and I therefore say nothing about it. If those conditions are met (as they were in this case), the court must proceed as set out in subsection (4), under which it must decide whether the defendant has a criminal lifestyle and, if so, whether he has benefited from his general criminal conduct and, if he does not have a criminal lifestyle, whether he has benefited from his particular criminal conduct. There are specific provisions relating to those questions which are not relevant for the purposes of resolving the issue in this appeal. By subsection (5), if the court decides that the defendant has benefited from his general criminal conduct or his particular criminal conduct, it must decide the recoverable amount and make a confiscation order requiring him to pay that amount. Subsection (6) converts that duty into a power in circumstances which are not relevant for present purposes. Sections 7 to 12 are also for the most part irrelevant for present purposes. It can be seen that there is nothing in section 6 which suggests that the court should not make a confiscation order where it gives or proposes to give the defendant an absolute or conditional discharge. On the contrary section 6(1) is expressed in absolute terms in that it leaves the court with no discretion whether or not to make a confiscation order if the conditions in subsections (2) and (3) are satisfied. Subsection (4) then provides how the court must proceed and subsection (5) provides that, where the court decides that the defendant has benefited from relevant criminal conduct, it must decide the recoverable amount (in accordance with section 7) and must make a confiscation order requiring him to pay that amount. Section 13 expressly provides what the court is to do if it makes a confiscation order. By subsection (1) it must proceed as mentioned in subsections (2) and (4). By subsection (2) it must take account of the confiscation order before it imposes a fine on the defendant or imposes any of the financial penalties specified in subsection (3). Subsection (5) and (6) contain provisions which relate to a case where the court makes both a confiscation order and a compensation order under section 130 of the 2000 Act. Section 13(4) is of significance in the context of this appeal. It provides that, subject to subsection (2), the court must leave the confiscation order out of account in deciding the appropriate sentence for the defendant. It is important to note that the purpose of section 13(4) is not to limit the scope of the confiscation order, let alone to prohibit the making of such an order. It could not have that effect because it assumes that a confiscation order has been made. However that may be, as I see it, the expression in deciding the appropriate sentence for the defendant must be a reference to the sentencing process, at which the court will consider how the defendant should be dealt with. As part of that process the court will no doubt consider all the options open to it, including the option of giving the defendant an absolute or conditional discharge. It is sometimes said that an absolute or conditional discharge is not a sentence because, under section 12(1) of the 2000 Act, the court may make such an order only if it is of the opinion that it is inexpedient to inflict punishment. Whether such an order is a sentence or not, it is in my opinion an order made as a result of deciding the appropriate sentence within the meaning of section 13(4). The effect of section 13(4) is that, in making that decision, the court must leave the confiscation order out of account. It was not suggested in argument that it would not be open to the court which had made a confiscation order to give the defendant an absolute or conditional discharge. The Court of Appeal thought (at para 28) that it would in principle be free to do so. I agree, although whether it would have power to do so would depend upon whether the court was of the opinion that it was inexpedient to inflict punishment. In deciding that question, by reason of section 13(4), it must, subject to subsection (2), leave the confiscation order out of account. All naturally depends upon the circumstances and it will no doubt be a rare case in which it will be appropriate to make an order in the form of an absolute or conditional discharge. However, it does not seem to me to be necessarily wrong in principle for a court to conclude that it is inexpedient to inflict punishment in a case where the defendant has benefited from his criminal conduct and a confiscation order has been made. For example, it may be inappropriate to impose a fine or other financial penalty in the light of the confiscation order, perhaps because of the defendants means, and there may be strong mitigation which persuades the court that it would not be appropriate to impose a sentence of imprisonment or a community order. Some assistance is also to be derived from sections 14 and 15. Subsections (1) to (4) of section 14 provide that the court may either (a) proceed under section 6 before it sentences the defendant or (b) postpone proceedings under section 6 for a period or periods up to a maximum of two years, although the maximum does not apply if there are exceptional circumstances. Section 15(1) provides that, if the court postpones proceedings under section 6, it may proceed to sentence the defendant. Although sections 14 and 15 contemplate the postponement of the section 6 proceedings, they do not nullify the duty of the court to act under section 6. Thus, where, as is common in practice, the court proceeds to sentence before the confiscation proceedings under section 6, the duty of the court to proceed under section 6 remains. The Court of Appeal has correctly so held on a number of occasions: see eg R v Hockey [2007] EWCA Crim 1577, [2008] 1 Cr App R (S) 279. The effect of section 15(2) and (3) is that, where the confiscation proceedings are postponed and the defendant is sentenced during the postponement period, the court may not impose a fine or other financial penalty upon him, but (subject to subsection (4)) the court may subsequently vary the sentence, by imposing a fine or other financial penalty, after the postponement period. Those provisions expressly contemplate confiscation proceedings after the end of the postponement period. They are consistent with section 13(2), which provides that the court must take account of the confiscation order before it imposes a fine or other specified financial penalty. Thus a sentence passed before a confiscation order is made cannot include a fine or other financial penalty because to do so would be inconsistent with section 13(2). By section 15(3) the Act contemplates that in those circumstances, when a confiscation order is made after the end of the postponement period, the court may then think it appropriate to impose a fine or other financial penalty, in which case it must take account of the confiscation order in accordance with section 13(2). The importance of these provisions for present purposes is that they show that the statutory scheme envisages, indeed requires, that confiscation proceedings take place after the end of the postponement period. In summary, the position as I see it on the true construction of the 2002 Act is that the court remains under a duty to proceed under section 6 and, subject to the express terms of the section, must make an order. In the case in which the section 6 proceedings take place before the defendant is sentenced, as stated above I can see no basis upon which it could be submitted to the court that no confiscation order should be made because it would be appropriate to give the defendant an absolute or conditional discharge. There is nothing in the Act which gives the court power to decline to discharge its duty to make a confiscation order under section 6 on that or any other ground. On the other hand, if the court decides (as it is entitled to do under section 15(1)) to postpone the confiscation proceedings under section 6 and proceed to sentence the defendant, if it makes an order for an absolute or conditional discharge, again I can see no basis upon which the making of such an order could absolve the Crown Court from its duty to proceed under section 6 or, having done so, from its duty to make a confiscation order under that section. If the relevant subsections of section 6 were satisfied, it would be bound to make such an order by reason of the plain words of subsection (1). I turn to consider those conclusions in the light of the decision in Clarke, the history of the 2002 Act, the meaning of punishment in section 12(1) of the 2000 Act and the position in Scotland. The decision in Clarke In Clarke the Court of Appeal said at para 48, in my opinion correctly, that, if the 2002 Act is read on its own, there could be no doubt that the court has jurisdiction to make a confiscation order. Equally it recognised at para 77 that the fact that the 2002 Act imposes a mandatory regime is obviously a powerful argument for saying that the court must proceed under section 6 even though the defendant is being absolutely or conditionally discharged, but in the remainder of para 77 it summarised its reasons for rejecting the argument. However before doing so, it considered the position under section 14 of the 2000 Act. It first rejected the argument that, as a matter of jurisdiction, section 14 prevented the court from making both a confiscation order and an order for an absolute or conditional charge. It did so on two bases. The first (at para 46) was that the court had jurisdiction to make a confiscation order under section 14(1)(a) of the 2002 Act before proceeding to sentence the defendant. There was nothing in section 14 of the 2000 Act retrospectively to deprive the court of that jurisdiction. The second was this. By section 14(1) of the 2000 Act, a conviction of an offence for which an order is made under section 12 of the 2000 Act discharging the offender absolutely or conditionally shall be deemed not to be a conviction for any purpose other than the purposes of the proceedings in which the order is made. The court held that a conviction which leads to the conditional or absolute discharge in the circumstances of the instant case is a conviction in the same proceedings as those in which the confiscation order is made, so that the conviction is not deemed not to be a conviction, within section 14(1): see paras 68 and 70 in Clarke and para 17 in the Court of Appeals judgment in the instant case. I agree with that analysis. The critical question was whether section 12 of the 2000 Act prevents the Crown Court from making a confiscation order and an absolute or conditional discharge order. The reasons given by the court in Clarke for answering that question in the affirmative were these (at para 77): However, in the light of R v Savage (1983) 5 Cr App R (S) 216 and R v Young (1990) 12 Cr App R (S) 262, section 12(7) [of the 2000 Act] and the history of section 12(7), we have reached the conclusion that the Crown Court has no power to make a confiscation order against a defendant following conviction of an offence if he or she receives an absolute or conditional discharge for that offence. If Parliament had wanted to include confiscation orders within the 1973 predecessor to section 12 (see para 37 above) or in the 2000 Act, it could easily have done so. We are mindful of the fact that the orders which had been made in R v Savage and R v Young were made under legislation which gave the power to make the order but did not require the making of an order, but we do not think that this affects the conclusion which we have reached. The argument accepted by the court in Clarke was that, as a matter of principle or law, section 12 of the 2000 Act prevented the Crown Court from making both an order for an absolute or conditional discharge and a confiscation order. The court concluded (at para 31) that there is a general principle or rule of law that no punitive order may be made in conjunction with an absolute or conditional discharge unless (a) it is listed in section 12(7) of the 2000 Act (viz orders for costs or disqualification, compensation orders, deprivation orders or restitution orders) or (b) the enactment which permits or requires the punitive order to be made expressly or impliedly provides for the making of that punitive order notwithstanding section 12(7). As it said in para 77, the court derived that principle from the two earlier decisions of the Court of Appeal in Savage and Young. The issue in Savage, in which the appellant pleaded guilty to handling stolen goods, was whether a deprivation order under section 43 of the Powers of Criminal Courts Act 1973 in respect of a motor car could stand with a conditional discharge for the handling. The issue in Young, in which the appellant pleaded guilty to managing a company as an undischarged bankrupt, was whether a disqualification under section 2 of the Company Directors Disqualification Act 1986 could stand with a conditional discharge on the count on which he had pleaded guilty. It was held in both cases that it could not. As Brooke J put it in Young at p 267, it was quite inappropriate for a [disqualification] to be linked with a conditional discharge. As is plain from section 12(7) of the 2000 Act, which re enacted earlier statutes, the result in both those cases was reversed by statute. However that may be, in my opinion the principle in those cases does not apply to the problem under consideration in this appeal. As expressly recognised in Clarke, in Savage and Young the court was considering whether a discretionary order (ie of deprivation or disqualification) could stand with an absolute or conditional discharge. In the instant case, for the reasons given above, the confiscation order was not made in the exercise of a power to impose it but in the discharge of a duty to do so. This is in my view a critical distinction. See further paras 33 to 39 below. The Court of Appeal in Clarke accepted the force of that point but held that Parliament must have intended that the court should not have a power or duty to make a confiscation order in circumstances in which an order for an absolute or conditional discharge was made because the Act did not include a reference to confiscation in section 12(7). However, it was accepted in Clarke at paragraph 46 (and it is not and could not be in dispute) that the Crown Court has jurisdiction under section 6 of the 2000 Act to make a confiscation order before the judge decides on sentence. The court added that such an order would (presumably) have to be quashed if, subsequently, an order of absolute or conditional discharge was made but it recognised that there was no express power to do that. For my part, I can see no mechanism by which a lawful confiscation order made by a court pursuant to its duty under section 6 could be quashed. The Crown Court would have no jurisdiction to quash it and I can see no basis upon which the Court of Appeal could properly quash it either. In Clarke the courts only solution to this problem was as stated in para 78, namely that, given that a confiscation order can, at least in theory, be made before passing sentence it would, as the court put it, obviously be prudent in those very rare cases where an absolute or conditional discharge is a possibility, to decide upon sentence first. In the instant case the Court of Appeal described that suggestion as an extra legislative process (para 28) and described the removal of the confiscation order as one which does not easily fit with the structure of the legislative provisions in sections 6, 14 and 15 of the 2002 Act. I would go further. In my opinion it is inconsistent with them. As I see it, the fact that there is no reference to a confiscation order in section 12(7) of the 2000 Act does not lead to the conclusion that Parliament intended that such an order could not stand with an absolute or conditional discharge. Whether it can or not depends upon the true construction of the 2002 Act, which to my mind is in clear terms. For these reasons I would reject the first of the two reasons given in para 31 in Clarke, namely that no punitive order may be made in conjunction with an absolute or conditional discharge unless (a) it is listed in section 12(7) of the 2000 Act (viz orders for costs or disqualification, compensation orders, deprivation orders or restitution orders). The second reason was that no such order may be made unless (b) the enactment which permits or requires the punitive order to be made, here the 2002 Act, expressly or impliedly provides for the making of that punitive order notwithstanding section 12(7). I would not accept the second reason precisely as formulated, if only because it assumes that the principles in Savage and Young apply in the present context, whereas to my mind they do not apply to duties imposed upon the court as opposed to powers conferred upon it. It is true that there is an argument, which was advanced on behalf of the respondent, that the principle in Savage and Young applies to duties as well as powers. Thus attention was drawn to Taylor v Saycell [1950] 2 All ER 887 and Dennis v Tame [1954] 1 WLR 1338 and to section 46 of the Road Traffic Offenders Act 1988. In this regard the submission made on behalf of the respondent can be summarised in this way. Historically, an important forerunner of section 12(1) of the 2000 Act was section 7(1) of the Criminal Justice Act 1948 (the 1948 Act), which contained the original section which provided for an absolute or conditional discharge if it was inexpedient to inflict punishment. Section 12(2) of the 1948 Act, which was a forerunner of section 14(3) of the 2000 Act, provided that the conviction of an offender who is discharged absolutely or conditionally shall be disregarded for the purposes of any enactment which imposes any disqualification or disability upon convicted persons, or authorises or requires the imposition of any such disqualification or disability. These sections were considered in the cases of Taylor v Saycell and Dennis v Tame, which were both decisions of the Divisional Court presided over by Lord Goddard CJ. In Taylor v Saycell the respondents were convicted by magistrates of using a vehicle without insurance. They were fined and disqualified from holding a licence for 12 months. They appealed to the Crown Court, which quashed the fines and the disqualifications and substituted conditional discharges. On a case stated by the prosecutor, the Divisional Court quashed the conditional discharges on the basis that there was no evidence upon which it could be said that it was inexpedient to inflict punishment. Moreover no special reasons had been advanced to avoid what would otherwise be a mandatory disqualification. At p 889H Lord Goddard said, obiter, that convictions under the Road Traffic Act 1930 (the RTA 1930) were within section 12(2) of the 1948 Act, that it was within the jurisdiction of the court to make an order for a conditional discharge and that such an order would avoid the necessity for disqualification. In Dennis v Tame the defendant was given a conditional discharge, which had the effect under section 12(2) of avoiding disqualification. The conditional discharge was set aside on the basis that the Divisional Court had said more than once that the conditional discharge provisions should not be used in order to avoid disqualification in cases where, under the RTA 1930, the defendant must be disqualified in the absence of special circumstances. It further held that there were no special circumstances on the facts. Attention was also drawn to section 46 of the Road Traffic Offenders Act 1988 (the RTOA 1988), which was relied upon on behalf of the respondent. It provides, so far as material (and as set out in Clarke at para 52): Notwithstanding anything in section 14(3) of the Powers of Criminal Courts (Sentencing) Act 2000 a court in England and Wales which on convicting a person of an offence involving obligatory or discretionary disqualification makes . an order discharging him absolutely or conditionally may or must disqualify or endorse. It was noted in Clarke that the reference to section 14(3) must have been included because of Taylor v Saycell. In Clarke the court said at para 52 that it followed from the reference to section 14(3) in section 46 of the RTOA 1988 that the draftsman was accepting Lord Goddards interpretation of what is now section 14(3), namely that it prevented the imposition of any disqualification or disability in the proceedings for the offence for which the conditional discharge had been granted, subject to any contrary enactment. It was submitted on behalf of the respondent that the effect of Taylor v Saycell and Dennis v Tame was that sentencing courts should not impose absolute or conditional discharges in an attempt to avoid disqualification because such a result was inconsistent with the statutory requirement that special circumstances (or special reasons) must be found before disqualification could be avoided. For my part, I am not persuaded that either those cases or section 46 of the RTOA 1988 carry the present debate much further forward. The cases do no more than reflect the position as it stood under the statutes then in force. Otherwise all that the cases did was to say that, as a matter of principle, the courts should not use an absolute or conditional discharge in order to avoid the effect of the RTA 1930, which required disqualification in the absence of special circumstances. The reason the cases were decided as they were was because of section 12(2) of the 1948 Act. They were concerned with the circumstances in which the court should impose an absolute or conditional discharge where to do so would avoid the effect of the statute. They treated the provisions of the statute as paramount. They were not concerned with the position we have here, where the terms of the statute are said to yield to the fact of a conditional discharge. In all these circumstances I remain of the view that there is an important distinction between the correct approach where the court has a power to impose a penalty together with an absolute or conditional discharge and the correct approach where the court has a duty to do so on the true construction of the statute. However, whether that is correct or not, all turns on the true construction of the 2002 Act. In my opinion, for the reasons I have given in paras 12 to 22 above, on its true construction the 2002 Act imposes a duty upon the court to make a confiscation order, whether the section 6 proceedings take place before or after the sentencing process. As to the second reason in para 31 of Clarke, the courts reasoning may be summarised in this way. Parliament had enacted legislation empowering courts to make various other punitive orders and had in the same legislation specified that such orders could be made even where an absolute or conditional discharge had been imposed. Examples of such punitive orders were orders disqualifying a person from driving under section 46(1) of the RTOA 1988, exclusion orders made under section 1 of the Licensed Premises (Exclusion of Certain Persons) Act 1980, designed to deal with persons who commit violent offences on licensed premises, banning orders made under the Football (Disorder) Act 2000 and orders made under the Sex Offenders Act 1997 requiring a defendant to comply with notification requirements. The 2002 Act does not expressly provide for the making of a confiscation order where an order for discharge is imposed. The absence of a specific provision in the 2002 Act could be taken to show Parliaments intention that confiscation orders should not be coupled with an order for absolute or conditional discharge. This was so notwithstanding the fact that the 2002 Act imposed a mandatory regime for confiscation orders. The difficulty with this general point is that identified on behalf of the appellant. Each of the statutes referred to empowered or required the court to impose a disqualification or disability of one kind or another. The explicit reference in those statutes to the regime for conditional and absolute discharges appears to have been designed principally to ensure that courts do not interpret section 14(3) of the 2000 Act as preventing the court from making such orders. However, first, section 14(3) would have no application to confiscation orders because a confiscation order is not a disqualification or disability. Secondly, it does not necessarily follow from the fact that other legislation contains an express provision permitting a punitive order and an absolute or conditional discharge to be made in respect of the same offence that the absence of such a provision in the 2002 Act has the effect of preventing a court from imposing both a confiscation order and an absolute or conditional discharge. All depends upon the scheme of the particular Act and, for the reasons I have given, I would accept the submission made on behalf of the appellant that the scheme of the 2002 Act demonstrates an intention on the part of Parliament to put in place a mandatory scheme of confiscation designed to deprive offenders of the benefit of their offending. The history of the 2002 Act Some reliance was placed upon the history of the 2002 Act, which was considered in detail by the Court of Appeal in Clarke. The first statute which provided for confiscation to which we were referred was the Drug Trafficking Offences Act 1986 (the 1986 Act). Section 1(1) (5) were very similar to what became section 6 of the 2002 Act. In summary, they required the court to take certain steps when a person appeared before the Crown Court for sentencing. They required the court to determine whether he had benefited from the drug trafficking offence or offences for which he was to be sentenced. Section 1(4), (5) and (6) then provided: (4) If the court determines that he has so benefited, the court shall, before sentencing or otherwise dealing with him in respect of the offence or, as the case may be, any of the offences concerned, determine in accordance with section 4 of this Act the amount to be recovered in his case by virtue of this section. (5) The court shall then, in respect of the offence or offences concerned (a) order him to pay that amount, (b) take account of the order before (i) imposing any fine on him, or (ii) making any order involving any payment by him, or (iii) making any (forfeiture orders), or (deprivation orders), and (c) subject to paragraph (b) above, leave the order out of account in determining the appropriate sentence or other manner of dealing with the defendant. (6) No enactment restricting the power of a court dealing with an offender in a particular way from dealing with him also in any other way shall by reason only of the making of an order under this section restrict the Crown Court from dealing with an offender in any way the court considers appropriate in respect of a drug trafficking offence. The 1986 Act was followed by the Criminal Justice Act 1988 (the 1988 Act), which extended the confiscation regime beyond drug trafficking. Section 72(5) and (6) of the 1988 Act were in very similar terms to sections 1(5) and (6) of the 1986 Act. The 1988 Act was amended by a number of subsequent Acts. Those amendments included the addition of section 72A, which provided for the postponement of the confiscation proceedings in very similar terms to the equivalent provisions of the 2002 Act. It is of interest to note the following. Section 72A(7) provided that, where the court exercised its power of postponement, it might nevertheless proceed to sentence, or otherwise deal with, the defendant in respect of the offence or any of the offences concerned. See also section 72A(8)(c) and section 72A(9), which provided that in sentencing, or otherwise dealing with, the defendant during the period of postponement, the court must not impose a fine or other financial penalty on him. The Drug Trafficking Act 1994 (the 1994 Act) repealed and replaced the 1986 Act. It was limited to drug trafficking offences but was in very similar terms to the 2002 Act. The equivalent of section 13(2), (3) and (4) in the 2002 Act was section 2(5) of the 1994 Act, although by section 2(5)(c) it provided that, subject to paragraph (b) (which was the equivalent of section 13(2) and (3)), the court must leave the confiscation order out of account in determining the appropriate sentence or other manner of dealing with the defendant. Section 3 provided for postponed determinations in very similar terms to section 15 of the 2002 Act, save that in subsection (7) it gave the court power during the postponement to proceed to sentence, or otherwise deal with the defendant and in subsection (9) it prohibited the court from imposing a fine or other specified financial penalty in sentencing, or otherwise dealing with, the defendant. The 2002 Act has replaced both the 1988 Act and the 1994 Act. In the Court of Appeal in the instant case the court noted in para 28 that the position when the 2002 Act came into force was that the effect of section 72(6) of the 1988 Act and of section 2(6) of the 1994 Act, which was of course the successor to section 1(6) of the 1986 Act, was that the court was not deprived of its power to make a confiscation order in addition to an absolute or conditional discharge or vice versa. In summary, the position when the 2002 Act came into force was that the court had both the duty (or in rare cases power) to make a confiscation order and also had the power to make an order for an absolute or conditional discharge in an appropriate case. The Court of Appeal noted that an equivalent provision to section 2(6) of the 1994 Act was included as clause 14(7) of the Bill which led to the 2002 Act but that the clause was removed from the Bill before it was enacted. The Court of Appeal plainly thought that it was very unlikely indeed that Parliament intended to change that position, when enacting the 2002 Act. It held (or would have held) that section 13(4) was in sufficiently clear terms to make such a provision unnecessary. It is of interest to note that, according to the explanatory note to section 13, it reproduces the effect of the existing legislation. Conclusions I would accept the approach of the Court of Appeal to the position as it was when the 2002 Act came into force. However, I am aware that the distinguished commentator, Dr David Thomas QC, has expressed the view in [2010] Crim LR 64 and 790 that, in so far as the argument of the appellant rests upon section 1(6) of the 1986 Act and section 72(6) of the 1988 Act it rests on what he calls an uncertain foundation. Fortunately the conclusion which I have reached does not depend upon that foundation, whether uncertain or not. It depends upon my view of the true construction of the relevant provisions of the 2002 Act, which I have set out in paras 12 to 22 above. I note in passing that Dr Thomas does not express a view on the Court of Appeals opinion that Clarke was wrongly decided. For my part, I agree with the Court of Appeal that section 13(4) is in clear terms and that Clarke was wrongly decided. In para 77 (quoted at para 26 above) the court in Clarke referred to the fact that the 2002 Act required the making of a confiscation order but simply said that it did not think that that affected the conclusion they had reached. I respectfully disagree. The issue was one of construction of the 2002 Act, which in my opinion required the making of a confiscation order whatever order was made as a result of the sentencing exercise. In short it is my view that in Clarke the court placed insufficient weight upon the mandatory provisions of the statute. On behalf of the appellant some reliance was placed upon the obligations of the United Kingdom under what is known as the Framework Decision, namely the Council Framework Decision of 26 June 2001 On Money Laundering, the Identification, Tracing, Freezing, Seizing and Confiscation of Instrumentalities and the Proceeds of Crime (2001/500/JHA). In the light of the conclusion which I have reached above, it is not necessary further to lengthen this judgment by referring to its provisions. Punishment There was some discussion in the course of the argument as to whether the making of a confiscation order is or is not punishment within the meaning of section 12(1) of the 2000 Act. The relevance of the issue is that, if a confiscation order is not punishment, it is not inconsistent with an order for an absolute or conditional discharge, which can only be made if it is inexpedient to inflict punishment, whereas if it is punishment, it is said to be inconsistent with an absolute or conditional discharge. The argument that a confiscation order is not punishment is that it is not intended to punish the defendant but to ensure that he disgorges any benefit he has made from crime, at any rate to the extent of his assets. On the other hand, the court in Clarke expressed the clear view that such an order is punishment: see in particular paras 65 and 74. It noted in para 65 that it has been treated as part of the process of sentencing and that, at least for some purposes, has been held to be a penalty: see eg R v Briggs Price [2009] 1 AC 1026, paras 30, 63, 112, 113, 115 and 134. At para 74 the court said: There can be no doubt that confiscation orders constitute punishment. The regime under what is now the 2002 Act is aptly described as Draconian. The use of the offender's realisable assets to recover any benefit (not merely profit), including benefits from criminal activity unassociated with the index offence with a maximum of ten years' imprisonment in default must constitute punishment. Thus, applying these cases, the making of a confiscation order is inconsistent with a finding that it is inexpedient to inflict punishment. It seems to me that must be correct. However, it is not necessary to reach a final conclusion on that question because section 13(4) of the 2002 Act expressly provides that the confiscation order must be left out of account in deciding the appropriate sentence for the defendant. It follows that whether a confiscation order is punishment or not is irrelevant to the question whether or not to make an order for an absolute or conditional discharge. Scotland The conclusions which I have reached seem to me to receive strong support from the position in Scotland, which is governed by Part 3 of the 2002 Act. Section 92 of the 2002 Act is almost identical to section 6, most of which is set out above. Section 92, however, provides three conditions rather than two. So far as relevant to the question in this appeal, section 92 provides: or (1) The court must act under this section where the following three conditions are satisfied. (2) The first condition is that an accused falls within either of the following paragraphs (a) he is convicted of an offence or offences, whether in solemn or summary proceedings, (b) in the case of summary proceedings in respect of an offence (without proceeding to conviction) an order is made discharging him absolutely. (3) The second condition is that the prosecutor asks the court to act under this section. (4) The third condition is that the court decides to order some disposal in respect of the accused; and an absolute discharge is a disposal for the purpose of this subsection. The remaining provisions are identical or almost identical to those in Part 2 relating to England and Wales which are quoted above. The significant provisions for present purposes are subsections (2)(b) and (4). Subsection (2)(b) provides that the first condition is satisfied in the case of summary proceedings if, without proceeding to a conviction, an order is made discharging the defendant absolutely and subsection (4) provides that the third condition is satisfied if the court decides to order a disposal, an absolute discharge being a disposal for that purpose. It is thus plain that, at any rate in the case of Scotland, Parliament expressly contemplated that the court will have a duty to make a confiscation order in circumstances in which it thinks it right to make an order for an absolute discharge, both where there is a conviction and where there is not. It seems inconceivable that Parliament intended that in England and Wales the making of an order for an absolute discharge should be a bar to the making of a confiscation order. In these circumstances, the position in Scotland seems to me to give some force to the underlying rationale of the construction of the 2002 Act set out in paras 12 to 22 above. Postscript There was a suggestion that confiscation proceedings after an absolute or conditional discharge were or might be an abuse of process or an infringement of the appellants rights under Article 1 Protocol 1 of the European Convention on Human Rights (A1P1). However, the duty of the court to make a confiscation order arises where the defendant has benefited from either general or particular criminal conduct and the court has determined the recoverable amount, which is defined in section 7(1) of the 2002 Act as an amount equal to the defendants benefit from the conduct concerned. I do not see how such proceedings could be an abuse of process. The present case is not concerned with the determination of the amount of that benefit or with the possible application, for example, of the provisions of A1P1 to that determination. A1P1 may have its part to play on issues of proportionality but not in the context of this appeal. Disposition As stated in para 6 above, the certified question is Does the Crown Court have power to make a confiscation order against a defendant following conviction for an offence if he or she receives an absolute or conditional discharge for that offence? For the reasons I have given, I would answer that question in the affirmative but I would go further. I would hold that, where the criteria in section 6 of the 2002 Act are satisfied, subject to subsection (6), the Crown Court has a duty to make a confiscation order against a defendant following conviction for an offence, whether or not he or she receives an absolute or conditional discharge for that offence. Where subsection (6) applies, that duty must be treated as a power. In all the circumstances I would allow the appeal and restore the confiscation order in the sum of 1,500. LORD PHILLIPS I am in full agreement with the judgment of Lord Clarke. I wish, however, to add a footnote, based on information supplied pursuant to a request from the Court. The prosecuting authority responsible for the prosecution of Mr Varma and for the decision to seek a confiscation order was the Revenue and Customs Prosecutions Office (the Customs). Where the Customs seize goods that a defendant is seeking to bring into the country without paying duty it would be open to them to confiscate the goods, to prosecute the defendant and to exact the duty payable on them. It is, however, their practice, where they prosecute in such circumstances, not to seek to exact payment of the duty but to initiate confiscation proceedings in the amount of the duty payable instead. That is what they did in the case of Mr Varma. This practice may well be convenient, but I doubt whether it is legitimate. Mr Varma pleaded guilty to section 170(2)(a) of the Customs and Excise Management Act 1979, which provides, in so far as material: if any person is, in relation to any goods, in any way knowingly concerned in any fraudulent evasion or attempt at evasion (a) of any duty payable on the goods (my emphasis). I consider it questionable whether, in confiscation proceedings, it is legitimate to treat a defendant in the position of Mr Varma as having evaded duty when the only reason that he has done so is that the Customs have chosen not to exact it. If I am correct, then it is doubtful whether there was any basis for bringing confiscation proceedings in this case. I am aware that I am questioning the assumption that underlay the decision of the House of Lords in R v David Smith [2002] 1 WLR 54, but that aspect of that decision (at least) calls out for review. It has not, however, been challenged in this case so the confiscation order made must stand. I agree with the judgment delivered by Lord Clarke and with his proposed LORD MANCE disposal of this appeal. As a member of the Court of Appeal with whose judgment the House of Lords disagreed in R v David Smith [2001] UKHL 68, [2002] 1 WLR 54, I have read with a particular interest Lord Phillipss supplementary judgment. In it he doubts whether, in confiscation proceedings, it is legitimate to treat a defendant as having evaded duty when the only reason that he has done so is that the Customs have chosen not to exact it. That, he suggests, was the assumption underlying the decision in David Smith. A problem about this suggestion appears to me to be that the evasion relied upon by the Customs in such cases as David Smith and the present lies in the initial importation of the dutiable goods without declaration or payment of duty, not in any non payment resulting from Customs failure to pursue the defendant. On that basis, therefore, the argument resolves itself into a question whether he has benefited from his particular criminal conduct. That was the question which the Court of Appeal answered in the favour of, and the House of Lords answered against, the defendant in David Smith. As I understand Lord Phillipss current suggestion, it would be impossible to treat any smuggler as having actually evaded any duty payable on the goods, unless and until it was clear that Customs could not pursue him for and presumably actually recover the duty. All that could be said until then was that the defendant was, by not declaring the importation and by not paying the duty, attempting to evade the duty payable. Without having heard argument on the point, I see some difficulty in thinking that this analysis reflects the ingredients of the criminal offence created by section 170(2) of the Customs and Excise Management Act 1979. That does not mean that I do not consider that the proper scope of confiscation orders in the present area merits further consideration at the highest level. |
The first Star Wars film (later renamed Star Wars Episode IV A New Hope in order to provide for prequels as well as sequels) was released in the United States in 1977. It was an enormous commercial success. It won an Oscar for best costume design. This appeal is concerned with intellectual property rights in various artefacts made for use in the film. The most important of these was the Imperial Stormtrooper helmet to which the trial judge (Mann J) referred in his judgment ([2008] EWHC 1878 (Ch), [2009] FSR 103, paras [2] and [121]): One of the most abiding images in the film was that of the Imperial Stormtroopers. These were soldiers clad in white armour, including a white helmet which left no part of the face uncovered. The purpose of the helmet was that it was to be worn as an item of costume in a film, to identify a character, but in addition to portray something about that character its allegiance, force, menace, purpose and, to some extent, probably its anonymity. It was a mixture of costume and prop. The parties are agreed that for the purposes of this final appeal the helmet can be taken as the paradigm case that will be decisive of the outcome. The facts are set out in the judges clear and thorough judgment. For present purposes a brief summary will suffice. The films story line and characters were conceived by Mr George Lucas. Between 1974 and 1976 Mr Lucass concept of the Imperial Stormtroopers as threatening characters in fascist white armoured suits was given visual expression in drawings and paintings by an artist, Mr Ralph McQuarrie, and three dimensional form by Mr Nick Pemberton (a freelance scenic artist and prop maker) and Mr Andrew Ainsworth (who is skilled in vacuum moulding in plastic). Mr Pemberton made a clay model of the helmet, which was adapted several times until Mr Lucas was happy with it. Mr Ainsworth produced several prototype vacuum moulded helmets. Once Mr Lucas had approved the final version Mr Ainsworth made 50 helmets for use in the film. These events all took place in England. Although Mr Lucas and his companies are based in California he had come to live in England while the film was made at Elstree (there was also filming on location in Tunisia). The first appellant is a Californian corporation owned by Mr Lucas. The second appellant is an English company owned by Mr Lucas. The third appellant is a Californian corporation responsible for the groups licensing activities; it is wholly owned by the first appellant. Between them these three companies own copyrights in the artistic works created for the Star Wars films, and they can be referred to generally as Lucasfilm. Apart from the huge commercial success of the Star Wars films, Lucasfilm has built up a successful licensing business which includes licensing models of Imperial Stormtroopers and their equipment. This litigation has come about because in 2004 Mr Ainsworth, the principal respondent in this appeal, used his original tools to make versions of the Imperial Stormtrooper helmet and armour, and other artefacts that it is not necessary to detail, for sale to the public. The second respondent is a private company owned by Mr Ainsworth but for practical purposes Mr Ainsworth can be treated as the only respondent. Mr Ainsworth sold some of the goods that he produced (to the value of at least $8,000 but not more than $30,000) in the United States. In 2005 Lucasfilm sued Mr Ainsworth in the United States District Court, Central District of California, and in 2006 it obtained a default judgment for $20m, $10m of which represented triple damages under the Lanham Act. The whole judgment remains unsatisfied. Lucasfilm also commenced proceedings in the Chancery Division of the English High Court. The re amended particulars of claim put forward a variety of claims under English law, including infringement of copyright (paras (1) to (10) of the prayer for relief); a claim for enforcement of the United States judgment to the extent of $10m (para (11)); and claims under United States copyright law (paras (12) to (17)). The trial occupied 17 days during April and May 2008. In his judgment delivered on 31 July 2008 Mann J dismissed all Lucasfilms claims based on English copyright law (together with some other claims that are no longer pursued). He held that the helmet made by Mr Ainsworth was a substantial reproduction of original work carried out by Mr McQuarrie and other persons working for Lucasfilm. But the English copyright claims failed because the helmet was not a work of sculpture and Mr Ainsworth had defences (to a claim that he was reproducing Mr McQuarries work) under sections 51 and 52 of the Copyright Designs and Patents Act 1988 (the 1988 Act). The judge also dismissed Mr Ainsworths counterclaim based on his own claim to copyright in the helmet. The judge held that the United States judgment was unenforceable for want of personal jurisdiction over Mr Ainsworth and his company. But he held that Lucasfilms United States copyright claims were justiciable in England and that Mr Ainsworth and his company had infringed those rights. The Court of Appeal ([2009] EWCA Civ 1328, [2010] Ch 503) agreed with the judge that the United States judgment is unenforceable, and there is no further appeal on that point. The Court of Appeal also agreed with the judge that any intellectual property rights in the helmet belong to Lucasfilm, and this Court has refused Mr Ainsworth permission to cross appeal on that point. The issues that are open in this Court are whether the helmet was a sculpture and the defences under sections 51 and 52 of the 1988 Act (on all of which the Court of Appeal agreed with the judge) and justiciability in England of the United States copyright claims (on which the Court of Appeal disagreed with the judge). The issues on sections 51 and 52 arise only if the helmet was a sculpture (and so an artistic work) within the meaning of the 1988 Act. In the Court of Appeal Lucasfilm abandoned its alternative contention that the helmet qualified as an artistic work because it was a work of artistic craftsmanship. Part I: English copyright law issues Current statutory provisions The Court has been taken to the full legislative history but it is better to start with the current legislation, that is the 1988 Act. Under section 1(1)(a) copyright is a property right which subsists in original literary, dramatic, musical or artistic works. Other works, including films, come in under section 1(1)(b) and (c). By section 4(1) artistic work means, for copyright purposes, (a) a graphic work, photograph, sculpture or collage, irrespective of artistic quality, (b) a work of architecture being a building or a model for a building, or (c) a work of artistic craftsmanship. By section 4(2) sculpture includes a cast or model made for purposes of sculpture. Sections 51 and 52 are in Part I, Chapter III of the 1988 Act (acts permitted in relation to copyright works). Chapter III contains a variety of exemptions from liability on general grounds, including fair dealing (sections 29 31) and educational, archival and other public purposes (sections 32 50). Section 62 contains a general exemption for buildings, sculpture and works of artistic craftsmanship on permanent public display. Section 51 (design documents and models) as amended provides as follows: (1) It is not an infringement of any copyright in a design document or model recording or embodying a design for anything other than an artistic work or a typeface to make an article to the design or to copy an article made to the design. (2) Nor is it an infringement of the copyright to issue to the public, or include in a film or communicate to the public, anything the making of which was, by virtue of subsection (1), not an infringement of that copyright. (3) In this section design means the design of any aspect of the shape or configuration (whether internal or external) of the whole or part of an article, other than surface decoration; and design document means any record of a design, whether in the form of a drawing, a written description, a photograph, data stored in a computer or otherwise. Section 52 (effect of exploitation of design derived from artistic work) provides as follows: (1) This section applies where an artistic work has been exploited, by or with the licence of the copyright owner, by (a) making by an industrial process articles falling to be treated for the purposes of this Part as copies of the work, and (b) marketing such articles, in the United Kingdom or elsewhere. (2) After the end of the period of 25 years from the end of the calendar year in which such articles are first marketed, the work may be copied by making articles of any description, or doing anything for the purpose of making articles of any description, and anything may be done in relation to articles so made, without infringing copyright in the work. (3) Where only part of an artistic work is exploited as mentioned in subsection (1), subsection (2) applies only in relation to that part. (4) The Secretary of State may by order make provision (a) as to the circumstances in which an article, or any description of article, is to be regarded for the purposes of this section as made by an industrial process; (b) excluding from the operation of this section such articles of a primarily literary or artistic character as he thinks fit. (5) An order shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (6) In this section (a) references to articles do not include films; and (b) references to the marketing of an article are to its being sold or let for hire or offered or exposed for sale or hire. These two sections operate so as to limit (in different ways) the influence of literary or artistic copyright on other persons freedom to make and market three dimensional objects. Section 51 applies where the end product of a design document or model is not an artistic work. It provides a more principled answer to the problem to which the House of Lords gave a radical and controversial solution in British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577 while the Bill which became the 1988 Act was before Parliament. Section 52 applies (subject to exceptions specified by the Secretary of State) where there is an artistic work, but that work has been exploited (with the consent of the copyright owner) by industrial production of copies to be marketed. The Copyright (Industrial Process and Excluded Articles) (No 2) Order 1989 (SI 1989/1070) (the 1989 Order), made under section 52(4) of the 1988 Act, provides (para 2) for an article to be regarded as made by an industrial process if it is one of more than 50 articles which are to be treated as copies of a particular artistic work (and are not together a set). The Order also provides (para 3(1)(a)) for the exclusion from section 52 of works of sculpture, other than casts or models used or intended to be used as models or patterns to be multiplied by any industrial process. Legislative history: before the 1911 Act These provisions (and especially sections 51 and 52) are difficult to understand without reference to their legislative history. Unfortunately the history is itself quite complicated. The Copyright Act 1911 (the 1911 Act) was (as Lord Bridge observed in British Leyland [1986] AC 577, 619) the first attempt to provide a comprehensive code of copyright protection. Section 1(1) of the 1911 Act was in terms similar to those of section 1(1)(a) of the 1988 Act, (except that the words irrespective of artistic quality did not appear in the 1911 Act), and it may give the impression of embodying a well proportioned symmetrical principle providing equal protection to every form of human creativity. Any such impression would be misleading. When the 1911 Act was passed there had already been two centuries of legislative history, starting with the Copyright Act 1709 (the 1709 Act), and for most of that time it was the protection of printed words published literary works that was the laws principal concern. Moreover the original legislative purpose of laws on literary copyright was the protection of the commercial interests of stationers (the early publishers) and booksellers, and the control of unlicensed (and possibly subversive) publications, rather than the vindication of the legal and moral rights of authors. There are useful summaries of the history of English copyright law in Copinger and Skone James on Copyright, 16th ed (2010), paras 2 08 to 2 42, and Cornish, Llewelyn and Aplin, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights, 7th ed (2010), paras 10 01 to 10 41. The 1709 Act protected literary works, books and other writings. During the 18th century protection was extended (by statute) to engravings and (by a liberal interpretation of the 1709 Act) to musical and dramatic compositions. Three dimensional works of art were brought within the scope of copyright by a statute enacted in 1798, 38 Geo III c 71, but it was very badly drafted and offered little practical protection (Lord Ellenborough said in Gahagan v Cooper (1811) 3 Camp 111, 113 that The statute seems to have been framed with a view to defeat its own object). This Act was replaced by the Sculpture Copyright Act 1814 (the 1814 Act). The class of protected works was described in discursive terms, starting with any new and original sculpture, or model, or copy, or cast of the human figure or human figures, or of any bust or busts, or of any part or parts of the human figure, clothed in drapery or otherwise, and continuing in broader terms, referring to any matter being subject of invention in sculpture. The sculpture was required to bear the makers name and the date when it was made. Paintings, drawings and photographs were not protected until the Fine Arts Copyright Act 1862 (the 1862 Act). The 1862 Act required registration as a condition of protection. Architectural works were not protected until the 1911 Act (which also introduced works of artistic craftsmanship into the definition of artistic work in section 35 of that Act). The 1814 Act remained in force until the coming into force of the 1911 Act, and was until then the only statute that gave long term copyright protection to any three dimensional works. During the 19th century the rapid expansion of mechanical mass production produced an obvious need for industrial designers and manufacturers to be protected against unfair competition by copying of their designs. Parliament decided that protection should be provided by a new right which was (rather confusingly, as the Court of Appeal said in para [24] of its judgment) called copyright, but which differed in two respects from literary and artistic copyright. First, the proprietor was required to register his design. Second, the period of protection was much shorter. Those were the essential features of the scheme introduced by the Copyright of Designs Act 1839, repealed and replaced by the Designs Act 1842. Earlier legislation granting copyright to the design of a range of printed textiles was repealed and replaced by the new system of registration, but copyright in sculpture under the 1814 Act was preserved. The law as to registered designs was amended by the Copyright of Designs Act 1850, was further amended and consolidated by Part III of the Patents, Designs and Trade Marks Act 1883 (the 1883 Act) and finally (as regards legislation before the 1911 Act) was further amended by the Patents and Designs Act 1907 (the 1907 Act). Most of the detail of this history is irrelevant for present purposes. But it is to be noted that although the periods of protection for registered designs were progressively extended, they were always much shorter than the period for literary or artistic copyright. It is also to be noted that after an uncertain start in the early statutes, a design for a work of sculpture was excluded from the statutory definition of design (section 60 of the 1883 Act and section 93 of the 1907 Act). Only one judicial decision on the 1814 Act calls for mention, that is Britain v Hanks Bros & Co (1902) 86 LT 765. Wright J held that copyright protection as sculpture was available to what the report refers to as toy metal models of soldiers on horseback, or mounted yeomen. The models were designed and made by William Britain, a partner in the plaintiff firm. The report does not say how large the models were, but they were evidently large enough for each to have stamped on it the makers name and the date of its manufacture. There was expert evidence, which the judge accepted, that the models were artistic productions, in that the anatomy is good, and that the modelling shows both technical knowledge and skill. The judge seems to have regarded the case as near the borderline, but was prepared to hold that the models were entitled to protection. The Court of Appeal observed (para [59]) that it is difficult . to take too much from this case. A minor point in the appellants case is that that is just what the Court did (para [82]) in describing the Britain models as highly crafted models designed to appeal to the collector but which might be played with by his children. Legislative history: the 1911 Act and afterwards The introduction by the 1911 Act of full copyright protection for a work of artistic craftsmanship was ascribed by Lord Simon, in George Hensher Ltd v Restawile Upholstery (Lancs) Ltd [1976] AC 64, 89 91, to the influence of the Arts and Crafts movement inspired by William Morris and John Ruskin. Lord Simons view (at p 91) was that the expression is a composite phrase which must be construed as a whole, and that view has had recent support from the High Court of Australia (Swarbrick v Burge (2007) 232 CLR 336). Section 22 of the 1911 Act provided as follows: (1) This Act shall not apply to designs capable of being registered under the Patents and Designs Act 1907, except designs which, though capable of being so registered, are not used or intended to be used as models or patterns to be multiplied by any industrial process. (2) General rules under section 86 of the Patents and Designs Act 1907 may be made for determining the conditions under which a design shall be deemed to be used for such purposes as aforesaid. The test for production by an industrial process was (by rule 89 of the Designs Rules 1920, and so far as now material) the same as that in the 1989 Order (mentioned in para [13] above). The effect of the double negative in section 22(1) can be more easily understood, as Viscount Maugham observed in King Features Syndicate Inc v O & M Kleeman Ltd [1941] AC 417, 427, if it is rewritten: This Act shall apply to designs capable of being registered under [the 1907 Act], which are not used or intended to be used as models or patterns to be multiplied by any industrial process. With that exception this Act shall not apply to designs capable of being registered under [the 1907 Act]. The main issue in that case (which was concerned with Popeye dolls derived from published comic strips enjoying artistic copyright) was the time at which the intention of use for industrial production had to be formed. The Lords decided that the intention must have been there from the start. The Patents and Designs Act 1919 amended the 1907 Act by substituting for the definition in section 93 of the 1907 Act a new definition of design which referred to features applied by any industrial process and did not make an express exception for a design for a sculpture. Because of the way that section 22 of the 1911 Act was framed, this had the effect of withdrawing from works of sculpture their specially privileged position in relation to mass production of copies. Its effect was illustrated by Pytram Ltd v Models (Leicester) Ltd [1930] 1 Ch 639. The Boy Scouts Association commissioned a model of a wolf cubs head which was to be used to produce a permanent mould for the production of large numbers of papier mach models to be attached to the top of wooden poles. Clauson J dismissed the plaintiffs claim to copyright in the original model. He accepted that the model was a work of sculpture, but it was not automatically exempt from registration under the 1907 Act as amended, and it did not come within the exception in section 22(1) because (p 647) The whole point in the preparation of this model was to enable the plaintiffs to supply totem poles in large quantities. After the second world war there was a legislative shift back again. In 1947 the Swan Committee recommended that works of sculpture should again be excluded from registrable designs. The Registered Designs Act 1949 provided (section 1(3) and (4)) for exclusions from registration of articles which were primarily literary or artistic in character. Rule 26(1) of the Designs Rules 1949 (SI 1949/2368) excluded works of sculpture other than casts or models used or intended to be used as models or patterns to be multiplied by any industrial process. This wording (now reproduced in the 1989 Order) followed section 22(1) of the 1911 Act and must be construed in line with the House of Lords decision on that section in King Features. The 1911 Act was repealed by the Copyright Act 1956 (the 1956 Act). Section 10 of the 1956 Act (special exception in respect of industrial designs) restated the boundaries between copyright and design right. As amended by the Design Copyright Act 1968, section 10(3) set a 15 year limit on copyright protection for any work in respect of which a corresponding design could have been registered under the 1949 Act. But section 10(4) made an exception for designs excluded from registration by rules made under the 1949 Act; and rule 26 of the Designs Rules 1949 has now been replicated by rule 26 of the Registered Designs Rules 1989. The 1956 Act introduced the words irrespective of artistic quality into para (a) of its definition of artistic work in section 3(1). This was, it seems, as a result of maps, charts and plans being reclassified by the 1956 Act as artistic rather than literary works. The new wording sits rather uneasily with works of artistic craftsmanship in para (c) of the same definition. In Hensher [1976] AC 64, 94, Lord Simon suggested an explanation which some may not find wholly convincing. But it is common ground that in copyright cases the court is not concerned with passing judgment on the merits of either literary or artistic works. The Court of Appeal drew two general conclusions from its own survey of the legislative history (which occupies paras [21] to [39] of the judgment). The first ([40] and [41]) was that there is little or no assistance as to the meaning of sculpture in the 1988 Act to be derived from the relationship between copyright and registered design rights. The second ([42] and [43]) is that design and artistic work are different concepts. Apart from unregistered design right (introduced by Part III of the 1988 Act), design right statutes are concerned with features that have visual appeal. Copyright protection depends on a work falling within a particular category specified in the 1988 Act: It does not depend upon a further analysis or identification of its design features. The meaning of sculpture Both the judge and the Court of Appeal undertook a full review of English and Commonwealth authority as to the meaning of sculpture. They rightly concluded that some first instance decisions gave them no real assistance, and it is unnecessary to go into them again. The judgments that call for discussion are (in chronological order) those of the Court of Appeal of New Zealand in Wham O Manufacturing Co v Lincoln Industries Ltd [1985] RPC 127, [1984] 1 NZLR 641; of Falconer J in Breville Europe Plc v Thorn EMI Domestic Appliances Ltd [1995] FSR 77; of Laddie J in Metix (UK) Ltd v G H Maughan (Plastics) Ltd [1997] FSR 718; and of Angel J (sitting in the Supreme Court of the Northern Territory) in Wildash v Klein (2004) 61 IPR 324. Before discussing these four cases it is appropriate to make a further brief reference to the decision of the House of Lords in Hensher [1976] AC 64. Since Lucasfilm is no longer contending that the helmet is a work of artistic craftsmanship it is unnecessary to make much further reference to Hensher, which Mann J discussed at some length, drawing attention to the difficulty of identifying the true principle of the decision. The reason why that contention has been abandoned is stated (para 22(2) of the appellants printed case) to be that section 4(1)(c) of the 1988 Act is intended to comprise articles whose purpose is primarily functional, and which cannot therefore qualify as sculpture. The relative significance of the functional and the artistic is central to this appeal. The speeches in Hensher, difficult though they are, show a general inclination to start with the ordinary meaning of the words of the statute (see Lord Reid at p 78, Lord Morris at p 81, Viscount Dilhorne at pp 86 87, Lord Simon at p 91 and Lord Kilbrandon at p 97), however much they differed as to the application of that principle. The same approach is called for in relation to the meaning of sculpture. In Wham O the Court of Appeal of New Zealand was concerned with frisbees (light plastic discs used in outdoor games because of their aerodynamic qualities). Lincoln made and marketed in New Zealand frisbees which were alleged to infringe Wham Os copyright in design drawings, wooden models, moulds and the final plastic moulded products. The relevant parts of the Copyright Act 1962 of New Zealand were similar but not identical to those of the 1988 Act. At first instance Moller J held that the wooden models were copyright as sculptures and that the moulds and final products were engravings. The Court of Appeal upheld this result, while holding that the final products were not sculptures (a point left open by the judge). Much of the judgment is taken up with reasoning leading to the rather surprising conclusion that the moulds and final products were engravings. The finding that the wooden model of a frisbee and that alone was a sculpture seems to have been based mainly on the fact that only the model had been made by hand, and the moulds and final products had been made industrially. Davison CJ stated ([1985] RPC 127, 157): It seems to us inappropriate to regard utilitarian objects such as plastic flying discs, manufactured as toys, by an injection moulding process, as items of sculpture for the purposes of the Copyright Act. The Breville case was concerned with sandwich toasters. Copyright was claimed for plaster shapes made for the production of die cast moulds of the heating plates (which were required to have the same scalloped shape as was to be impressed on the toasted sandwiches). Falconer J held that there had been no infringement, but went on to express the view that the plaster shapes were protected by copyright. He stated (at p 94): I do not see why the word sculpture in section 3 of the Copyright Act 1956 should not receive its ordinary dictionary meaning except in so far as the scope of the word is extended by section 48(1) which provides that sculpture includes any cast or model made for purposes of sculpture. In reaching this conclusion he relied on the part of the Wham O decision which recognised copyright in the wooden model of a frisbee. He also relied on the Concise Oxford Dictionarys definition of sculpture: Art of forming representations of objects etc or abstract designs in the round or in relief by chiselling stone, carving wood, modelling clay, casting metal, or similar processes; a work of sculpture. Falconer J was a very experienced intellectual property judge but in Breville he seems to have overlooked the significance of the words for purposes of sculpture in the statute and the significance of the first word, Art, in the dictionary definition. That was the view of the Court of Appeal (para [66]): The same [far removed from the creation of expressive form] goes for the plastic shapes considered by Falconer J in the Breville case [1995] FSR 77. No ordinary citizen indeed no ordinary lawyer would regard a sandwich toaster or any part of it as a work of sculpture even if it did produce scalloped sandwiches. So why should a copyright lawyer take a different view? A total or almost total emphasis on the manner of creation, as in the Breville case and Wham O case [1985] RPC 127 produces a result which offends common sense and in our view is wrong. There must, as Mann J said, be some element of artistic expression however unsuccessful. The point about for purposes of sculpture is underlined by some observations earlier in the judgment of the Court of Appeal (paras [49] and [50], and again at para [70]) as to the word sculpture being applicable both to a process and to a product (terms familiar to intellectual property lawyers). Over the centuries statues and other works of art cast in metal have been produced by what is basically a three stage process: first by making a model in clay or some other malleable material; then by taking a mould from the model; and then by casting, that is, pouring molten metal into the mould to produce the work of art (followed no doubt by appropriate finishing). Copyright protection is therefore extended (currently by section 4(2) of the 1988 Act) to a cast or model made for purposes of sculpture. But not every product of industrial casting or moulding is sculpture. As the Court of Appeal observed (para [50]): Casting or moulding is an industrial process commonly used where the end product is made of plastic or metal of some kind. It is used in the production of millions of ordinary household objects, none of which would usually be described as sculptures. A motor car is but one obvious example. Some would have qualified for protection as registered designs so as to be excluded under section 22(1) of the 1911 Act. But would they have qualified as sculpture?. Metix can be taken more shortly. It was a case in which Laddie J rightly rejected a claim to artistic copyright in moulds used for making cartridges used in conjunction with flow mixers (the judge described them as looking like double barrelled hyperdermic syringes). Laddie J, another very experienced intellectual property judge made some general observations (at pp 721 722): The law has been bedevilled by attempts to widen out the field covered by the Copyright Acts. It is not possible to say with precision what is and what is not sculpture, but I think Mr Meade was close to the heart of the issue. He suggested that a sculpture is a three dimensional work made by an artists hand. It appears to me that there is no reason why the word sculpture in the 1988 Act, should be extended far beyond the meaning which that word has to ordinary members of the public. Mr Meades formulation as recorded by Laddie J seems to be the only suggested definition or near definition that has not attracted adverse comment from any quarter. Wildash v Klein (2004) 61 IPR 324, like Metix, is of interest not so much for what it decides as for its discussion of general issues (including the notion of copying of part, which is not an issue here). The case was an unfortunate dispute between two women, each of whom made craftwork depicting local wildlife for sale at markets. Initially they cooperated but later each accused the other of copyright infringement. The craftworks were made of wire but also (and here the summaries in the judgments below are rather sparse) glass rods, glass nuggets, copper foil and other materials. The judge held that they were sculptures or, alternatively, works of artistic craftsmanship. The judge cited the Court of Appeal of New Zealand in Wham O (sculpture should in some way express in three dimensional form an idea of the sculptor) and also Laddie J in Metix. In connection with copying the judge also cited Lord Hoffmanns cryptic observation about foxes and hedgehogs in Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416, 2423, describing it as an allusion to an essay written in 1953 by Sir Isaiah Berlin; in fact Sir Isaiah was alluding, as has Professor Ronald Dworkin in his latest book, Justice for Hedgehogs (2011), to a saying attributed to Archilochus in the 7th century BC , (the fox knows many things, but the hedgehog one big thing.) The judgments of Mann J and the Court of Appeal It was primarily from these authorities that Mann J derived what he called guidelines, not rigid requirements as to the meaning of sculpture in the 1988 Act. These are set out in nine numbered sub paragraphs in para 118 of his judgment. The Court of Appeal quoted this paragraph in full, [2010] Ch 503, para [54], and was generally in agreement with it. As the guidelines are readily accessible we will not quote them again. The first three note (as did the House of Lords in Henscher [1976] AC 64) that normal English usage is important, though not determinative. The fourth guideline (no judgment is to be made about artistic worth) is in the text of section 4(1)(a) of the 1988 Act, and is common ground. The Court is not to set itself up as an arbiter of artistic merit. But it is concerned with artistic purpose (the artists hand). The fifth guideline (not every three dimensional representation of a concept can be regarded as a sculpture) is also uncontroversial, at any rate if concept is understood as covering any idea, functional as well as artistic (Mr Bloch QC challenged it in the Court of Appeal, but it is consistent with the appellants printed case in this Court, especially paras 7 and 14). In the courts below as in the parties written and oral submissions in this Court, the argument has centred on the right approach to three dimensional objects that have both an artistic purpose (of some sort) and a utilitarian function (of some sort). These issues are addressed in the rest of the judges guidelines. The appellants printed case gives some world famous examples: the caryatids which form part of the Erectheion at Athens; the Medici tombs in the sacristy of San Lorenzo in Florence; the Trevi fountain in Rome. These seem to be rather special cases, not because of their outstanding merit but because they all have a strong architectural element, and the fact that a work of architecture is functional does not disqualify it from copyright protection. Other artefacts mentioned in the case, such as the Ribchester helmet in the British Museum or a decorated medieval suit of armour, would come more naturally under the head of works of artistic craftsmanship, together with fine furniture, musical instruments, silverware and ceramics. But the appellants have made clear that it is no longer part of their case that the Imperial Stormtrooper helmet was a work of artistic craftsmanship. Instead, the appellants contend that the helmet had no practical function at all. Their case is that it is sculpture because its purpose is wholly artistic. Para 7 of their printed case puts it in these terms: In the present case, the question of functionality does not arise, because the articles in question have no functional purpose whatever. The Stormtroopers helmets and armour did not exist in order to keep their wearers warm or decent or to protect them from injury in an inter planetary war. Their sole purpose was to make a visual impression on the filmgoer. They are therefore artistic works. Mann J saw it differently. He stated (para [121], and here we are picking up the quotation in the first paragraph in this judgment): It was a mixture of costume and prop. But its primary function is utilitarian. While it was intended to express something, that was for utilitarian purposes. While it has an interest as an object, and while it was intended to express an idea, it was not conceived, or created, with the intention that it should do so other than as part of character portrayal in the film. That, in my view, does not give it the necessary quality of artistic creation inherent in the test suggested by Laddie J. The Court of Appeal took the same view (paras [79] and [80]): Mr Bloch seeks to avoid our example of a real soldiers helmet being used as a prop in a film by stressing the fictional and imaginary nature of the stormtroopers and what they were . But that argument confuses the fictional nature of the stormtrooper with his physical depiction in the film. Although invented, the helmet and armour are still recognisable as such and have a function within the confines of the film as the equipment of the stormtrooper. Discussion In this Court the appellants have challenged the reasoning of the judge and the Court of Appeal. Mr Sumption QC said that it was eccentric of the judge to describe the helmets purpose as utilitarian, and that the Court of Appeal could find it to have a functional purpose only by treating it as having the same functional purpose as a real helmet within the confines of a film. This is quite a puzzling point. The Star Wars films are set in an imaginary, science fiction world of the future. War films set in the past (Paths of Glory, for instance, depicting the French army in the first world war, or Atonement depicting the British Expeditionary Force at Dunkirk) are at least based on historical realities. The actors and extras in the trenches or on the beaches may be wearing real steel helmets, or (because real steel helmets of the correct style are unobtainable in sufficient numbers) they may be wearing plastic helmets painted khaki. In either case the helmets are there as (in the judges words) a mixture of costume and prop in order to contribute to the artistic effect of the film as a film. They are part of a production process, as Laddie J said in Metix at p 721, citing Whitford J in Davis (J & S)(Holdings) Ltd v Wright Health Group Ltd [1988] RPC 403, 410 412. In this case the production process was the making of a full length feature film. It would not accord with the normal use of language to apply the term sculpture to a 20th century military helmet used in the making of a film, whether it was the real thing or a replica made in different material, however great its contribution to the artistic effect of the finished film. The argument for applying the term to an Imperial Stormtrooper helmet is stronger, because of the imagination that went into the concept of the sinister cloned soldiers dressed in uniform white armour. But it was the Star Wars film that was the work of art that Mr Lucas and his companies created. The helmet was utilitarian in the sense that it was an element in the process of production of the film. Those were the concurrent findings of both the judge and the Court of Appeal, in paras [121] and [80] of their respective judgments. The type of judgmental conclusion that often has to be reached in intellectual property cases on issues such as obviousness, inventiveness, and copying are matters on which appellate courts should be slow to interfere with the judgment of the trial judge. In Designers Guild [2000] 1 WLR 2416, 2423 2424, Lord Hoffmann observed that there were two reasons for this. The first is that the judge has, and the appellate court has not, seen and heard the witnesses. Lord Hoffmann continued, Secondly, because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, I think that this falls within the class of case in which an appellate court should not reverse a judges decision unless he has erred in principle: see Pro Sieben Media AG v Carlton UK Television Ltd [1991] 1 WLR 605, 612 613. I agree with Buxton LJ in Norowzian v Arks Ltd (No 2) [2000] FSR 363, 370 when he said: where it is not suggested that the judge has made any error of principle a party should not come to the Court of Appeal simply in the hope that the impression formed by the judges in this court, or at least two of them, will be different from that of the trial judge. That applies with extra force in the case of a second appeal. To the same effect are Lord Hoffmanns observations in Biogen Inc v Medeva plc [1997] RPC 1, 45, which are too well known to need repetition. The Court of Appeal (para [78]) relied on Lord Hoffmanns observations in Designers Guild, and in our view it was right to do so. During the 17 days of the trial Mann J heard evidence about the helmet and the other artefacts from numerous different witnesses. Long and thorough as his judgment is, he may not have recorded every nuance that contributed to his conclusion. He did not err in law or reach an obviously untenable conclusion, and the Court of Appeal was right to uphold his decision on this point. We would uphold the judgments below very largely for the reasons that they give. But (at the risk of appearing humourless) we are not enthusiastic about the elephant test in para [77] of the Court of Appeals judgment (knowing one when you see it). Any zoologist has no difficulty in recognising an elephant on sight, and most could no doubt also give a clear and accurate description of its essential identifying features. By contrast a judge, even one very experienced in intellectual property matters, does not have some special power of divination which leads instantly to an infallible conclusion, and no judge would claim to have such a power. The judge reads and hears the evidence (often including expert evidence), reads and listens to the advocates submissions, and takes what the Court of Appeal rightly called a multi factorial approach. Moreover the judge has to give reasons to explain his or her conclusions. There is one other matter to which the Court of Appeal attached no weight, but which seems to us to support the judges conclusion. It is a general point as to the policy considerations underlying Parliaments development of the law in order to protect the designers and makers of three dimensional artefacts from unfair competition. After reviewing the legislative history the Court of Appeal took the view (para [40]) that there was no assistance to be obtained from the relationship between copyright and registered design right. We respectfully disagree, especially if the relatively new unregistered design right is also taken into account. It is possible to recognise an emerging legislative purpose (though the process has been slow and laborious) of protecting three dimensional objects in a graduated way, quite unlike the protection afforded by the indiscriminate protection of literary copyright. Different periods of protection are accorded to different classes of work. Artistic works of art (sculpture and works of artistic craftsmanship) have the fullest protection; then come works with eye appeal (AMP Inc v Utilux Pty Ltd [1971] FSR 572); and under Part III of the 1988 Act a modest level of protection has been extended to purely functional objects (the exhaust system of a motor car being the familiar example). Although the periods of protection accorded to the less privileged types have been progressively extended, copyright protection has always been much more generous. There are good policy reasons for the differences in the periods of protection, and the Court should not, in our view, encourage the boundaries of full copyright protection to creep outwards. Sections 51 and 52 The appellants accept that if the helmet did not qualify as a sculpture within the meaning of the 1988 Act, then Mr Ainsworth had a defence under section 51 to any infringement claim based on Mr McQuarries graphics, and section 52 does not arise. The Court of Appeal dealt with these sections, for completeness, in paras 83 to 98 of its judgment. It is unnecessary to cover the same ground again. We would dismiss the appeal so far as it is based on the English law of copyright. Part II: Whether a claim against a defendant domiciled in England for infringement of a foreign copyright is justiciable The decision of the Court of Appeal and the issue on the appeal The issue on this aspect of the appeal is a narrow one, whether the English court may exercise jurisdiction in a claim against persons domiciled in England for infringement of copyright committed outside the European Union in breach of the copyright law of that country. That issue has raised two questions. The first question is whether a claim for infringement of a foreign copyright is non justiciable. The second question only arises if the answer to the first question is in the affirmative: the question would then arise whether the English court is in any event required to accept jurisdiction by virtue of Council Regulation (EC) No 44/2001 on jurisdiction and the enforcement of judgments in civil and commercial matters (the Brussels I Regulation), article 2, which provides that, subject to the terms of the Regulation, persons domiciled in a Member State shall be sued in the courts of that Member State. The Court of Appeal decided that the claim for breach of the United States copyright was non justiciable. It held that the rule in British South Africa Co v Companhia de Moambique [1893] AC 602 that the English court has no jurisdiction to entertain an action for the determination of the title to, or the right to possession of, foreign land, or the recovery of damages for trespass to such land, was an example of a general principle which applied not only to foreign land, but also to claims for infringement of foreign intellectual property rights, including copyright, irrespective of whether issues of title or validity were involved; and irrespective of whether the rights required registration (such as trade marks or registered designs) or not. It also held that article 2 of the Brussels I Regulation did not require the English court to exercise jurisdiction. The substantial question on this aspect of the appeal is whether, as Lucasfilm contends, the Court of Appeal was wrong, as a matter of law and policy, to extend to foreign copyrights the common law rule in the Moambique case that actions for damages for infringement or invasion of property rights in foreign land are not justiciable. The foreign land rule and its application to intellectual property: British South Africa Co v Companhia de Moambique and Potter v Broken Hill Pty Co Ltd Some legal archaeology is necessary for an understanding of how the law developed to the point where the English courts, at first instance and in the Court of Appeal, decided that claims for infringement of foreign copyright were not justiciable in England. British South Africa Co v Companhia de Moambique The decision in the Moambique case is the authoritative foundation for the rule that the English court has no jurisdiction to entertain an action for (1) the determination of the title to, or the right to the possession of, any immovable situate out of England or (2) the recovery of damages for trespass to such immovable (Dicey, Conflict of Laws, 1st ed (1896), pp 214 215, Rule 39). The rule has for long been subject to an exception where there is a contract, or an equity, between the parties, which the courts of equity will enforce: ibid, p 216; Penn v Lord Baltimore (1750) 1 Ves Sen 444. As the House of Lords noted, in the United States there is a similar local action rule (based on Livingston v Jefferson, 15 Fed Cas 660 (CCD Va, 1811), Marshall CJ on circuit) for actions to determine title: see Hay, Borchers & Symeonides, Conflict of Laws, 5th ed (2010), para 7.7. But the current prevailing view in the United States is that the local action rule does not apply to actions for trespass to foreign land: Restatement Second, Conflict of Laws, section 87 (1971). It seems also that that part of the rule which denies jurisdiction for trespass to foreign land had no counterpart outside common law countries (Rabel, Conflict of Laws: A Comparative Study, 2nd ed, (1960) vol 2, p 47; Wolff, Private International Law, 2nd ed (1950), p 92; and for the position in France see Audit, Droit International Priv, 6th ed (2010), para 346), and, as will be seen, although the House of Lords refused to reconsider the trespass rule, it no longer applies at least as regards land in other Member States of the European Union. The speeches of Lord Herschell LC and Lord Halsbury (and, in the Court of Appeal, of Lord Esher MR, whose dissenting judgment was upheld in the House of Lords) are substantially based on Storys Conflict of Laws. The essence of the decision is that jurisdiction in relation to land is local (that is, the claim has a necessary connection with a particular locality) as opposed to transitory (where such a connection is not necessary) and that it is contrary to international law, or comity, for one state to exercise jurisdiction in relation to land in another state. Lord Esher MR said ([1892] 2 QB 358, 398): an action quare clausum fregit cannot be entertained by an English Court in respect of an alleged wrongful entry on land situated abroad; and the ground of the inability is no consent of other nations by way of comity to the exercise of such jurisdiction can be inferred. Lord Herschell LC and Lord Halsbury relied in particular on Storys quotation (Story, Conflict of Laws, section 553, from the 1st edition in 1834 to the 8th edition in 1883) of a translation of a passage in Vattels Droit des Gens, which concluded that, in the case of an action relating to an estate in land, or to a right annexed to such an estate: [1893] AC at 622, 631: in such a case, inasmuch as property of the kind is to be held according to the laws of the country where it is situated, and as the right of granting it is vested in the ruler of the country, controversies relating to such property can only be decided in the state in which it depends. In Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508 Lord Wilberforce said (at p 537) that the foreign land rule involved possible conflict with foreign jurisdictions, and the possible entry into and involvement with political questions of some delicacy; and Viscount Dilhorne said (at p 541) that: Questions of comity of nations may well be involved. The leading cases all involved unusual factual situations in which the claim had major political ramifications, and in which, therefore, issues of international law and comity were engaged. The Moambique company was a Portuguese company (with substantial British ownership) effectively in control of Mozambique and Cecil Rhodes British South Africa Co was effectively in control of Southern Rhodesia. The Moambique case was a battle between them over mines in territories which were claimed by Portugal. In Hesperides Hotels the plaintiffs were Greek Cypriot hotel owners who were seeking to establish that their hotels in Northern Cyprus had been illegally requisitioned by the authorities of the unrecognised Turkish Federated State of North Cyprus. Similarly, in the leading case on the related, and more general, principle that the courts will not adjudicate upon the transactions of foreign sovereign states, Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, Occidental Petroleum was endeavouring to establish that Buttes and the Ruler of Sharjah had fraudulently deprived Occidental of the benefit of its oil concession in the neighbouring emirate of Umm al Qaywayn. Potter v Broken Hill Pty Co Ltd It is inevitable that any discussion of the justiciability of claims for infringement of foreign intellectual property rights must begin with the influential decision in Potter v Broken Hill Pty Co Ltd [1905] VLR 612, affd (1906) 3 CLR 479, which is generally (but not entirely accurately) regarded as based on an extension of the Moambique rule to actions for infringement of patents. At a time when patents were granted by the several States in Australia, Potter obtained a patent in Victoria for the separation of metals from sulphide ores and a patent for the same process in New South Wales. Potter claimed that (as well as a threatened infringement of the Victorian patent in Victoria) the defendant company (now BHP Billiton) had infringed the New South Wales patent at its mine in New South Wales. Broken Hill denied novelty and utility, but also said that an action for the infringement in New South Wales of a New South Wales patent was not justiciable in the Victorian courts. The question of justiciability was argued as a preliminary matter before the Full Court of the Supreme Court of Victoria, which decided by a majority that the claim was not justiciable, and an appeal to the High Court of Australia was dismissed. As already mentioned, the decision is generally regarded as based on the Moambique rule. Although the Moambique rule is one of the elements in the conclusion of the High Court, an examination of the way in which the case was argued, and of the reasoning of the High Court, shows that it is a decision extending the act of state doctrine to foreign patents. There are four strands to the conclusions reached by the Full Court and the High Court of Australia. The first strand is in the judgment of Hodges J (with whom Hood J concurred) in the Full Court. That strand is based on that aspect of the Moambique rule which turns on the distinction between local and transitory actions. He considered that the patent had a definite locality: Potter claimed in effect that in no building and on no land in New South Wales could the company use his invention. It was a claim made in respect of a defined area, the whole of which was outside the jurisdiction of the court in Victoria. The second strand is found only in the judgment of Hood J in the Full Court, but it finds an echo in later English decisions, and that is that the action was precluded by what became known as the first branch of the rule in Phillips v Eyre (1870) LR 6 QB 1, namely that an act done abroad was only actionable in England if it was actionable as a tort according to English law, that is, was an act, which if done in England, would be a tort. The rule as then understood showed what became the first limb of the rule as the second limb in these terms: An act done in a foreign country is a tort if it is both (1) wrongful according to the law of the country where it was done, and, (2) wrongful according to English law, ie, is an act which, if done in England, would be a tort (Dicey, Conflict of Laws, 1st ed (1896), Rule 175, p 659). Hood J considered that the rule was not satisfied because Potter could not show that, if the act had been committed in Victoria, it would have been actionable there, because infringement of a New South Wales patent in Victoria was not actionable in Victoria: the act of Broken Hill, using and working certain alleged inventions in New South Wales even though it be wrong by the law of that State, would not be actionable if committed here (at p 631). The third strand is found in the reliance on the Moambique case by the High Court of Australia. Both Griffiths CJ and Barton J said that the question did not depend on the distinction between local and transitory actions. They (and the third member of the court, OConnor J) took their inspiration from those parts of the speeches in the House of Lords, and of the dissenting judgment of Lord Esher MR in the Court of Appeal, which emphasised that rights in immovables were created by the exercise of the sovereign power of the State, and that controversies relating to such property could only be decided in that State. So also, they reasoned, the comity of nations required a similar rule for patents: especially (1906) 3 CLR 479, 495, 502. The appeal was first argued in November 1905, but the report shows (at p 486) that on 27 February 1906: The matter was, at the desire of the Court, further argued on the point whether the Courts of one State can enquire into the propriety or validity of an attempted exercise of the sovereign power of another State. As a result there is a fourth, and decisive, strand in the decision, namely the act of state doctrine. The classic statement of the act of state doctrine was enunciated by Fuller CJ in the United States Supreme Court in Underhill v Hernandez, 168 US 250, 252 (1897): Every sovereign State is bound to respect the independence of every other sovereign State, and the Courts of one country will not sit in judgment on the acts of the government of another done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves. This principle had its origin, as appears clearly from the decision of the lower court in that case, in the decision of the House of Lords in Duke of Brunswick v Duke of Hanover (1848) 2 HLC I, 17, in which it was said: the courts of this country cannot sit in judgment upon an act of a sovereign, effected by virtue of his sovereign authority abroad . : see Underhill v Hernandez, 65 F 577 (2d Cir 1895). As re stated by the United States Supreme Court, the act of state doctrine was re imported into English law in Luther v Sagor [1921] 3 KB 532 (CA). All three members of the High Court of Australia quoted and applied Underhill v Hernandez and it is the act of state doctrine, rather than the Moambique rule, which is the essential foundation of the judgments in the High Court. Thus Griffith CJ said that if a government had granted a monopoly in respect of an alleged invention which was not new, the government must have been misled: at pp 498 499. Barton J thought that the whole subject matter of the action was excluded from the cognizance or competence of Victoria, and its courts could not sit in judgment to determine whether such rights were validly granted: at p 503. O'Connor J said that a court could not enquire into the validity of a patent, any more than it could enquire into the validity of a concession granted by the Czar: at p 513. Consequently the effect of the decision in Potter v Broken Hill Pty Co Ltd was to apply the Moambique rule and, especially, the act of state doctrine to actions for patent infringement. It received no attention in the English case law until it was mentioned by Lord Wilberforce in Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508, 536 as authority for the proposition that the Moambique rule applied in Australia. It was only from the 1980s that it came to be regarded as a significant authority in the field of transnational intellectual property litigation: Def Lepp Music v Stuart Brown [1986] RPC 273; Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 (both copyright cases). Subsequent developments There have been major developments since the decisions in the Moambique case and Potter v Broken Hill Pty Co Ltd, which have to a significant extent undermined them, and to which it is now necessary to turn. The questions to which these developments are relevant are these: (1) whether there is a distinction between actions to determine title and/or validity and actions for infringement of rights; (2) whether there is a distinction between actions for infringement which raise issues of title and/or validity and actions for infringement which do not; (3) whether there is a distinction between intellectual property rights which require registration or prior examination and those which do not, and in particular whether there is a relevant distinction between copyright and other intellectual property rights, especially patents; (4) whether the conflict of laws rules relating to tortious conduct abroad have undermined the older decisions; and (5) whether the act of state doctrine has any relevance to actions for infringement of intellectual property rights. The Moambique rule To the extent that the principles in Potter v Broken Hill Pty Co Ltd were based on that part of the rule in the Moambique case which precluded actions for damages for infringement of property rights (in that case damages for trespass), they have been fatally undermined so far as English law is concerned. That part of the rule was confirmed by the House of Lords in Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508. The House of Lords not only refused an invitation to depart from that part of the rule, but also extended it by holding that it applied when no question of title was involved. Lord Wilberforce said (at p 541) that questions of comity might well be involved, and it had to be for Parliament to change the law. That invitation was taken up, and that part of the Moambique rule was abolished by section 30(1) of the Civil Jurisdiction and Judgments Act 1982, which came into force in 1982, and provides: The jurisdiction of any court in England . to entertain proceedings for trespass to, or any other tort affecting, immovable property shall extend to cases in which the property in question is situated outside that part of the United Kingdom unless the proceedings are principally concerned with a question of the title to, or the right to possession of, that property. There was a parallel development in European law which also confirms, broadly, that the foreign land principle in the European Union is concerned only with actions to establish title. That development began with the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, which was signed in 1968 and came into force for the six original EEC Member States in 1973. The Brussels Convention was enacted into United Kingdom law by the 1982 Act and the relevant provisions came into force in 1987, and are now contained in the Brussels I Regulation (Council Regulation (EC) No 44/2001). The effect is that the Moambique rule has been superseded, as regards land in other Member States, by what is now Article 22(1) of the Brussels I Regulation. Article 22(1) (formerly article 16(1)(a) of the Brussels Convention) provides that the courts of the Member State in which the property is situated have exclusive jurisdiction, regardless of domicile, in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property. The European Court has confirmed that what is now article 22(1) must not be given an interpretation broader than is required by its objective: and that actions for damages based on infringement of rights in rem or on damage to property in which rights in rem exist do not fall within its scope: Case C 343/04 Land Obersterreich v EZ as [2006] ECR I 4557, para [26] et seq. The consequence is that in the United Kingdom the trespass aspect of the Moambique rule has no application as regards land in other Member States, and (subject to the controversial question of the applicability of article 2) can only apply to land outside the Member States where a question of title is involved: see Dicey, Morris & Collins, Conflict of Laws, 14th ed (2006), vol 2 paras 23 02523 027. The rule in Phillips v Eyre As has been seen, in Potter v Broken Hill Pty Co Ltd, in the Full Court of the Supreme Court of Victoria, Hood J considered that the action was precluded by the first branch of the rule in Phillips v Eyre, ie that Potter could not show that, if the act had been committed in Victoria, it would have been actionable there, because infringement of a New South Wales patent in Victoria was not actionable in Victoria. The effect of the first limb of the rule in intellectual property cases was expressed in Dicey & Morris, Conflict of Laws, 12th ed (1993) (the last edition before the law was changed), vol 2, at p 1516: Nor can the holder of a French patent, trade mark or copyright sue in England for its infringement in France. Since the French patent, trade mark or copyright is territorial in its operation and the act complained of would not be a tort if committed in England, it cannot be brought within [the first limb of the rule in Phillips v Eyre]. In consequence it was held in Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 that it was not possible to bring an action in England for infringement (or, as in that case, an action for a declaration of non infringement) of United States copyright. The first limb of the rule in Phillips v Eyre was also employed by Sir Nicolas Browne Wilkinson V C in Def Lepp Music v Stuart Brown [1986] RPC 273 to deny a claim in England for breach of a United Kingdom copyright in the Netherlands, but a shorter answer to the claim would have been that United Kingdom copyrights are purely territorial and do not, by United Kingdom law, confer any rights abroad: see, eg Norbert Steinhardt & Son Ltd v Meth (1960) 105 CLR 440. But the rule in Phillips v Eyre was first eroded by case law and then abolished by statute. Following the lead of Lord Wilberforce and Lord Hodson in Boys v Chaplin [1971] AC 356, in Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190 the Privy Council decided that the first limb of the rule in Phillips v Eyre could be displaced so that an issue might be governed by the law of the country which with respect to that issue had the most significant relationship with the occurrence and with the parties. That exception was applied in Pearce v Ove Arup Partnership Ltd [2000] Ch 403, in which the Court of Appeal held that a claim in England for infringement of a Dutch copyright was not defeated by the first limb of the rule in Phillips v Eyre, because the issues had the most significant relationship with the Netherlands. Accordingly, the court held that Dutch law was the applicable law and not the combination of English law and Dutch law required by Phillips v Eyre. In KK Sony Computer Entertainment v Van Veen (2006) 71 IPR 179 (High Court of New Zealand), MacKenzie J held (in reasoning which is not entirely clear) that, in a claim for infringement of United Kingdom and Hong Kong copyrights, the first limb of the rule in Phillips v Eyre was satisfied. The rule in Phillips v Eyre was abolished by the Private International Law (Miscellaneous Provisions) Act 1995. In principle the law of the place of infringement applies: 1995 Act, section 11(1). Consequently, so far as English proceedings are concerned, that basis for the decisions in Potter v Broken Hill Pty Co Ltd and Tyburn Productions Ltd v Conan Doyle has disappeared, and the rule in Phillips v Eyre is no impediment to actions in England for infringement of foreign intellectual property rights. The act of state doctrine In the United States the act of state doctrine has been used as a basis for non justiciability of foreign trade mark and patent rights. The Court of Appeals for the Second Circuit held in Vanity Fair Mills Inc v T Eaton Co Ltd, 234 F 2d 633, 646 (2d Cir 1956), cert den, 352 US 871 (1956) that a United States federal court should not rule on the validity of a Canadian trade mark because (among other reasons) the act of state doctrine precluded determination of the acts of a foreign sovereign done within its own territory, and to rule on validity would create conflicts with Canadian administrative and judicial officers. The act of state doctrine was also invoked more recently in the United States as a ground for refusing to allow the addition of claims for infringement of parallel foreign patents to claims for infringement of United States patents, in litigation in which validity was in issue: Voda v Cordis Corp, 476 F 3d 887 (Fed Cir 2007). The majority of the court (Gajarsa CJ, Prost CJ concurring) said (at p 904): the act of state doctrine may make the exercise of supplemental jurisdiction over foreign patent infringement claims fundamentally unfair. As a principle of decision binding on federal and state courts alike, the act of state doctrine requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid. W S Kirkpatrick & Co, Inc v Envtl Tectonics Corp, Intl, 493 U.S. 400, 406, 409 (1990) In this case, none of the parties or amicus curiae have persuaded us that the grant of a patent by a sovereign is not an act of state. Therefore, assuming arguendo that the act of state doctrine applies, the doctrine would prevent our courts from inquiring into the validity of a foreign patent grant and require our courts to adjudicate patent claims regardless of validity or enforceability. The act of state doctrine was held not to apply where, in a dispute arising out of a patent licence, the issue was one of interpretation of the patent, and not of validity: Fairchild Semiconductor Corpn v Third Dimension (3D) Semiconductor Inc, 589 F Supp 2d 84, 98 (D Me 2008). So also, in the case of copyright infringement, it has been held that the act of state doctrine has no application because there is no need to pass on the validity of acts of foreign government officials. In London Film Productions, Ltd v Intercontinental Communications, Inc, 580 F Supp 47, 49 (SDNY 1984) the District Court held that the plaintiff could sue for infringement of its foreign copyright in films. The court accepted Professor Nimmers view that the act of state doctrine was not engaged: in adjudicating an infringement action under a foreign copyright law there was no need to pass upon the validity of acts of foreign governmental officials, since foreign copyright laws did not generally incorporate administrative formalities which had to be satisfied to create or perfect a copyright. In Frink America, Inc v Champion Road Machinery Ltd, 961 F Supp 398 (NDNY 1997) it was held that dismissal of a claim for infringement of Canadian copyright was not warranted because US and Canada were signatories to the Berne Convention, which bars administrative formalities, and therefore there was no question of passing on acts of foreign government. Contrast ITSI TV Productions, Inc v California Authority of Racing Fairs, Inc, 785 F Supp 854, 866 (ED Cal 1992). But in the Commonwealth Potter v Broken Hill Pty Co Ltd appears to stand alone in using the act of state doctrine as an impediment to actions for infringement of foreign intellectual property rights. In Voda v Cordis Corpn, above, Circuit Judge Newman, dissenting, rightly pointed out (at p 914) that not every governmental action and not every ministerial activity is an act of state. In Mannington Mills, Inc v Congoleum Corpn, 595 F 2d 1287, 129394 (3d Cir 1979) the Court of Appeals for the Third Circuit was unable to accept the proposition that the mere issuance of patents by a foreign power constitutes an act of state. It has been said that the grant of a national patent is an exercise of national sovereignty (Jenard Report on the Brussels Convention (OJ 1979 C59 pp 1, 36), and the European Court has emphasised that the issue of patents necessitates the involvement of the national administrative authorities (Case C 4/03 Gesellschaft fr Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I 6509, para [23]). But in England the foreign act of state doctrine has not been applied to any acts other than foreign legislation or governmental acts of officials such as requisition, and it should not today be regarded as an impediment to an action for infringement of foreign intellectual property rights, even if validity of a grant is in issue, simply because the action calls into question the decision of a foreign official. European law and intellectual property rights Two important developments in European law have undermined any argument that there is a substantial policy reason for the view that actions for infringement of intellectual property rights cannot be brought outside the State in which they are granted or subsist. First, article 22(4) of the Brussels I Regulation (formerly article 16(4) of the Brussels Convention) provides that, in proceedings concerned with the registration or validity of patents, trade marks, designs, or other similar rights required to be deposited or registered, the courts of the Member State in which the deposit or registration has been applied for, has taken place or is deemed to have taken place, have exclusive jurisdiction irrespective of the domicile of the defendant. This is an exception to the general domicile rule of jurisdiction, and has to be construed strictly. It applies only to intellectual property rights which are required to be deposited or registered, and does not apply to infringement actions in which there is no issue as to validity. The European Court has emphasised that article 22(4) is only concerned with cases in which a question of validity arises. It has made the following points: the basis for article 22(4) is that the courts of the Contracting State in which the deposit or registration has been applied for or made are best placed to adjudicate upon cases in which the dispute itself concerns the validity of the patent or the existence of the deposit or registration; but it does not apply in proceedings which do not concern the validity of the intellectual property right or the existence of the deposit or registration and these matters are not disputed by the parties, for example, a patent infringement action, in which the question of the validity of the patent allegedly infringed is not called into question; it would apply if the question of validity were raised by way of defence in infringement proceedings; the concern for the sound administration of justice is all the more important in the field of patents since, given the specialised nature of this area, a number of Contracting States have set up a system of specific judicial protection, to ensure that these types of cases are dealt with by specialised courts; the exclusive jurisdiction is also justified by the fact that the issue of patents necessitates the involvement of the national administrative authorities: Case C 4/03 Gesellschaft fr Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I 6509, para [16] et seq. Article 22(4) does not in terms apply to intellectual property rights outside the Member States. It is not necessary for present purposes to delve into the question whether it may be applied by analogy (or reflexively) to non Member States. What it shows is that there is a fundamental distinction between intellectual property claims which involve the registration or validity of intellectual property rights which are required to be deposited or registered, and those which are not. The second relevant piece of European legislation does not apply to the present proceedings because it came into force only on 11 January 2009, but it also shows clearly that there is no European public policy against the litigation of foreign intellectual property rights. Regulation (EC) No 864/2007 of the European Parliament and of the Council on the law applicable to non contractual obligations (Rome II) applies wherever in the world a tort was committed. It plainly envisages that actions may be brought in Member States for infringement of foreign intellectual property rights, including copyright. Recital (26) states: Regarding infringements of intellectual property rights, the universally acknowledged principle of the lex loci protectionis should be preserved. For the purposes of this Regulation, the term intellectual property rights should be interpreted as meaning, for instance, copyright, related rights, the sui generis right for the protection of databases and industrial property rights. As regards choice of law, article 8 provides: Infringement of intellectual property rights 1. The law applicable to a non contractual obligation arising from an infringement of an intellectual property right shall be the law of the country for which protection is claimed. 2. In the case of a non contractual obligation arising from an infringement of a unitary Community intellectual property right, the law applicable shall, for any question that is not governed by the relevant Community instrument, be the law of the country in which the act of infringement was committed. Other proposals These developments in European law are mirrored in proposals within the American Law Institute, which favour adjudication of foreign intellectual property rights, at least where issues of validity are not in issue. The American Law Institutes Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes (2008) apply to transnational civil disputes which involve (inter alia) copyrights, patents, trademarks, and other intellectual property rights (section 102) and note the controversy over the question of the justiciability of intellectual property rights (Reporters Notes 4 and 5). Section 211 provides that the court must have subject matter and personal jurisdiction. Comment b states: There is substantial sentiment that issues regarding the validity of a registered right, particularly a patent right, should be adjudicated in the courts of the State in which the right is registered. Only this State is competent to cancel the registration. Nonetheless, the Principles do not include a blanket prohibition on the adjudication of matters involving a foreign States registered rights, because separating adjudication of validity from infringement can have substantive ramifications. Separate resolutions can prevent a court from hearing all of the evidence relevant to the action and from using its understanding of how a technology is utilized to inform its decision on the scope of the right. Bifurcating validity and infringement can also increase the parties costs. The draft Principles for Conflict of Laws in Intellectual Property, 2011, prepared by the European Union Max Planck Group on Conflict of Laws in Intellectual Property contain no specific provision for actions for infringement of foreign rights abroad, but it is implicit in the Principles that they envisage such actions: (a) the primary rule of jurisdiction in the Principles is habitual residence (Part 2, section 1), and (b) the primary law applicable to infringement is the law of the State for which protection is sought (Part 3, section 6). The English and foreign authorities on justiciability of intellectual property claims A number of distinguished judges have expressed the view that the English court cannot, or should not, exercise jurisdiction in claims for infringement of foreign intellectual property rights, such as patents (Mlnlycke AB v Procter & Gamble Ltd [1992] 1 WLR 1112, 1118, per Dillon LJ; Plastus Kreativ AB v Minnesota Mining and Manufacturing Co [1995] RPC 438, 447, per Aldous J) or trade marks (LA Gear Inc Ltd v Gerald Whelan & Sons Ltd [1991] FSR 670, 674, per Mummery J). But prior to the decision of the Court of Appeal in the present proceedings the only directly relevant decisions were the decisions of Vinelott J in Tyburn Productions Ltd v Conan Doyle [1991] Ch 75, of Laddie J in Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33, and of the Court of Appeal in Pearce v Ove Arup Partnership Ltd [2000] Ch 403. In Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 Vinelott J applied the Moambique rule in the light of Potter v Broken Hill Pty Co Ltd to what was in effect a prospective negative declaration relating to potential copyright infringement in the United States. The action was by a television company for a declaration that the daughter of Sir Arthur Conan Doyle had no rights under the copyright, unfair competition, or trademark laws of the United States to prevent the company from distributing a Sherlock Holmes television film. It was conceded on behalf of the television company that no distinction could be drawn for the purpose of the case law between patents and other intellectual property rights including copyright. Vinelott J also supported his conclusion by reliance on the first limb of the rule in Philips v Eyre: infringement of an American copyright was not a tort in English law and the first limb could not be satisfied. In R Griggs Group Ltd v Evans [2004] EWHC 1088 (Ch), [2005] Ch 153, Vinelott Js decision was criticised by Mr Peter Prescott QC, sitting as a Deputy High Court judge, who distinguished it by applying the exception to the Moambique rule whereby jurisdiction could be exercised if there were a contract or an equity between the parties: the judge allowed an amendment to a pleading on the basis that the court in the exercise of its equitable in personam jurisdiction could order a person who had acquired property situate abroad with sufficient notice of an earlier obligation to transfer the property to another to assign that property to its equitable owner, and that it would not be a breach of comity to adjudicate in personam on rights to foreign intellectual property (copyright) arising out of a contract. Patents were the subject of the decision of Laddie J in Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33, in which he held that the court had no jurisdiction to try claims for infringement of German and Spanish patents for two reasons: the first was that the claims were not justiciable under the Moambique/Potter v Broken Hill Pty Co Ltd principles. The second was that the claims were concerned with validity and within what is now article 22(4) of the Brussels I Regulation. In Pearce v Ove Arup Partnership Ltd [2000] Ch 403 Mr Pearce claimed that the defendants had infringed his English and Dutch copyrights in his drawings and plans for a town hall by copying them in designing the Kunsthal in Rotterdam. There was no issue about existence or validity of the copyrights. The sole factual question was whether his drawings and plans had been copied. On the question of the justiciability of the claim for infringement of the Dutch copyright, the court had personal jurisdiction over the defendants by virtue of their domicile in England (because they were additional parties for the purposes of what is now article 6(1) of the Brussels I Regulation). It was not suggested that what is now article 22(4) applied, since the proceedings were for infringement of copyright and no question of deposit or registration arose. The effect of what is now article 22(1)) was that the Moambique rule no longer applied within the Member States, and that where proceedings in relation to intellectual property fell outside what is now article 22(1), the general rules of jurisdiction applied, and there was no room for an objection of non justiciability. The common law rule of choice of law applied because the relevant events occurred before section 11 of the Private International law (Miscellaneous Provisions) Act 1995 came into force in 1996, but (as mentioned above) the court disapplied the first limb of the rule in Phillips v Eyre in favour of the law of the country which with respect to that issue had the most significant relationship with the occurrence and with the parties, which was Dutch law. Foreign authorities In the United States the local action rule has been used as a ground for refusal to add claims for infringement of foreign patents to a United States patent infringement action: Voda v Cordis Corp, 476 F 3d 887 (Fed Cir 2007), discussed above in connection with the act of state doctrine. The majority said (at pp 901 902): the local action doctrine informs us that exercising supplemental jurisdiction in this case appears to violate our own norms of what sovereigns ordinarily expect. Courts derived the local action doctrine from the distinction between local and transitory actions beginning with Livingston v Jefferson, written by Justice John Marshall riding Circuit. 15 F. Cas. 660 (C.C.D.Va. 1811). [T]he local action doctrine served to prevent courts from adjudicating claims for trespass or title to real property. The territorial limits of the rights granted by patents are similar to those conferred by land grants. A patent right is limited by the metes and bounds of the jurisdictional territory that granted the right to exclude. Therefore, a patent right to exclude only arises from the legal right granted and recognized by the sovereign within whose territory the right is located. It would be incongruent to allow the sovereign power of one to be infringed or limited by another sovereign's extension of its jurisdiction. Claims for infringement of foreign copyright have been held in New Zealand and South Africa to be non justiciable. In Atkinson Footwear Ltd v Hodgskin International Services Ltd, (1994) 31 IPR 186 (High Court of New Zealand) Tipping J followed the Tyburn Productions Ltd decision and in Gallo Africa Ltd v Sting Music (Pty) Ltd [2010] ZASCA 96, 2010 (6) SA 329 the Supreme Court of Appeal of South Africa applied the decision of the Court of Appeal in the present case. But in KK Sony Computer Entertainment v Van Veen (2006) 71 IPR 179 MacKenzie J in the High Court of New Zealand declined to follow Atkinson Footwear and held that a claim for infringement of foreign intellectual property rights (in that case breach of United Kingdom and Hong Kong copyright in PlayStation 2) was justiciable if no question of the existence or validity of those rights was in issue. Conclusions on the justiciability question The issue on this appeal is a very narrow one because the appellants do not take issue with the application of the Moambique rule to intellectual property so far as it is limited to patents and other intellectual property rights dependent on the grant or authority of a foreign State, and to cases where what is in issue is the validity of the patent, as opposed to its infringement. As recorded by Mann J, the trial judge ([2008] EWHC 1878 (Ch), [2009] FSR 103, at [272]), the dispute relating to the United States copyright was as follows. The subsistence of copyright and ownership of all drawings was accepted by Mr Ainsworth, although the existence of some drawings was disputed. Infringement was denied so far as some drawings are concerned, on the footing that they were not copied, or not copied closely enough. Because three dimensional items were produced, it was argued that under United States law there was no infringement because copyright in the drawings would not be infringed by the production of a utilitarian or functional device. Lucasfilm claimed copyright in physical helmets and armour, which was disputed by Mr Ainsworth because they were said to be functional or utilitarian. According to the judge, at one stage it had also been suggested that if there was copyright it was vested in Mr Ainsworth and not in Lucasfilm, but this point was not ultimately persisted in. Although at trial the infringement arguments sometimes merged into a subsistence argument, the substantial dispute has always been about the ownership of the relevant copyrights and their infringement rather than about their subsistence. Were these claims justiciable? Mr Ainsworth argued that the principle behind the Moambique rule (as extended in Hesperides to include actions in which no issue of title arises) still subsists and applies to claims for infringement of all foreign intellectual property rights, including copyright, because such claims are essentially local and must be brought in the place where the rights have been created, irrespective as to whether there is any claim to title. But to describe the claims as local is simply to beg the question whether as a matter of law they must be brought in the place where the rights originate and are effective. We have come to the firm conclusion that, in the case of a claim for infringement of copyright of the present kind, the claim is one over which the English court has jurisdiction, provided that there is a basis for in personam jurisdiction over the defendant, or, to put it differently, the claim is justiciable. It is clear that much of the underpinning of the Moambique rule and the decision in Potter v Broken Hill Pty Co Ltd has been eroded. All that is left of the Moambique rule (except to the extent that it is modified by the Brussels I Regulation) is that there is no jurisdiction in proceedings for infringement of rights in foreign land where the proceedings are principally concerned with a question of the title, or the right to possession, of that property. So also article 22(1) of the Brussels I Regulation does not apply to actions for damages for infringement of rights in land. The basis for what remains of the rule was said by the House of Lords in the Moambique case to be that controversies should be decided in the country of the situs of the property because the right of granting it was vested in the ruler of the country and in the Hesperides case to be the maintenance of comity and the avoidance of conflict with foreign jurisdictions. It is possible to see how the rationale of the Moambique rule can be applied to patents, at any rate where questions of validity are involved. For example the claims might touch on the validity of patents in sensitive areas, such as armaments, and that no doubt is part of the rationale for article 22(4) of the Brussels I Regulation. But it is very difficult to see how it could apply to copyright. It is true that copyright can involve delicate political issues. Thus in a very different context Brightman J had to deal with the international consequences for copyright protection of the samizdat circulation in the Soviet Union of Solzhenitsyns August 1914 without having been passed by the Soviet censor: Bodley Head Ltd v Flegon [1972] 1 WLR 680. But such cases can be dealt with by an application of the principles of public policy in appropriate cases. Nor do the additional matters relied on in Potter v Broken Hill Pty Co Ltd lead to any different conclusion. The rule in Phillips v Eyre has gone. There is no room for the application of the act of state doctrine in relation to copyright in this case, even if (contrary to the view expressed above) actions of officials involved with registration and grant of intellectual property rights were acts of state. The requirement to apply for copyright registration in the United States is limited to the copyright in any United States work which in practice means that published works first published outside the United States are exempted from compliance with US registration provisions. In the present case the copyrights were treated as United States works and were registered. Registration is a pre requisite to proceedings in the United States: United States Copyright Act, section 411. But the unchallenged evidence before the judge in this case was that registration was not a prerequisite to subsistence but only to suit, and it was possible to register at the time of suit. Consequently the provision is purely procedural. That has been confirmed recently by the United States Supreme Court, which has held that federal courts have subject matter jurisdiction to approve a class action settlement where some of the authors are not registered, because section 411 is not a jurisdictional rule: Reed Elsevier Inc v Muchnick, 130 S Ct 1237 (2010). There is no doubt that the modern trend is in favour of the enforcement of foreign intellectual property rights. First, article 22(4) of the Brussels I Regulation only assigns exclusive jurisdiction to the country where the right originates in cases which are concerned with registration or validity of rights which are required to be deposited or registered and does not apply to infringement actions in which there is no issue as to validity. This can rarely, if ever, apply to copyright. Second, the Rome II Regulation also plainly envisages the litigation of foreign intellectual property rights and, third, the professional and academic bodies which have considered the issue, the American Law Institute and the Max Planck Institute, clearly favour them, at any rate where issues of validity are not engaged. There are no issues of policy which militate against the enforcement of foreign copyright. States have an interest in the international recognition and enforcement of their copyrights, as the Berne Convention on the International Union for the Protection of Literary and Artistic Works shows. Many of the points relied on by the Court of Appeal to justify the application of the Moambique rule in this case as a matter of policy would apply to many international cases over which the English court would have jurisdiction and would in principle exercise it, especially the suggestion that questions of foreign law would have to be decided. It was also said by the Court of Appeal that enforcement of foreign intellectual property law might involve a clash of policies such that a defendant may be restrained by injunction from doing acts in this country which are lawful in this country. But such an injunction will be granted only if the acts are anticipated to achieve fruition in another country, and there is no objection in principle to such an injunction. Nor is there any objection in principle, as the Court of Appeal thought, to a restraint on acts in another country. Extra territorial injunctions are commonly granted here against defendants subject to the in personam jurisdiction. The Court of Appeal also thought that it was relevant that there was no international regime for the mutual recognition of copyright jurisdiction and of copyright judgments, but this is no reason for the English court refusing to take jurisdiction over an English defendant in a claim for breach of foreign copyright. It follows that Tyburn Productions Ltd v Conan Doyle was wrongly decided and that on this aspect the decision of the Court of Appeal in these proceedings cannot stand. The Owusu v Jackson point If the Court of Appeal was right to hold that the claim was in principle non justiciable, a further question would arise whether nevertheless, in the light of the decision of the European Court in Case C 281/02 Owusu v Jackson [2005] ECR I 1383, the English court must grant a remedy against Mr Ainsworth, who is domiciled in England for the purposes of what is now Article 2 of the Brussels I Regulation. In Owusu v Jackson the European Court decided that an action in England arising out of events in Jamaica could not be stayed as against an English defendant in favour the Jamaican courts on the ground of forum non conveniens. That was because the English defendant was domiciled in a Member State for the purposes of article 2, and the assignment of jurisdiction to that State applied also as between Contracting and non Contracting States (now Member and non Member States). In this case the Court of Appeal distinguished Owusu v Jackson on the basis that it did not apply to cases where the English court held that it had no subject matter jurisdiction. Lucasfilm argues that it would be inconsistent with the Owusu principle for the English court to decline to decide a particular issue on the ground that it is not justiciable under English law, because (in particular) the Brussels I Regulation is concerned with subject matter jurisdiction as well as personal jurisdiction; it is concerned with achieving the uniform application of common principles regarding jurisdiction across the European Community, and it would not be consistent with that object if national courts were able to decline jurisdiction on principles of non justiciability. Although in argument it was stressed that the argument was one of lack of jurisdiction rather than non justiciability, in substance the real point of the argument is that if Lucasfilm were right, then the Brussels I Regulation would require the English court to adjudicate on other matters which have hitherto been regarded as non justiciable, such as the transactions of foreign sovereign states which were held to be non justiciable in Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, 931; and that to require the English court to so adjudicate would be contrary to international law (or, perhaps more accurately, put the United Kingdom in breach of international law). In view of the conclusion on the main point, this issue (on which a reference to the European Court might be required) does not arise and there is no need to express a view on it. We would therefore allow the appeal on the justiciability issue. LORD MANCE For the reasons given by Lord Walker and Lord Collins in their combined judgment, I agree that the appeal fails on the first issue (sculpture) and succeeds on the second (justiciability of a claim for infringement of a foreign copyright). I express no view about the application or scope of the doctrine of act of state in relation to issues of validity of foreign intellectual property rights which (unlike copyright) may be said to depend upon state grant. |
This appeal is concerned with the extent and consequences of duties of equal treatment or fairness, said to have been owed by the Office of Fair Trading (OFT) to those subject to investigation under the Competition Act 1998 (the Act). Since the events in question the OFT has been replaced by the Competition and Markets Authority (CMA), but it will be convenient in this judgment to refer throughout to the OFT. The facts The investigation In March 2003 the OFT began an investigation into alleged price-fixing arrangements in the tobacco market, contrary to section 2(1) of the Act. On 24 April 2008, it issued a Statement of Objections (SO) under section 31 of the Act, addressed to 13 parties, including two manufacturers and 11 retailers. The first respondents (Gallaher) were involved as manufacturers; the second respondents (Somerfield) as retailers. On 15 April 2010 the OFT issued its decision (the Tobacco decision) upholding the finding of infringement against both respondents, and all but one of the other parties. Six of those affected appealed to the Competition Appeal Tribunal. The respondents did not appeal, having each reached settlements with the OFT under the so-called Early resolution process (or ER process). The ER process The letters accompanying the SOs sent to the parties in April 2008 had offered the possibility of obtaining a reduction in the financial penalty through co- operation with the OFTs investigation. The parties were invited to indicate by 9 May 2008 whether they wished to enter into without prejudice discussion with the OFT for this purpose. Both the respondents responded positively within the time- limit. Following negotiations they, along with four other parties, entered into Early Resolution Agreements (ERAs). The ERAs required the signatories admission of involvement in the infringements, set out a series of terms for further co-operation, and indicated the penalties to be imposed subject to a possible reduction of up to 20% for procedural co-operation. Entry into an ERA did not prevent a party from terminating that agreement at any time up to publication of the OFTs final decision. If a party did terminate an ERA, it would forgo any discounted penalty negotiated as part of the ERA. In that event, the OFT would continue with its case against that party in accordance with the usual administrative procedure. A party to an ERA could also, upon receiving the final decision, decide to appeal against it if it wished to do so, notwithstanding the admissions in the ERA. In that event, the OFT reserved the right to make an application to the Tribunal to increase the penalty and to require the party to the ERA to pay the OFTs full costs of the appeal regardless of the outcome. The ER process was not subject to any statutory rules, nor at the material time described in any published document. The clearest contemporary description of the ER process (though not by that name) came in an internal document of the OFT dated 28 January 2008, and entitled A principled approach to Settlements in Competition Act cases. This paper was designed to draw out a number of principles from the OFTs experience to date, and emerging thinking, on settlements in Competition Act 1998 cases, and to provide a policy framework for teams who may be considering the possibility of settlement. Ten principles were identified and discussed. Particular attention in the present case has been directed to Principle Three: Fairness, transparency and consistency are integral to an effective settlements process. This was explained as follows: 16. The overriding principles of fairness, transparency and consistency must always be taken into account. When engaged in settlement discussions, for example, it is important to ensure that the process is consensual and as transparent as possible throughout, in order to avoid any subsequent allegations of undue pressure having been applied to force parties to sign up to settlement. 17. Consistency is a particularly key consideration, given parties sensitivity to equality of treatment issues. Whether or not the details of an individual case have been made public, particular approaches in one case will inevitably leak out during the settlement process (and be set out in the infringement decision) and inform parties strategies in others. Consistency of approach (or, alternatively, the formulation of strong arguments to justify taking a different approach in similar circumstances) is therefore vital. Although this is useful as indicating the adopted policy approach of the OFT itself, it is not suggested that the contents were known to or in terms relied on by the respondents when entering into their agreements. However, the OFT had a separate speaking note for use in discussions with parties. This summarised the main features of the ER process, and ended with the following commitment to equal treatment: Once first party signed up, the OFT will inform other parties of the terms agreed in terms of the Step 1 to 5 penalty calculation - these terms will be the benchmark for dealing with other parties (as the OFT will observe equal treatment principles). Both the respondents concluded ERAs with the OFT in early July 2008, involving substantial reductions in the anticipated penalties. In due course, when the OFT decision was issued in April 2010 the respondents did not appeal, but instead elected to pay the penalties imposed in the ERAs, taking the benefit of the reductions. TMR Martin McColl Retail Group Ltd and TM Retail Group Ltd (together, TMR) was another party subject to the investigation, which also entered into an ERA. In the course of the negotiations for the ERA, at a meeting on 8 July 2008, TMRs representatives asked about the OFTs likely attitude to those who entered ERAs in the event of a successful appeal by one of the other parties to the investigation. The effect of the exchange was recorded in an email from TMR to OFT after the meeting in the following terms (which were not contradicted): Should another manufacturer or retailer appeal any OFT decision against that manufacturer or retailer to the CAT (or subsequently appeal to a higher court) and overturn, on appeal, part or all of the OFTs decision against that manufacturer or retailer in relation to either liability or fines, then, to the extent the principles determined in the appeal decision are contrary to or otherwise undermine the OFT's decision against [TMR], the OFT will apply the same principles to [TMR] (and therefore presumably withdraw or vary its decision against [TMR] as required). (Emphasis added) In the course of 2009 and 2010, and before the expiry of the time for appealing the OFT decision, two other parties (Party A and Asda) made similar inquiries about the effect of a successful appeal by other parties, but received non-committal answers. The Tribunals decision and its aftermath On 12 December 2011 the Tribunal gave judgment allowing all six appeals: [2011] CAT 41. Following the Tribunals judgment, TMR wrote to the OFT inviting it to withdraw the OFTs decision as against it, and threatening legal action if it failed to do so. In the course of further discussions TMR relied on the OFTs earlier assurances about its position in the event of a successful appeal by another party, stating that this had been a key factor in its own decision-making. As to what followed I take the following from the agreed statement of facts (para 50): The OFT considered that the statements which it had made to TMR in 2008 might have given rise to an understanding on the part of TMR that the OFT would withdraw or vary its decision against TMR in the event of a successful third party appeal. In light of this, the OFT considered that there was a real risk that TMR would, as a result of this reliance on those statements, be permitted to appeal out of time to the Tribunal and would succeed in that appeal. The OFT reached a settlement agreement with TMR, by which the OFT agreed to pay to TMR an amount equal to the penalty TMR had paid together with a contribution to interest and legal costs. The Tobacco Decision was not withdrawn against TMR. The agreed terms were set out in a settlement agreement dated 9 August 2012. The OFT then published a statement about the TMR settlement on its website, in which it said that in the light of the particular assurances provided to TM Retail it had agreed to pay the amount of its penalty (2,668,991) and a contribution to costs. In the meantime, following the Tribunals decision, in February 2012 each of the respondents had written to the OFT calling upon it to withdraw the decision as against them, and to refund the penalties. This was refused. In August 2012, after the publication of the information about the settlement between the OFT and TMR, they sent the OFT letters before claim, arguing that they also should be given the benefit of the assurances made to TMR. In October 2012 they issued the present claims for judicial review. The out-of-time appeals The claims were initially stayed by consent to allow the respondents to pursue applications, made in July 2012, for permission to appeal the Tobacco Decision out of time. By rule 8(2) of the Competition Appeal Tribunal Rules 2003 (SI 1372/2003), the Tribunal may not extend the time limit for appeal unless satisfied that the circumstances are exceptional. The applications succeeded before the Tribunal, but its decision was reversed by the Court of Appeal on 7 April 2014: Office of Fair Trading v Somerfield Stores Ltd [2014] EWCA Civ 400. The court held that there were no exceptional circumstances. In the leading judgment Vos LJ referred (paras 35-36) to the principle of finality, exemplified by the CJEUs decision in Commission of the European Communities v AssiDoman Kraft Products AB (Case C-310/97P) [1999] All ER (EC) 737 (the Wood Pulp II case). That principle was said to be based on the consideration that the purpose of such time-limits is to ensure legal certainty by preventing Community measures which produce legal effects from being called in question indefinitely. Although the Wood Pulp II decision was no more than analogous, it pointed the way to the need for finality in competition cases. In the present case, in Vos LJs view, the respondents had entered the ERAs with their eyes open and made a deliberate decision not to appeal. He added: It is true that the OFT has the role of a prosecutor and has wide powers to impose penalties, and that those powers must be exercised on a proper basis, but that does not stop commercial parties from taking a commercial view as to whether or not to sign up to an ERA after a long investigatory process and the publication of a lengthy Statement of Objections. The addressee knows precisely the terms that are being offered. It knows what it has done in relation to the alleged infringements, and what it is being asked to admit, and the terms requiring its co-operation and the fetters on its rights of defence to which it is being asked to agree. It can take it or leave it (para 45) The courts below In a judgment dated 26 January 2015, Collins J rejected the claims: [2015] EWHC 84 (Admin). He started from the proposition that the OFTs powers in relation to infringement of the 1998 Act were subject to public law requirements of fairness and equal treatment, so that it was essential that in negotiations in relation to ERAs one party is not given an advantage denied to another (para 38). However, the assurance given to TMR had been given in error, without regard to the finality principle. Citing Customs and Excise Comrs v National Westminster Bank plc [2003] STC 1072 para 66, he agreed with Jacob J that as a general rule a mistake should not be replicated where public funds are concerned. That consideration provided an objective justification for the refusal by the OFT to make payment to the claimants (para 50). The Court of Appeal took a different view [2016] EWCA Civ 719; [2016] Bus LR 1200. In the leading judgment, Lord Dyson MR (para 34) noted it as common ground that (in the words of Cranston J, Crest Nicholson plc v Office of Fair Trading [2009] EWHC 1875 (Admin)) the OFT must comply with the principle of equal treatment in all steps leading up to the imposition of a penalty. He agreed that the assurance given to TMR was a mistake: a decision which no- one who had the finality and legal certainty principles in mind could reasonably have taken (para 58). The failure to offer a similar assurance to the claimants or others in the same position, or even to inform them, involved unequal treatment which was stark and manifest (para 59). Under the heading Objective justification (paras 53-54), he agreed with counsel for the OFT that a mistake was not a trump card which will always carry the day The question as he saw it was - whether there has been unfairness on the part of the authority having regard to all the circumstances. The fact that there has been a mistake may be an important circumstance. It may be decisive. It all depends. He found assistance in the law relating to legitimate expectation, citing R v Secretary of State for Education and Employment, Ex p Begbie [2000] 1 WLR 1115, 1127B-D, per Peter Gibson LJ, to the effect that whether an authority should be permitted to resile from a mistaken statement depends on whether that would give rise to unfairness amounting to an abuse of power. In the same way, as he saw it, the question in the present case was whether the OFT should be permitted to resile from a mistake where to do so results in unfair and unequal treatment of the claimants. He concluded that it should not. It is necessary to quote the concluding paragraph in full, to indicate the sequence of events and combination of circumstances, which appear to have led Lord Dyson MR ultimately to the view that the OFTs action was unlawful: 60. But the real focus must be on the question whether the 2012 Decision was objectively justified. That is when the OFT decided that it would act on the 2008 decision in relation to TMR and honour the assurances that it had mistakenly given at that time, and to treat the claimants differently. The result was that it agreed with TMR to repay the whole of its penalty plus a contribution of 250,000 in relation to costs and interest. But it refused to pay anything to the claimants. The only difference between the positions of TMR on the one hand and that of the claimants on the other hand was that the OFT had given the assurances to TMR in 2008, but not to the claimants. The effect of that manifestly unfair and unequal treatment in 2008 could have been reversed after the issue had been raised by Asda and party A and the OFTs eyes had been opened to the significance of its earlier mistake in giving the assurances to TMR. That would have put all the companies which had been the subject of the Tobacco Decision and to which the [Statement of Objections] has been addressed on an equal footing. The OFT could have withdrawn the assurances. It would not have been too late for TMR to appeal at that time. Even if TMR had been out of time, it would have had a very powerful case for arguing that the withdrawal of the assurances was an exceptional circumstance which justified an extension of time for appealing. Instead, the OFT acted on the assurances it had given to TMR, made the 2012 decision and repaid the penalty previously levied and made further payments too. In all the circumstances, this was a plain breach of the principle of equal treatment and unfair. The Court of Appeals order declared that the OFT had acted unlawfully by - (a) not offering the appellants in 2008 the assurance given to [TMR] that in the event of a successful appeal by other parties, it would benefit from that appeal decision even if it did not appeal; and (b) refusing in 2012 to make payment to the appellants of the amount of the penalty imposed on them even though it had made such a payment to TMR. It ordered that the respondents should each be entitled to payment of a sum equal to the penalties they had paid to the OFT, together with an amount in interest and costs. Equal treatment and fairness The submissions It was central to the reasoning of both courts below that the OFT was subject (as Collins J put it) to public law requirements of fairness and equal treatment. That analysis was not seriously challenged by counsel for the appellant in this court. They accepted that the principle of equal treatment applied to the OFT, but submitted that it did not require it to replicate a mistake, at least in the absence of conspicuous unfairness. They rely on the approach of Lord Bingham in R (OBrien) v Independent Assessor [2007] 2 AC 312, para 30: It is generally desirable that decision-makers, whether administrative or judicial, should act in a broadly consistent manner. If they do, reasonable hopes will not be disappointed. But the assessors task in this case was to assess fair compensation for each of the appellants. He was not entitled to award more or less than, in his considered judgment, they deserved. He was not bound, and in my opinion was not entitled, to follow a previous decision which he considered erroneous and which would yield what he judged to be an excessive award. The respondents similarly adopt the language of equal treatment and fairness. Thus Miss Jessica Boyd, counsel for the second respondent, formulated the issue in these terms: The issue before the Court is whether it was conspicuously unfair and/or a breach of the principle of equal treatment, amounting to a breach of public law, for the OFT, on the successful appeal of its decision in the Tobacco Decision, to repay one non-appellant addressee of that decision (namely, TM Retail) the penalty it had paid pursuant to that decision, while refusing to do the same for the respondents. The equal treatment principle was said to be well-established in domestic law, by reference for example to R (Middlebrook Mushrooms Ltd) v Agricultural Wages Board of England and Wales [2004] EWHC 1447 (Admin) at para 74. The expression conspicuous unfairness was derived from the judgment of Simon Brown LJ in R v Inland Revenue Comrs, Ex p Unilever plc [1996] STC 681, as applied by Richards J in R v National Lottery Commission, Ex p Camelot Group plc [2001] EMLR 3, para 72. To those authorities Lord Pannick QC for the first respondent added Bank Mellat v HM Treasury (No 2) [2014] AC 700, 773 para 25 per Lord Sumption; and Paponette v Attorney General of Trinidad and Tobago [2012] 1 AC 1, 12 paras 28 and 30 per Lord Dyson. He relied also on the formulation of the principle of equal treatment in European Union law: The principle of equal treatment, as a general principle of EU law, requires that comparable situations must not be treated differently and that different situations must not be treated in the same way, unless such treatment is objectively justified. (Case C-510/11, Kone OYJ and others v European Commission (Elevators and Escalators Cartel Appeal) [2014] 4 CMLR 10, para 97). This was said to apply to the relevant functions of the OFT, by virtue of section 60(1) of the Competition Act 1998, the purpose of which is to ensure that as far as possible questions arising under this Part in relation to competition within the United Kingdom were dealt with in a manner consistent with the treatment of corresponding questions arising in Community law However, I say at once that I find no assistance in this respect in section 60, which seems to me directed to questions arising specifically under the statute, rather than as here under general principles of administrative law. Notwithstanding the degree of common ground on these points, it is important in this court to be clear as to the precise content and attributes of the relevant legal principles, and their practical consequences in terms of remedies. Equal treatment Whatever the position in European law or under other constitutions or jurisdictions, the domestic law of this country does not recognise equal treatment as a distinct principle of administrative law. Consistency, as Lord Bingham said in the passage relied on by the appellant (para 19 above), is a generally desirable objective, but not an absolute rule. The need for clear dividing lines in this context has been highlighted in the Privy Councils consideration of various forms of equal treatment clauses in common law constitutions. Thus for example in Webster v Attorney General of Trinidad and Tobago [2015] UKPC 10; [2015] ICR 1048 the Board was concerned with section 4(d) of the Constitution of that country, which recognises the right of the individual to equality of treatment from any public authority in the exercise of any functions. Lady Hale commented (para 14) that open-ended constitutional guarantees of equal treatment by public authorities, such as that in section 4(d), are few and far between. She contrasted such provisions with the Constitution of Mauritius, section 16 of which prohibits discrimination both by the laws and by public authorities, but only on defined grounds, and under which, as the Board had held in Matadeen v Pointu [1999] 1 AC 98 there was no general constitutional right to equal treatment by the law or by the executive. In the latter case, in an important passage under the heading Democracy and Equality ([1999] AC 98, para 9), Lord Hoffmann had emphasised the need to distinguish between equal treatment as a democratic principle and as a justiciable rule of law: 9. Their Lordships do not doubt that such a principle is one of the building blocks of democracy and necessarily permeates any democratic constitution. Indeed, their Lordships would go further and say that treating like cases alike and unlike cases differently is a general axiom of rational behaviour. It is, for example, frequently invoked by the courts in proceedings for judicial review as a ground for holding some administrative act to have been irrational: see Professor Jeffrey Jowell QC, Is Equality a Constitutional Principle? (1994) 7 CLP 1, 12-14 and de Smith, Woolf and Jowell, Judicial Review of Administrative Action, 5th ed (1995), pp 576-582, paras 13- 036 to 13-045. Of course persons should be uniformly treated, unless there is some valid reason to treat them differently. But what counts as a valid reason for treating them differently? And, perhaps more important, who is to decide whether the reason is valid or not? Must it always be the courts? The reasons for not treating people uniformly often involve, as they do in this case, questions of social policy on which views may differ. These are questions which the elected representatives of the people have some claim to decide for themselves. The fact that equality of treatment is a general principle of rational behaviour does not entail that it should necessarily be a justiciable principle - that it should always be the judges who have the last word on whether the principle has been observed. In this, as in other areas of constitutional law, sonorous judicial statements of uncontroversial principle often conceal the real problem, which is to mark out the boundary between the powers of the judiciary, the legislature and the executive in deciding how that principle is to be applied. (see now the current edition of De Smiths Judicial Review 8th ed (2018) paras 11.061ff) As that passage makes clear, in domestic administrative law issues of consistency may arise, but generally as aspects of rationality, under Lord Diplocks familiar tripartite categorisation. The authorities cited by the respondents provide illustrations. The passage cited by Lord Pannick from Lord Sumptions judgment in Bank Mellat (No 2) (above) at para 25 was concerned directly with the question of proportionality under the European Convention on Human Rights, but it was expressed in terms which could be applied equally to common law rationality. Lord Sumption spoke of a measure which, while responding to a real problem, may nevertheless be irrational or disproportionate by reason of its being discriminatory in some respect that is incapable of objective justification. He gave as the classic illustration A v Secretary of State for the Home Department [2005] 2 AC 68, in which it was held by the House of Lords that a derogation from the Human Rights Convention permitting the detention of non-nationals considered a risk to national security, was neither a proportionate nor a rational response to the terrorist threat, because it applied only to foreign nationals; it was not explained why, if the threat from UK nationals could be adequately addressed without depriving them of their liberty, the same should not be true of foreign nationals. He quoted Lord Hope (para 132): the distinction raises an issue of discrimination. ... But, as the distinction is irrational, it goes to the heart of the issue about proportionality also. At a more mundane level, R (Middlebrook Mushrooms Ltd) v Agricultural Wages Board of England and Wales [2004] EWHC 1447 (Admin) (cited by Miss Boyd) concerned a statutory order under the Agricultural Wages Act 1948, which established a new category of worker, the Manual Harvest Worker (MHW), whose minimum wage was lower than that of a Standard Worker, but the order uniquely excluded mushrooms from the definition of produce the harvesters of which might be paid at the lower rate. This was challenged successfully by the mushroom growers. Having rejected as baseless the various reasons put forward for the distinction, the judge (Stanley Burnton J) concluded that there was no lawful justification for the exclusion of mushroom pickers from the lower rate. He cited inter alia Lord Donaldsons reference to the cardinal principle of public administration that all persons in a similar position should be treated similarly (para 74) (R (Cheung) v Hertfordshire County Council, The Times, 4 April 1986). He concluded that the exclusion of manual harvesters of mushrooms from the MHW category was Wednesbury unreasonable and unlawful, or in other words irrational. In the present context, however, it is not necessary in my view to look for some general public law principle of equal treatment. It is not difficult to hold that the OFT owed a general duty during the negotiations in 2008 to offer equal treatment to those subject to the Tobacco investigation. There was no logical reason to do otherwise, since it was applying a single set of legal and policy criteria to a limited group of parties within a single area of business activity. In addition, its commitment to equal treatment had been expressed in terms to those parties (assuming, as I do, that the speaking note fairly reflects what they were told). To that extent, it may be said, they had in public law terms a legitimate expectation that they would be treated equally. However, that in itself does not provide an answer to the present problem. It tells one nothing about the legal consequences of such an expectation, in terms of rights and remedies in public law, in the events as they developed up to 2012. Before returning to that critical question, it is necessary to consider what if anything is added by the concept of fairness, as invoked by Lord Dyson in his concluding paragraph, albeit without direct reference to authority. It is that gap which the respondents counsel have sought to fill by the authorities noted above, in particular the Unilever case. Fairness Fairness, like equal treatment, can readily be seen as a fundamental principle of democratic society; but not necessarily one directly translatable into a justiciable rule of law. Addition of the word conspicuous does not obviously improve the precision of the concept. Legal rights and remedies are not usually defined by reference to the visibility of the misconduct. Simple unfairness as such is not a ground for judicial review. This was made clear by Lord Diplock in R v Inland Revenue Comrs, Ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, 637: judicial review is available only as a remedy for conduct of a public officer or authority which is ultra vires or unlawful, but not for acts done lawfully in the exercise of an administrative discretion which are complained of only as being unfair or unwise, (Emphasis added) Procedural fairness or propriety is of course well-established within Lord Diplocks trilogy. R v National Lottery Commission, Ex p Camelot Group plc [2001] EMLR 3, relied on by the respondents, is a good example. It concerned unequal treatment between two rival bidders for the lottery, one of whom was given an unfair procedural advantage over the other. That was rightly seen by Richards J as amounting to a breach of procedural fairness (see paras 69-70). Although he used the judgment to discuss principles of fairness in a wider context, that was not essential to his decision, which ultimately turned on the proposition that the Commission had decided on a procedure that results in conspicuous unfairness to Camelot - such unfairness as to render the decision unlawful (para 84, emphasis added). A broader concept of unfairness amounting to excess or abuse of power emerged in a series of cases in the 1980s, under the influence principally of Lord Scarman. In the National Federation case (above at p 652) he had been alone in holding that a legal duty of fairness (was) owed by the revenue to the general body of taxpayers. However, in R v Inland Revenue Commission, Ex p Preston [1985] AC 835, in which he presided, he was able with the support of Lord Templeman (who gave the leading speech) to develop the same idea in terms of a duty of fairness to an individual taxpayer, arising from a written assurance given by the Revenue as to his tax treatment. Lord Scarman himself said no more than that unfairness in the purported exercise of a power can be such that it is an abuse or excess of power, but he referred to Lord Templemans speech for illustrations (p 851H-852C). Lord Templeman dealt with this subject in an extended passage, starting from a citation of various statements in the National Federation case. In particular he took the words of Lord Scarman about the Revenues general duty of fairness (without noting that it had been a minority view) as supporting a duty of fairness owed to each individual taxpayer; but subject to the caveat that the court could not in the absence of exceptional circumstances decide to be unfair that which the commissioners had determined to be fair. Judicial review, he said, is only available if the court is satisfied that - the unfairness of which the applicant complains renders the insistence by the commissioners on performing their duties or exercise of powers an abuse of power by the commissioners. (p 864G) There followed a passage citing various authorities, in which judicial review was said to have been granted on the grounds of unfairness amounting to abuse of power, either due to some proven element of improper motive (p 864H, citing Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997), or due to an error of law whereby the Price Commission misconstrued the code they were intending to enforce (p 866F, citing HTV Ltd v Price Commission [1976] ICR 170). These authorities, he thought, supported the suggestion that the commissioners would be guilty of unfairness amounting to an abuse of power if their conduct would in a private context entitle the appellant to an injunction or damages based on breach of contract or estoppel by representation (p 866H-867C). This part of Lord Templemans speech was obiter, since the claim of abuse of power failed on the facts. It is not without difficulty. It seems that in all the examples given by Lord Templeman there was a conventional ground of review, such as improper motive or illegality. It is not clear what he saw the word unfairness (always in inverted commas) as adding to the legal reasoning. With hindsight the case is best understood by reference to principles of legitimate expectation derived from an express or implied promise (see de Smith op cit para 12-019; R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213, paras 61ff)). It had not been argued on that basis, perhaps because of the uncertain application at that time of legitimate expectation to substantive rather than procedural benefits (see United Policyholders Group v Attorney General of Trinidad and Tobago [2016] 1 WLR 3383 at paras 83ff). The authority is not relied on directly in the present appeal, but is of some relevance as providing the background to the references to unfairness or conspicuous unfairness in the judgments in the Unilever case, on which the respondents rely, and to which I now turn. In Unilever the Court of Appeal held that the Revenue should not be permitted without warning to apply a strict time-limit for submission of claims to loss relief, when to do so departed from a practice accepted by them without objection for some 20 years. The judge (Macpherson of Cluny J) had held that the Revenues conduct amounted to a representation in Preston terms, or, if not, had led to unfairness and an abuse of power (p 689f). In the Court of Appeal the main issue seems to have been whether the taxpayer could succeed in the absence of a representation by the Revenue which was clear, unambiguous, and devoid of relevant qualification, as stated in previous Court of Appeal authority (p 690a). Sir Thomas Bingham MR held that, on the unique facts of the case, to reject the claims was so unfair as to amount to an abuse of power (p 691h), and so unreasonable as to be, in public law terms, irrational (p 692f). In a concurring judgment, Simon Brown LJ, under the heading Legitimate expectation or nothing? (pp 693-695), sought to relate the case more directly to Lord Diplocks famous definition of irrationality as a decision so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it (Council of Civil Service Unions v Minister for the Civil Service [1985] 1 AC 374, 410). It was in that context that he introduced the idea of conspicuous unfairness: He said: Unfairness amounting to an abuse of power as envisaged in Preston and the other Revenue cases is unlawful not because it involves conduct such as would offend some equivalent private law principle, not principally indeed because it breaches a legitimate expectation that some different substantive decision will be taken, but rather because either it is illogical or immoral or both for a public authority to act with conspicuous unfairness and in that sense abuse its power. In short, he regarded the MFK category of legitimate expectation as essentially but a head of Wednesbury unreasonableness (p 695a-b). On the facts of the case, he held that the test was satisfied, observing that he could think of no surer guide than Macpherson of Cluny J in determining - the border between on the one hand mere unfairness - conduct which may be characterised as a bit rich but nevertheless understandable - and on the other hand a decision so outrageously unfair that it should not be allowed to stand. (p 697C) I have quoted at some length from these judgments to show how misleading it can be to take out of context a single expression, such as conspicuous unfairness, and attempt to elevate it into a free-standing principle of law. The decision in Unilever was unremarkable on its unusual facts, but the reasoning reflects the case law as it then stood. Surprisingly, it does not seem to have been strongly argued (as it surely would be today) that a sufficient representation could be implied from the Revenues consistent practice over 20 years (see eg de Smith para 12-021). It seems clear in any event from the context that Simon Brown LJ was not proposing conspicuous unfairness as a definitive test of illegality, any more than his contrast with conduct characterised as a bit rich. They were simply expressions used to emphasise the extreme nature of the Revenues conduct, as related to Lord Diplocks test. In modern terms, and with respect to Lord Diplock, irrationality as a ground of review can surely hold its own without the underpinning of such elusive and subjective concepts as judicial outrage (whether by reference to logical or moral standards). In summary, procedural unfairness is well-established and well-understood. Substantive unfairness on the other hand - or, in Lord Dysons words at para 53, whether there has been unfairness on the part of the authority having regard to all the circumstances - is not a distinct legal criterion. Nor is it made so by the addition of terms such as conspicuous or abuse of power. Such language adds nothing to the ordinary principles of judicial review, notably in the present context irrationality and legitimate expectation. It is by reference to those principles that cases such as the present must be judged. The present case Against that background I can turn to the analysis of the present case. The respondents no doubt have grounds to complain of the administrative failure to inform them of the assurance given to TMR in 2008. Had they known of it, they might have sought similar assurances. We do not know whether, if the request had been pressed, the assurance would have been replicated, or whether (more probably) the OFT would have reviewed the assurance to TMR in time to leave open the possibility of appeal. In any event, grounds for administrative complaint do not necessarily add up to a cause of action in law. Even accepting that there was a breach of a legitimate expectation of equal treatment in the failure to replicate the assurances given to TMR in 2008, that would not in itself provide a basis for financial remedy in relation to the events of 2012, nor the reversal of financial penalties which had by then been lawfully imposed on the respondents and accepted by them. Lord Dyson identified the critical issue as whether the 2012 decision - that is, to honour the assurances given to TMR but not to do likewise for the respondents - was objectively justified. In my view it makes no difference to the result whether one applies a test of objective justification or of rationality. I see this question as depending, not so much on whether the giving of the assurance to TMR had been a mistake, but on the reality of the position as reasonably perceived by the OFT in 2012. It is not entirely clear what it was about the combination of circumstances, summarised in Lord Dysons concluding paragraph, which led the court to the view that a critical boundary of unfairness had been crossed. Lord Dyson noted that the only difference between the respective positions of TMR and of the respondents was that the OFT had given the assurances to TMR in 2008, but not to the (respondents). But that was a potentially crucial difference. All those who entered ER agreements were aware of the possibility that other parties would appeal and might be successful. That was a risk the respondents took. As Vos LJ said, they knew what they were doing and accepted it with their eyes open. TMR did not. They sought and obtained an assurance on which they claimed to have relied. In 2012 the OFT could reasonably take the view that, if the assurance were not honoured, TMR would have had a strong case for permission to appeal out of time, whereas the respondents did not (as the Court of Appeal has since held). If objective justification were needed for the OFT taking a different approach to TMR, that in my view was sufficient; nor was it irrational for them to do so. For these reasons, I would allow the appeal and restore the order of Collins J. Cartel investigations are notoriously difficult without inside information or the active co-operation of at least one participant and are not necessarily straightforward even then. Early Resolution Agreements are a standard tool at the disposal of competition authorities for settling them by consent at an early stage after the investigation has been notified to those under investigation. A party under investigation is offered the prospect of settling the allegation on the basis of a negotiated admission and a discount on the penalty which would otherwise have been imposed. Properly used, they enable an investigation to be conducted expeditiously, economically and fairly and are in principle in the public interest. The practice, however, raises questions of some delicacy. A competition authority is not an ordinary litigant, but a public authority charged with enforcing the law. It therefore has wider responsibilities than the extraction of the maximum of penalties for the minimum of effort. A party under investigation must not be subjected to undue pressure to make admissions. Nor can it be deprived of any statutory right of appeal against the ultimate decision. The terms of the Early Resolution Agreements made with TMR, Gallaher, Somerfield and Asda in this case followed the internal procedures laid down within the OFT. They sought to balance these considerations by providing (i) that the party under investigation would be entitled to terminate the agreement at any time before receipt of the final decision, in which case it would forgo the discount; and (ii) that notwithstanding its admission it would be entitled to exercise its statutory right of appeal against the decision to the Competition Appeal Tribunal, in which case the OFT would be at liberty to apply to the Tribunal to increase the penalty and order the party under investigation to pay the costs of the appeal in any event. It is fundamental to the efficacy of such an agreement that subject to its terms it cuts short the investigation of the counterparty by finally resolving the issues as between it and the OFT. Where an Early Resolution Agreement is made with one party but the investigation proceeds against others, the former is entitled to the benefit of the discount or to the benefit of the continuing investigation and/or an appeal. He is not entitled to both. This carefully drawn balance was disturbed by the oral assurance unwisely given by the responsible OFT officer Ms Branch to TMR, but not Gallaher or Somerfield. The assurance was that a successful appeal by other parties on liability would result in no finding against [TMR] and that in the event of a successful appeal on penalty, then OFT would apply any reduction to TMR. There was a successful appeal to the CAT by the parties who had not entered into Early Resolution Agreements, and also by Asda, which had entered into one but exercised its right to appeal. The appeal succeeded on the ground that the OFT decision did not show that there was any anti-competitive object or effect. That is a ground on which TMR, Gallaher and Somerfield would also have been entitled to succeed if they had appealed. Therefore the effect of the assurance was that TMR obtained the benefit of a successful appeal without itself having to appeal and therefore without being exposed to the risk of losing the discount if the appeal failed. The result was to put them in a better position than Gallaher or Somerfield. Moreover, although Gallaher and Somerfield were notified of the Early Resolution Agreement with TMR they were not told about the oral assurance. Consequently, they were not prompted to ask for a similar assurance. The Court of Appeal held that the OFTs failure to repay the penalties to Gallaher and Somerfield, as they had to TMR, was a breach of a public law duty to treat all those under investigation equally in the absence of some objective ground for treating them differently. They considered that there was no such ground. I agree with Lord Carnwaths analysis of the relevant legal principles. In public law, as in most other areas of law, it is important not unnecessarily to multiply categories. It tends to undermine the coherence of the law by generating a mass of disparate special rules distinct from those applying in public law generally or those which apply to neighbouring categories. To say that a decision-maker must treat persons equally unless there is a reason for treating them differently begs the question what counts as a valid reason for treating them differently. Consistency of treatment is, as Lord Hoffmann observed in Matedeen v Pointu [1999] 1 AC 98, at para 9 a general axiom of rational behaviour. The common law principle of equality is usually no more than a particular application of the ordinary requirement of rationality imposed on public authorities. Likewise, to say that the result of the decision must be substantively fair, or at least not conspicuously unfair, begs the question by what legal standard the fairness of the decision is to be assessed. Absent a legitimate expectation of a different result arising from the decision-makers statements or conduct, a decision which is rationally based on relevant considerations is most unlikely to be unfair in any legally cognisable sense. In the present case nothing that the OFT said or did could have given rise to any other expectation than that it would act rationally. The questions which this appeal poses are (i) whether the OFT acted rationally in giving the assurance to TMR alone in 2008 and in repaying the penalty to TMR alone in 2012; and (ii) if not what are the consequences for Gallaher and Somerfield. I start with the decision of 2008. As a statement of the ordinary legal consequences of a successful appeal by other parties, the assurance given by Ms Branch was wrong. An appeal by one party from a decision of the OFT on a cartel investigation is a distinct legal proceeding whose outcome affects that party only: Deutsche Bahn AG v Morgan Advanced Materials plc (formerly Morgan Crucible Co plc) (European Commission intervening) [2014] 2 All ER 785, para 21, Commission of the European Communities v Assidomn Kraft Products AB (Case C-310/97P) at paras 2-14, 4 CMLR 10 (Wood Pulp II), para 63. The assurance could therefore be relevant only as a collateral undertaking to TMR that they would be treated otherwise than in accordance with the general law. This was a mistake, as both courts below have recognised. It was a mistake not because Ms Branch did not intend to give the assurance or did not know what she was doing. It was a mistake because it was inconsistent with the OFTs policy of non-discrimination, as well as with the terms of the Early Resolution Agreement under discussion, and more generally with the purpose of the early resolution procedure. That, however, cannot affect the position of Gallaher or Somerfield, for substantially the reason given by the Court of Appeal when they held that Gallaher and Somerfield were not entitled to appeal the OFTs decision out of time after the other appeals had succeeded. Save in exceptional circumstances, such an appeal must be brought within two months of the OFTs final decision. The Court of Appeal held that there were no exceptional circumstances. This was because each of them had entered into a distinct agreement which was intended finally to resolve the issues the subject of the appeals, subject only to the right conferred by the agreement to terminate the agreement before a final decision or to appeal afterwards. They had invoked neither condition, thus accepting the risk that they would not benefit if the appeal succeeded but ensuring that they would retain the benefit of the discount if it failed. Finality and certainty required that they should live with the consequences: see Office of Fair Trading v Somerfield Stores Ltd [2014] EWCA Civ 400, esp at paras 33, 38, 41 and 45. The fact that no corresponding assurance was given to Gallaher or Somerfield makes no difference to this analysis. This was not a zero sum game, like the tender process considered in R v National Lottery Commission, Ex p Camelot Group Plc [2001] EMLR 3. The benefit to TMR was in no sense given at their expense. Nor does it make any difference that the oral assurance was not disclosed to them. If it had been, they might well have asked for a similar assurance for themselves. But they would have had no right to one. As a matter of principle, the OFTs mistake was that they gave the assurance to TMR, not that they failed to give it to Gallaher and Somerfield. As a matter of fact, if Gallaher and Somerfield had asked for a similar assurance, there is no reason to suppose that the OFT would have made the same mistake again. It is at least as likely that such a request would have provoked a reassessment of the assurance given to TMR, followed by its withdrawal. Against that background, I turn to the 2012 decision which the Court of Appeal, correctly as I think, regarded as the relevant one. Was it irrational to repay the penalty to TMR after the appeal but not to Gallaher or Somerfield? In my opinion it was not, because although the decision to repay TMR also was discriminatory, the discrimination was objectively justified. To see why this is so, it is necessary to look more carefully at the basis on which the OFT agreed to repay the penalty to TMR in 2012. The OFTs assurance had been that in the event of a successful appeal by another party on liability they would withdraw as against TMR the finding of unlawfulness made in their decision. However, they refused to do that. It would have been contrary to the terms of the Early Resolution Agreement. Instead, they recognised that they had slipped up in giving the assurance. As a result, first, TMR would be certain to get permission to appeal out of time, because the assurance had made it unnecessary for them to appeal in time; and, secondly, their appeal would have been bound to succeed, because the ground on which the other appeals had succeeded applied equally to them. Accordingly, the OFT settled with TMR on the only realistic basis. Gallaher and Somerfield were not in the same position. The OFT had not slipped up in their case. They had no basis for a late appeal, as indeed the Court of Appeal subsequently held. There was nothing as between them and the OFT to be settled. Because TMR had received the oral assurance and on that basis foregone an appeal which would certainly have succeeded, the repayment of the penalty to them was in no sense a windfall. But it would be a windfall if a corresponding repayment were now to be made to Gallaher and Somerfield, who forewent their appeal by their own decision on an entirely different basis. For these reasons, I would allow the appeal. I agree that this appeal should be allowed, and with Lord Carnwaths analysis of the relevant legal principles. As he concludes, the OFTs decision to honour the assurance given to TMR, but not to replicate it in favour of the respondents, was both objectively justified and a rational response to the predicament which it faced. In 2008 the OFT gave an assurance to TMR about extending to it the benefit of any successful appeal by another party which the evidence shows (and the courts below rightly held) was the result of a mistake. It had been intended as a statement of what the OFT then thought, without proper consideration of the question, and in particular the finality principle, would be the legal consequence for TMR of a successful appeal by another party. It had not been intended to confer some special benefit upon TMR, and might have been unthinkingly replicated in favour of other parties negotiating ERAs if any had asked the same question, but none did. In 2012, when the consequences of the mistaken assurance came home to roost, the OFT was faced, at least in theory, with three unpalatable alternatives: It could go back on the assurance to TMR, and refuse any similar It could honour the assurance to TMR, and extend it to the respondents (a) benefit to any other party. (b) and any other party in a similar position. (c) to any other party. It could honour all or part of the assurance to TMR but not extend it. Option (a) was unsatisfactory because it would almost certainly have led to TMR (but not the respondents) obtaining permission to appeal out of time, and to a wholly successful appeal. This would have been an even better outcome for TMR than that which the OFT provided by agreement, because the agreement did not abandon the finding of unlawfulness against TMR in the decision. Furthermore the complaint by the respondents of having been treated differently in 2008 would have remained. Option (b) would have involved the replication of a mistake at very large cost to the public purse, in favour of parties who neither received nor relied upon a similar assurance. Option (c) would involve treating the respondents differently, but would at least not involve the replication of a mistake. These claims seek judicial review of the OFTs choice of option (c). Where a public authority has a choice of this kind, and one of the options avoids replicating an earlier mistake, but at some cost to equal treatment, the choice is one for the authority, not for the court, for the reasons which Lord Carnwath gives, subject to the usual constraints of lawfulness and rationality. If, but only if, the authority acts outside those constraints will its choice be subject to judicial review. In the present case I do not consider that the OFTs response to its predicament transgressed those boundaries. The fact that the giving of the assurance to TMR in 2008 was a mistake, that its withdrawal in 2012 would be likely to leave TMR even better off than if the assurance was honoured, and that the respondents had neither received or relied upon any similar assurance seem to me, taken in combination, to amount to a powerful objective justification for unequal treatment, as between TMR and the respondents. On any view the OFT made a rational choice between unpalatable alternatives, with which the court should not interfere. |
This appeal concerns the rights of so called Zambrano carers and their children to financial support from the state. That expression is derived from the decision of the Court of Justice of the European Union dated 8 March 2011, in Ruiz Zambrano v Office national de lemploi (Case C 34/09) [2012] QB 265. The case concerned a Colombian who had been living in Belgium with his wife, and working (and paying social security contributions), but without a right to reside. Their three children, born between 2003 and 2005, acquired Belgian nationality at birth, and with it European citizenship and the right of free movement, under article 20 of the Treaty on the Functioning of the European Union (TFEU). When in 2005 he lost his job, he was refused unemployment benefit, because under the relevant national law that depended on his having a right to reside. The European court held that the refusal of such a right was unlawful because it would result in the children being deprived of effective enjoyment of their rights as European citizens. The present appeal arises from a challenge to the legality of amendment regulations introduced in this country in November 2012 in response to the Zambrano decision. They were designed to limit the rights of Zambrano carers to claim certain categories of non contributory social security assistance to which those habitually resident would otherwise be entitled: more specifically, income related benefits, child benefit and child tax credit, and housing and homelessness assistance. The amendment regulations in question are: i) The Social Security (Habitual Residence) (Amendment) Regulations 2012 (SI 2012/2587), amending the Income Support (General) Regulations 1987 (SI 1987/1967). ii) The Child Benefit and Child Tax Credit (Miscellaneous Amendments) Regulations 2012 (SI 2012/2612), amending the Child Benefit (General) Regulations 2006 (SI 2006/223). iii) The Allocation of Housing and Homelessness (Eligibility) (England) (Amendment) Regulations 2012 (SI 2012/2588), amending the Allocation of Housing and Homelessness (Eligibility) (England) Regulations 2006 (SI 2006/1294). The effect of the amendment in each case is to add to the relevant list of exclusions from qualifying rights of residence, a right to reside existing by virtue of TFEU article 20, where that right arises because a British citizen would otherwise be deprived of the genuine enjoyment of the substance of their rights as a European Union citizen. The Secretary of States evidence (in a statement by Gareth Cooper, Policy Adviser) refers to the Explanatory Memorandum to the amendment regulations. This explained the purpose as being to maintain the existing policy that non European Economic Area (EEA) nationals are not entitled to claim income related benefits, following the ruling in the Zambrano case. Mr Cooper (para 8) quotes it as follows: the Home Office are amending their regulations to provide a right to reside and a right to work to a non EEA national who is a primary carer of a dependent British citizen only if the British citizen would otherwise be forced to leave the UK and be deprived of exercising their rights as an EU citizen. If the social security regulations are not amended such persons would become entitled to income related benefits. The amendments had been subject to consultation with local authority associations and the Social Security Advisory Committee, and had attracted no objection or substantive comment. According to Mr Cooper it had been estimated by the Home Office that there would initially be some 700 people a year qualifying for Zambrano rights, giving rise to a potential annual cost of between 3.8m and 9.4m in respect of income support, housing benefit and council tax benefit together. Mr Cooper does not indicate what consideration, if any, had been given to how children of workless Zambrano carers were to be supported, if not entitled to such assistance. The facts relevant to the present appellant, Mrs HC, can be shortly stated. She is an Algerian national who has been living in this country since 2008, having arrived with leave but over stayed. In 2010 she married a British national on whom she was financially dependent. She has two children by him, born in August 2011 and March 2013. Her relationship with him ended after domestic violence in late 2012, when she sought help from the Oldham City Council, in whose area she was then living. After an initial refusal, the council agreed to provide temporary housing and financial support under section 17 of the Children Act 1989. Separate judicial review proceedings against the council resulted in an interim order by His Honour Judge Pelling QC, under which she and her children were accommodated by the council in two bedroom accommodation and given 80.50 per week to cover subsistence and utility costs. Those proceedings were later stayed by consent on the councils agreement to carry out a further assessment of their needs, and to continue the support in the meantime. It is now common ground (following a decision of the First tier Tribunal in April 2014) that she is entitled to reside in the UK as a Zambrano carer. It is also not in dispute that that entitlement, taken with the financial support provided by the council, provides not only the legal right, but also the practical support, necessary to protect the children against being obliged to leave the territory of the European Union while under her care. Her case (para 36 of her second witness statement) is that this is not enough: As I cannot go back to Algeria and have no right to live in any other country my only option is to remain here, where at least I have the protection of a prohibited steps order and the British courts. Also my children are British. This is their home country and the only place they know. They are entitled to grow up here and, I pray, to enjoy the same benefits and opportunities of growing up in Britain that other British children have. At present when I see how they must live compared to their British cousins and step siblings I know that they do not in practice have the same rights. We are expected to make do with far less, the bare minimum, only enough to survive. In legal terms, Mr Drabble QC on her behalf submits that it was not legally possible for the amendment regulations to deny a Zambrano carer and her child mainstream welfare and housing provision, without contravening what he calls the fundamental principle of equal treatment that is part of EU law, as embodied in article 21 of the EU Charter of Fundamental Rights (the Charter). As a fall back position he relies also on article 14 of the European Convention on Human Rights (the Convention). Against this background, the following issues arise: i) The Zambrano principle. Does the principle require from the state more for the children and their Zambrano carer than bare protection (legal and practical) against being obliged in practice to leave the territory of the Union? ii) Discrimination: a) In so far as the regulations placed limits on the benefits available to Zambrano carers was the UK implementing Union law (within the meaning of article 51 of the EU Charter), so as to bring the Charter into play? If so, did those limits involve unjustified discrimination on grounds prohibited by article 21 of the Charter? b) Alternatively, did involve unjustified those discrimination contrary to article 14 of the Convention, taken with article 8 (right to respect for private and family life) or article 1 of the First Protocol (right to property)? limits The Zambrano principle I start from the formulation of the principle by the European court in Zambrano itself. Having described citizenship of the European Union as the fundamental status of nationals of the member state, the court said: 42. In those circumstances, article 20 TFEU precludes national measures which have the effect of depriving citizens of the European Union of the genuine enjoyment of the substance of the rights conferred by virtue of their status as citizens of the European Union 43. A refusal to grant a right of residence to a third country national with dependent minor children in the member state where those children are nationals and reside, and also a refusal to grant such a person a work permit, has such an effect. 44. It must be assumed that such a refusal would lead to a situation where those children, citizens of the European Union, would have to leave the territory of the European Union in order to accompany their parents. Similarly, if a work permit were not granted to such a person, he would risk not having sufficient resources to provide for himself and his family, which would also result in the children, citizens of the Union, having to leave the territory of the European Union. In those circumstances, those citizens of the European Union would, as a result, be unable to exercise the substance of the rights conferred on them by virtue of their status as citizens of the Union. 45. Accordingly, the answer to the questions referred is that article 20 TFEU is to be interpreted as meaning that it precludes a member state from refusing a third country national on whom his minor children, who are European Union citizens, are dependent, a right of residence in the member state of residence and nationality of those children, and from refusing to grant a work permit to that third country national, in so far as such decisions deprive those children of the genuine enjoyment of the substance of the rights attaching to the status of European Union citizen. (emphasis added) It is clear (particularly from the passages highlighted in para 44) that the reasoning of the court turned specifically and solely on the risk of being obliged to leave the territory of the Union. There was no issue as to the nature of financial support (if any) required, nor as to the extent of any right to benefits otherwise available to nationals. Once the right of residence, and with it the right to work, were established, the entitlement to and the amount of unemployment benefit followed as a matter of Belgian law. Indeed Advocate General Sharpston had dismissed arguments that there might be an unreasonable burden on public finances, pointing out that Mr Zambrano had worked full time for nearly five years, paid social security contributions, and thus contributed steadily and regularly to the public finances of the host member state (Opinion paras 118 120). Mr Drabble rightly does not suggest that in itself the judgment throws any light on the right to non contributory benefits. The same emphasis is found in the next significant case: Dereci v Bundesministerium fr Inneres (Case C 256/11) [2012] 1 CMLR 45. Mr Dereci, a Turkish national, had entered Austria illegally. He had married an Austrian woman and had three children who were EU citizens. He applied for a residence permit, but this was refused by the national authorities because the EU citizens concerned had not exercised their right of freedom of movement. The European court accepted that, in the light of its decision in Zambrano, the situation of Union citizens who have not made use of their freedom of movement could not for that reason alone, be assimilated to a purely internal situation (para 61). Having summarised the decision in that case, the court said: 66. It follows that the criterion relating to the denial of the genuine enjoyment of the substance of the rights conferred by virtue of EU citizen status refers to situations in which the Union citizen has, in fact, to leave not only the territory of the member state of which he is a national but also the territory of the Union as a whole. 67. That criterion is specific in character inasmuch as it relates to situations in which, although subordinate legislation on the right of residence of third country nationals is not applicable, a right of residence may not, exceptionally, be refused to a third country national, who is a family member of a member state national, as the effectiveness of Union citizenship enjoyed by that national would otherwise be undermined. 68. Consequently, the mere fact that it might appear desirable to a national of a member state, for economic reasons or in order to keep his family together in the territory of the Union, for the members of his family who do not have the nationality of a member state to be able to reside with him in the territory of the Union, is not sufficient in itself to support the view that the Union citizen will be forced to leave Union territory if such a right is not granted. 69. That finding is, admittedly, without prejudice to the question whether, on the basis of other criteria, inter alia, by virtue of the right to the protection of family life, a right of residence cannot be refused. However, that question must be tackled in the framework of the provisions on the protection of fundamental rights which are applicable in each case. That passage indicates both the exceptional nature of the Zambrano right (para 67); and that it is triggered not by the mere desirability of keeping the family together, on economic or other grounds, but solely by the threat of being forced to leave Union territory if the right were not granted (para 68). Subsequent authorities are to the same effect. We have been referred to no European court authority which extends Zambrano rights to include non contributory benefits of the kind in issue in the present appeal. A more recent example, on which Mr Drabble relies, is Rendn Marin v Administracin del Estado (Judgment: Citizenship of the Union) [2016] EUECJ C 165/14; [2017] QB 495, where the court described this line of cases as having the common feature that, although they are governed by legislation which falls, a priori, within the competence of the member states, namely legislation on the right of entry and residence of third country nationals outside the scope of provisions of secondary legislation which provide for the grant of such a right under certain conditions, they nonetheless have an intrinsic connection with the freedom of movement and residence of a Union citizen, which prevents the right of entry and residence being refused to those nationals in the member state of residence of that citizen, in order not to interfere with that freedom. (para 75) Mr Drabble asks us to note that the national (Spanish) court, in making the reference, had referred to its possible relevance to social benefits under domestic law (para 30). However, there is nothing in the European courts treatment of the case itself to suggest that the scope of EU law for these purposes extended beyond protection against being obliged to leave. Thus it was left for the national court to determine whether the refusal to grant residence to the father would mean that he had to leave the territory of the European Union with the result that the children could be compelled to go with him, and therefore to leave the territory of the European Union as a whole (para 78). In R (Agyarko) v Secretary of State for the Home Department [2017] UKSC 11; [2017] 1 WLR 823, paras 62 63, in a judgment agreed by the other members of the Supreme Court, Lord Reed referred to this line of cases and emphasised the specific and derivative nature of the rights so conferred. He cited a passage from the judgment of the European court in S v Secretary of State for the Home Department (Case C 304/14) [2017] QB 558; [2017] 2 WLR 180, para 29, holding that there are very specific situations in which, despite the fact that the secondary law on the right of residence of third country nationals does not apply and the Union citizen concerned has not made use of his freedom of movement, a right of residence must nevertheless be granted to a third country national who is a family member of his since the effectiveness of citizenship of the Union would otherwise be undermined, if, as a consequence of refusal of such a right, that citizen would be obliged in practice to leave the territory of the European Union as a whole, thus denying him the genuine enjoyment of the substance of the rights conferred by virtue of his status. (emphasis added) The emphasised words in that citation are critical in defining the limited scope of the right. On this issue I agree entirely with the analysis of Elias LJ (Harrison (Jamaica) v Secretary of State for the Home Department [2012] EWCA Civ 1736; [2013] 2 CMLR 23, paras 63 70). As he said: The right of residence is a right to reside in the territory of the EU. It is not a right to any particular quality of life or to any particular standard of living. Accordingly, there is no impediment to exercising the right to reside if residence remains possible as a matter of substance, albeit that the quality of life is diminished (para 67) Baumbast and related cases It is convenient at this point to address Mr Drabbles argument based on a line of cases beginning with Baumbast v Secretary of State for the Home Department (Case C 413/99) [2002] ECR I 7091, followed in Ibrahim v Harrow London Borough Council and Teixeira v Lambeth Borough Council (Joined Cases C 310/08 and C 480/08) (both reported at [2010] ICR 1118). These were concerned directly with a quite different issue: the interpretation of EU Regulation 1612/68, on freedom of movement for workers. Article 12 provided that children of a national of a member state employed in the territory of another member state should be admitted to that states general educational courses under the same conditions as the nationals of that state, if such children are residing in its territory. In Bambaust itself there was an issue whether the childrens rights of residence under the article continued after a change in the position of the parents in the state concerned. It was held that the children retained their right under article 12 to reside for the purpose of attending educational courses, notwithstanding the facts that the parents had divorced, that the only Union citizen parent had ceased to be a migrant worker in the state concerned, and that the children were not themselves citizens of the Union (para 63). It was held further that the parent who was the primary carer, irrespective of nationality, must be permitted to reside with them in order to facilitate the exercise of their right. Mr Drabble relies in particular on the application of that principle in the second case, Ibrahim. That concerned a Somali national who entered with leave to join her Danish husband, who was at the time working here; their children began to attend school shortly after her arrival. They later separated, and the husband had ceased working here, and she was wholly dependent on social assistance. The question arose whether she had a right of residence derived from her childrens rights under article 12, or whether that was subject to the conditions laid down in the Citizenship Directive (2004/38), including that of sufficient resources. On a reference from the Court of Appeal, the CJEU held that the rights of both children and their primary carers were derived from article 12, and were not as such subject to any such conditions (under the Citizenship Directive or otherwise) (paras 50 59). Mr Drabble relies on this as showing that once the right of residence is established it was not necessary to show a positive right to claim social assistance. In the words of his case (para 4.34): The whole approach proceeds on the basis that if there is a right of residence which arises even if the individuals concerned are not self sufficient, the individuals who are exercising the rights derived from EU law will be able to claim the same benefits as nationals of the host state. By the same token, he submits, in the absence of any self sufficiency condition or other limitation, the residence rights of Zambrano carers should be treated as giving rise to the same benefits as those of other categories of resident. He adopts a passage from an article by Dr Charlotte OBrien Hand to mouth citizenship: decision time for the UK Supreme Court on the substance of Zambrano rights, EU citizenship and equal treatment: [2016] 38(2) JSWFL 228 at p 234: The CJEU [in Zambrano] created an EU citizenship based right to reside, which necessarily triggers a right to equal treatment under EU law. Nowhere did the CJEU suggest that those exercising that right were not intended to really have that kind of right. Given that the Zambrano case was a benefits case, it seems only fair to suppose that had the CJEU wished to invent a new equal treatment free right to reside, that is something they might have mentioned. We have been here before, and should have learnt from past experience. Following Baumbast UK authorities were adamant that Baumbast only applied to the self sufficient (ie the well off), even though the CJEU had not said so, and in spite of the incongruity with the case law. According to the UK the right to reside did not entail equal treatment. The Court of Appeal, while making the reference in Ibrahim [2008] EWCA Civ 386 was inclined to agree, expressing scepticism about the idea that they shouldnt read a self sufficiency condition into Baumbast (55). However, the CJEU in Ibrahim . made clear that there was no basis for a condition of self sufficiency in the legislation in question (52), or in the case law (53) and specifically pointed out that the ruling in Baumbast had not been based on a finding of self sufficiency I have two difficulties with the comparison so made with this line of cases. In the first place, the domestic law context was quite different. As the court noted in Ibrahim (para 14), entitlement under the national legislation turned on whether she had a right of residence conferred by EU law, but was otherwise unlimited. The issue was whether it was implicitly subject to a self sufficiency condition derived from EU law. No such issue arises here. The limitations are derived from the domestic legislation, and the only issue is their compatibility with EU law. Secondly, the proposition that the right of residence created in Zambrano necessarily triggers a right to equal treatment under EU law begs one of the principal issues raised by the present appeal a question to which I now turn. Discrimination under the Charter Although Mr Drabble has referred to what he calls the fundamental principle of equal treatment that is part of EU law, his submissions (rightly in my view) are not based on any such general principle. They are directed specifically to article 21 of the Charter, as applied by article 51, rather than any more general principle. At an earlier oral permission hearing of this case permission was refused for a separate ground of appeal based on article 18 of the Treaty, which prohibits discrimination on the grounds of nationality. That can have no application to a third country national, such as Mrs HC. As Lady Hale has said (Patmalniece v Secretary of State for Work and Pensions [2011] 1 WLR 783, para 83): This [article 18] is not a general prohibition of discrimination on grounds of nationality. Only the nationals of member states are protected. Discrimination against third country nationals is not prohibited. Indeed it is positively expected. The underlying purpose is to promote the objects of the Union and in particular the free movement of workers between the member states and the free establishment of businesses within them. Under the Charter, the starting point is article 51, by which the principles of the Charter apply to member states only when they are implementing Union Law. Mr Drabble submits that for this purpose it is sufficient that the Zambrano principle brings the carer and child within the scope of the EU treaties ratione personae (adopting the language of the CJEU in Martnez Sala v Freistaat Bayern (Case C 85/96), [1998] ECR I 2691). Alternatively, in setting the support to be provided to Zambrano carers, and in choosing between section 17 support and mainstream welfare benefits, the Secretary of State was choosing between different modes of implementing EU law, or (as Mr Banner puts it, for the AIRE Centre, as intervener) regulating the entitlement to financial assistance under EU law. Mr Coppel, for the Secretary of State, rejects that approach. It is not enough to say that Mrs HC is personally (ratione personae) within the scope of the Treaty by virtue of her derivative right of residence. Sala was directed specifically to the rights of EU citizens (see judgment paras 62 63), and was not in any event concerned with the application of the Charter. Nor is it enough that the national law is related in some way to EU law. There must be a direct link between the act in question and the implementation of that law. This is illustrated by reference to Ymeraga v Ministre du Travail, de lEmploi et de lImmigration (Case C 87/12) [2013] 3 CMLR 33. That concerned the refusal by the Luxembourg government, under a national law on freedom of movement, to grant a right of residence to family members of the first applicant (Mr Y). One issue concerned the application of the Charter to the law in question. The court considered whether the refusal was a situation involving the implementation of European Union law within the meaning of article 51. For that purpose it must be ascertained among other things whether the national legislation at issue is intended to implement a provision of EU law, what the character of that legislation is, and whether it pursues objectives other than those covered by EU law, even if it is capable of indirectly affecting that law, and also whether there are specific rules of EU law on the matter or capable of affecting it (para 41) The court accepted that the national law on freedom of movement was indeed intended to implement EU law, but that was not enough. The situation of the applicants was not governed by either of the EU directives relied on, nor did the refusal of a right of residence to Mr Ys family members have the effect of denying him the genuine enjoyment of the substance of the rights conferred by virtue of his status as citizen of the Union. Accordingly the refusal did not involve the implementation of European Union law, and accordingly the Charter had no application (paras 41 43). Mr Coppel relies particularly on Dano v Jobcenter Leipzig (Case C 333/13) [2015] 1 WLR 2519 (Dano), as showing that decisions about the level of non contributory benefits, absent any specific requirement or condition of EU law, are not within the scope of the Charter. In that case a Romanian mother had been living in Germany with her son, where she was looking for work. Her application for benefits as a job seeker was refused because national law excluded such benefits for foreign nationals whose right of residence arose solely out of the search for employment. This was challenged as breaching their right to equal treatment under Parliament and Council Regulation No 883/2004 (which categorised such benefits as special non contributory cash benefits), article 4 of which provided that Union citizens residing in another member state should enjoy the same benefits as nationals of the host member state. It was held by the CJEU (in summary) that, although the benefits in question fell within the scope of article 4, they were linked to the right of residence under the Citizenship Directive and could be limited by reference to its conditions. A fourth question related to the application of certain provisions of the Charter. The court referred to article 51, and to article 6(1) of the EU Treaty, by which the provisions of the Charter are not to extend the competences of the EU as defined in the Treaties (paras 87 88). It noted that the relevant regulation did not lay down conditions for the rights in question; it was therefore for the legislature of each state to lay down those conditions (para 89). It concluded: 91. Consequently, when the member states lay down the conditions for the grant of special non contributory cash benefits and the extent of such benefits, they are not implementing EU law. In my view Mr Coppels approach is correct. The test is not whether Mrs HC is personally within the scope of EU law in some way. The issue must be judged by reference to the test set by article 51, which is directed to implementation of EU law. Once it is determined that EU law does not require more for the children of a Zambrano carer than practical support sufficient to avoid their being obliged to leave the Union, that also sets the limits of what is involved in its implementation. Although it is open to the state to provide more generous support (gold plating, as it is sometimes called), that is the exercise of a choice under national law, not EU law. To describe this as regulating the financial assistance given to the EU carer does not alter that fact. Just as Mr Ymeraga could not rely on the Charter to extend the derivative rights otherwise available to his family members, so Mrs HC cannot rely on it to give her any entitlement to financial assistance beyond the limited support required by the Zambrano principle itself. The point does not bear of much elaboration, but the conclusion is sufficient to dispose of this issue in favour of the Secretary of State. It is unnecessary therefore to consider the interesting questions which would have arisen under article 21, had the Charter been held to apply. Discrimination under the Convention I can deal relatively briefly with this issue, which was not developed in any great detail by Mr Drabble, other than by repetition of the arguments advanced in respect of article 21 of the Charter. In short, he submits that the amendment regulations have an impact within the ambit of article 8, or article 1 of the First Protocol, and that accordingly there is right under article 14 not to be discriminated against without reasonable justification. It is unnecessary for present purposes to enter into the continuing debate about the application to benefits of this kind of article 8, as opposed to article 1 of the First Protocol) (see per Collins J R (DA) v Secretary of State for Work and Pensions [2017] EWHC 1446 (Admin), paras 39 40). I am prepared to proceed on the basis that the case falls within the ambit of convention rights so as potentially to engage article 14. That article provides: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. The status on which Mr Drabble relies, as I understand his submission, is either immigration status, or, more narrowly, the status of Zambrano carer and child. I do not think that either can assist him under article 14. Discrimination on the basis of immigration status is of course a fundamental and accepted part of both EU and national law, but cannot in itself give rise to an issue under article 14. In so far as Mrs HCs differential treatment arises from her status as a third country national, she can have no complaint. So far as concerns her Zambrano status, that is a creation of European law, and such differences of treatment as there are, as compared to other categories of resident, do no more than reflect the law by which the status is created. In any event, the Strasbourg court has long accepted that the allocation of limited public funds in the social security and welfare context is pre eminently a matter for national authorities, subject only to the requirement that their decisions should not be manifestly without reasonable foundation (see R (MA) v Secretary of State for Work and Pensions (Equality and Human Rights Commission intervening) [2016] 1 WLR 4550, para 32 per Lord Toulson). The governments reasons for not providing support to Zambrano carers, as explained in the evidence of Mr Gareth Cooper, included the objectives of reducing costs by allocating benefits to those with the greatest connection with this country, of encouraging immigrants here unlawfully to regularise their stay, of encouraging TCNs wishing to have children here to ensure that they had sufficient resources to support themselves and their children, and of reducing benefits tourism. Like Arden LJ in the Court of Appeal (para 96) in spite of criticisms made by Mr Drabble, I find it impossible to say that these objectives fall outside the wide margin of discretion allowed to national governments in this field. Section 17 As I have said, no issue arises in this appeal as to the scope of the local authoritys duties under section 17 of the Children Act 1989, and we have heard no argument upon them. However, it has emerged as an important aspect of the governments response to Zambrano principle, which may not have been anticipated at the time that the amending regulations were being prepared. There is no indication that it was the subject of discussion between central and local government at that time. Mr Cooper does no more than refer to the actions taken by the Oldham Borough Council, as the responsible local authority under that Act. He does not suggest that section 17 formed any part of the governments thinking when preparing the regulations, or of any impact assessment then carried out. Nor have we heard any submissions from the Oldham Borough Council itself. However some brief comment may be appropriate. Section 17(1) imposes a general duty on local authorities: to safeguard and promote the welfare of children within so far as is consistent with that duty, to promote the (a) their area who are in need; and (b) upbringing of such children by their families, by providing a range and level of services appropriate to those childrens needs. The services so provided may include providing accommodation and giving assistance in kind or in cash (section 17(6)). A child is taken to be in need for this purpose if (inter alia) he is unlikely to achieve or maintain, or to have the opportunity of achieving or maintaining, a reasonable standard of health or development without the provision for him of services by a local authority under this Part. (section 17(10)) More detailed provision as to how that duty is to be carried out is contained in Schedule 2 to the Act. Also relevant is section 11 of the Children Act 2004, which requires local authorities to make arrangements to ensure that their functions are discharged having regard to the need to safeguard and promote the welfare of children (section 11(2)(a)); and in so doing to have regard to any guidance given to them for the purpose by the Secretary of State (section 11(4)). The scope of the section 17 duty was considered by the Court of Appeal in R (C) v London Borough of Southwark [2016] EWCA Civ 707; [2016] HLR 36. That case concerned assistance provided to children of a Nigerian mother following the refusal of leave to remain, and pending their return to Nigeria. The court rejected, on the evidence, a claim that the authority had applied an unlawful policy of setting financial support by reference to levels of child benefit, or to amounts paid by the Secretary of State to asylum seekers, rather than by way of assessing their actual needs. In the leading judgment Ryder LJ described the duty in these terms: 12. It is settled law that the section 17 scheme does not create a specific or mandatory duty owed to an individual child. It is a target duty which creates a discretion in a local authority to make a decision to meet an individual child's assessed need. The decision may be influenced by factors other than the individual childs welfare and may include the resources of the local authority, other provision that has been made for the child and the needs of other children Accordingly, although the adequacy of an assessment or the lawfulness of a decision may be the subject of a challenge to the exercise of a local authoritys functions under section 17, it is not for the court to substitute its judgment for that of the local authority on the questions whether a child is in need and, if so, what that child's needs are, nor can the court dictate how the assessment is to be undertaken 14. A local authority that provides support for children in need under the 1989 Act is acting under its powers as a childrens services authority (a local social services authority with responsibility for children) not as a local social services authority performing functions relating to homelessness and its prevention, and not as a local housing authority. The limited nature of the local authority's power is important. The local authority appropriately remind this court of the statement of principle in this regard which is to be found in R (Blackburn Smith) v London Borough of Lambeth [2007] EWHC 767 (Admin) at para 36 per Dobbs J: the defendants powers [under section 17] were never intended to enable it to act as an alternative welfare agency in circumstances where Parliament had determined that the claimant should be excluded from mainstream benefits. As that judgment makes clear, section 17 is designed to cover a wide range of circumstances in which a local authority may need to take action to protect the interests of children in their area, temporary (as in that case) or more long lasting. The duty arising in the present context is perhaps unusual in that arises from a responsibility imposed by EU law on member states. It is also likely to continue so long as no other sources of support are available to the child. On the view I have taken the allocation of responsibility for that support, as between central and local government, is an issue of national rather than EU law. However, that does nothing to diminish the importance of the duty. It must always be remembered that the primary objective is to promote the welfare of the children concerned, including the upbringing of such children by their families. The assessment of need must remain the responsibility of the local authority (as Ryder LJ made clear), but, given that this is a national responsibility, it is clearly desirable that there should be a degree of consistency as between authorities. The legislation allows for the provision of national guidance. Judicial review is available as a backstop, but it is likely to be unsatisfactory for the levels of appropriate support to be left for determination by the individual authorities on a case by case basis, subject only to control by the courts by reference to conventional Wednesbury principles. On this aspect I agree also with the observations of Lady Hale at paras 43 46 of her judgment. Conclusion For the reasons given above, which are substantially the same as those of the Court of Appeal, I would dismiss the appeal. LADY HALE: I have found this a very troubling case. It is not a case about adults rights. It is a case about childrens rights specifically the right of these two very young British children to remain living in their own country and to have the support which they need in order to enable them to do so. Self evidently they need the support of their mother in the shape of the care which she is able to give them. But they also need support in the shape of a place to live and enough to live on. Yet this is not the way in which the policy makers who framed the various Regulations which are under attack in these proceedings saw the matter. They saw it solely in terms of the mother and other Zambrano carers like her, as third country nationals who should be put in the same position as any other third country national. Third country nationals are not, in general, entitled to income related benefits; and so (as Mr Gareth Cooper explains) the Department for Work and Pensions extended this rule to Zambrano carers. Third country nationals are only entitled to be allocated social housing or given homelessness assistance if this accords with the Governments immigration and asylum policy, broadly only if they have leave to enter or remain without a condition that they have no recourse to public funds; and so (as Ms Frances Walker explains) the Department for Communities and Local Government excluded Zambrano carers from eligibility. Third country nationals are only entitled to child benefit and child tax credits in broadly the same circumstances; and so (as Mr Phillip Dearne explains) Her Majestys Revenue and Customs excluded them from eligibility. Yet Zambrano carers are not like any other third country nationals. They have British (or other EU citizen) children dependent upon them. That is why, because of the Zambrano decision, the Immigration (European Economic Area) Regulations 2006 (SI 2006/1003) had to be amended to give them the right to live and work here. There is not a hint in the evidence which we have seen that any consideration was given to how these children would be supported if the parent looking after them was unable to work, whether because of the demands of child care or for any other good reason. We are told that the Department of Work and Pensions consulted the local government associations about the exclusion from benefits and the associations made no objection. We do not know whether it had occurred either to central or to local government that (unless there was family or charitable support) the only way in which these children could escape destitution was through the powers of local childrens services authorities under section 17 of the Children Act 1989. If that had been made clear, one imagines that the local government associations might well have expressed some concern about the transfer of this responsibility to them without some corresponding transfer of the considerable sums entailed in discharging this responsibility properly. Section 17 empowers and obliges local authorities to provide a range of services to safeguard and promote the welfare of children in need and, so far as is consistent with that duty, to promote their upbringing by their families. It is a development of a duty dating back to the Children and Young Persons Act 1963 to provide families with help in order to avoid the need for children to be taken into care or looked after by the local authority. It was not intended to be a long term substitute for social housing or means tested benefits. Fortunately, however, section 17(6) provides that The services provided by a local authority in the exercise of functions conferred on them by this section may include providing accommodation and giving assistance in kind or in cash. As originally enacted, cash could only be provided in exceptional circumstances, but those words were repealed in 2011, under powers granted by the Children and Young Persons Act 2008. Section 17 services have the great merit of flexibility. They can be adjusted to the needs of the particular child or family. They may well be in addition to the benefits and services to which the family are entitled under other legislation and thus may provide assistance at a higher level than that. But they have several disadvantages when compared with the benefits and services from which these children and their carers are excluded. First, they depend upon the local authority considering that the child is in need as defined in section 17(10) and (11) (see para 34). This is a judgment to be made by the local authority subject only to judicial review on the usual principles. Second, they are discretionary and not as of right to those who qualify. Indeed, it has been held that (unlike the duty to accommodate a child in section 20 of the 1989 Act) the section 17 duty is a target duty rather than a duty owed to any individual child. Third, there are no standard rates for assistance in cash, as there are with state benefits generally, with the consequent risk of inconsistency between authorities. Fourth, providing assistance in cash does not automatically bring with it entitlement to other assistance, such as free school meals, to which receipt of certain benefits is a passport. Fifth, the only way in which a family can seek to challenge the local authoritys decision is through judicial review, which is far more limited in scope and accessibility than an appeal to the social entitlement chamber of the First tier Tribunal. Thus, according to the mothers evidence, when she approached the local authority for the area where she was living with her husband, she was given her train fare to travel north to the area where her sister and family were living. This is a typical use of section 17 money. When she approached the local authority for that area, because her sister could not house and feed her and her child and her expected second child indefinitely, she was at first refused. But eventually she was offered one room in a local hotel and 45 per week in cash. That is how things stood when these proceedings were launched in July 2013. The local authority then reassessed the childrens needs and (through their Head of Safeguarding, Mr Saul Ainsworth) offered them two bedroomed accommodation of the sort which would be offered to a family who may be eligible for homeless accommodation and in effect to discharge her council tax liability; 55 a week for subsistence, based on the UK Border Agencys figures for the amount needed to meet the needs of one adult and two children under three (as they then were); and 25.50 a week for gas, electricity and water, based on local inquiries. The annual cost of this package was estimated at 11,368.76, while the local authoritys annual budget for section 17 support was 12,000 (which is an indication that it is not expected to be used to provide long term income support). It was on that basis that, on 1 August 2013, the proceedings against the local authority were stayed while the proceedings against the Department of Work and Pensions, the Department for Communities and Local Government and Her Majestys Revenue and Customs, challenging the various regulations, continued. We are told that that is still the position today, although of course the local authority may carry out a further review of the childrens needs, especially as they are older now, and will no doubt have to do so if these proceedings are concluded in the Governments favour. In carrying out that review, the local authority will no doubt bear in mind, not only their duties under section 17, but also their duty under section 11 of the Children Act 2004, to discharge all their functions having regard to the need to safeguard and promote the welfare of children, and their duty, under section 175 of the Education Act 2002, to exercise their education functions with a view to safeguarding and promoting the welfare of children. Safeguarding is not enough: their welfare has to be actively promoted. The authority will no doubt take into account that these are British children, born and brought up here, who have the right to remain here all their lives; they cannot therefore be compared with asylum seeking children or the children of asylum seeking parents, who may end up with no or only a limited right to remain. They will no doubt also wish to take into account the impact upon the proper development of these children of being denied a level of support equivalent to that of their peers, that is, the other British children around them whose families are dependent on income related benefits. That level of support is not fixed at a level designed to lift children out of poverty, as officially defined, but at a level much closer to subsistence. The above is, of course, premised on the dismissal of this appeal. Zambrano and the later cases say nothing about entitlement to benefits, but they do recognise that the children are dependent upon their parents, not just for care, but also for financial support, at least if it is derived from the parents ability to work. The situation of Zambrano carers and their children does not fall within the European Union legislation on access to social security and other welfare benefits. All that Zambrano requires is that the children are not effectively deprived of their rights as European citizens by the situation in which they find themselves. Section 17 support, at least if it is determined giving due weight to the factors suggested above, should be sufficient to ensure that they are not effectively deprived of their rights as British and European citizens. So the questions of EU law which arise are, first, does the Charter of Fundamental Rights apply, and second, what difference, if any, would it make if it did? By article 51 of the Charter, its provisions are addressed to the member states only when they are implementing Union law. The change to the 2006 Immigration Regulations, allowing Zambrano carers to live and work here, was of course implementing Union law. But were the changes to the Regulations at issue here doing so? They were in consequence of a development in Union law, but they were not implementing it in fact, quite the reverse. Supposing that there had been no fall back in the shape of section 17, this could well have been a failure to implement Union law, leaving these children and their carers without support in this country and thus effectively obliging them to leave. But there is section 17, and in my view it is the administration of section 17 which could be said to be implementing Union law, by enabling these children to remain living in this country. Assuming for the moment, without deciding, that the Charter can apply, not only to domestic legislation which implements Union law but also to domestic administration which does so, what difference would the Charter make in this context? Article 24(1) requires that Children shall have the right to such protection and care as is necessary for their well being; section 17 of the 1989 Act is designed as a way of doing this. Article 24(2) requires that In all actions relating to children, whether taken by public authorities or private institutions, the childs best interests must be a primary consideration. This obligation is obviously derived from article 3(1) of the United Nations Convention on the Rights of the Child, as was the obligation in section 11 of the 2004 Act. Properly understood, they should amount to the same thing. By article 21(1) of the Charter, Any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited. The discrimination complained of here is between two types of British citizen child the child who is being cared for by a third country national with only Zambrano carers rights to be here, and the child who is being cared for by a parent (or anyone else) who is entitled to claim income related benefits, child benefit and child tax credit, and to seek social housing and homelessness assistance. In general, of course, member states are entitled to draw distinctions between different categories of their own citizens, as long as these are not based on the listed personal characteristics. But, at a stretch, it might just be possible to regard this as a ground such as those listed. If that were so, I am not impressed by the justifications given by the respondents witnesses. These were justifications for exclusion from mainstream benefits. They were addressed to the parents, viewed as third country nationals rather than Zambrano carers, and not to the children. A child focussed approach would have been quite different. Thus the first aim, allocating benefits to those with the greatest connection with this country, would obviously include allocating benefits to British children who were born here and have lived here all their lives. The second aim, of strengthening immigration control, is irrelevant to children who are not subject to it. Their Zambrano carers are only here to support them and for a long as they need that support. A third aim, of saving money, is less than compelling, given that what has in fact happened is a transfer of responsibility from one arm of government to another. As we have seen, the sums involved for a local authority such as this one are not negligible. But if there is a need to avoid discrimination against the children of Zambrano carers, this merely reinforces my view of what local authorities should be taking into account when making their decisions about the level of support to be provided under section 17. Section 17 is one way of providing these children with what they need and deserve. That fact that there are other, and in some respects preferable, ways of doing so does not mean that the United Kingdom is in breach of its obligations under EU law. But no doubt local authorities would welcome some guidance on how they should meet their responsibilities to children with Zambrano carers (and even some help in doing so). For these reasons, I agree that there is no question to be referred to the Court of Justice of the European Union and this appeal should be dismissed. |
It was not until the end of the last century that those who were thinking about the reform of the law in Scotland paid any attention to the problems created when men and women decide to live together without getting married. The traditional approach was that nothing short of marriage would create rights in each others property in the event of death or separation. But entering into a regular marriage, with all the formalities that this involved, was not essential. As every student of Scots law knows, the common law recognised three ways in which an irregular marriage could be constituted: by declaration de praesenti; by a promise to marry subsequente copula; and by cohabitation with habit and repute. The first two were abolished by the Marriage (Scotland) Act 1938. The third survived until it too was abolished by section 3 of the Family Law (Scotland) Act 2006. Irregular marriages had to be proved, however. So a form of action was devised for this purpose. Either of the parties could bring proceedings for declarator of marriage, even after the death of the other party. The declarator was a judgment in rem. Its effect was to provide conclusive proof that a marriage had been constituted, and it was binding on all persons whomsoever: Longworth v Yelverton (1867) 5 M (HL) 144, per Lord Chancellor Chelmsford at 147. There were various reasons why such an order might be sought. Usually it was to obtain the benefit of the property rights that were enjoyed by the parties to a regular marriage. Before the law on legitimacy was reformed it was used to enable the children of the relationship to obtain the rights that were conferred on the children of a marriage too. Very occasionally, when it was still the practice for undefended actions of divorce to be heard in the Court of Session, the unremitting diet of divorce proofs would be varied by an action for declarator of marriage which the other party did not wish to defend. But the opportunity of proving a marriage by cohabitation with habit and repute was of use only to those who had the capacity to marry, were free to do so and were content to live together as husband and wife. It was not available to cohabiting couples who had deliberately chosen not to marry. And couples who had not made that choice but had made no effort to pretend that they were married to each other were unlikely to be able to produce evidence of habit and repute to show that they were living together as husband and wife. It was an unsatisfactory system, as many people who had committed themselves to a relationship as cohabiting couples and were under the impression that their relationship was one of common law marriage were unable to meet the legal requirements of the common law. Social attitudes were changing too, and pre marital cohabitation was becoming the norm. One of the recommendations in the Scottish Law Commissions Report on Family Law (Scot Law Com No 135) (6 May 1992) was that this form of irregular marriage should be abolished, as it was anomalous: recommendation 42. It addressed the issue of cohabitation in Part XVI of the same report. This issue had been the subject of a discussion paper issued two years previously: The Effects of Cohabitation in Private Law (Discussion Paper No 86, May 1990). In para 16.1 of its Report the Scottish Law Commission said that the results of its consultation, and of a survey of public opinion, had confirmed it in its view that there was a strong case for some limited reform of Scottish private law to enable certain legal difficulties faced by cohabiting couples to be overcome and to enable certain anomalies to be remedied. It accepted, however, that legal intervention in this area, as to which widely differing views were held, ought to be limited. There was a respectable body of opinion that it would be unwise to impose marriage like legal consequences on couples who had deliberately chosen not to marry. The reform ought not to undermine marriage, nor should it undermine the freedom of those who had deliberately opted out of marriage. It went on to say that the presumption of equal sharing of household goods acquired during marriage under section 25(2) of the Family Law (Scotland) Act 1985 should, in a case of cohabitation, be modified. A comprehensive system of financial provision on termination of cohabitation comparable to the system of financial provision on divorce on principles analogous to those in sections 9(1)(d) or 9(1)(e) of the 1985 Act was not favoured. That would be to impose a regime of property sharing, and in some cases, continuing financial support on couples who might well have opted for cohabitation to avoid such consequences: para 16.15. But the principle in section 9(1)(b), which enables fair account to be taken of any economic advantage derived by either party from contributions by the other, and of any economic disadvantage suffered by either party in the interests of the other party or the family could be applied, quite readily and appropriately, to cohabitants: para 16.18. A similar approach was taken to the question whether a surviving cohabitant should succeed on intestacy to his or her deceased partners estate. A discretionary system, to enable the court to take account of all the circumstances of the relationship, would be preferable to any fixed rules. These proposals were summarised in recommendations 80 to 83, and a draft Bill was appended to the Report. Part III of the Bill dealt with cohabitation. More than 10 years were to pass, however, before legislation was introduced to give effect to these recommendations. In the meantime the trend for couples to prefer cohabitation rather than marriage had increased. It was estimated that, of families by type of family in Scotland, the percentage of cohabiting couple families had increased from 4% in 1991 to 7% in 2001, and that the percentage of married couple families had decreased from 50.7% in 1991 to 42.5% in 2001: Legal of May 2010): Practitioners Perspectives on the Cohabitation Provisions of the Family Law (Scotland) Act 2006 (Centre for Research on Families and Relationships, University see Edinburgh, http://www.crfr.ac.uk/reports/Cohabitation%20final%20report.pdf. This is a trend which can be expected to have continued. In March 1999 the Scottish Office Home Department issued a Consultation Paper entitled Improving Scottish Family Law. But the opportunity to bring the Scottish Law Commissions proposals into law did not present itself at Westminster during the period prior to the coming into effect of the Scotland Act 1998. The process of consultation was then taken up by the Scottish Executive, and on 7 February 2005 a Bill which became the Family Law (Scotland) Act 2006 was introduced by the then Minister for Justice, Cathy Jamieson. It was considered by, among others, the Justice 1 Committee whose Stage 1 Report was published on 7 July 2005. In accordance with the normal procedure the Deputy Minister of Justice, Hugh Henry, provided a detailed written response to the issues raised by the Committee in August 2005. The Stage 2 procedure then followed, and there was a debate in the Parliament on 15 December 2005 when the Bill was passed. The Family Law (Scotland) Act 2006, asp 2, received its Royal Assent on 20 January 2006. This appeal is concerned with the meaning and effect of section 28 of the 2006 Act. It provides that a cohabitant can apply to a court for financial provision when the cohabitation has ended otherwise than by the death of one of the cohabitants. The drafting of this section was much criticised while it was undergoing Parliamentary scrutiny, and the questions that it raises are not free from difficulty. The facts The appellant, Mrs Gow, met the respondent, Mr Grant, in 2001 at a singles club which they had both joined. Mrs Gow, who was born on 2 January 1937, was then about 64. Mr Grant, who was born on 18 December 1943, was about 58. They commenced a relationship, and in about December 2002 Mr Grant asked Mrs Gow to live with him at his home in Penicuik. Mrs Gow agreed to do so if they became engaged to be married, which they then did. They lived together as husband and wife and engaged in an active social life together from June 2003 to January 2008, when their relationship came to an end. When the parties met they each owned their own home and they were each in employment. Mrs Gow owned a studio flat in Edinburgh which was subject to an interest only mortgage, of which 11,876 was outstanding in December 2002. Mr Grant owned a three bedroom house in Penicuik which was free of any mortgage. He encouraged Mrs Gow to sell her flat. Indeed, as Sheriff Mackie who conducted the proof put it in para 4 of her note, her evidence, which the sheriff accepted, was that he was adamant that she should do so. Mrs Gow, as the owner of the property, dealt with the legal and practical aspects of the sale. But Mr Grant discussed the sale with her and gave her advice, particularly as to the price at which the property should be offered. The sheriff held that there was no evidence that Mrs Gow was forced to sell the flat because she was in financial difficulties. She accepted that Mrs Gow sold the property in the interests of furthering her relationship with Mr Grant. The flat was sold in June 2003 for 50,000, from which Mrs Gow received a net sum after repayment of the mortgage and expenses of 36,559. She used the money to repay various debts, including credit card debts and the balance of the cost of a new kitchen, amounting in total to 14,133. She invested 5,000 in a guaranteed investment account and 5,000 in a Sterling Investment Bond, and she loaned 4,000 to her son. The balance of 8,425 was contributed by Mrs Gow to her relationship with Mr Grant, as it was used towards the parties living expenses. Mr Grant was able to continue to live in his own house when the parties relationship came to an end. It was worth about 200,000 in June 2003. Mrs Gow continued to live in Mr Grants home until she obtained rented accommodation in June 2009. The sheriff found that the value in July 2009 of the flat which had formerly belonged to her was 88,000. The difference between that figure and the price at which the flat was sold in June 2003 was 38,000. Mrs Gow was employed as an audio typist until the parties began living together. Her contract came to an end in May 2003, and at Mr Grants request she did not seek further work. She was in receipt of an occupational pension and a state pension amounting in total to about 640 per month. Mr Grant was employed part time as a lecturer at Jewel & Esk Valley College. He was also in receipt of a widowers pension from the Bank of Scotland in excess of 600 per month. He stopped working as a lecturer in 2006, and obtained part time work as a courier. During their cohabitation the parties purchased two timeshare weeks in their joint names, each of which cost 7,000. Mrs Gow paid 1,500 towards the first week, and in about July 2005 she surrendered her Sterling Investment Bond and used the proceeds together with other funds to pay the whole price of the second week. In about 2006 her guaranteed investment account matured in the sum of about 6,000. She spent 2,000 on paintings, two of which she gave to Mr Grant, and spent 1,000 on a holiday. The balance of the proceeds was used towards the parties day to day expenses. In consequence of the position in which she found herself when the cohabitation came to an end Mrs Gow brought an action against Mr Grant in the Sheriff Court in Edinburgh, in which she sought payment of a capital sum in terms of section 28 of the 2006 Act. It was not disputed that the parties were cohabitants in terms of section 25 of the Act, which provides that the word cohabitant means, in the case of two persons of the opposite sex, a man and a woman who are, or were, living together as if they were husband and wife. Mr Grant maintained, however, on various grounds that Mrs Gow was not entitled to any payment under section 28. Section 28 of the 2006 Act Section 28(1) provides that subsection (2) of that section applies where cohabitants cease to cohabit otherwise than by reason of the death of one (or both) of them. Subsections (2) to (6) are in these terms: (2) On the application of a cohabitant (the applicant), the appropriate court may, after having regard to the matters mentioned in subsection (3) (a) make an order requiring the other cohabitant (the defender) to pay a capital sum of an amount specified in the order to the applicant; (b) make an order requiring the defender to pay such amount as may be specified in the order in respect of any economic burden of caring, after the end of the cohabitation, for a child of whom the cohabitants are the parents; (c) make such interim order as it thinks fit. (3) Those matters are (a) whether (and, if so, to what extent) the defender has derived economic advantage from contributions made by the applicant; and (b) whether (and, if so, to what extent) the applicant has suffered economic disadvantage in the interests of (i) the defender; or (ii) any relevant child. (4) In considering whether to make an order under subsection (2)(a), the appropriate court shall have regard to the matters mentioned in subsections (5) and (6). (5) The first matter is the extent to which any economic advantage derived by the defender from contributions made by the applicant is offset by any economic disadvantage suffered by the defender in the interests of (a) the applicant; or (b) any relevant child. (6) The second matter is the extent to which any economic disadvantage suffered by the applicant in the interests of (a) the defender; or (b) any relevant child, is offset by any economic advantage the applicant has derived from contributions made by the defender. Subsection (4), (5) and (6) were inserted into the draft Bill at Stage 2 of the proceedings in the Parliament. In subsection (9) the expressions contributions and economic advantage are defined. Contributions includes indirect and non financial contributions. Economic advantage includes gains in capital, income and earning capacity; and economic disadvantage is to be construed accordingly. The same expressions, together with the phrase in the interests of, appear in section 9(1)(b) of the Family Law (Scotland) Act 1985. But the wording of that provision, which sets out one of the principles which the court is to apply in deciding what order for financial provision to make on divorce, is not the same as that used in section 28(5) and (6) of the 2006 Act. Section 9(1)(b) states that fair account is to be taken of any economic advantage and disadvantage, whereas the extent of the economic advantage and disadvantage mentioned in section 28(5) and (6) are matters to which section 28(4) says the court is to have regard in considering whether to make an order under section 28(2)(a). Nor is the context, as one of the principles to be applied on divorce is that the net value of the matrimonial property should be shared fairly between the parties to the marriage and the sharing is to be taken to have been fair if the property is shared equally: sections 9(1)(a) and 10(1) of the 1985 Act. Section 28 requires the court to conduct an entirely different exercise. The proceedings below The sheriff delivered her judgment on 7 December 2009: 2010 Fam LR 21. She observed in para 39 of her note, at the outset of her discussion of the issues, that the approach which she required to adopt was not the same as under section 9(1)(b) of the 1985 Act, as there was no matrimonial property to be divided fairly between the parties. Concentrating on the language of section 28 in para 41, she noted that section 28 says that the court may make an order in terms of section 28(2) after having regard to the matters mentioned in section 28(3)(a) and (b). So the court had a discretion to make an order, and a precise calculation of loss did not require to be made. It was significant that the court was not directed to make a fair division of property acquired during or for the purpose of cohabitation. Having regard to section 28(3)(a), the sheriff said in para 48 that she was satisfied that Mrs Gow had contributed financially to the parties expenditure during the period of cohabitation, and that Mr Grant had also derived an economic advantage from her non financial contribution in looking after the house in which the parties cohabited and in other ways. She then had to consider under section 28(5) the extent to which the economic advantage enjoyed by Mr Grant had been offset by economic disadvantage suffered by him in the interests of Mrs Gow. It appeared to her that there was no evidence that he had suffered any such economic disadvantage: para 55. As for section 28(3)(b), the sheriff said in para 56 that she was satisfied on the evidence that Mrs Gow had suffered economic disadvantage in the interests of Mr Grant. She accepted Mrs Gows evidence that the only reason that she sold her house was as a result of Mr Grants encouragement and in the interests of furthering the relationship. She also accepted her evidence that had she not embarked on a new life with Mr Grant she would have continued to maintain her own property and would have continued to work to enable her to do so. As a result of the sale she had lost her principal capital asset, required now to live in rental accommodation and was unlikely to be able to afford to purchase another property. She had enjoyed the benefit of a substantial amount of the sale proceeds, but the balance of 8,000 had been contributed to the parties relationship. As the value of her flat was 88,000 in July 2009, she had suffered economic disadvantage in the interests of Mr Grant to the extent of 38,000, which was the difference between the sale proceeds and the flats current value: para 59. Although the parties owned the two weeks timeshare jointly, Mrs Gow had paid more than 50% of the price. She had suffered economic disadvantage in the interests of Mr Grant to the extent of 1,500 in the acquisition of these assets: para 60. Turning lastly to section 28(6), the sheriff examined the question whether any economic disadvantage suffered by Mrs Gow in the interests of Mr Grant was offset by any economic advantage derived by her from contributions made by Mr Grant. It was not disputed that he had made various contributions, financial and non financial, to the relationship. But in her opinion such contributions as were made were not sufficient to offset the economic disadvantage suffered by Mrs Gow in the interests of Mr Grant: para 65. Her conclusion, having regard to the matters to which she was directed to have regard by the statute, was that there was a net economic disadvantage in favour of Mrs Gow, and that she should be compensated in the sum of 39,500. Mr Grant appealed against the sheriffs decision to the Inner House of the Court of Session. The appeal was heard by the Second Division (the Lord Justice Clerk (Gill), Lord Mackay of Drumadoon and Lord Drummond Young), and the opinion of the court was delivered by Lord Drummond Young on 22 March 2011: [2011] CSIH 25, 2011 SC 618. The appeal was allowed and Mrs Gows application for an award of a capital sum was refused. Lord Drummond Young noted in para 3 of his opinion that there had been a number of cases which disclosed varying and contradictory approaches to the construction of section 28. But he said that it was not necessary for present purposes for the court to express any view on the detailed issues that arose in them, nor was it necessary for it to express any general view as to the construction of section 28. He did however make two observations. First, in contrast to the scheme in sections 8 to 10 of the 1985 Act as to the rights of a spouse on divorce, the financial provision which the court was permitted to make by section 28 was in the nature of compensation for an imbalance of economic advantage or disadvantage. Secondly, the court had to have regard to the precise wording of the section, and it must be satisfied that the requirements set out in the section are satisfied on the evidence. The difficulties would be minimised if it was recognised that the objective of the section was limited in scope. It was intended to enable the court to correct any clear and quantifiable economic imbalance that might have resulted from cohabitation. After summarising the findings of fact and the crucial part of the sheriffs reasoning, Lord Drummond Young said in para 9 that the court was of the opinion that the sheriffs award was not justified by her findings of fact. Three reasons for this conclusion are set out in that paragraph. First, what was required by the phrase in the interests of in section 28(3)(b) was that the applicant should suffer an economic disadvantage in a manner intended to benefit the defender. In the present case all that the findings of fact indicated was that Mrs Gow was encouraged to sell her house. The proceeds were then used either for her own purposes or to meet the parties joint living expenses. And the fact that the sale was encouraged by Mr Grant was clearly insufficient to draw the inference that the transaction was in his interests. Secondly, the fact that the sale was intended to further the parties relationship was insufficient to justify the conclusion that it was in the defenders interests. These two matters appeared to the court to be conceptually quite distinct. Thirdly, to the extent that Mrs Gow might be said to have suffered an economic disadvantage in relation to the timeshares, it was plainly offset by the economic advantage that Mrs Gow derived from Mr Grants contributions towards joint living expenses. The issues The parties are agreed that the decision of the Inner House raises the following issues: (i) Is an intention to benefit the other cohabitant a necessary element of the requirements of section 28(3)(b) and (6)? (ii) Is it necessary for the applicant to establish that the defender derived actual economic benefit as a result of economic disadvantage suffered by the applicant? (iii) Must any benefit so conferred be in the interests of the defender alone, or may it be of benefit to both parties? (iv) Whether, if relevant economic disadvantage is established which is not offset by relevant economic advantage, the court has a discretion as to the amount of any award, and the extent of any such discretion. For Mr Grant it was submitted that, having regard to the ordinary meaning of the text of section 28, an intention to benefit the other cohabitant is essential for a claim under that section to succeed. It was also submitted that, for a claim under that section based on economic disadvantage to succeed, it is necessary for the applicant to establish that, as a result of economic disadvantage suffered by the applicant, the defender has derived economic benefit. It was accepted that the words of the section are not apt to exclude a successful claim where both parties have benefitted from economic disadvantage suffered by the other. On the other hand, for a claim to succeed, it is not sufficient simply to establish economic disadvantage in the interests of the parties wider, non economic affairs, such as the nature of their relationship or other social or emotional concerns. The section requires the court to assess the net economic advantage or disadvantage derived or suffered by each party. Background In order to find an answer to these problems it is necessary to look more closely at the background to the legislation. What was the mischief that section 28 was designed to address? And what were the principles to which it seeks to give effect? As already mentioned (see para 5, above), the Scottish Law Commission rejected the concept of equal sharing where a relationship of cohabitation was terminated: Report on Family Law, para 16.15. On the other hand it recommended that a former cohabitant should be able to apply for a financial provision based on the principle in section 9(1)(b) of the 1985 Act. The existing common law on unjustified enrichment did not provide a clear or certain remedy: para 16.17. The principle in section 9(1)(b), on the other hand, could be applied, quite readily and appropriately, to cohabitants. The argument for doing so was that it would be unfair to let economic gains and losses arising out of contributions or sacrifices made in the course of a relationship simply lie where they fell. Applying it would give them the benefit of a principle which was designed to correct imbalances arising out of a non commercial relationship where parties are quite likely to make contributions or sacrifices without counting the cost or bargaining for a return: para 16.18. The formula which is set out in section 9(1)(b) was adopted in clause 36(2) of the draft Bill which was annexed to the Report. It provided: (2) The court shall make an award to the applicant in pursuance of an application under subsection (1) above only if it is satisfied (a) that the other former cohabitant has derived economic advantage from contributions by the applicant, or that the applicant has suffered economic disadvantage in the interests of the other former cohabitant or their children; and (b) that having regard to all the circumstances of the case it is fair and reasonable to make such an award. In para 16.20 the Commission observed that, although a claim based on contributions or sacrifices could often not be valued precisely, it would provide a way of awarding fair compensation, on a rough and ready valuation, in cases where otherwise none could be claimed. The Deputy Minister for Justice, Hugh Henry, commented on the provisions in the Bill relating to legal safeguards for cohabiting couples and their children in his response to the Justice 1 Committees Stage 1 Report on the Bill in August 2005. He said that it might be helpful if he clarified the policy principles that had informed the detailed drafting. The Executives view was that the function of the law in relation to cohabitants should be both protective and remedial. The law needed to provide a framework for a fair remedy when committed relationships founder or the parties to them are separated by death. Our focus in policy terms is therefore on those cohabiting relationships which offer some evidence of the parties commitment to a joint life. It is that evidence that justifies a remedial intervention by law, the allocation of rights and obligations by the parties towards one another, and the redistribution of certain of their property. At the same time, however, we think it would be wrong to impose on cohabitants a legal requirement to support one another financially during the relationship: we can never know why people have not married and chosen not to incur that responsibility and in the absence of such knowledge we believe an obligation of mutual aliment would be unjustifiable. Our sense of a fair and just outcome when committed relationships come to an end involves setting a framework for compensation where one partner can show that they have suffered net economic disadvantage in the interests of the relationship. Reference to Parliamentary material has, of course, become commonplace since the previous rule that excluded this was relaxed by Pepper v Hart [1983] AC 593, and the rather strict rules that were laid down in that case have become gradually more relaxed. It remains the case that this approach should be used only where the legislation is ambiguous, and then only with circumspection. When it is used, however, the purpose of the exercise is to determine the intention of the legislator. The Deputy Ministers remarks were set out in a letter. They were not made orally in the course of a debate in the Committee or in the Parliament. But I do not think that this, in itself, is a reason for excluding reference to them. It is the normal procedure for Ministers to provide the relevant committee with a letter setting out the governments views in response to issues raised by the committee in its Stage 1 Report. This is the kind of thing that is done orally under the procedures which are familiar in the case of the Parliament at Westminster. The Scottish Parliament has devised a different system of procedure, but that should not inhibit reference to written material of this kind that may be of assistance. In my opinion the Deputy Ministers letter is as much a guide as to the intention of the legislator as if its contents had been set out in a statement made by him to the Justice 1 Committee orally. When the Bill was debated in the Parliament on 15 December 2005 the Minister for Justice, Cathy Jamieson, said that the Executive had been at pains to ensure two things (Official Report, col 21922): first, that any financial award that the courts make to an applicant addresses the net economic disadvantage that the person may face as a direct result of joint decisions that were made by the couple during the relationship; and secondly, that the economic burden of caring for a child that cohabitants have had together is shared until the child is 16. Later in the same contribution which she made to the debate, referring to what is now section 28 of the Act, she said (ibid): Cohabitants are under no legal obligation to aliment each other during their relationship, so there is no reason that we should seek to ensure that they do so when the relationship is over. However, it is important to achieve fairness. That is why we have adopted the provisions set out in section 21. Those provisions will ensure that one partner compensates the other for any net economic disadvantage that has resulted from the relationship that they formed together and that they will share the cost of caring for their children. We believe that that offers fairness to both parties, while respecting their rights to live as they choose without the Government imposing other financial obligations. Common to all these statements is an emphasis on fairness to both parties. This is the principle that lies at the heart of the award that the court is able to make under this section. The words fair and reasonable which were in clause 36(2)(b) of the Scottish Law Commissions draft Bill do not appear anywhere in section 28. It lacks any reference to fairness as the guiding principle. But the background shows that this is what was intended by the legislature. Section 28(2) tells the court that it may make the orders of the kind referred to in subsection (1) after having regard to the matters referred to in subsection (3), and the same phrase appears again in subsection (4). The purpose of this exercise must be taken to be to achieve fairness between both parties to the relationship in the assessment of any capital sum that the defender is to be ordered to pay to the other cohabitant. The same approach must be taken to the sharing of the economic burden of caring for any child of whom they are the parents. Fairness in the context of section 28 embraces a different concept than it does in the context of section 9(1) of the 1985 Act. Section 9(1)(a) states that one of the principles that the court must apply is that the net value of the matrimonial property should be shared fairly between the parties to the marriage. This provision must be read together with section 10(1), which states that in applying the principle which it sets out the net value of the matrimonial property shall be taken to be shared fairly when it is shared equally or in such other proportions as are justified by special circumstances. As Sheriff M G Hendry observed in F v D 2009 Fam LR 111, para 7, the rebuttable presumption at the stage of the dissolution of a marriage or civil partnership is that property will be shared fairly if it is shared equally. The rebuttable presumption at the end of cohabitation is that each party will retain his or her own property. In that context what section 28 seeks to achieve is fairness in the assessment of compensation for contributions made or economic disadvantages suffered in the interests of the relationship. The wording of subsections (3), (5) and (6) should be read broadly rather than narrowly, bearing in mind the point that the Scottish Law Commission made in para 16.18 that the principle in section 9(1)(b) of the 1985 Act which these subsections adopt was designed to correct imbalances arising out of a non commercial relationship where parties are quite likely to make contributions or sacrifices without counting the cost or bargaining for a return. As Lady Hale points out (see para 54, below), in most cases it is quite impracticable to work out who has paid for what and who has enjoyed what benefits in kind during the cohabitation, as people do not keep such running accounts and the cost of working things out in detail is quite disproportionate to the task of doing justice between the parties. Discussion The first point to be considered is whether section 9(1)(b) of the 1985 Act has any bearing on the way the matters referred to in section 28(3), (5) and (6) of the 2006 Act should be approached. The Second Division say in para 3 of their opinion that sections 8 to 10 of the 1985 Act have no bearing on the construction of section 28. This, as they observe in the same paragraph, is a matter on which varying and contradictory views have been expressed: contrast, for example, the Lord Ordinarys opinion in M v S [2008] CSOH 125, 2008 SLT 871, para 272, that the provisions, while not absolutely identical, are so similar as to make it clear that the Scottish Parliament must have intended the courts to approach them in the same way, with Sheriff K R W Hoggs observation in Jamieson v Rodhouse 2009 Fam LR 111, para 51 that they are of no assistance. In this case Sheriff Mackie said in para 39 of her note that, as there are no references in section 28 to fair and reasonable division and the Minister for Justice said during Stage 3 of the Bill that the provisions were not about seeking to replicate the financial arrangements between spouses and civil partners, there was force in the argument that one cannot adopt the same approach in its application as that to claims in terms of section 9(1)(b). It is, of course, true that section 28 does not seek to replicate the arrangements that are available for financial provision on divorce or the termination of a civil partnership. For this reason it would not be right to adopt the same approach to the application of that section as would be appropriate if the exercise was being conducted under section 9 of the 1985 Act. The starting points of principle are significantly different: Malcolm, Kendall and Kellas, Cohabitation (2nd edition, 2011), para 1 10. But it is sufficiently clear from the background to the enactment of section 28 that in its case too the underlying principle is one of fairness and that it is designed to correct imbalances of the kind referred to by the Scottish Law Commission in para 16.18 of its Report. The Deputy Minister for Justice referred to the Executives sense of a fair and just outcome: para 28, above. The Minister for Justice too said that it was important to achieve fairness, and that the Executive believed that the provisions offered fairness to both parties: para 30, above. As Sheriff A D Miller put it in Lindsay v Murphy 2010 Fam LR 156, para 58, the statutory purpose does no more than reflect the reality that cohabitation is a less formal, less structured and more flexible form of relationship than either marriage or civil partnership. I think therefore, contrary to the views expressed by the Second Division in para 3, that it would be wrong to approach section 28 on the basis that it was intended simply to enable the court to correct any clear and quantifiable economic imbalance that may have resulted from the cohabitation. That is too narrow an approach. As the Commission observed in para 16.20 of its Report, a claim based on contributions or sacrifices in non commercial relationships of the kind that family law must deal with cannot often be valued precisely. Section 9(1)(b) enables fair compensation to be awarded, on a rough and ready valuation, in cases where otherwise none could be claimed. Section 28 is designed to achieve the same effect. So it may be helpful to refer to cases decided under section 9(1)(b) when the court is considering what might be taken to be an economic advantage, disadvantage or contribution for this purpose or how the economic burden of caring for a child is to be dealt with under section 28(2)(b). An assessment of what is in the interests of any relevant child cannot sensibly be reduced to purely financial factors. The next point is directed to the meaning and effect of the phrase in the interests of the defender in section 28(3)(b) and (6). Lord Drummond Young said in para 9 of his opinion that the phrase requires that the applicant should suffer economic disadvantage in a manner intended to benefit the defender, and that the transaction in question must have been in that partys interests. That interpretation provided the basis for holding that the sheriff erred in making an award in this case. Her findings were that the sale of the house was encouraged by Mr Grant, that it was undertaken in the interests of furthering the relationship and that the proceeds were used in part to meet the parties joint living expenses. But this was held to be insufficient to show that it was intended by Mrs Gow to benefit Mr Grant. An intention to further the parties relationship did not justify the conclusion that the sale was in his interests. Here again, however, this is to take too narrow a view of the effect of these provisions. The phrase in the interests of the defender can be taken to mean in a manner intended to benefit the defender. But it does not compel that interpretation, and in the present context, where the guiding principle is one of fairness, its more natural meaning is directed to the effect of the transaction rather than the intention with which it was entered into. The reference to the defender at the end of the phrase does, of course, require that the disadvantage which the applicant suffered was in his interests. But it does not say that this must have been his interests only, or that the fact that it was in the applicants interests also means that it must be left out of account. Still less does it say that interests have to be equated with economic advantage or benefit. To adopt that interpretation does not fit easily with a relationship of this kind, where many decisions are taken jointly in its interests without counting the cost or bargaining for a return: see para 16.18 of the Scottish Law Commissions Report. Nor does it fit in with the reference to the interests of any relevant child in section 28(3)(b). I agree with the approach that Sheriff Principal R A Dunlop QC took to this problem in Mitchell v Gibson 2011 Fam LR 53, para 13. Provided that disadvantage has been suffered in the interests of the defender to some extent, the door is open to an award of a capital sum even though it may also have been suffered in the interests of the applicant. It seems to me, therefore, that the Second Divisions discussion of the sheriffs reasoning did not give effect to the true meaning and effect of sections 28(3)(b) and (6) of the 2006 Act. The sheriff was entitled to take the sale of the house into account, notwithstanding her findings that the proceeds were used by Mrs Gow for her own purposes or to meet the parties joint living expenses, that it was encouraged by Mr Grant and that it was in the interests of furthering the parties relationship. The question for her was whether, at the end of the exercise directed by the subsections, the applicant was left with some economic disadvantage for which an award might be made. But, as the sheriff said in para 45 of her note, it would be an unusual relationship if parties, from the commencement, proceeded to keep full and detailed accounts of their respective finances so that upon termination a mathematical calculation might be made of any contributions made, economic advantage derived or disadvantage suffered. The Second Division appear to have overlooked the sheriffs finding that the economic disadvantage that Mrs Gow suffered in the interests of Mr Grant was her loss of the benefit of the increase in value of her principal capital asset. They concentrated on Mrs Gows use of the proceeds as showing that the transaction was not, on their interpretation of sections 28(3)(b) and (6), intended to benefit Mr Grant and in his interests. The sheriff, for her part, accepted that Mrs Gow had had the benefit of a substantial amount of the sale proceeds. So she left the proceeds out of account in her assessment. But she had a discretion as to what order she should make. The overriding principle was one of fairness, rather than precise economic calculation having regard, as Lady Hale puts it in para 54, to where the parties were at the beginning of their cohabitation and where they were at the end. She was entitled to hold that the loss of the benefit of the increase in value was an economic disadvantage, and that it was suffered by Mrs Gow in the interests of her relationship with Mr Grant. As she noted in para 66 of her note, when the cohabitation ended Mrs Gow did not have a home whereas Mr Grant still had a home which had increased in value. I do not think that her conclusion that Mrs Gow should be compensated for that disadvantage can reasonably be criticised. There remains the sum that the sheriff awarded in relation to the acquisition of the timeshare. The Second Division held in para 10 of their opinion that it was unwarranted. Their reasons for doing so were not based on a finding that, in making this award, the sheriff erred in principle. They were based on their own analysis of the facts. Reference was made to the fact that the sum in question was relatively small in relation to the parties total expenditure and the fact that they enjoyed a relatively extravagant lifestyle, with both incurring substantial amounts of debt in order to fund it. Reference was also made to relative significance of the contributions made by one party to the other when set against their level of expenditure. It is clear, however, from the sheriffs note that this part of her award was arrived at after carrying out a careful analysis of all the facts. Section 28 leaves both the making of an award and the amount to be awarded to the discretion of the court. There must, of course, be a basis in fact for the decision that it takes. But, as Sheriff Principal Dunlop observed in Mitchell v Gibson, para 13, as with all discretionary decisions, the scope for interference by the appellate court is constrained according to well recognised principles. It is clear that it ought not to interfere with the decision of a judge in the exercise of his discretion unless it can be shown that he misdirected himself in law or failed to take account of a material factor or reached a result which was manifestly inequitable or plainly wrong: Gray v Gray 1968 SC 185, per Lord Guthrie at p 193; see also Little v Little 1990 SLT 785, 786. The making of an award under section 28 of the 2006 Act is as much a matter of discretion as it is under section 9 of the 1985 Act, and the same principles apply in its case too. I do not think that the Second Division were able to demonstrate in their reasoning that they had a proper basis for disturbing this part of the sheriffs award. Conclusion In my opinion the sheriffs approach to the issues with which she was faced in this case cannot be faulted. She based her conclusions on a careful analysis of all the issues that she was directed by section 28 to consider, and it was well within the band of reasonable decisions that were open to her. I would allow the appeal, recall the Second Divisions interlocutor and affirm the sheriffs finding in fact and law that the pursuer has suffered economic disadvantage in the interests of the defender to the extent of 39,500. LADY HALE (WITH WHOM LORD WILSON AND LORD CARNWATH AGREE) I agree that this appeal should be allowed for the reasons given by Lord Hope. I add a few words because there are lessons to be learned from this case in England and Wales. The first is that there is a need for some such remedy as this in England and Wales. In July 2007, the Law Commission published their report on Cohabitation: the financial consequences of relationship breakdown (Law Com No 307). They too rejected two of the principles which are applicable to financial relief upon the breakdown of a marriage: they would not impose upon unmarried couples the principle that marital assets should be fairly shared between them or that either should provide for the needs of the other. These reflect the concept of partnership and the responsibilities towards one another which are undertaken in marriage but not in setting up home together. But setting up home together may well result either in benefit to one party or in loss to the other for which it would be fair to expect some redress. Like the Scots, therefore, the Law Commission adopted a principle of compensation for the economic advantages and disadvantages resulting from the relationship, although the details of their scheme contained some important differences from the Scots. The Government had invited the Law Commission to undertake the project as a matter of some urgency and, unusually, the Report was produced without a draft Bill attached. In March 2008, however, the Parliamentary Under Secretary of State for Justice (Bridget Prentice) announced that the Government proposed to await the results of research into the Scottish scheme before deciding what to do. It was said then that the Scottish Executive intended to undertake research into the cost of such a scheme and its efficacy in resolving the issues faced by cohabitants when their relationships end. The Government therefore planned to extrapolate the likely cost in England and Wales of bringing into effect a similar scheme and the likely benefits it would bring (Hansard, HC Deb 6 March 2008, c122WS). While one can understand entirely that it is prudent to try to estimate the likely cost of any new legislation, it is much more difficult to understand how the benefits can be quantified. Nor can the benefits in England and Wales be directly compared with those in Scotland. The existing law relating to cohabitants property rights is quite different in England and Wales and has led to a good deal of litigation. It has twice recently had to be clarified by the highest court in the land (Stack v Dowden [2007] 2 AC 432, Jones v Kernott [2011] UKSC 53, [2011] 3 WLR 1121). There is some reason to think that a family law remedy such as that proposed by the Law Commission would be less costly and more productive of settlements as well as achieving fairer results than the present law. Be that as it may, there is, so far as I am aware, no published research commissioned by the Scottish Executive into the costs and benefits of the Scottish scheme. There is an important piece of research, by Fran Wasoff, Jo Miles and Enid Mordaunt, funded by the Nuffield Foundation, into Legal Practitioners Perspectives on the Cohabitation Provisions of the Family Law (Scotland) Act 2006 (2010), to which Lord Hope refers in paragraph 6 above. One message from that research was that the introduction of broadly similar provisions in England and Wales would not place significant additional demands on court and legal aid resources (CRFR research briefing 51). In September 2011, the Parliamentary Under Secretary of State for Justice Mr Jonathan Djanogly made the following announcement (Hansard, HC Deb 6 September 2011 cc15 16WS) : The findings of the research into the Scottish legislation do not provide us with a sufficient basis for change in the law. Furthermore, the family justice system is in a transitional period, with major reforms already on the horizon. We do not therefore intend to take forward the Law Commissions recommendations for reform of cohabitation law in this Parliamentary term. In the House of Lords, it became clear that the research referred to was the study by Fran Wasoff and her colleagues. Lord McNally emphasised, however, that (Hansard, HL Deb, 6 September 2011, c 119): The main message to concentrate on is that a significant period of change is due in the family justice system, which we are using to consider legislation in general. We have taken the Scottish research on board, but it is, as I say, rather narrow, very early and not enough to persuade us that we should implement the Law Commissions recommendations now. Responding to the Governments announcement (Law Commission, 6 September 2011), Professor Elizabeth Cooke, the Law Commissioner who leads the Commissions work in family and property law, said this: We hope that implementation will not be delayed beyond the early days of the next Parliament, in view of the hardship and injustice caused by the current law. The prevalence of cohabitation, and the birth of children to couples who live together, means that the need for reform of the law can only become more pressing over time. As Professor Cooke also pointed out, the existing law is uncertain and expensive to apply and, because it was not designed for cohabitants, often gives rise to results that are unjust. The reality is that the sufficient basis for changing the law had already been amply provided by the long standing judicial calls for reform (dating back at least as far as Burns v Burns [1984] Ch 317, at 332); by the Law Commissions analysis of the deficiencies in the present law and the injustices which can result; by the demographic trends towards cohabitation and births to cohabiting couples, which are even more marked south of the border than they are in the north; and by the widespread belief that cohabiting couples are already protected by something called common law marriage which has never existed in the south. There was no need to wait for experience north of the border to make the case for reform. The second lesson is that reform needs to cater for a wide variety of cohabiting relationships which may result in advantage or, more commonly, disadvantage to one of the parties. There is a tendency to concentrate upon the younger couples who have children, where one of them suffers financial disadvantage as a result of having to look after the children both during and after the relationship. It may be very difficult to say that the other party has derived any economic advantage from those sacrifices, but it is entirely fair that he should compensate the childrens carer for the disadvantages that she has suffered. This case is an example of such disadvantages arising in a completely different context, but one which is by no means uncommon these days: a mature couple, both of whom have been married before, each of whom has a home and an income from pensions or employment, but where one of them gives up her home and at least some of her income as a result of their living together (an occupational widows pension, for example, may well be lost on cohabitation as well as marriage). At the end of the relationship, one of them may be markedly less well off than she was at the beginning, whereas the other may be in much the same position as he was before or even somewhat better off. Such cases should not be forgotten in any scenario testing of proposed reforms (although they do not feature in the worked examples given in Appendix B to the Law Commissions Report). This case also illustrates the fact, well established by research, that many, even most, cohabiting couples have not deliberately rejected marriage (A Barlow, S Duncan, G James and A Park, Marriage, Cohabitation and the Law, 2005). For many couples, co habitation is a preliminary to the marriage they hope to enter into one day. In this case, it is stronger than that: Mrs Gow only agreed to move in with Mr Grant if they became engaged to be married. A third lesson from Scotland is that the lack of any definition of cohabitation, or a qualifying period of cohabitation for couples who do not have children, has not proved a problem. Very few cases have involved short relationships and people have not disputed whether or not they have been cohabitants, although they have sometimes disputed when their cohabitation came to an end. It might be less productive of disputes for there to be no minimum qualification period in England and Wales and, equally, for there to be no one year limitation period from the end of the cohabitation in Scotland (Wasoff et al; see also J Miles, F Wasoff and E Mordant, Cohabitation: lessons from research north of the border? (2011) 23 CFLQ 302). A fourth lesson from Scotland is that the compensation principle, although attractive in theory, can be difficult to apply in practice because of the problems of identifying and valuing those advantages and disadvantages. Lord Lesters Cohabitation Bill, which received a second reading in the House of Lords on 13 March 2009 (see Hansard, HL Deb, 13 March 2008, cc1413 1443), would have given the courts a much wider discretion to do what was just and equitable having regard to all the circumstances. The Law Commissions proposals sought to cut down the problems by focussing on the end of the relationship: on the benefit retained by one party and on the present and future losses sustained by the other. The object was to avoid protracted analysis of what may be called water under the bridge: every past gain and loss over the course of a long relationship, regardless of whether they have any enduring impact at the point of separation (see J Miles et al, (2011) 23 CFLQ 302, 316). This case illustrates the problem very well. It is in most cases quite impracticable to work out who has paid for what and who has enjoyed what benefits in kind during the cohabitation. People do not keep such running accounts and the cost of working things out in detail is quite disproportionate to the task of doing justice between the parties. Section 28(3)(a) and (9) requires regard to be had to non financial contributions; the economic disadvantage to which regard must be had under section 28(3)(b) must be suffered in the interests of the other, but does not have to amount even to a non financial contribution. Who can say whether the non financial contributions, or the sacrifices, made by one party were offset by the board and lodging paid for by the other? That is not what living together in an intimate relationship is all about. It is much more practicable to consider where they were at the beginning of their cohabitation and where they are at the end, and then to ask whether either the defender has derived a net economic advantage from the contributions of the applicant or the applicant has suffered a net economic disadvantage in the interests of the defender or any relevant child. There is nothing in the Scottish legislation to preclude such an approach, as the court is bound to be assessing the respective economic advantage and disadvantage at the end of their relationship. The English proposals make it rather clearer. Finally, the case illustrates that it may be unwise to be too prescriptive about the order which the court should make to redress such advantage or disadvantage. In principle, if one party has derived a clear and quantifiable economic benefit from the economic contributions of the other, it may be fair to order what is, in effect, restitution of the value of that benefit. But sometimes the benefit will result from non financial contributions or be very hard to quantify. Even more problematic are the cases where there is identifiable economic disadvantage, as here, without a corresponding economic advantage. In some cases, it may be entirely fair to expect the better off partner to compensate the other in full for the losses she has sustained as a result of their relationship: as, for example, where a rich widower persuades a widow to give up her secure tenancy and widows pension to move in with him and can well afford to put her back in the position in which she was before their cohabitation began. In others, this may be impossible or quite unfair. Thus, it seems to me, the flexibility inherent in the Scottish provisions is preferable to the Law Commissions proposal that the losses should be shared between them. On the other hand, the Law Commissions proposed list of factors to be taken into account in the exercise of the courts discretion might be a useful addition to the Scottish law, as also might the power to make a periodical payments order in those rare cases where it is not practicable to make an order that a capital sum be paid by instalments. The main lesson from this case, as also from the research so far, is that a remedy such as this is both practicable and fair. It does not impose upon unmarried couples the responsibilities of marriage but redresses the gains and losses flowing from their relationship. As the researchers comment, The Act has undoubtedly achieved a lot for Scottish cohabitants and their children. English and Welsh cohabitants and their children deserve no less. |
This appeal arises out of the inquest held into the death of Mr James Maughan. It concerns the standard of proof, or degree of conclusivity, required for the determination of the result of an inquest into a death where the question is whether the deceased committed suicide. The result of an inquest may be given in a single short form conclusion (using simply the word suicide) and/or in a brief narrative statement (a narrative conclusion). This appeal has to consider whether the degree of conclusivity is the same in both cases, and what it is. There is nothing in the relevant primary legislation, which is the Coroners and Justice 2009 Act (the 2009 Act), about this. However, Note (iii) to the form for recording the results of an inquest prescribed by the Coroners (Inquests) Rules 2013 (SI 2013/1616) (the 2013 Rules) states the standard of proof for narrative conclusions is on a balance of probabilities, which is the rule (the civil rule) for civil proceedings, and for short form conclusions of suicide and unlawful killing it is the criminal standard, so the coroner or jury must be sure, and that means that they are satisfied beyond reasonable doubt. The civil rule applies in civil proceedings even if the issue is whether someone committed a criminal offence. A coroners inquest is not a criminal proceeding. At the time of the 2013 Rules, the common law was understood to be as stated in Note (iii). As I shall explain, there were at one time links between inquests and criminal proceedings. The 2013 Rules concretised the differential standard for short form and narrative conclusions in Note (iii). One of the issues on this appeal is whether that approach correctly reflects the common law, either historically or currently. Two elements must be established before suicide can be found: it must be shown that the deceased took his own life and that he intended to kill himself (or another): see Jervis on Coroners, 14th ed (2019), para 13.67 and Kennys Outlines of Criminal Law, 17th ed (1958), p 163. It may happen in one and the same inquest that the narrative conclusions find facts which in law mean that the deceased committed suicide and yet that conclusion cannot be recorded as a short form conclusion. The Divisional Court saw the logical difficulty in a situation where there might be narrative findings showing that the two elements of suicide were satisfied and yet no short form conclusion of suicide: [2018] EWHC 1955 (Admin); [2019] 1 All ER 561. It held: A narrative conclusion to the effect that on the balance of probabilities the deceased did a deliberate act which caused his own death intending the outcome to be fatal clearly amounts to a conclusion that the deceased committed suicide whether or not the word suicide is used. It is sophistry to say that such a conclusion is not one of suicide because the required standard of proof has not been met. The standard of proof even if referred to in the record of inquest, as it was in this case, is not itself part of the substantive conclusion adopted by the coroner or jury. It is simply a statement of the evidential test which must be met in order to reach a particular conclusion. If the standard of proof required to determine that the deceased committed suicide is the criminal standard and the necessary facts have been proved only on the balance of probabilities, this does not mean that a conclusion which records those facts is not one of suicide. It means that the coroner or jury cannot lawfully reach that conclusion. (para 25) Death of Mr James Maughan Tragically, early on 11 July 2016, the appellants brother, Mr James Maughan, was found in his prison cell hanging by a ligature from his bedframe. He was pronounced dead. He had had a history of mental health issues and was agitated on the previous evening and threatened self harm. At the inquest into the circumstances of Mr James Maughans death, the coroner, the Senior Coroner for Oxfordshire, applying the Chief Coroners Guidance No 17: Conclusions: Short Form and Narrative (referred to below as Guidance No 17 issued by the Chief Coroner), decided that the jury could not safely reach a short form conclusion of suicide on the basis of the criminal standard of proof, that is, on the basis that the jury was sure that Mr James Maughan had committed suicide. Nonetheless, the coroner considered that the jury should have the opportunity to make a narrative statement of the circumstances of Mr James Maughans death on a balance of probabilities. The jury answered the questions put to them by saying that the deceased had a history of mental health issues and that on a balance of probabilities the deceased intended fatally to hang himself and that increased vigilance would not have prevented his death. There was no short form conclusion of suicide. The appellant submits that this course was not open in law on the legal requirements as to standard of proof. If those standards were correctly applied, no issue is taken on the findings themselves. Parties to this appeal The first respondent to this appeal is Senior Coroner for Oxfordshire, who conducted the inquest and who understandably makes no submissions on this appeal. The first intervener is Chief Coroner of England and Wales, for whom Mr Jonathan Hough QC appears. INQUEST, a charity with expertise in relation to state related deaths and their investigation, with the permission of the court, intervene in this appeal (as they had done in the Court of Appeal) and Mr Adam Straw made submissions on their behalf. Changes in inquests and the introduction of narrative conclusions Longer, more judgemental narrative conclusions, as used by the coroners jury in this case, are relatively new. They result from the recent transformation of many inquests from the traditional inquiry into a suspicious death into an investigation which is to elicit the facts about what happened, and in appropriate cases identify lessons to be learnt for the future. This is the position in inquests which the state is now required to carry out because of the European Convention on Human Rights (enforceable in the domestic law of England and Wales since 2 October 2000). Article 2 of the Convention protects the right to life. One of the consequences of this is that there must generally be an effective investigation of deaths which occur while a person is in the custody of the state (state related deaths), and one of the ways in which this obligation may be discharged is by holding a coroners inquest, in which the next of kin of the deceased can participate. The relevant principles of domestic law have been established by decisions of the courts, including, in particular, the decision of the House of Lords in R (Middleton) v West Somerset Coroner [2004] UKHL 10; [2004] 2 AC 182 (Middleton). In his written submissions, the Chief Coroner states that an article 2 inquest: opens up the field for conclusions about underlying or contributory causes, such as failures to prevent suicide in prison. It may require a coroner to deliver (or elicit from a jury) a more extensive and judgmental form of narrative conclusion. The manner of eliciting such a conclusion in a jury case is for the coroners discretion but it is often done by means of questions (as in this case). (para 19) This is confirmed by the case of Scholes v Secretary of State for the Home Department [2006] EWCA Civ 1343; [2006] HRLR 44, which came before Pill LJ and myself in the Court of Appeal. It concerned a vulnerable 16 year old boy, Joseph Scholes, who was sent to a young offender institution instead of a secure home for boys of his age and who shortly thereafter hanged himself. The inquest revealed a worrying situation with regard to the detention of young offenders and the Secretary of State was required to take steps to improve the situation. There had to be an increase in the number of places available in secure homes for such individuals. Even though his mothers attempt to obtain a further inquiry failed, several improvements in the system resulted from the findings at the inquest. This case illustrates a point also made by the Chief Coroner that the family of the deceased often want findings to be made at an inquest so that steps can be taken to ensure that the same tragedy does not occur again. I need only refer to the consequences of the article 2 obligation that are relevant to this appeal. I will assume that, as in this case, the coroner sits with a jury. The purpose of the inquest is to determine how, when and where the deceased came by his death (2009 Act, section 5(1)). Where article 2 is engaged, how, when and where includes in what circumstances the deceased came by his or her death (2009 Act, section 5(2)). The inquest will generally hear evidence on these matters. After the evidence is given, the jury must make their determination as to how, when and where the deceased died (2009 Act, section 10). The Convention does not require any particular standard of proof or degree of conclusivity for these findings. The coroner will determine which facts in issue are at the centre of the case. A narrative statement of facts will often be necessary to express the findings of the jury on these facts (Middleton, para 36, and Guidance No 17 issued by the Chief Coroner). The coroner may formulate some questions to help the jury, and their answers will form the narrative conclusions recorded at the end of the inquest. The conclusion in such a narrative is of a factual nature (Middleton, para 37). That is reinforced by section 10(2) of the 2009 Act, which provides that a determination may not be framed so as to appear to determine any question of any question of criminal responsibility on the part of any named person or any civil liability. The conclusions of the inquest must be recorded in the Record of Inquest. Form 2 in the Schedule to the 2013 Rules is the mandatory prescribed form for this. The conclusion may be a short form conclusion which should be from the list provided in Form 2, such as suicide, accident or unlawful killing, but it may be or be also a narrative statement. Guidance No 17 issued by the Chief Coroner sets out a three stage process for arriving at a conclusion, namely: (a) that the facts should be found (on the evidence); (b) that the manner in which the deceased came by his death should then be distilled from the narrative findings; and, (c) the conclusion flowing from (a) and (b) should then be recorded. As explained, the 2009 Act did not provide for the standard of proof for conclusions at the end of an inquest, but section 45 of that Act provides for coroners rules for regulating the practice and procedure at or in connection with inquests. Section 45 gives specific examples of the matters to which the coroners rules might relate including, for example, provisions about evidence. That is the enabling power under which the 2013 Rules were made. It is to those Rules that I must first turn. Statement of the standard of proof in the 2013 Rules The 2013 Rules cover many procedural aspects of a coroners inquest. For the first time, use of the prescribed form to record the result of the inquest, Form 2, was made mandatory: see rule 34, which provides: A coroner or in the case of an inquest heard with a jury, the jury, must make a determination and any findings required under section 10 using Form 2. Form 2 is as follows: Form 2 Record of an inquest The following is the record of the inquest (including the statutory determination and, where required, findings) 1. Name of the deceased (if known): 2. Medical cause of death: 3. How, when and where, and for investigations where section 5(2) of the Coroners and Justice Act 2009 applies, in what circumstances the deceased came by his or her death (see note (ii)): 4. Conclusion of the coroner/jury as to the death: (see notes (i) and (ii): 5: Further particulars required by the Births and Deaths Registration Act 1953 to be registered concerning the death: 3 Sex 1 Date and place of death 2 Name and surname of deceased 5 Date and place of birth 6 Occupation and usual address 4 Maiden surname of woman who has married Signature of coroner (and Jurors): NOTES: (i) One of the following short form conclusions may be adopted: I. Accident or misadventure II. Alcohol/drug related III. Industrial disease IV. Lawful/unlawful killing V. Natural causes VI. Open VII. Road traffic collision VIII. Stillbirth IX. Suicide (ii) As an alternative, or in addition to one of the short form conclusions listed above under NOTE (i), the coroner or where applicable the jury, may make a brief narrative conclusion. (iii) The standard of proof required for the short form conclusions of unlawful killing and suicide is the criminal standard of proof. For all other short form conclusions and a narrative statement the standard of proof is the civil standard of proof. (Italics added) Note (ii) expressly contemplates that both short form and narrative conclusions may be used in the same inquest. Note (iii) uses very precise language, but the first question is whether it simply declares the common law position in a convenient form or whether it goes further and codifies the common law rules and makes them mandatory in this form so as to remove them from the reach of the courts when considering the true state of the common law. For that question, I must turn to consider the legal basis for Note (iii). Before I do that, I will refer to the guidance issued by the Chief Coroner, so far as relevant. One of the functions of the Chief Coroner is to give guidance to coroners. In discharge of this function he has issued Guidance to Coroners and a Bench Book. The 2009 Act does not attach particular status to these. The provisions relevant to the standard of proof are set out in the judgments below. Without in any way detracting from the importance of the Chief Coroners Guidance or the Coroners Bench Book, I do not repeat those passages in this judgment, save one, namely para 62 of the Chief Coroners Guidance, which advises on the possible explanation a coroner sitting without a jury might give where the coroner considers that suicide is not established to the criminal standard. Para 62 states: Looking at the two elements which must be proved to the higher standard of proof before a conclusion of suicide can be recorded, I am satisfied that [the deceased] took his own life, but I am not satisfied that he intended to do so. I cannot be sure about it. It is in my judgment more likely than not that he had that intention, but on the evidence looked at as a whole I cannot rule out that this was a terrible accident. For those reasons my conclusion is not suicide or accident but an open conclusion. Legal basis for the statement of the standard of proof in Note (iii) The issue here is: if Note (iii) constitutes a statutory statement of the standard of proof, does it constitute a matter of practice or procedure for the purposes of section 45 of the 2009 Act? In McKerr v Armagh Coroner [1990] 1 WLR 649, which concerned the question whether coroners rules could restrict a coroners right to compel witnesses, Lord Goff made some introductory points which are helpful here. He held that what is meant by practice and procedure must depend to some extent on the context in which the expression is used; that the distinction drawn for the purposes of civil proceedings between the mode of proceeding by which a legal right is enforced and the law which gives or defines the right (per Lush LJ in Poyser v Minors (1881) 7 QBD 329, 333) is not apt in relation to coronial proceedings, which are not concerned with the enforcement of a legal right. Nonetheless rules which regulate the mode of proceeding are rules which regulate the practice and procedure at an inquest. Lord Goff held that there was no real distinction between practice and procedure in coronial or civil proceedings (p 657). A question as to the meaning of procedure in a statute came before the Court of Appeal in R (LG) v Independent Appeal Panel for Tom Hood School [2010] EWCA Civ 142; [2010] PTSR 1462, paras 41 to 44 per Wilson LJ (as he then was). The issue was whether a statutory power to make rules for the procedure on appeals of a schools independent appeal panel included power to make a rule that a decision to exclude a pupil should be taken on a balance of probabilities. Wilson LJ, as he then was, gave the leading judgment. He held that the power was wide enough to cover the question of the standard of proof to be applied by the tribunal. I agree with this. As Wilson LJ sets out, the word procedure should be given a wide, purposive meaning to enable it to cover all the steps in the proceedings: The procedure on appeals is synonymous with the processing of appeals; and, when the panel takes the step (or reaches the stage) at which it determines a question whether a fact is established, a necessary part of its processing of that part of the appeal is to apply a particular standard of proof in reaching an answer to the question. A regulation about the inadmissibility of evidence of a specified character would in my view clearly fall within the rubric of procedure on appeal and there is in my view no material difference between a requirement that the panel should exclude evidence of a specified character and a requirement that it should apply a specified standard of proof to its appraisal of such evidence as is properly before it. (para 43) The expression of practice and procedure must have been intended to cover all the matters on which rules would be required for the efficient management of the inquests and so I see no reason therefore why the expression should not include the standard of proof to be required. The standard of proof is after all a necessary part of the process of making a determination and it is sometimes called the evidential standard, thus engaging the express provision in section 45(2)(a) authorising coroners rules to make provision about evidence. So far so good. But the fact that a note to a form as to the standard of proof can constitute a matter of procedure of the question is not the end of the matter on this appeal for several reasons, which I will explain in the succeeding paragraphs. Section 45 requires that the rules should be made for, that is, for the purpose of, regulating the practice and procedure at or in connection with inquests. That is the purpose of the power and the decision maker must not use it for any other extraneous purpose. Such purpose may include the provision of a new regulation for a matter which is already regulated by some other means. I will return to this particular point later. To begin, it is necessary to examine the background to the relevant part of the 2013 Rules. They were preceded by a public consultation conducted by the Ministry of Justice (MoJ) on the draft 2013 Rules: Implementing the coroner reforms in part one of the Coroners and Justice Act 2009 consultation on rules, regulations, coroner areas and statutory guidance CP 2/2013, 1 March 2013. This annexed Form 2 in draft, including Note (iii), but the body of the consultation document did not refer to the evidential standard. One of the consultation questions was: Question 18: Are you content with the draft rule and form on conclusions, determinations and findings? If not, how could they be improved? Do you agree with the addition of the new short form conclusions drink/drug related and road traffic collision? Please give your reasons. There was no question about whether the existing rules on standard of proof should be changed. Some of the consultees in their responses sought to raise the issue whether the standard of proof for the short form conclusion of suicide should be the civil standard, others sought to have the criminal standard applied. In the subsequently published analysis of responses, Implementing the coroner reforms in Part 1 of the Coroners and Justice Act 2009 Response to consultation on rules, regulations, coroner areas and statutory guidance 4 July 2013 the MoJ recorded: Suicide standard of proof We also received comments on the most appropriate standard of proof needed for a coroner or jury to give a suicide conclusion at an inquest. Under current practice (common law precedence), coroners may return a verdict of suicide only where the criminal standard of proof has been established, ie that it was beyond reasonable doubt that the deceased intended to take their own life. Some respondents expressed strong views on whether the current criminal standard should be replaced by the civil standard. (internal p 37) The MoJ response made it clear that the Government proposed to retain the standard established by case law: As the requirement to use the criminal standard of proof when returning a suicide verdict is established under case law rather than coroner legislation we cannot take forward a change in the law through secondary legislation flowing from the 2009 Act. However the Chief Coroner and the MoJ are considering the views expressed on this issue. (internal p 38) The decision therefore was that the 2013 Rules could not make a change in the law (we cannot take forward a change in the [case] law through secondary legislation), not that the criminal standard should be established in the 2013 Rules. Mr Straw submits that a mere consultation document and response would not be admissible on statutory interpretation in the same way that explanatory notes on an Act would be. But this is not so. The courts will look beyond explanatory notes (which are a comparatively recent innovation) in their endeavour to find the true intention of Parliament. In my judgment, the consultation documents and the response documents are documents which show the mischief to which Note (iii) was directed and their contents are therefore admissible when the courts seek to interpret Note (iii): see Bennion on Statutory Interpretation, 7th ed (2017), section 24.3 (External aids to construction may be used for a variety of different purposes. For example, they may be used to provide evidence as to the intended meaning of the words used ). Moreover, the consultation document and the response document were made available to Parliament, which is of some weight when deciding whether they should be admissible on interpretation. What is clear from these documents is that the mischief to which Note (iii) was directed was not any dissatisfaction with the case law or policy objective of altering it. The Note was simply part and parcel of an exercise of updating the forms in the light of the 2009 Act. Criticism of the standard of proof for suicide was not new in 2013 and would not have taken the MoJ by surprise. The Report of a Fundamental Review 2003 into Death Certification and Investigation in England, Wales and Northern Ireland (Cm 5831) referred to the criminal standard for suicide and considered that its justification was the need to find outcomes on issues of legal liability to higher evidential standards. Such an approach was not, however, considered to be appropriate: Present practice is that most short form inquest verdicts should be established to the civil standard of proof the balance of probabilities test. But for verdicts of suicide and unlawful killing it is the higher criminal standard of proof beyond reasonable doubt which is applied. The justification for this appears to lie in the need for outcomes which determine, or appear to determine, legal liability (albeit not that of a named individual) to be reached on the basis of standards which are properly applicable in the appropriate civil or criminal court. It is not feasible, however, for such standards to be systematically applied in an inquisitorial process whose role is to determine what may be a set of complex and interrelated facts. (para 30) The Report did not recommend altering the standard of proof for suicide. It may be that this was in part because the Report also recommended a substantial change in short form conclusions in any event (para 37). We are told that these recommendations of the 2003 Review were not accepted by the government. The standard of proof for suicide was also the subject of cogent criticism by Professor Paul Matthews (subsequently Judge Paul Matthews) in two valuable articles: The Coroner and the Quantum of Proof (1993) 12 (July) CJQ 279 and The Coroner and the Quantum of Proof a postscript (1994) 13 (October) CJQ 309. These articles drew attention to the differential evidential standards for the conclusion of suicide, perhaps for the first time in UK scholarly literature. They also drew attention to a body of Commonwealth authority applying the civil standard. They also made the point that, if narrative findings could be made but the standard of proof for a short form conclusion precluded a short form conclusion of suicide, and no other short form conclusion was appropriate, the coroner would have to enter an open conclusion. The point to be deduced from the response document is that, there being a common law rule in place to regulate the standard of proof for the conclusion of suicide, it would be outside the enabling power in section 45 to make a rule to substitute for a common law rule which was in place and represented the law of the land. In those circumstances the power to make rules could understandably not be used to state some new rule. A new rule stating the position at common law was unnecessary and a new rule altering the common law would not be a rule for regulating coronial practice and procedure. It would be for achieving a change in an existing rule of law. So the carefully worded response of the MoJ was: we cannot take forward a change in the [case] law through secondary legislation. So there was no point in even opening a dialogue on the point and it could not hold up placing the draft rules before Parliament. But the fact that this exchange took place in public documents is a valuable aid to interpretation of the 2013 Rules and enables the courts more clearly to see the meaning which Parliament intended Note (iii) to have. I would not assume that the drafter mistakenly thought that the notes were of no legislative force. It is true that in R v HM Coroner for North Humberside and Scunthorpe, Ex p Jamieson [1995] QB 1, 25, the Court of Appeal (Sir Thomas Bingham MR, McCowan and Hirst LJJ) held that the notes on the then current form 22 scheduled to the Coroners Rules 1984 (which covered different matters) were not binding. However, while no reason was given for this observation, the observation is readily distinguishable because the use of form 22 as opposed to Form 2 was not mandatory (see the Coroners Rules 1984 (SI 1984/552), rule 60). The Divisional Court (Leggatt LJ as he then was and Nicol J) considered this question of the meaning of Note (iii) briefly, and concluded that it was within the scope of the enabling power for the 2013 Rules but was simply stating, for the assistance of those using the form, what the law with regard to the standard of proof is understood to be, and not legislating what the law shall be (para 47). In the Court of Appeal, Davis LJ, with whom Underhill and Nicola Davies LJJ agreed, came to the same conclusion, [2019] EWCA Civ 809; [2019] QB 1218: If it was desired by the Coroners rules to make provision for the standard of proof (and it was common ground before us that section 45 of the 2009 Act would have so permitted) then the obvious place to do so would have been in the body of the Coroners rules themselves. The notes appended to the prescribed form cannot, in my view, be given the substantive status of rules. They simply set out, for the convenience of coroners, an understanding of the law. (para 76) The point made in the first sentence is a powerful one, and I agree with it. However, neither court referred to the consultation document or the consultation response document referred to in paras 25 to 27 above. I therefore turn to the interpretation of Note (iii) with the consultation document and response available to me. Meaning of Note (iii) The first point to make is that Note (iii) forms part of an enactment and must be interpreted in the same manner as any other enactment and as part of that enactment. As Brett MR held in Attorney General v Lamplugh (1878) 3 Ex D 214, 229: [A] schedule in an Act of Parliament is as much a part of the statute, and is as much an enactment as any other part. Moreover, all parts of a statute have operative effect and provisions are not to be treated simply as for the avoidance of doubt or guidance. Very occasionally, however, the contrary may be stated or the contrary may occur. Parliament may, for instance, occasionally provide examples which are not necessarily intended to be used as aids to restrict the interpretation of the principal provision. The same applies to footnotes to a schedule to an enactment. The principal authority on this is Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398, to which the President of the Supreme Court, Lord Reed, drew counsels attention. The House of Lords there held that Parliament could change the law, in that case by harmonising different rules of procedure, by means of enacting a footnote to a form in a schedule to rules of procedure. The competing statutory provisions in that case were complex. The case concerned the start date for the accrual of interest on costs awarded by order of the court and it turned on a note to a prescribed form and the effect of its deletion. The appellant argued that under section 17 of the Judgments Act 1838 interest on costs ran from the date of judgment. The practice between the common law and the chancery courts between 1839 and 1875 differed in that the former took the date of the judgment and the latter the date of the certificate of taxation (there was no similar practice at common law). Eminent judges held different views as to which was the fairer rule. The Rules of Court 1875 enacted by section 16 of the Supreme Court of Judicature Act 1875 annexed a writ of execution (known as a writ of fi fa) for use in relation to judgments of the High Court and Court of Appeal adopting by way of a footnote the chancery practice. However, a new form of writ of execution was required to be used by new rules enacted in 1883. A footnote to this form provided that interest ran from the date of judgment. This footnote was not attached to the form when it appeared in the Rules of the Supreme Court 1965. The House analysed the issue of the date from which interest on costs should run as one of statutory interpretation. The footnote to the form of writ of execution in the 1883 Rules had swept away the chancery practice, as had been held by Field J in Pyman & Co v Burt, Boulton [1884] WN 100 and by a unanimous Court of Appeal in Boswell v Coaks (1887) 57 LJ (NS) Ch 101 (Cotton, Lindley and Lopes LJJ). The latter case was particularly striking as the effect of the change was directly in issue and the judgments were informative as to the contemporary practice: Lord Ackner, with whom the other members of the House agreed, referred to it several times. In Boswell v Coaks, judgment at trial had been given before the 1883 Rules were commenced but by the time the costs were assessed the 1883 Rules were in force. The 1883 Rules applied because the proceedings were still in progress until the assessment of costs and enforcement were completed and there was no vested right in a rule of practice. Lindley LJ in particular explained how the 1883 Rules had struck out the old rules and made one code applicable to all divisions of the Court (p 105). The House therefore overruled the earlier decision of the Court of Appeal in K v K (Divorce Costs: Interest) [1977] Fam 39, which held that the court was therefore able to choose which rule to adopt and adopted the old rule of the chancery courts. By implication, the House in Hunt v RM Douglas (Roofing) Ltd did not consider that the deletion of the footnote by the Rules of the Supreme Court 1965 resuscitated the old chancery rule which had been abolished in 1883. There is no doubt that Note (iii) in the present case expresses the common law as it was perceived to be but the question is whether Note (iii) is also to be interpreted as codifying the law and taking away the power of the courts to develop or elucidate or correct the common law. In my judgment, that is where the statement in the response to consultation by the MoJ comes in. Given that, as a result of the response to consultation published by the MoJ, neither Parliament nor the public had notice of any intention to change the common law rule, as would be the inevitable result of codifying it without reservation, it seems to me that the proper course is for the court to interpret Note (iii) as having an interpretation that accords with that position, stating the common law rule for short form conclusions as the (current) common law rule. I reach this conclusion as a matter of interpretation and my conclusion should not in any way be read as departing from the strong presumption that every provision of an enactment has legislative force. It turns on the very special background applying to Note (iii) informing the court in its interpretative role as to the presumed intention of Parliament. The footnote to the statutory form in Hunt v RM Douglas (Roofing) Ltd served an entirely different purpose, namely that of laying to rest a debate between two divisions of the High Court whose practice it was desired to harmonise. It will be recalled that shortly before 1883 the courts of common law and equity had been fundamentally reorganised by the Judicature Acts 1873 to 1875 so that there would in future be only one Supreme Court of Judicature in England and Wales in which the courts administered both law and equity, so harmony was essential and consistent with legislative policy. In relation to interest on costs, that legislative policy could not be achieved unless the common law and chancery rules were harmonised. The judgments in Boswell v Coaks, described in para 39 above, show that the debate was well known. The Court of Appeal interpreted the note against the background of the prior differences in practice. There was no equivalent debate in the case law in this case as to the correctness of the common law rule reflected in Note (iii) prior to its enactment. It would, moreover, be contrary to drafting conventions for a schedule to the Rules to be used to make what would clearly be a change of some consequence in the law. Lord Thring, the first Head of the Office of Parliamentary Counsel, states in his Practical Legislation (1877) that: As to Schedules Great care should be taken in the preparation of schedules. It is desirable to include in a schedule matters of detail; it is improper to put in a schedule matters of principle. The drawing [of] the proper line of demarcation between the two classes of matters is often difficult. All that can be said is that nothing should be placed in a schedule to which the attention of Parliament should be particularly directed; for example, the constitution of an electoral or financial body of persons should be found in the body of the Act; but the mode of conducting the election of the electoral body, and the rules as to proceedings at meetings of the financial body, may not improperly be placed in a schedule. (pp 100 101, reprint (1902)) As I see it, to construe Note (iii) as having the effect of transforming a common law rule into a statutory one without any provision in the body of the Rules themselves would contravene at least two of the matters stated in this passage. Codification would reduce the role of the courts in keeping the common law up to date and in harmony, and that is not a matter of detail. Moreover, the change that would be effected by Note (iii) was a matter to which the attention of Parliament (not to mention, consultees) should have been drawn and there is nothing to suggest that this was done. The 2013 Rules were considered by the Joint Committee on Statutory Instruments with further explanation. The conventions observed by legislative drafters as described by Lord Thring in the passage I have set out make admirable good sense. Those conventions are part of the unwritten principles on which the British constitution depends, and the courts ought to proceed on the presumption that high standards of drafting have been observed. There is no reason to think that the principle behind the passage that I have quoted from Lord Thring is not equally valid today. The appellant submit that the view expressed by the MoJ in the Governments response to the 2013 consultation was wrong and that the effect of Note (iii) was to codify the common law. I do not agree for the reasons given above. The apparent width of section 45 of the 2009 Act is nothing to the point. The one place where the users might naturally expect to find guidance in this context on what the relevant law is, as opposed to some new operative provision, is in the notes to a prescribed form and Note (iii) provides that guidance for so long as the common law remains the same. But Note (iii) does not take away the role of the courts in reviewing the common law. As Davis LJ observed in the passage I have already cited, that Parliament was not intending to transform a common law rule into a statutory one is consistent with the fact that there is no rule in the 2013 Rules setting out the standard of proof and with the choice of wording in Note (iii) itself. That point cannot be universally true because there was no rule abolishing the chancery rule as to the commencement date for interest on costs in Hunt v RM Douglas (Roofing) Ltd, but as I have explained the context in which the footnote had to be interpreted was entirely different in that case. There is no equivalent or compelling legislative policy made known to the court here. Moreover, Note (iii) is completely silent on the provenance of the standard of proof for the short form conclusion of suicide or unlawful killing. If the source was the 2013 Rules, then the only relevant provision was Note (iii). It is hard to see how this could be because the word required is logically referring to a source of law which pre existed the 2013 Rules. That could be the 2009 Act, but that made no such provision. By a process of elimination, the provenance of that standard of proof could only be the common law. The word required is not used in the second sentence of Note (iii). I venture to suggest that it was not used there because the drafter could not point to any source for the statement outside the 2013 Rules and was merely making a statement based on his or her understanding of the effect of common law principles in this case. The courts had not had the opportunity of considering the standard of proof for narrative statements at that point. The drafter was merely making a deduction from the general principle that, in civil proceedings, the civil standard of proof applies. Another important feature of the drafting of Note (iii) is that it is in the present tense. It does not use the future tense. In my judgment, that means that the provision does not have the effect of ruling out any further change in the common law. The correct interpretation in the light of the background material is that Note (iii) was merely speaking as to the state of the law as at the date on which the 2013 Rules came into effect. Starting from the position that the standard of proof is set by the common law, the word is means has been held to be and is, and not is to be or shall be. If it had been intended to be mandatory for the future, it would have used the words shall be especially as these forms were to be seen and used not just by coroners but by jurors and other non lawyers. Finally, it is not without significance that under section 45 of the 2009 Act these Rules were made by the Lord Chief Justice of England and Wales in consultation with the Lord Chancellor. That reflects the constitutional principle that it is primarily a judicial function to lay down rules which govern the conduct of judicial hearings. It is the principle on which much of Schedule 4 to the Constitutional Reform Act 2005 on the division of functions between the Lord Chancellor and the Lord Chief Justice of England and Wales is based. Given that there was no statutory provision dealing with the standard of proof in inquests, and that it was governed by the common law, it would be very strange if the effect of the rules was to prevent the courts developing the common law in the future. The identity of the Lord Chief Justice as the person who was to make the rules (in consultation with the Lord Chancellor) would seem in any event to run counter to the notion that in that capacity he had power to make rules bringing about a substantial change, especially one that was controversial. Another factor relevant to interpretation is that Note (iii) produces the possibility of differential standards of proof in the same inquest, for which it must have appeared likely, even in 2013, that there might have to be some reconsideration in the future. Finally, there is a presumption in statutory interpretation that Parliament did not intend to make a casual change in the common law. As Bennion on Statutory Interpretation explains: (1) It is a principle of legal policy that law should be altered deliberately rather than casually, and that Parliament should not change either common law or statute law by a sidewind, but only by measured and considered provisions. In the case of common law, or Acts embodying common law, the principle is somewhat stronger than in other cases. It is also stronger the more fundamental the change is. (section 26.8) In all the circumstances, to hold that Parliament had set down the standard of proof in Note (iii) would in my judgment be inconsistent with this presumption. I therefore reject the appellants submission that Note (iii) has codified the law. All that has happened is that Note (iii) has set out the common law as at the date of the 2013 Coroners Rules and did not exclude the power of the courts to develop the common law. As I have said, Davis LJ made a powerful point when he held that, had that been the intention, there would have to have been a direct statement to that effect. of proof applying to short form conclusions at inquests. Case law in England and Wales on the criminal standard of proof in cases where there are grounds for a conclusion of suicide The real focus of the judgment of the Divisional Court was on the legal basis for what was essentially common ground before that court, namely that a conclusion of suicide had to be reached on the criminal standard of proof. Having examined the case law, their conclusion was: I turn next to consider the case law on the question of the criminal standard We consider the true position to be that the standard of proof required for a conclusion of suicide, whether recorded in short form or as a narrative statement, is the balance of probabilities, bearing in mind that such a conclusion should only be reached if there is sufficient evidence to justify it. (para 75) The Court of Appeal also examined the case law with great care and they also reached this conclusion. Their conclusion is to be found in para 88 of the judgment of Davis LJ: 88. The upshot is, in my judgment, that the decision in Ex p Evans is to be overruled. The reasoning in Ex p Gray (in so far as it relates to suicide) and the dictum of Woolf LJ in Ex p McCurbin with regard to suicide are not to be followed. The standard of proof to be applied at an inquest where an issue of suicide arises is in all respects, and whether for the purposes of a short form conclusion or for the purposes of a narrative conclusion, the civil standard of proof: that is to say, by reference to the balance of probabilities. There are many cases in which the Divisional Court or the Court of Appeal has in the past held that the criminal standard applies to suicide verdicts in a coroners inquest. In R v HM Coroner for Dyfed, Ex p Evans, (unreported) Divisional Court, 24 May 1984, Watkins LJ, with whom Forbes J agreed, held that it was not permissible for a coroners jury to bring in a verdict of suicide on a balance of probabilities. In R v West London Coroner, Ex p Gray [1988] 1 QB 467 Watkins LJ, with whom Roch J agreed, held that it was unthinkable that anything less than proof on the criminal standard would do. In R v Coroner for North Northumberland, Ex p Armstrong (1987) 151 JP 773, Woolf LJ and McCullough J held that the criminal standard applied. In R v Inner South London Coroner, Ex p Kendall [1988] 1 WLR 1186, Parker LJ and Simon Brown J held that the criminal standard applied. The criminal standard was assumed to be the correct standard in R v HM Coroner for Newbury, Ex p John (1991) 156 JP 456. It was held to apply in R v HM Coroner for Solihull, Ex p Nutt [1993] COD 449, R (Lagos) v City of London Coroner [2013] EWHC 423 (Admin), and Jenkins v HM Coroner for Bridgend and Glamorgan Valleys [2012] EWHC 3175 (Admin); [2012] Inquest LR 97. The Court of Appeal came to the same conclusion in R v Wolverhampton Coroner, Ex p McCurbin [1990] 1 WLR 719 and in R (Sreedharan) v HM Coroner for the County of Greater Manchester [2013] EWCA Civ 181; [2013] Med LR 89. The critical case in the analysis of both the Divisional Court and the Court of Appeal was Ex p Gray. The Court of Appeal held that the only one of the cases that held that the evidential standard for a conclusion of suicide in a coroners inquest was the criminal standard was Ex p Gray but that the holding was both obiter and per incuriam, since the court had not taken into account the decision in Hornal v Neuberger Products Ltd [1957] 1 QB 247, in which the Divisional Court held that where in civil proceedings it was in issue whether a criminal act had been committed, the evidential standard was the civil standard, not the criminal one. Accordingly, Davis LJ held that the Court of Appeal was not bound by it. I see no reason to doubt the conclusions of either the Divisional Court or the Court of Appeal on the effect of the existing case law. There is considerable authority for the proposition that suicide is not to be presumed and must be affirmatively proved by some evidence (see, for example, In re Davis, decd [1968] 1 QB 72, 82, per Sellers LJ). It must be proved, and it is not permissible to fill in gaps in the evidence. It is not sufficient to say that, if all other causes of death are ruled out, it must have been a suicide. We are not concerned with this branch of jurisprudence on this appeal. Should the standard of proof for short form conclusions of suicide and narrative conclusions of suicide be the same? Both courts below answered this question in the affirmative. The Divisional Court took what the Court of Appeal held was a bold course and held that, insofar as earlier authorities had held that the jury had to reach a verdict of suicide on the criminal standard, those authorities were wrong and should not be followed. Ms Karon Monaghan QC, for the appellant, submits that the lower courts were wrong not to follow the earlier decisions. The conclusion of suicide is a very serious one for the family of the deceased, as this case shows, and the family appearing at the inquest may be disadvantaged by the inquisitorial nature of the proceedings. It would not violate article 2 of the Convention to require the criminal standard. There was little assistance to be derived from the Commonwealth cases cited by the Divisional Court. Ms Monaghan also submits that the criminal standard for suicide should be maintained because of its implications for the family, who have a limited role in the inquest. The proceedings being inquisitorial, there are no parties. There is a statutory definition of interested persons which is wide enough to include the family but there are restrictions on the part that they can play in the proceedings. For instance, they can examine witnesses, but the coroner may disallow their questions. There are no closing submissions on the facts after the evidence has been led. There is no automatic disclosure of documents. In this case, Mr James Maughans widow was legally represented at the inquest and his family participated in the inquest, but there are considerable restrictions on public funding for representation of the family at an inquest. Ms Monaghan submits that, as (on their case) the criminal standard applies, the jury should not be invited to consider questions which enable them to make findings which effectively undermine the restriction on finding a conclusion of suicide on a balance of probabilities and enable them to avoid that restriction. There would on this basis be no narrative findings as to the elements of suicide if the suicide conclusion could not be reached on the criminal standard. That would, she submits, be a way of avoiding the strange situation in which a jury is able to make narrative findings on the elements of suicide but not make the short form conclusion itself. Ms Monaghan submits that there was a close affinity between suicide and a criminal offence. She pointed to the continuing application of the offence of encouraging or assisting in a suicide, which is a serious matter. The fact that coronial proceedings are said to be civil proceedings is not a deciding factor. My conclusions on this issue I fully accept that it may be an anxious cause of concern to the family of the deceased if the evidential standard for the short form conclusion of suicide is not the criminal standard but the lower civil standard. However, the issue of the correct standard of proof for a short form conclusion of suicide has to be decided on the basis of legal principle. The position is that to hold that a criminal standard applies is out of line not only with narrative conclusions but also with the principle applying to civil proceedings generally. I see no reason why the normal legal principles should not apply. On the contrary there are good reasons why they should apply. Short form conclusions on the basis of the civil standard may for instance enhance the recording of suicides and assist research for the future. In my judgment the arguments for doing so are compelling. I explain my reasons for so concluding below. (1) On legal principle, the civil standard should apply, and the common law does not demonstrate any cogent reason for not applying that principle The principle is clear and it is that in civil proceedings the civil standard of proof should apply. There may be cases where it does not so apply, for example, contempt and forfeiture, but they are rare. These particular situations involve risk to liberty and loss of property, both keenly protected by the common law. None of the many cases on dealing with the standard of proof for suicide cited here or below is binding on us. I have considered them for the assistance which they can give to this court today in deciding what standard of proof the law requires. The assistance is somewhat limited. In, for example, R v West London Coroner, Ex p Gray, [1988] QB 467, the Divisional Court was not bound by any earlier decision for the reasons which the Divisional Court in this case gave (para 59). So the Divisional Court in Gray had to articulate their own reasoning but they did not do so, perhaps because they had been misled into thinking that the earlier case of R v City of London Coroner, Ex p Barber [1975] 1 WLR 310 was decisive of the issue. The Divisional Court simply came to the view that it was unthinkable that any lesser standard should apply (see para 60 of the Divisional Courts judgment in this case). It is as if the common law had accepted that the criminal standard applied because of the links between coronial proceedings and criminal proceedings, the serious consequences of suicide (which at one time led to the denial of normal burial rites and the barbaric practice of burial on the highway impaled by a stake), and the then generally prevailing societal norms attaching stigma to suicide. There are rare occasions when the reason for a rule has disappeared but the rule remains. This would appear to be one of those situations. The rule cannot be left as it is. As the Divisional Court first pointed out, if the appellant is right and the criminal standard is applied to the findings which pertain to the elements of suicide, then some conclusions will be reached on one basis and some on another within a single inquest. A system of fact finding on this basis is internally inconsistent and unprincipled and does not meet the standards of a modern, principled legal system. It is quite different from the situation which Woolf LJ (as he then was) (with whom Lord Donaldson MR and Stocker LJ agreed) considered and found satisfactory in McCurbin. In that case, Woolf LJ saw no difficulty in the jury considering unlawful killing on the basis of the criminal standard and if not sure, misadventure on the civil standard: I am quite satisfied that, in a case where it is open to a jury, as a result of a coroners inquest, to come to a verdict of unlawful killing, the appropriate direction which the coroner should give to the jury is the simple one that they should be satisfied beyond all reasonable doubt or, as sometimes said, satisfied so that they are sure. That provides clear guidance to the coroners jury which they will be able to follow, and it is not necessary for them to be involved with sliding scales which are more appropriate for a judge than a jury. It is true that, in many cases where it is open to a coroners jury to find a verdict of unlawful killing, they may also have to consider the question of death by misadventure. However, in my view, this does not and should not give rise to problems. The coroner should indicate to the jury that they should approach, initially, the question as to whether or not they are satisfied so that they are sure that this is unlawful killing. If they come to the conclusion that it is unlawful killing, there is no need for them to go on to consider death by misadventure. But, if they come to the conclusion that it is not unlawful killing, they are not satisfied so that they are sure that that verdict is appropriate, then they will consider the question of misadventure and, in so doing, they do not need to bear in mind the heavy standard of proof which is required for unlawful killing. They can approach the matter on the basis of the balance of probabilities. The situation is that, just as it is important that a jury should not bring in a verdict of suicide unless they are sure, likewise they should not bring in a verdict of unlawful killing unless they are sure. (p 728) Finally, on this point, the civil standard still results in safeguarding the interests of those adversely affected by the conclusion. As the Divisional Court pointed out (para 56), a conclusion on the balance of probabilities still involves showing that it is more likely than not that the deceased took his own life and intended so to do. It is not enough for the coroner or the jury to think that because certain possibilities (for example, unlawful killing by a person unknown) can be discounted, that suicide must have occurred. (2) The criminal standard may lead to suicides being under recorded and to lessons not being learnt The retention of the criminal standard for the short form conclusion of suicide is likely to lead to the assessment of when, where and in what circumstances did the deceased meet his death being left in a partially complete and incoherent way, which may give an inaccurate understanding of the position. The reasons for suicide are often complex. It is important not to adopt a stereotypical attitude here as elsewhere. Society needs to understand the causes and to try and prevent suicides occurring. Statistics are the means whereby this can be done. If a criminal burden of proof is required, suicide is likely to be under recorded. This is especially worrying in the case of state related deaths. If there is an open verdict because the criminal standard of proof cannot be achieved, the circumstances of the case have to be analysed before it can be included in any statistics to show the true number of suicides. There is a considerable public interest in accurate suicide statistics as they may reveal a need for social and medical care in areas not previously regarded as significant. Each suicide determination can help others by revealing how suicide risks may be managed in future. I accept that to some extent policy makers and researchers can seek to mitigate the under recording of cases by examining cases of open conclusions but they may not be able to do so accurately and lowering the standard of proof would be a more satisfactory way of getting accurate figures. (3) The changing role of inquests and changing societal attitudes and expectations confirm the need to review the standard of proof I have answered the question on this appeal in terms of legal principle but it may be asked why the standard of proof should now be challenged and why it is thought that a different and lower standard should now apply. In answer I should like to record some significant changes in the legislative background and in societal attitudes and expectations that have occurred in recent years. As to legislative background, suicide used to be a crime, but it ceased to be such in 1961. Section 1 of the Suicide Act 1961 enacts that: The rule of law whereby it is a crime for a person to commit suicide is hereby abrogated. Although the offence has been abolished, it is still a crime to encourage or assist a person to commit suicide (Suicide Act 1961, section 2). There has been an unmistakeable change in societys understanding and attitude to suicide. This change is charted by Lloyd LJ in Kirkham v Chief Constable of the Greater Manchester Police [1990] 2 QB 283. In that case, the court was faced with the argument that there was a defence to a claim for damages against a prison authority where a person had committed suicide in circumstances where it was alleged that the prison authorities had been negligent, on the basis of the defence of ex turpi causa, namely that it was contrary to public policy for a person who had committed suicide to recover damages. Lloyd LJ rejected that defence, holding: It is apparent from these authorities that the ex turpi causa defence is not confined to criminal conduct. So we cannot adopt the simple approach favoured by the judge. We have to ask ourselves the much more difficult question whether to afford relief in such a case as this, arising, as it does, directly out of a mans suicide, would affront the public conscience, or, as I would prefer to say, shock the ordinary citizen. I have come to the conclusion that the answer should be in the negative. I would give two reasons. In the first place the Suicide Act 1961 does more than abolish the crime of suicide. It is symptomatic of a change in the public attitude to suicide generally. It is no longer regarded with the same abhorrence as it once was. It is, or course, impossible for us to say how far the change in the public attitude has gone. But that there has been a change is beyond doubt. The fact that aiding and abetting suicide remains a crime under section 2 of the Suicide Act 1961 does not diminish the force of the argument. The second reason is that in at least two decided cases courts have awarded damages following a suicide or attempted suicide. In Selfe v Ilford and District Hospital Management Committee, The Times, 26 November 1970, Hinchcliffe J awarded the plaintiff damages against a hospital for failing to take proper precautions when they knew that the plaintiff was a suicide risk. In Pigney v Pointers Transport Services Ltd [1957] 1 WLR 1121, to which I have already referred, Pilcher J. awarded damages to the dependants of a suicide under the Fatal Accidents Act 1846. Moreover, in Hyde v Tameside Area Health Authority, Court of Appeal (Civil Division) Transcript No 130 of 1981 another hospital case, the judge awarded 200,000 damages in respect of an unsuccessful suicide attempt. The Court of Appeal allowed the defendants appeal, on the ground that there had been no negligence on the part of the hospital, but not on the ground that the plaintiffs cause of action arose ex turpi causa. Selfe and Pigney are not binding on us. But they are important for this reason. They show, or appear to show, that the public conscience was not affronted. It did not occur to anyone to argue in either case that the granting of a remedy would shock the ordinary citizen; nor did it occur to the court. For the above reason I would hold that the defence of ex turpi causa is not available in these cases, at any rate where, as here, there is medical evidence that the suicide is not in full possession of his mind. To entertain the plaintiffs claim in such a case as the present would not, in my view, affront the public conscience, or shock the ordinary citizen. (p 291) Farquharson LJ and Sir Denys Buckley gave concurring judgments to the same effect. However, it must be pointed out that there are those who consider that suicide is a mortal sin, and suicide will constitute a stigma for the deceased and also for his family. In the more recent case of Braganza v BP Shipping Ltd [2015] UKSC 17; [2015] 1 WLR 1661, this court had to consider the application of the civil standard of proof where an employer alleged that the death of an employee, a chief engineer on a ship, who was lost overboard in the Atlantic, was suicide. The deceased was a Roman Catholic and considered that suicide was a mortal sin (per Lady Hale at para 41). If he had committed suicide, he would be disqualified from receiving a death in service benefit. In determining his entitlement, the employer had to take into account in forming its view the improbability of suicide having occurred. The deceaseds view of suicide must be recognised but it could not any more be described as a generally prevailing social attitude. Braganza illustrates that others may oppose suicide verdicts for a different reason: it may lead to the loss of employee and other benefits, such as the proceeds of life insurance. The role of inquests has also changed (see paras 8 to 10 above). Inquests are concerned today not with criminal justice but with the investigation of deaths. They take a new and different purpose in a case such as this. (4) Leading Commonwealth jurisdictions have taken this course As the Chief Coroner explains, courts in Canada, New Zealand and Australia have sought to align the evidential standard in inquests to that applying in civil litigation: see In re Beckon (1992) 93 DLR 4th 161, 176b f (Ontario Court of Appeal), Anderson v Blashki [1993] 2 VR 89 (Supreme Court of Victoria) (unlawful killing: These being civil proceedings, the assault allegation is required to be proved on the lesser standard on the balance of probabilities despite the criminal nature of the allegation.) and In re Sutherland (deceased) [1994] 2 NZLR 242, 251 (which cites with approval the first article of Professor Matthews). That leads to the further question about unlawful killing considered by the Court of Appeal, to which I now turn. Should the criminal standard be retained for unlawful killing? The Court of Appeal considered this question at the request of Mr Hough. The Court of Appeal considered that, if the civil standard applied to unlawful killing cases as well as suicide, that would promote consistency of approach within the proceedings, be consistent with principle and remove the internal inconsistency caused by having different rules for short form and narrative conclusions in this area too. However, the Court of Appeal rejected the view that the civil standard also applied to unlawful killing. While under section 10(2) of the 2009 Act, a finding of unlawful killing could not name the person thought to be responsible, criminal law concepts applied: see, for example, R (Duggan) v North London Assistant Deputy Coroner [2017] EWCA Civ 142; [2017] 1 WLR 2199. Moreover, the Court of Appeal was bound by the decision in McCurbin to hold that the criminal standard applied. Davis LJ also held that section 10(2) of the 2009 Act contemplated that the criminal standard would be available. Section 10(2) provides that the determination of the result of the inquest may not be framed in such a way as to appear to determine any question of criminal liability on the part of a named person I do not take Davis LJ to say that this provision means that the criminal standard must be applied in unlawful killing cases, as it is well established that the commission of an offence can be determined in civil proceedings on the civil standard. Davis LJ was rightly concerned about the protection for a person implicated in any conclusion of unlawful killing. Such conclusion might make it more likely that a criminal prosecution is brought. In practice, despite the provisions of section 10(2) of the 2009 Act (see para 12 above), the name of that person may be more likely to be identified if the standard of proof for unlawful killing is the civil standard, because that standard may be more easily met. That person might thus be less able to enjoy the protection that section 10(2) conferred on him. The Chief Coroners primary concern on this appeal is to place arguments before this court both ways, and the court is grateful to him for doing that. The Chief Coroner explains that the application of the criminal standard in unlawful killing cases derives from the fact that coronial proceedings used to be a means for finding criminal liability. It used to be the duty of the coroners jury where they found that the death was murder, manslaughter or infanticide, to state in the verdict the name of the person considered to have committed the offence or of being an accessory before the fact. However, section 56 of the Criminal Law Act 1977 provided that a coroners verdict shall not make any finding that any person is guilty of murder, manslaughter or infanticide or charge any person with any of these offences. On that basis, the criminal standard for unlawful killing has lost at least some of its historical purpose. The able and concise submissions of Mr Straw are principally directed to the question of the appropriate standard of proof for a verdict of unlawful killing. He submits that the civil standard should apply in all non criminal cases, unless there is some good reason to the contrary. There is no principled basis for distinguishing suicide and unlawful killing in this regard. He points out, as did Professor Matthews in his articles, that one unfortunate result of the criminal standard is that an open conclusion has to be entered and the family will be denied the determination of the jury on issues as to how the deceased came by his death and what could have been done in his case, or what could be done in the future, to prevent a recurrence. The person implicated in an unlawful killing is at no greater risk of prosecution than he would be if findings of fact had been made against him in civil proceedings. Mr Straw further submits that the identity of the person whom the jury considered was responsible for the death may be obvious to persons familiar with the facts, and he is at no greater risk than he would be in a civil trial. Ms Monaghan submits that the criminal standard of proof should be maintained for both unlawful killing and suicide. On her submission, it is additionally desirable to uphold that standard for unlawful killing as the person responsible for the death will often in practice be identifiable. In my judgment, the short form conclusions of unlawful killing and suicide cannot satisfactorily be distinguished with respect to the standard of proof. As Davis LJ accepted, both such decisions contrast with the standard applying to narrative statements and different standards of proof may therefore confusingly apply to different conclusions within the same inquest. It is said that it would not promote public confidence in the legal system if a conclusion of unlawful killing is reached in an inquest on the civil standard, and a prosecution is mounted as a result which then fails. But that can happen in any event, even if the existing criminal standard is maintained, and it is at least as likely that public confidence in the legal system will be diminished if the evidence at the inquest cannot lead to clear findings on a balance of probabilities. It would appear to the public as if the system has conspired to prevent the truth from being available to them. It seems to me that the public are likely to understand that there is difference between a finding at an inquest and one at a criminal trial where the accused has well established rights to participate actively in the process. Moreover, if there appears to be a risk that criminal proceedings will be brought before an inquest has been completed, the inquest can be adjourned, and in some circumstances must be adjourned (see the 2009 Act, Schedule 1). In that way the person who is at risk of prosecution is protected against a short form conclusion reached on a civil standard which is unfavourable to him. The person implicated in the conclusion of unlawful killing is equally liable to suffer prejudice from the findings by way of narrative statement, which can be found on a balance of probabilities. They may equally point a finger at him. In addition, as Mr Straw points out, the accused would be in the same position in an inquest as he already is if civil proceedings are brought against him. In summary, a common standard applying to both unlawful killing and suicide is more consistent with principle and removes an inherent inconsistency in the determinations made at an inquest. It reflects the general rule for the standard of proof in civil proceedings. In short, it seems to me that the arguments in favour of applying the rule that in most civil proceedings the civil standard will apply are stronger than those against, and that this Court should take the opportunity of so deciding. Conclusion conclusions at an inquest is the balance of probabilities. LORD CARNWATH: I am grateful for Lady Ardens comprehensive exposition of the factual, legal and policy background to this difficult case. Like her I agree with the conclusion of the courts below in respect of suicide, and would extend it to unlawful killing (not a course open to the courts below because of binding authority to the contrary). Since I understand there to be disagreement within this court, I will add a brief statement of my own reasons, which for the most part accord with hers. I would dismiss this appeal. The standard of proof for all short form As indicated by Lady Arden and the courts below, the previous case law is of no great help. The 2009 Act should in my view be approached as a new statute intended to restate the law in modern form, without undue regard to the history, but against the background of the current view of standards of proof in civil cases. The modern approach to that issue in respect of alleged suicide is usefully exemplified by the judgments of this court in Braganza (cited by Lady Arden at para 79). As was there recognised, earlier decisions, such as Ex p Gray, had been in effect overtaken by the approach authoritatively established in In re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 and In re B (Children) (Care Proceedings: Standard of Proof) [2008] UKHL 35; [2009] AC 11, which made clear that in civil cases there is only one standard of proof, viz the balance of probabilities: Those cases make it clear that there is not a sliding scale of probability to be applied, commensurate with the seriousness of the subject matter or the consequences of the decision. The only question is whether something is more likely than not to have happened. (Braganza v BP Shipping Ltd [2015] 1 WLR 1661, para 34, per Lady Hale) I can find nothing in the 2009 Act to support a more restricted approach. I note in particular: Section 1(1) imposes a duty on the coroner to conduct an i) investigation into the relevant death; ii) Section 5(1) indicates that the purpose of the investigation is to ascertain certain matters including who the deceased was, how, when and where he died, and (in an article 2 case) in what circumstances he came by his death; iii) Section 10 requires a determination as to the questions in section 5(1), but not framed in such a way as to appear to determine any question of criminal liability on the part of a named person; iv) Section 45 allows rules for regulating the practice and procedure, including provision about evidence. The emphasis on investigation and ascertainment of the relevant facts is consistent with leading authorities on the purpose of the inquest, which make clear that the primary purpose is to find facts, not apportion guilt. As Lord Lane CJ said in R v South London Coroner, Ex p Thompson (1982) 126 SJ 625; The Times, 9 July 1982: it should not be forgotten that an inquest is a fact finding exercise and not a method of apportioning guilt. The procedure and rules of evidence which are suitable for one are unsuitable for the other. In an inquest it should never be forgotten that there are no parties, there is no indictment, there is no prosecution, there is no defence, there is no trial, simply an attempt to establish facts. It is an inquisitorial process, a process of investigation quite unlike a criminal trial where the prosecutor accuses and the accused defends, the judge holding the balance or the ring, whichever metaphor one chooses to use. This is also consistent with the fact finding purposes of an article 2 inquiry, as described in R (Amin) v Secretary of State for the Home Department [2003] UKHL 51; [2004] 1 AC 653, para 31 per Lord Bingham: to ensure so far as possible that the full facts are brought to light; that culpable and discreditable conduct is exposed and brought to public notice; that suspicion of deliberate wrongdoing (if unjustified) is allayed; that dangerous practices and procedures are rectified; and that those who have lost their relative may at least have the satisfaction of knowing that lessons learned from his death may save the lives of others. See also the recent discussion of effectiveness in the context of an article 2 investigation, in In re Finucane [2019] UKSC 7; [2019] 3 All ER 191, para 126ff per Lord Kerr. There is nothing in the Act to suggest that a different, or more restricted, approach to handling the evidence or fact finding is appropriate, or even permissible, in particular categories of case, such as where there may be a finding of suicide or unlawful killing. Reading the statute in the light of the contemporary understanding of the law, I see no reason to do other than treat all cases and all issues alike: that is, in accordance with the ordinary standard for civil proceedings. Must this view of the statutory scheme be modified to take account of footnote (iii)? The statutory material has been set out by Lady Arden. The footnote states simply: The standard of proof required for the short form conclusion of unlawful killing and suicide is the criminal standard of proof. For all other short form conclusions and a narrative statement the standard of proof is the civil standard of proof. It is not in dispute that a statutory footnote may be an operative part of the statute. Whether it is so, and its effect in any particular case, must depend on the true construction of the footnote in its context, taking account of the statutory framework and its policy background. Rule 33 requires the coroner to direct the jury as to the law. Rule 34 (Record of inquest) by contrast is not about the law or the decision making process, but as its title suggests about recording the decision. It requires the determination and any findings required under section 10 to be made using Form 2. The rule contains no specific reference to the notes as such, nor anything to suggest that the notes are intended to prescribe a standard of proof, or anything else. In the form itself, item 4 (Conclusion as to the death) specifically incorporates a reference to notes (i) and (ii). The purpose is to indicate the possible short form conclusions and the possibility of a brief narrative conclusion as an alternative or in addition. There is no equivalent reference in the body of the form to note (iii), which is most naturally read as guidance as to what is understood to be the existing state of the law, rather than as prescribing a particular standard. The Divisional Court said: We accept that the power under section 45 of the 2009 Act to make coroners rules is sufficiently broad to enable a rule to be made stipulating the standard of proof to be applied in coroners proceedings. But if the intention had been to make such a rule, the appropriate place to do so would be in the body of the rules, and not in a prescribed form. Form 2, as is clear from its subject matter, is simply a form which must be used to record the determination which the coroner or jury has made. Its function is not to enact rules about how evidence given at an inquest must be approached. In our view, the reasonable interpretation of note (iii) is simply as stating, for the assistance of those using the form, what the law with regard to the standard of proof is understood to be, and not as legislating what the law shall be. (para 47) I agree. Although I have reached this view without needing to rely on the preparatory materials cited by Lady Arden, they provide useful confirmation. Like Lady Arden, and for the reasons given by her, I would apply the same approach to unlawful killing. LORD KERR: (dissenting) (with whom Lord Reed agrees) Section 45(1) of the Coroners and Justice Act 2009 provides that: Rules may be made in accordance with Part 1 of Schedule 1 to the Constitutional Reform Act 2005 (c4) (a) for regulating the practice and procedure at or in connection with inquests. Subsection (2) states that rules may make provision as to various matters, including: (a) provision about evidence This power was used to make the Coroners (Inquests) Rules 2013. Rule 34 of the 2013 Rules deals with the record of the inquest. It states that [a] coroner, or in the case of an inquest heard with a jury, the jury must make a determination using Form 2 (emphasis added). This is a straightforward provision. It connotes that the provisions of form 2 have to be followed. Form 2 contains a range of sundry instructions. The record must contain the name of the deceased (if known); the medical cause of death; how, when and where the death came about; and further particulars required by the Births and Deaths Registration Act 1953. There is nothing to indicate that compliance with these instructions is other than mandatory. Note (i) of the Notes to Form 2, by contrast, comprises a list of possible short form conclusions which may be adopted. These include at IV lawful/unlawful killing and at IX suicide. Plainly, it is not compulsory that any of the short form conclusions be reached. Note (ii) likewise contains a permissive provision. It states that [as] an alternative, or in addition to one of the short form conclusions listed under NOTE (i), the coroner or where applicable the jury, may make a brief narrative conclusion. Again, it is clear that arriving at a narrative conclusion is not obligatory. The critical note, for the purposes of this appeal is Note (iii). It provides: The standard of proof required for the short form conclusions of unlawful killing and suicide is the criminal standard of proof. For all other short form conclusions and a narrative statement the standard of proof is the civil standard of proof. The meaning of Note (iii) general considerations Two features of this note are significant. First, from the nine possible short form conclusions outlined in Note (i) (traditionally known as verdicts) only unlawful killing and suicide are identified as those to which the criminal standard applies. Secondly, the use of the word is clearly denotes that if a verdict of suicide or unlawful killing is to be reached, that may only occur where the coroner or the jury has been brought to a point of conviction beyond reasonable doubt that such a verdict is warranted. In my view, the framing of the note in this way was deliberate. The rendering of a short form conclusion is not obligatory but if one is expressed, then in the case of two specifically chosen verdicts, the criminal standard of proof must be applied. The reasons for this are not difficult to divine. A short form conclusion that the deceased died from, say, accident or misadventure; or natural causes; or a road traffic accident will, in the general run of cases, not be as significant as finding that they were unlawfully killed or committed suicide. The latter verdicts denote a solemn pronouncement and they have clear resonances beyond those of other short form conclusions. I do not find any incongruity in the circumstance that a narrative statement in respect of any of the verdicts listed in Note (i), including unlawful killing and suicide, should be on the basis of the civil standard of proof. The clear distinction (in cases of unlawful killing and suicide) between a short form conclusion (verdict) and a narrative statement (recital of the relevant testimony and transitory conclusions) should be recognised. A narrative statement recounts the salient evidence and circumstances. In the case of unlawful killing and suicide it should not purport to constitute a final conclusion on that evidence unless the coroner or the jury has become convinced beyond reasonable doubt that it is justified. The meaning of Note (iii) a textual approach In R (LG) v Independent Panel for the Tom Hood School [2010] EWCA Civ 142; [2010] PTSR 1462, section 52(3)(d) of the Education Act 2002 was considered. It stated that regulations shall make provision as to the procedure on appeals from orders excluding pupils from school. The relevant regulations made provision as to the standard of proof to be applied. Wilson LJ held that the procedure on appeals covered the issue as to the particular standard of proof that was applicable in reaching an answer to a question. At para 43 he said: The procedure on appeals is synonymous with the processing of appeals; and, when the panel takes the step (or reaches the stage) at which it determines a question whether a fact is established, a necessary part of its processing of that part of the appeal is to apply a particular standard of proof in reaching an answer to the question. A regulation about the inadmissibility of evidence of a specified character would in my view clearly fall within the rubric of procedure on appeal and there is in my view no material difference between a requirement that the panel should exclude evidence of a specified character and a requirement that it should apply a specified standard of proof to its appraisal of such evidence as is properly before it. Section 45(2) of the Coroners and Justice Act 2009 is, if anything, more explicit than section 52(3)(d) of the Education Act. Whereas the latter refers only to procedure on appeals, the Coroners and Justice Act 2009 expressly provides that the rules may make provision about evidence. And what is a stipulation about the standard of proof to be applied if it is not a provision about evidence? In para 35 of her judgment, Lady Arden says that Note (iii) to Form 2 of the rules forms part of an enactment and must be interpreted in the same manner as any other enactment and as part of that enactment. I agree. It is no less binding than a provision contained in a section of the Act itself. Its meaning and force should be considered as if it was prominent in the opening provision of the legislation. As Bennion states, If material is put into the form of a footnote it is still fully part of the Act and must be construed accordingly. And in Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398 it was held that inclusion of rules in a footnote to a form that must be used has the effect of creating binding law. What then does Note (iii) mean? Lady Ardens approach to its interpretation is that the word required in the first sentence of the note is logically referring to a source of law which pre existed the 2013 Rules para 49 of her judgment. But why should this be so? In my view, the verb required in this context has a straightforward meaning. It is that the standard of proof which must be observed is the criminal standard. To construe it as referring to some form of provenance or earlier prescription of the standard to be applied is, in my respectful opinion, contrived. In its natural and ordinary meaning the note is simply saying that this is the standard that is needed before a verdict of suicide or unlawful killing may be returned. For the same reason, I find it impossible to attach any significance to the omission of the word, required from the second sentence of Note (iii) (para 50 of Lady Ardens judgment). I cannot agree with the (admittedly speculative) suggestion that this was because the drafter could not point to any source for the statement outside the 2013 Rules and was merely making a statement based on his or her understanding of the effect of common law principles in this case. In my view, there was no occasion for the drafter to look for a source for the statement. He or she was merely stating what the law was to be. Underpinning Lady Ardens analysis is the premise that the drafting of Note (iii) was linked to and dependent on the common law. On this basis, the meaning of the note would shift and change to reflect future developments in the common law. That would be, to say the least, an unusual way to proceed and one which would surely require express articulation in the provision itself. Again, therefore, I find myself in regretful disagreement with the suggestion that the use of the present tense in the note supports this conclusion and cannot see any warrant for investing the word is with the quite different connotation from the normal understanding of the word suggested in para 51 of Lady Ardens judgment. In fact, of course, her discussion of the use of the present tense requires that the note be interpreted as if the word is meant not only, as she suggests, has been held to be and is but has been held to be and is until future change in the common law. I cannot believe that such an unnatural meaning is justified when the text of the note is susceptible to a simple, straightforward construction viz that this is the standard to be applied so long as the statutory provision remains in force. The public consultation Lady Arden was influenced to her choice of interpretation of Note (iii) by what she considered to be the outcome of the consultation exercise conducted by the Ministry of Justice on the 2013 Rules when they were in draft form. Her consideration of this matter is at paras 24 to 31 of her judgment. I need not repeat details of the consultation document and the responses received. These have been fully set out in Lady Ardens judgment. Part of the Ministrys response to the consultation (set out by Lady Arden at para 26) does bear repetition, however: As the requirement to use the criminal standard of proof when returning a suicide verdict is established under case law rather than coroner legislation we cannot take forward a change in the law through secondary legislation flowing from the 2009 Act. However the Chief Coroner and the MoJ are considering the views expressed on this issue. This statement was made in reaction to the strong views expressed by some respondents to the consultation document on whether the criminal standard of proof for suicide should be replaced by the civil standard. Lady Arden has interpreted the Ministrys response as meaning that it had been decided that the 2013 Rules could not make a change in the law. I agree that this is an interpretation which may be placed on the Ministrys response. But I do not agree that it was outside the enabling power in section 45 to make a rule for coronial proceedings which replaced a common law rule para 31 of Lady Ardens judgment. It is trite that a common law rule can be amended, modified or even abolished by legislation. And, since, as Lady Arden says in para 35, Note (iii) forms part of an enactment and, as was said in Hunt v RM Douglas (Roofing) Ltd (see para 119 above) Rules in a footnote to a form that must be used have the effect of creating binding law, it would have been possible to effect a change in the law by the use of a note in a form provided for in the Rules. Of course, the note did not purport to change the law. But it confirmed the existing law. And the plain effect of that, in my opinion, was to give statutory expression to the common law rule. Once the 2013 Rules were enacted, therefore, the common law rule that proof to the criminal standard was required for a verdict of suicide or unlawful killing, was given statutory force. It became a statutory rule. And it could only cease to have force and effect by the enactment of a statutory provision amending or abolishing it. Conclusion on the proper interpretation of Note (iii) I have decided therefore that Note (iii) of Form 2 admits of no interpretation other than that the prescribed short form conclusion in inquests involving questions of unlawful killing or suicide can only be reached by applying the criminal standard of proof. In light of that view, it is not strictly necessary to consider case law relating to three associated issues: (i) the standard of proof in civil proceedings where a criminal offence is alleged; and (ii) how the verdict of suicide has been traditionally regarded; and (iii) the nature of proceedings in an inquest. Since the first (and to some extent the second) of these played a significant part in the decisions of the Divisional Court and the Court of Appeal, it is appropriate to say something of the issues, albeit briefly. The standard of proof required to establish a criminal offence in civil proceedings It is accepted (rightly) by the appellant that in civil proceedings generally the standard of proof applicable in relation to findings of fact is the balance of probabilities. It is also accepted (again rightly) that whereas it was previously considered that the standard of proof in civil proceedings could be adjusted according to the gravity of the allegation (Hornal v Neuberger Products Ltd [1957] 247, 266; R v Secretary of State for the Home Department, Ex p Khawaja [1984] AC 74, at 112 114), it is now established that there is a single standard to be applied in proceedings which are properly to be regarded as civil. In In re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563, 586C Lord Nicholls said: Where the matters in issue are facts the standard of proof required in non criminal proceedings is the preponderance of probability, usually referred to as the balance of probability. This is the established general principle. Lord Nicholls recognised that there could be exceptions to this general rule and subsequent cases have confirmed his caveat. In In re D (Secretary of State for Northern Ireland intervening) [2008] UKHL 33; [2008] 1 WLR 1499, while the balance of probabilities standard was applied to findings in parole proceedings, Lord Carswell at para 23 accepted that the criminal standard of proof could apply in some civil proceedings. At para 49, Lord Brown observed that the criminal standard of proof might apply in quasi criminal cases. In In re B (Children) (Care Proceedings: Standard of Proof) [2008] UKHL 35; [2009] 1 AC 11, while the House of Lords held that the civil standard of proof applied in care proceedings, Lady Hale, at para 69, stated that there were some proceedings, although civil in form, which were of such a nature as to make it appropriate that the criminal standard of proof be applied. Examples of quasi criminal cases justifying the application of the criminal standard of proof or something akin to it are to be found in a number of decisions between 2001 and 2009. The first of these was B v Chief Constable of Avon and Somerset Constabulary [2001] 1 WLR 340 concerning the making of sex offenders orders. Lord Bingham CJ applied a standard of proof that was for all practical purposes indistinguishable from the criminal standard in view of the seriousness and implications of the matters to be proved para 41(a). In Gough v Chief Constable of the Derbyshire Constabulary [2002] QB 1213, Lord Phillips MR applied an exacting standard of proof in practice hard to distinguish from the criminal standard because of the consequences that would follow if a football banning order was made. In R (McCann) v Crown Court at Manchester [2002] UKHL 39; [2003] 1 AC 787, a case on the making of anti social behaviour orders, Lord Steyn suggested a standard of proof that was virtually indistinguishable from the criminal standard given the seriousness of matters involved para 37. Significantly, at paras 56 and 82 83, Lord Hope stated that it was not an invariable rule that the lower standard of proof must be applied in civil proceedings. In some cases, he said, the interests of fairness, the criminal or quasi criminal nature of an allegation, or the serious consequences of a finding could require the criminal standard. The other members of the Appellate Committee agreed with Lord Steyn and Lord Hope. In Birmingham City Council v Shafi [2008] EWCA Civ 1186; [2009] 1 WLR 1961, the Court of Appeal followed the reasoning in McCann to apply the criminal standard in applications for an injunction in circumstances where the relief was identical or almost identical to an anti social behaviour order. What these cases illustrate is that the characterisation of proceedings as criminal or civil will not automatically predetermine the standard of proof to be applied. If the proposition which is sought to be established is sufficiently grave or carries significant consequences for those whom it will affect, the criminal standard of proof may be deemed to be appropriate. How a finding of suicide has traditionally been regarded As the appellant submitted, the verdict of suicide has traditionally been regarded as one which carries serious legal and social consequences. Consideration of whether the verdict should be returned is one of the utmost seriousness and potential complexity, not least because it involves consideration of whether the deceased intended to kill himself or herself. Until the introduction of the Suicide Act 1961, a finding of suicide was also a finding of guilt of a criminal offence. Encouraging or assisting the suicide or attempted suicide of another still constitutes a criminal offence: section 2 of the 1961 Act. In R v West London Coroner, Ex p Gray [1988] QB 467, 477, Watkins LJ said that a suicide conclusion was a drastic action which often leaves in its wake serious social, economic and other consequences. In R v HM Coroner for Dyfed, Ex p Evans (unreported 24 May 1984) it was stated that an overly ready verdict of suicide oppresses the living and demeans the dead. A verdict of suicide causes stigma to the memory of the deceased in circumstances in which there is a clearly established policy of avoiding so far as possible any unnecessary stigma per Simon Brown J in R v Inner South London Coroner, Ex p Kendall [1988] 1 WLR 1186, 1192. Most recently, in this court, there was unanimous agreement as to the seriousness of a conclusion that a death was due to suicide (although there was disagreement as to the outcome of the appeal). In Braganza v BP Shipping Ltd [2015] UKSC 17; [2015] 1 WLR 1661, Lady Hale said at para 36 that such a finding had serious consequences for the family of the deceased and at para 41 that for many religions suicide was a mortal sin. At para 61 Lord Hodge stated that a finding that an employee had committed suicide carried a stigma for his spouse. Lord Neuberger acknowledged (at para 107) that, having suffered the blow of losing her husband, the finding of an inquiry that he had killed himself would involve additional blows. There can be no doubt, therefore, of the gravity of a finding of suicide or of the need to distinguish it from other causes of death in terms of the level of proof required to establish it. There are, of course, contrary views as to whether the criminal standard should be applied. Some of these have been referred to in the judgment of Lady Arden. But none suggests that a verdict of suicide is other than a very serious matter. There is nothing in the least untoward, therefore, in placing suicide (and unlawful killing) in a special category requiring proof of those verdicts to the criminal standard. Note (iii) expressly does so and, for the reasons given at para 116 above, there is nothing incongruous in the circumstance that a short form conclusion requires that heightened level of proof, whereas the narrative version does not. Even if such an incongruity existed, that would not warrant a refusal to apply the plain effect of the language of Note (iii), constituting as it does a direct statutory provision that a short form conclusion as to suicide and unlawful killing may only be made where there is proof beyond reasonable doubt to sustain it. Whatever anomaly might be said to arise, it is not open to the courts to disapply what is unambiguous statutory language. True it may be, as Lady Arden says in para 27 of her judgment, that the Ministry of Justice decided that it could not make a change in the law by the 2013 Rules. And it may also be true, as she says in the same para, that the criminal standard was not established by those rules, for it had its origins in the common law. But what the 2013 Rules unquestionably established was a statutory basis for the application of the criminal standard of proof for verdicts (or short form conclusions) in cases of suicide and unlawful killing and that statutory imperative cannot be displaced by judicial pronouncement. It has full force and effect until amended or abolished by subsequent statutory provision. The nature of proceedings in an inquest As submitted by the appellant, inquests are not civil or criminal proceedings. They are sui generis proceedings with rules of procedure of their own. In R v South London Coroner, Ex p Thompson (1982) 126 SJ 625; The Times, 9 July 1982, Lord Lane CJ said: it should not be forgotten that an inquest is a fact finding exercise and not a method of apportioning guilt. The procedure and rules of evidence which are suitable for one are unsuitable for the other. In an inquest it should never be forgotten that there are no parties, there is no indictment, there is no prosecution, there is no defence, there is no trial, simply an attempt to establish facts. It is an inquisitorial process, a process of investigation quite unlike a criminal trial where the prosecutor accuses and the accused defends, the judge holding the balance or the ring, whichever metaphor one chooses to use. It is unwise, therefore, to categorise inquests as civil proceedings simply because they do not fit the criminal model. It is even less appropriate to consider that the civil standard of proof should apply to all matters which fall to be decided in an inquest. Given the unique nature of inquests, it is not surprising that some issues should be susceptible to differing standards of proof. Overall conclusion It would be ironic, to say the least, that Note (iii) which, on its face, decrees that verdicts of suicide and unlawful killing should only be returned if proof of them measures up to the criminal standard, proved to be the instrument of the abolition of this traditional rule. The inference that this is its effect is based on what is perceived to be the anomaly that a narrative conclusion effectively permits a verdict of suicide on the basis of the balance of probabilities, whereas a short form conclusion requires proof beyond reasonable doubt. For the reasons that I have sought to explain, there is, in truth, no incongruousness between the two. In my view, on a proper understanding of the effect of Note (iii), the present state of the law is that there must be proof beyond reasonable doubt before a verdict of suicide or unlawful killing may be returned. I would allow the appeal. |
By its judgment in this appeal dated 24 March 2010 the Supreme Court referred to the Court of Justice five questions regarding the nature and assessment of the concept of paid annual leave in articles 7 of Council Directives 93/104/EC and 2003/88/EC and clause 3 of the European Agreement annexed to and intended to be implemented under Council Directive 2000/79/EC (the Aviation Directive). The Court of Justice by its judgment dated 15 September 2011 gave its response: British Airways plc v Williams (Case C 155/10) [2012] ICR 847. The parties are now at odds as to its consequences for the dispute between them. Clause 3 of the European Agreement reads: (1) Mobile staff in civil aviation are entitled to paid annual leave of at least four weeks, in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. (2) The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated." In the United Kingdom, The Civil Aviation (Working Time) Regulations 2004 (SI 2004/756) (the Aviation Regulations) were introduced to comply with this countrys obligations to give effect to Directive 2000/79/EC. The Aviation Regulations provide: (1) A crew member is entitled to paid annual leave of at least four weeks, or a proportion of four weeks in respect of a period of employment of less than one year. (2) Leave to which a crew member is entitled under this regulation (a) may be taken in instalments; (b) may not be replaced by a payment in lieu, except where the crew member's employment is terminated. 4. As the Supreme Court explained in its judgment dated 24 March 2010 the Aviation Regulations are part of a wider complex of legislation requiring paid annual leave, starting with a general requirement introduced by Directive 93/104/EC (the Working Time Directive). The Working Time Directive excluded various sectors, including air transport. Further, when the Working Time Directive was implemented by the Working Time Regulations 1998 (SI 1998/1833) (the Working Time Regulations), these made specific reference to sections 221 to 224 (and by implication sections 234 to 235) of the Employment Rights Act 1996, which contain a detailed scheme (originally introduced in the context of redundancy pay) for ascertaining a weeks pay in the cases of employments with and without normal working hours. In contrast, the Aviation Regulations neither contain nor refer to any such scheme. They leave the concept of paid annual leave undefined. Hence, the issues arising in this appeal. The appellants are British Airways pilots. Their terms of employment, negotiated by their union, British Air Line Pilots Association (BALPA), are found in a Memorandum of Agreement (MOA) which requires them to take 30 days annual leave and entitles them to take a further two weeks leave, save in the case of pilots with a Gatwick base, who are obliged to take 35 days holiday and are entitled to a further seven days of leave. The MOA provides for pilots to receive (a) a fixed annual sum, plus two supplementary payments varying according to the time spent flying, consisting of (b) the Flying Pay Supplement (FPS) paid at 10 per flying hour and (c) the Time Away from Base allowance (TAFB) paid at 2.73 per hour. British Airways explains that TAFB was introduced to replace meal allowances, sundries and the Gatwick Duty Allowance and to be increased in accordance with the UK Retail Prices Index for Catering Restaurant Meals. Her Majestys Revenue and Customs attitude is that the TAFB is over generous and that 18% of it is taxable, in effect as pure remuneration. The history of the case to date When the appeal first came before the Supreme Court, British Airways primary submission was that the United Kingdom legislator, by omitting to introduce any detailed scheme for the calculation of paid annual leave like that provided under the Working Time Regulations, must be taken to have left this to be determined by collective or individual agreement between the parties, whatever might be the effect of the Aviation Directive. The Supreme Court was not at that time persuaded by this submission, and thought it likely to be possible to construe the Aviation Regulations to reflect what meaning the Aviation Directive might have. Hence, the reference made to the Court of Justice. British Airways second submission was that the Aviation Directive was to like effect, leaving the calculation of paid annual leave to collective or individual agreement between the parties. Its third submission, if this was wrong, was that the only constraint imposed by the Directive was that pay during annual leave must not be so low as to prevent or inhibit the taking of leave. Finally, it submitted that the fixed annual sum (a) above constituted the pilots normal pay and was sufficiently comparable to remuneration received while working to satisfy the requirement for paid annual leave. The questions referred to the Court of Justice by the Supreme Court were in these circumstances: (1) Under (a) articles 7 of Council Directives 93/104/EC and 2003/88/EC and (b) clause 3 of the European Agreement annexed to the Council Directive 2000/79/EC: (i) to what, if any, extent does European law define or lay down any requirements as to the nature and/or level of the payments required to be made in respect of periods of paid annual leave; and (ii) to what, if any, extent may member states determine how such payments are to be calculated? (2) In particular, is it sufficient that, under national law and/or practice and/or under the collective agreements and/or contractual arrangements negotiated between employers and workers, the payment made enables and encourages the worker to take and to enjoy, in the fullest sense of these words, his or her annual leave; and does not involve any sensible risk that the worker will not do so? (3) Or is it required that the pay should either (a) correspond precisely with or (b) be broadly comparable to the worker's "normal" pay? Further, in the event of an affirmative answer to question (3)(a) or (b): (4) Is the relevant measure or comparison: (a) pay that the worker would have earned during the particular leave period if he or she had been working, instead of on leave, or (b) pay which he or she was earning during some other, and if so what, period when he or she was working? (5) How should "normal" or "comparable" pay be assessed in circumstances where: (a) a worker's remuneration while working is supplemented if and to the extent that he or she engages in a particular activity; (b) where there is an annual or other limit on the extent to which, or time during which, the worker may engage in that activity, and that limit has been already exceeded or almost exceeded at the time(s) when annual leave is taken, so that the worker would not in fact have been permitted to engage in that activity had he been working, instead of on leave? The Court of Justice gave a compendious answer. It ruled (para 31) that article 7 of Directive 2003/88/EC and clause 3 of the European Agreement: must be interpreted as meaning that an airline pilot is entitled, during his annual leave, not only to the maintenance of his basic salary, but also, first, to all the components intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of his total remuneration, is provided and, second, to all the elements relating to his personal and professional status as an airline pilot. It is for the national court to assess whether the various components comprising that worker's total remuneration meet those criteria. The Court of Justices reasoning makes clear that it was ruling against British Airways on questions (2), (3) and (5)(a): 20 The purpose of the requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work 21 remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker. It also follows that an allowance, the amount of which is just sufficient to ensure that there is no serious risk that the worker will not take his leave, will not satisfy the requirements of European Union law. The court went on, in further answer, to say that where, as here, pay was structured to involve several components, a specific analysis was required (para 22), because (para 23): that structure cannot affect the worker's right to enjoy, during his period of rest and relaxation, economic conditions which are comparable to those relating to the exercise of his employment and 24 Accordingly, any inconvenient aspect [sic] which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided which is included in the calculation of the worker's total remuneration, such as, in the case of airline pilots, the time spent flying, must necessarily be taken into account for the purposes of the amount to which the worker is entitled during his annual leave. 25 By contrast, the components of the worker's total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the tasks which the worker is required to carry out under his contract of employment, such as costs connected with the time that pilots have to spend away from base, need not be taken into account in the calculation of the payment to be made during annual leave. 26 In that regard, it is for the national court to assess the intrinsic link between the various components which make up the total remuneration of the worker and the performance of the tasks which he is required to carry out under his contract of employment. That assessment must be carried out on the basis of an average over a reference period which is judged to be representative and in the light of the principle established by the case law , according to which Directive 2003/88 treats entitlement to annual leave and to a payment on that account as being two aspects of a single right. 27 That stated, it must also be pointed out that the court has already held that an employee, working as a purser for an airline company and transferred, by reason of her pregnancy, temporarily to ground work, was entitled, during her temporary transfer, not only to maintenance of her basic salary but also to pay components or supplementary allowances relating to her professional status as an employee. Accordingly, allowances relating to her seniority, her length of service and her professional qualifications had to be maintained: see, to that effect, Parviainen v Finnair Oyj (Case C 471/08) [2011] ICR 99; [2010] ECR I 6529, para 73. That case law also applies to a pregnant worker who has been granted leave from work: see Gassmayr v Bundesminister fr Wissenschaft und Forschung (Case C 194/08) [2010] ECR I 6281, para 65. 28 It follows that, in addition to the components of the total remuneration set out in para 24 of the present judgment, all those which relate to the personal and professional status of an airline pilot must be maintained during that worker's paid annual leave. The court ended its reasoning by repeating that It is for the national court to assess whether the various components comprising that worker's total remuneration meet those criteria (para 31). The court therefore drew a distinction relevant to TAFB between, on the one hand, remuneration, including remuneration based on personal or professional status, for all activities whether basic or inconvenient undertaken during employment (para 24) and, on the other hand, payments intended exclusively to cover occasional or ancillary costs (para 25) costs which would not of course be incurred during holiday periods. The court made clear in para 26 that it is for the national court to assess into which of the two categories identified in paras 24 and 25 any payment fell. When it went on in para 26 to state that That assessment must be carried out on the basis of an average over a reference period which is judged to be representative, the most natural reading of the statement is that the court understood that this assessment was also something that the national court could and would judge for itself. The courts reasoning in para 26 further indicates that it contemplated an average over a reference period judged to be representative of normal working and remuneration, rather, therefore, than a calculation based on what the employee might have earned during the holiday period, had she or he then been working. The concept of a reference period judged to be representative recognises the exercise of judgment inherent in words like representative and normal. The Court of Justice was not prescriptive as to what might or might not constitute a representative period. The court did not expressly address the question how far a member state or national court might adopt a standard period, applicable to a range of employees, like that required under sections 221 to 226 of the Employment Rights Act 1996. Different British Airways pilots may earn different supplementary amounts of FPS (or TAFB) according to their different flying patterns during different periods. This could no doubt be one factor to bear in mind in arriving at any reference period, whether for pilots generally or for a particular pilot. Further, the court did not specifically answer question (5)(b), which is potentially relevant since Regulation 9 of the Aviation regulations provides: in any month (a) no person shall act as a crew member during the course of his working time, if during the period of 12 months expiring at the end of month before the month in question the aggregate block flying time of that person exceeds 900 hours; and (b) no crew member employed by him shall have a total annual working time of more than 2,000 hours during the period of 12 months expiring at the end of the month before the month in question". If a reference period of the previous 10 or 11 months at work were taken, a pilot might in that period have exhausted his or her permitted 900 hours. If an average is in such circumstances to be calculated including all 900 hours, the pilot would (as he or she arguably should) receive paid holiday pay higher than that receivable by a pilot who had only flown 800 hours in the same 10 or 11 months. The current issues In the light of the Court of Justices judgment, the appellants submit that (i) each of their claims can and should now be remitted to the Employment Tribunal for assessment by that tribunal of a representative period and of the relevant remuneration earned during that period, and that (ii) such remuneration should include not merely basic pay and FPS, but also 18% of TAFB. British Airways, on the other hand, submits that (i) the Aviation Regulations are too unspecific to give effect to the Aviation Directive, in the absence of any relevant legislative scheme, and (ii) that the whole of the TAFB should be excluded from remuneration for the purposes of any calculation. It is common ground that clause 3 of the European Agreement annexed to the Aviation Directive does not have direct effect against British Airways. In Dominguez v Centre Informatique du Centre Ouest Atlantique (Case C 282/19) [2012] ICR D23, the Court of Justice treated the equivalently worded article 7 of the Working Time Directive as directly effective against the State. But British Airways is not an emanation of the State. Clause 3 of the European Agreement can only therefore be invoked against British Airways if it has been effectively implemented at domestic level. In support of its first, general submission, British Airways thus argues that this has not occurred; that the concept of an average over a reference period which is judged to be representative is open ended and so open to differing assessments that implementation of the Aviation Directive in national law requires legislation; and that the mere echoing in regulation 4(1) of the phrase paid annual leave which appears in clause 3 is insufficient for effective implementation of the Directive. At the European legal level, British Airways invokes the principle of legal certainty; at the domestic level, it submits that no possibility exists of interpreting the Aviation Regulations as implementing the Aviation Directive effectively, pursuant to the well established duty to interpret domestic legislation so far as possible in a manner conforming with any obligations imposed by a Directive: see, inter alia, Marleasing SA v La Comercial Internacional de Alimentacin SA (Case C 106/89)[1990] ECR I 4135 and Pfeiffer v Deutsches Rotes Kreuz, Kreisverband Waldshut eV (Joined Cases C 397 403/01) [2005] ICR 1307, paras 109 120. The impossibility of a conforming interpretation is reinforced, British Airways submits, by the consideration that the Merchant Shipping (Hours of Work) Regulations 2002 (SI 2002/2125), although not directly in issue, provide (in regulation 12) for the same entitlement to paid annual leave, but go on to provide not for civil liability, but for criminal liability in the event of any contravention of regulation 12. British Airways argue that the need for legal certainty and the obstacles to any form of interpretive solution are all the greater when the concept of paid annual leave has, albeit in the context of other Regulations, penal implications. British Airways invokes in this connection the principle that the interpretive obligation recognised in cases such as Marleasing should not be used with the effect of determining or aggravating domestic criminal liability: Criminal Proceedings against Kolpinghuis Nijmegen BV (Case 80/86) [1987] ECR 3969, para 14 and Criminal Proceedings against Arcaro (Case C 168/95) [1997] All ER (EC) 82, para 42. British Airways notes that the present situation has only arisen because pilots have been successful in the Court of Justice in challenging the parties collective agreement in the MOA, according to which basic pay was to be taken as the measure of paid annual leave and increments in basic pay were from time to time negotiated. Had the Court of Justice restricted the payment required during annual leave to basic pay or allowed the parties to do so, there would have been no problem in knowing what the Directive required or in giving effect to it at national level. As it is, however, British Airways submits, the requirements of the Directive, as explained by the court, require a detailed legislative scheme, which is not found in the Aviation Regulations and could not be supplied by an employment tribunal. Finally, British Airways seeks to gain support for its case from the absence in regulation 18 of the Aviation Regulations of any explicit power in the employment tribunal to assess or award compensation for paid annual leave. That, British Airways submits, is precisely because no one conceived that paid annual leave could, under the Aviation Regulations, mean anything other than basic pay, as had been collectively agreed by the MOA. Now that it is clear that it means more, the absence of any such power confirms the absence of any legislative scheme regarding paid annual leave sufficient to implement the Aviation Directive or to have any domestic effect. Analysis on issue of uncertainty and domestic effect I do not accept British Airways submissions. Their foundation is the open endedness of the exercise of judgment inherent in the concept of an average over a reference period which is judged to be representative. The domestic legislator may well have assumed, as British Airways submits, that the assessment of paid annual leave would be a simple matter, with any problems being resolved by collective agreement. The more sophisticated assessment now revealed to be necessary and the absence of any collective agreement leave scope for differences of view about the period to be taken. On the other hand, a general legislative scheme of the sort that British Airways maintains to be required could itself have risked being over prescriptive. Be that as it may, the legislator chose in the Aviation Regulations simply to repeat the relevant language of the Aviation Directive. The Court of Justice having explained the principles behind article 7 of the Working Time Directive and clause 3 of the European Agreement, the same principles must be taken to have been intended to govern the same wording where it appears in regulation 4 of the Aviation Regulations. The solution, in my opinion, is that, in these circumstances and in the absence of any other means of ascertaining a representative reference period, the choice of a reference period is in the first instance for British Airways to make. This is a choice to be made by British Airways within the parameters of what can (reasonably) be judged to be representative. Failing such a choice, British Airways cannot complain if a court or tribunal takes its own view of what best represents a representative period in the case of an individual employee who brings a case to it. This in my opinion matches the Court of Justices own expectations: see para 13 above. It would be surprising if domestic courts or tribunals were to conclude that they could not give effect to a domestic article using identical language to the Aviation Directive in the way in which the Court of Justice contemplated that the language of the Directive envisages. This is reinforced by the Court of Justices conclusion that, in a context where the employer is the State, article 7 is directly effective (and so, by necessary implication, sufficiently certain for that purpose). I am unimpressed by the submission that, on the basis that the same approach is to be transposed to the same language in the Merchant Shipping (Hours of Work) Regulations 2002, the result would be to expose employers to criminal liability for failing to make an appropriate choice within uncertain parameters. So long as an employers choice is within those parameters, no problem arises, and, if a bona fide choice were to fall outside such parameters, the likelihood of a criminal prosecution would appear remote. If the problem were to prove a real one, then the difference between the present regulations and those imposing criminal liability might itself also require a different approach to the issue of enforceability if it arose in the latter context. I am also unimpressed by the submission that regulation 18 militates against or prevents a conclusion that, in the absence of a choice by British Airways, the employment tribunal can make its own assessment of an average over a reference period which is judged to be representative. Regulation 18 provides: Remedies 18.(1) A crew member may present a complaint to an employment tribunal that his employer has refused to permit him to exercise any right he has under regulation 4, 5(1), (4), 7(1) or 7(2)(b). (2) An employment tribunal shall not consider a complaint under this regulation unless it is presented (a) before the end of the period of three months beginning with the date on which it is alleged (i) that the exercise of the right should have been permitted (or in the case of a rest period or annual leave extending over more than one day, the date on which it should have been permitted to begin), or (ii) the payment under regulation 4(2)(b) should have been made; as the case may be; or (b) within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three months. (3) Where an employment tribunal finds a complaint under regulation 4, 5(1), (4), 7(1) or 7(2)(b) well founded, the tribunal (a) shall make a declaration to that effect; and (b) may make an award of compensation to be paid by the employer to the crew member. (4) The amount of the compensation shall be such as the tribunal considers just and equitable in all the circumstances having regard to (a) the employer's default in refusing to permit the crew member to exercise his right; and (b) any loss sustained by the crew member which is attributable to the matters complained of. British Airways submission is that regulation 18(1) only contemplates complaints based on a refusal to permit an employee to take paid annual leave, not complaints about the level of payment for such leave. The only reference to a complaint based on failure to make a payment is in regulation 18(2)(a)(ii). There it is linked to a failure on termination of employment to make a payment in lieu of leave under regulation 4(2)(b), and that is a payment which is based necessarily on an assessment of what the employee would have earned during a defined period. British Airways contrasts this position with that under certain other regulations, such as the Working Time Regulations 1998. Regulation 16 of the Working Time Regulations entitles a worker to be paid at the rate of a weeks pay in respect of each week of the annual leave required under regulation 13 and regulation 30 (Remedies) goes on specifically to deal in regulation 30(1)(a)(i) with refusal to permit a worker to exercise any right he has under regulation 13, and in regulation 30(1)(b) with failure to pay him the whole or any part of any amount due to him under regulation . 16(1), while regulation 30(5) provides that, where an employment tribunal finds such a failure, it shall order the employer to pay to the worker the amount which it finds to be due to him. It is true that the Aviation Regulations, unlike the Working Time Regulations, do not explicitly address complaints relating to the payments for annual leave. But it is our duty to read the domestic Regulations so far as possible to give effect to the Aviation Directive, as interpreted by the Court of Justice. Regulation 18(1) contemplates complaints where an employer has refused to permit the exercise of any right that an employee has under regulation 4. Regulation 18(4) enables an employment tribunal to award such compensation as it considers just and equitable in all the circumstances having regard to the employers default in refusing to permit the crew member to exercise his right. The concept of refusal to permit the exercise of a right can extend to cover refusal to permit the crew member an appropriate payment as part of the right to paid annual leave. The employment tribunal can on the like basis make such award as it considers just and equitable to compensate for such refusal. The implication of British Airways present submissions is that any complaint that a pilot might have can and would lie not against British Airways, but at most against the United Kingdom, for failure to implement the Aviation Directive effectively at the domestic level. I note that this would itself involve the pilot invoking a forum, presumably a court, which would then have to determine as against the State the appropriate parameters of a period judged to be representative of the pilots normal pay the very exercise that British Airways submits is so uncertain that it cannot be undertaken by the employment tribunal. For the reasons I have given, I do not accept British Airways submissions, and conclude accordingly that the claims should be remitted to the Employment Tribunal for further consideration of the appropriate payments to be made to the pilots in respect of the periods of paid annual leave in issue. The appellants submit that the Supreme Court can and should without more conclude that the pilots remuneration includes 18% of the sums paid by way of TAFB. But the 18% is no more than the percentage which Her Majestys Revenue and Customs regards as taxable. The Revenues attitude for tax purposes is presently irrelevant. It amounts at best to a third partys view on an issue to be determined independently by the employment tribunal. Even if the Revenues attitude for tax purposes were relevant, it is not in any event clear on what basis the Revenue arrived at its attitude, or by reference to what considerations. In contrast, British Airways relies upon the test stated by the Court of Justice in its para 25, which excludes from remuneration relevant to the calculation of holiday pay, components of pay which are intended exclusively to cover costs. British Airways stresses the word intended. Within such components, the Court of Justice expressly included costs connected with the time that pilots have to spend away from base. The question arising is therefore whether the payments by way of TAFB were intended exclusively to cover costs. Although British Airways submits that the Supreme Court can or should itself determine the answer to this question, we do not have the material to do so in the agreed statement of facts or elsewhere. Even the history of TAFB given by British Airways as summarised in para 5 above is no more than its statement of the position. It must be for the employment tribunal to consider and determine upon what basis TAFB was agreed and paid during any relevant period. As to the precise test, the concept intended exclusively to cover costs requires attention to be focused on the real basis on which the TAFB payments were made. If they were payments that were made genuinely and exclusively to cover costs, that would, at least prima facie, be the end of the matter. The appellants case appears to be that, although they were designated as being for the exclusive purpose of covering costs, they were in fact more than some or all pilots might actually need for or spend on costs, and that the Revenue has, in effect, seen through the description to a reality which the Supreme Court, or an employment tribunal, should also recognise. As Mr Jeans QC for British Airways accepted, there could no doubt come a point at which it was obvious that payments nominally made to cover costs were not required, or were not going to be required, in their entirety, to match actual costs. An employer who in such circumstances continued to make such payments in their full amount could then no longer maintain that they were genuinely and exclusively intended to cover costs. But, in using the phrase intended exclusively to cover costs, it does not appear that the Court of Justice contemplated any detailed evaluation of the precise need for or reasonableness of payments which were so intended. What matters is whether there was a genuine intention in agreeing and making such payments that they should go exclusively to cover costs. It is on that the employment tribunal should in my opinion focus. Hilary Term [2010] UKSC 16 On appeal from: [2009] EWCA Civ 281 JUDGMENT British Airways plc (Respondents) v Williams (Appellant) and others before Lord Walker Lady Hale Lord Brown Lord Mance Lord Clarke JUDGMENT GIVEN ON 24 March 2010 Heard on 24 and 25 February 2010 Appellant Jane McNeill QC Michael Ford (Instructed by Thompsons Solicitors) Respondent Christopher Jeans QC Andrew Short (Instructed by Baker and Mackenzie LLP) LORD MANCE (delivering the judgment of the court) The relevant law 1. This appeal concerns the concept of paid annual leave for crew members employed in civil aviation appearing in regulation 4 of The Civil Aviation (Working Time) Regulations 2004 (SI 2004 no. 756) (the Aviation Regulations). These Regulations were introduced under s.2(2) of the European Communities Act 1972 to comply with the United Kingdoms obligations under Council Directive 2000/79/EC of 27 November 2000 (the Aviation Directive), the purpose of which was in turn to implement the European Agreement on the organisation of working time of mobile staff in civil aviation dated 22 March 2000 (the European Agreement) annexed to the Directive. 2. Clause 3 of the European Agreement reads: 1. Mobile staff in civil aviation are entitled to paid annual leave of at least four weeks, in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. 2. The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated. 3. The Aviation Regulations provide: 4. (1) A crew member is entitled to paid annual leave of at least four weeks, or a proportion of four weeks in respect of a period of employment of less than one year. (2) Leave to which a crew member is entitled under this regulation (a) may be taken in instalments; (b) may not be replaced by a payment in lieu, except where the crew members employment is terminated. 4. The Aviation Regulations and Directive are part of a wider complex of legislation requiring paid annual leave. Council Directive 93/104/EC of 23 November 1993 (the Working Time Directive) introduced a general requirement that Member States take measures to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice (article 7(1)). But it excepted various mobile sectors of activity, viz air, rail, road, sea, inland waterway and lake transport, sea fishing, other work at sea and the activities of doctors in training (article 1(3)), and further stated that its provisions should not apply where other Community instruments contain more specific requirements concerning certain occupations or occupational activities (article 14). 5. The Working Time Directive was implemented domestically, with exceptions matching those of the Directive, by the Working Time Regulations 1998 (SI 1998 no. 1833) (the Working Time Regulations). These Regulations (as amended by the Working Time (Amendment) Regulations 2001 (SI 2001 no. 3256)) provide that a worker is entitled to four weeks annual leave in each leave year (regulation 13) and entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13 at the rate of a weeks pay in respect of each week of leave (regulation 16(1)). Regulations 16(2) and (3) make ss.221 to 224 (and by implication also, it has been held, ss.234 235) of the Employment Rights Act 1996 applicable to the determination of the amount of a weeks pay for the purposes of regulation 16. Ss.221 to 224 contain a detailed scheme (originally introduced in the context of redundancy pay) for ascertaining a weeks pay in the cases of employments with and without normal working hours. The scheme includes provisions governing the differing situations of remuneration varying (s.221(3)) and not varying (s.221(2)) with the amount of work done and of remuneration varying according to the times of day or days of the week in which work is required to be done (s.222); as well as provisions governing employments with no normal working hours (s.224). Where the remuneration varies according to the amount, time or hours of work, the computation of weekly pay falls to be derived from an examination of an average position over a defined period of twelve weeks preceding the relevant calculation date, itself defined (ss.221(3), 222 and 224). Under s.234, in the case of an employee who is entitled to overtime pay when employed for more than a fixed number of hours in a week, the employees normal working hours are the number of hours so fixed unless the contract also fixes a number of hours of overtime which the employer is bound to provide and the worker bound to work, in which case, the employees normal working hours consist in the total number of fixed hours (so excluding any voluntary overtime): Tarmac Roadstone Holdings Ltd. v Peacock [1973] ICR 273 (CA); the same interpretation of s.234 has been applied to a claim under Regulation 16 of the Working Time Regulations: Bamsey v Albon Engineering and Manufacturing plc [2004] EWCA Civ 359; [2004] ICR 1083 (CA). 6. The exceptions from the Working Time Directive were in due course addressed. Council Directive 1999/63/EC of 21 June 1999 gave effect to a European Agreement dated 30 September 1998 entitling non fishing seafarers to paid annual leave on the same basis as was in 2000 provided for mobile staff in civil aviation (paragraph 2 above). This was in turn given domestic effect by The Merchant Shipping (Hours of Work) Regulations 2002 (SI 2002 no. 2125) (the non fishing Seafarers Regulations), in language identical as regards paid annual leave to that of the Aviation Regulations (paragraph 3 above), with the substitution of the word seafarer for crew member (regulation 12 ). 7. Directive 2000/34/EC of 22 June 2000 extended the application of the Working Time Directive to all sectors of activity, excluding seafarers as defined in Council Directive 1999/63/EC, and gave Member States until 1 August 2003 to achieve this. However, it also replaced article 14 of the Working Time Directive with a provision that that Directive should not apply where other Community instruments contain more specific requirements relating to the organisation of working time for certain occupations or occupational activities. With effect from 2 August 2004, the Working Time Directive as extended and amended has been replaced by a consolidated Working Time Directive 2003/88/EC of 4 November 2003, but article 7 remains in identical terms to article 7 of the original Working Time Directive of 1993. 8. The Aviation Directive of 27 November 2000 was a specific Community instrument within article 14 of the Working Time Directive and was, as stated, implemented domestically in 2004 by the Aviation Regulations. The extension of the Working Time Directive in its original and consolidated form to other mobile workers was further implemented domestically by inter alia The Merchant Shipping (Working Time: Inland Waterways) Regulations 2003 (SI 2003 no. 3049) made 23 December 2003 and The Fishing Vessels (Working Time: Sea fishermen) Regulations 2004 (SI 2004 no. 1713) made 16 August 2004. In these two sets of Regulations, governing inland waterway workers and sea fishermen, regulation 11(1) entitles such workers to (or, in the case of the latter, to at least) four weeks annual leave and to be paid in respect of any such leave at the rate of a weeks pay in respect of each week of leave. They go on to apply ss.221 to 224 for the purpose of determining the amount of a weeks pay for the purposes of the right to four weeks paid annual leave, and to define the relevant calculation date for the purposes of the twelve week period as the first day of the period of leave in question. They also provide specifically for a worker to be able to complain of failure to pay any amount due under regulation 11(1). 9. In contrast, neither the non fishing Seafarers Regulations of 2002 nor the Aviation Regulations made 13 April 2004 contain any detailed provisions which either define the nature or amount of the payment to be made during annual leave or apply ss.221 to 224 of the 1996 Act for that purpose. Nor do they provide specifically for the consequences of failure to pay for annual leave (though the Aviation Regulations entitle a worker to complain of a refusal to permit him to exercise any right to paid annual leave, while the non fishing Seafarers Regulations make contravention by an employer of regulation 12, entitling seafarers to paid annual leave of at least four weeks, a criminal offence). These domestic distinctions can only have been deliberate. It is common ground now that ss.221 to 224 cannot apply to aviation crew members. This appeal therefore turns on the meaning of the phrase paid annual leave, which is all that the United Kingdom legislator has relevantly enacted. The phrase cannot of course be construed in a vacuum. The Aviation Directive is not directly applicable, certainly not against British Airways which is not an emanation of the state. But it is our duty, as far as possible, to construe the phrase in the domestic Regulations consistently with any requirement inherent in the identical phrase used in clause 3(1) of the European Agreement to which Member States are required to give effect by the Aviation Directive: see e.g. Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C 106/89) [1990] ECR I 4135, paragraph 8; Pfeiffer v Deutsches Rotes Kreuz, Kreisverband Waldshut eV (Cases C 397 404/01) [2004] ECR I 8835, paragraphs 111 113 and, most recently, Seda Kckdeveci v Swedex GmbH & Co. KG, (Case C 555/07) (judgment of 19 January 2010) paragraphs 44 48. 10. Strictly, the European Agreement is an agreement between private associations representing airlines on the one hand and aviation workers on the other. As such, its meaning might be capable of being influenced by the circumstances in which it was negotiated, any travaux prparatoires and even statements made during its negotiation. But no evidence of that nature was put before the Employment Tribunal which considered the present case, and all that the Tribunal records (paragraph 37) is that the issue of holiday pay was not high on the agenda of those representing the interests of aviation workers when the Agreement was reached. The reality is that clause 3 of the European Agreement adopted identical wording to article 7 of the Working Time Directive. The natural inference is that it was intended to have the same effect in law and there is nothing to suggest the contrary. The facts 11. The factual context in which the phrase paid annual leave has presently to be understood and applied is as follows. The appellants are pilots employed by British Airways plc. In practice the terms of their employment were and are negotiated with British Airways by the pilots union, British Air Line Pilots Association (BALPA). These terms are currently found in a Memorandum of Agreement (MOA) dated 1 April 2005. The Court understands that, for present purposes, the terms of this MOA mirror those applicable under previous similar agreements going back to before 2000. Under the MOA (and consistently with the Aviation Directive and Regulations) British Airways pilots are required to take 30 days annual leave and are entitled to take a further two weeks leave, save for pilots with a Gatwick base who are obliged to take 35 days holiday and are entitled to a further seven days of leave. 12. Under the MOA, read with collectively agreed bidline rules, pilots remuneration includes three components relevant to this case. The first consists of a fixed annual sum. The second and third consist of supplementary payments varying according to time spent flying (the Flying Pay Supplement or FPS, paid at 10.00 per planned flying hour) and time spent away from base (the Time Away from Base Allowance or TAFB, paid at 2.73 per hour). The whole of the FPS is remuneration and taxable. 82% at the relevant time of the TAFB is treated as having been paid on account of expenses, so that only 18% is treated as remuneration and taxable. 13. There are limits to the FPS and TAFB which a pilot or other crew member can earn. Regulation 9 of the Aviation Regulations requires every employer to ensure that: in any month (a) no person employed by him shall act as a crew member during the course of his working time, if during the period of 12 months expiring at the end of month before the month in question the aggregate block flying time of that person exceeds 900 hours; and (b) no crew member employed by him shall have a total annual working time of more than 2,000 hours during the period of 12 months expiring at the end of the month before the month in question. 14. The amount of time a pilot spends flying will depend upon his or her route and roster. It could typically be about 15 days a month. The Court has been given a schedule of payments made to the first appellant, Ms Williams. This indicates that, in the calendar year 2006, she took 25 working days leave in periods of between one and eight days in five different months, and received total fixed pay of 96,452.36, total FPS of 8,510 and total taxable TAFB of 1,038.49. Total FPS of 8,510 is indicative (at 10 an hour) of 851 flying hours. If that is so, then, had Ms Williams continued to fly at this rate during leave periods, it appears that she would or might have exceeded the maximum permitted annual number of 900 flying hours. Total taxable TAFB of 1,038.49 gives total TAFB of 5,769.39 (1,038.49 x 100 18: see paragraph 12 above), indicative of 2,113 hours away from base. Again, had Ms Williams continued to fly during leave periods, it appears that she would or might have exceeded the maximum total annual working time of 2,000 hours. However, whether this be so or not in her case in relation to FPS or TAFB, a crew member could clearly be in this position in practice, i.e. in a position where during the 12 month period prior to taking any particular leave, he or she had already completed all or almost all of his or her permitted annual flying or working time. The issue and submissions 15. It is common ground that, upon a true construction of the MOA and so as a matter of contract, the payment to be made in respect of annual leave is based on the first component of remuneration only, that is the fixed annual sum. The question is whether this was and is permissible under the Aviation Regulations, interpreted in the light of the Aviation Directive. This question was first raised in 2005 following the introduction of the Aviation Regulations on 13 April 2004. The Court understands that it has been raised not merely by British Airways pilots, but also by other airlines pilots and other aviation crew under contractual arrangements not before the Court. Before the Employment Tribunal and Employment Appeal Tribunal, the appellants argued, successfully, that they were entitled under European and domestic law to payment at a weekly rate based on all three components of remuneration (which both Tribunals said should be calculated by analogy with ss.221 4, despite the inapplicability of these sections). The Court of Appeal accepted British Airways contrary case under both European and domestic law. 16. British Airways case operates at various levels: (i) British Airways first submission is that (a) the United Kingdom legislator must be taken (when deciding not to enact any detailed provisions to define the nature or amount of the payment to be made during annual leave or to apply ss.221 to 224 of the 1996 Act: see paragraph 9 above) to have intended that the amount of any payment to be made to aviation workers (and non fishing seafarers) in respect of their annual leave should be determined by collective or individual contractual agreement between the relevant parties; and (b) the domestic legislative intention being in this respect clear, it must prevail, whatever the effect may be of the Aviation Directive. (ii) Second, however, if and to the extent that, contrary to the first submission, the meaning of the Aviation Regulations can be derived from the Aviation Directive, British Airways submits that the Aviation Directive is to the same effect. (iii) (a) Third, British Airways qualifies its first two submissions only to the extent that it accepts that the payment for annual leave could not, under domestic or European law, be so low as to prevent or inhibit the taking of leave. Pay during weeks of annual leave at the rate of 96,452 per annum or 1,854.85 per week could hardly be said to fall within this qualification. Accordingly, British Airways contends that the contractual arrangements between them and their pilots are legitimate. (b) The appellants contrary submission of law is that the Aviation Directive requires the payment in respect of annual leave of normal remuneration in order to ensure that the worker is on leave in a position which is comparable to that when he or she is at work. (c) There is however disagreement about what this would mean in circumstances such as the present. In particular, on that basis of what periods is normality or any comparison to be established? And on the basis of what hypotheses? The latter question is relevant where, as may well be the case here, the worker was subject to annual limits which would have precluded him or her from undertaking particular work and receiving particular payments additional to his or her basic salary. (iv) Fourth, British Airways submits (in response to this submission by the appellants) that, if the phrase paid annual leave involves payment of normal or comparable remuneration, then, in the present case, payment in respect of annual leave based on the fixed annual remuneration to which pilots are entitled satisfies this requirement. 17. The Court is not presently persuaded by British Airways first submission. Of course, whether domestic legislation is capable of being interpreted consistently with the meaning of the Directive will or may depend upon what that meaning is. But, bearing in mind the possible meanings which appear, the Courts present view is that it is likely to be possible to construe the Regulations so as to comply with whatever meaning the Directive may have, even if the domestic position would otherwise be that for which British Airways contends by its submission at (i)(a) above. This is so, even though the determination of the relevant weekly rate will pose difficulties for the employment tribunals who will have to engage with this exercise, in circumstances where there is no detailed scheme and ss.221 to 224 of the 1996 Act do not apply. 18. British Airways second and third submissions raise questions regarding (a) the meaning of the phrase paid annual leave in the Aviation Directive and (b) the extent of the freedom for national legislation and/or practice to lay down conditions for entitlement to, and granting of, such leave [i.e. paid annual leave]. The determination of these questions is in the Supreme Courts view necessary for the resolution of this appeal. There are statements in the Court of Justices recent case law (discussed below) which, on their face, are adverse to British Airways second and third submissions (paragraph 16(ii) and (iii)(a) above) and favour the appellants case that the Aviation Directive requires payment of normal or comparable remuneration (paragraph 16(iii)(b) above). But these statements were made in very different contexts to the present, and, further, do not specifically address the point identified in paragraph 16(iii)(c) above. The position in a case such as the present is not in the Supreme Courts view acte clair and the Supreme Court therefore makes this reference. Analysis 19. In case it may assist the Court of Justice, the Supreme Court adds these observations. British Airways submits that the concept of paid annual leave is to be understood in the context in which the Working Time and Aviation Directives were enacted, namely the promotion of the health and safety of workers. That context appears from United Kingdom v Council of the European Union (Case C 84/94) [1996] ECR I 5755; [1997] ICR 443. The Court of Justice there upheld (save in one presently immaterial respect relating to Sunday working) the validity of the adoption of the Working Time Directive under article 118a of the European Community Treaty. Article 118a entitled the Council, by qualified majority voting, to adopt by means of Directives, minimum requirements for gradual implementation to encourage improvements, especially in the working environment, as regards the health and safety of workers. (Subsequent to the Treaty of Nice, the relevant article became article 137, entitling the Community to support and complement the activities of Member States in the fields of, inter alia, improvement in particular of the working environment to protect workers health and safety. It is, since the Treaty of Lisbon, article 153 in similar terms.) In R(BECTU) v Secretary of State for Trade and Industry (Case C 173/99) [2001] ECR I 4881; [2001] ICR 1152, the Court of Justice again stressed the importance of the general principles of protection of the health and safety of workers and the aim of ensuring effective protection of health and safety (paragraphs 40 and 44), when holding impermissible a provision of the then Working Time Regulations, according to which no entitlement to paid annual leave arose until an employee had been continuously employed for 13 weeks. The entitlement to paid annual leave was a particularly important principle of Community social law from which there can be no derogations (paragraph 43) and the Directive did not allow Member States either to make subject to any preconditions or to exclude the very existence of a right granted to all workers (paragraphs 53 and 55). Recital (11) to the Aviation Directive of 27 November 2000 confirms (unsurprisingly) that its objectives are precisely the same as those of the Working Time Directive, viz. to protect workers health and safety. 20. British Airways submits that paid annual leave therefore requires payment at a level which ensures that annual leave can be taken and enjoyed, that is payment which does not frustrate or undermine the purpose of the relevant Working Time or Aviation Directive. The Supreme Court would agree that the present arrangements with pilots employed by British Airways could not be regarded as posing any such risk to their health or safety. There is no suggestion that they do or could prevent or deter pilots or crew members from taking annual leave (even to the limited extent that they are free not to do so). On the contrary, the Employment Tribunal referred (paragraph 38) to a consensus that British Airways pilots not based at Gatwick do in practice take the extra two weeks voluntary leave to which they are entitled. 21. British Airways also points out that, in United Kingdom v Council, the Court of Justice referred to Member States freedom to lay down detailed implementing provisions in general terms, when it said in paragraph 47 that: Once the Council has found that it is necessary to improve the existing level of protection as regards the health and safety of workers and to harmonize the conditions in this area while maintaining the improvements made, achievement of that objective through the imposition of minimum requirements necessarily presupposes Community wide action, which otherwise, as in this case, leaves the enactment of the detailed implementing provisions required largely to the Member States. 22. Recital (12) to the Aviation Directive also indicates that Member States are to be free to define any terms used in the annexed European Agreement in accordance with national law and practice, providing that the definitions are consistent with the Agreement. In British Airways submission, the freedom to enact detailed implementing provisions and the freedom to leave matters to national practice allow Member States either to introduce detailed provisions along the lines of ss.221 to 224 of the 1996 Act or to leave it to contracting parties to agree on terms as regards pay, so long as these do not frustrate or undermine the taking and enjoyment of annual leave. 23. The appellants, in relation to this latter point, rely upon further statements in BECTU as indicating a narrow view of Member States discretion under clause 3 of the Aviation Directive. In his opinion in that case, Advocate General Tizzano said at paragraph 34: It is not of course my intention to deny that the expression in question means that reference must be made to national legislation and therefore that the Member States enjoy some latitude in defining the arrangements for enjoyment of the right to leave. In particular, as the Commission also points out, the reference is intended to allow the Member States to provide a legislative framework governing the organisational and procedural aspects of the taking of leave, such as planning holiday periods, the possibility that a worker may have to give advance notice to the employer of the period in which he intends to take leave, the requirement of a minimum period of employment before leave can be taken, the criteria for proportional calculation of annual leave entitlement where the employment relationship is of less than one year, and so forth. But these are precisely measures intended to determine the 'conditions for entitlement to, and granting of, leave and as such are allowed by the Directive. What, on the other hand, does not seem to be allowed by the Directive is for national legislation and/or practice to operate with absolutely (or almost) no restrictions and to go so far as to prevent that right from even arising in certain cases. The Court of Justice referred to this passage in its judgment (paragraph 24. 53): The expression 'in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice must therefore be construed as referring only to the arrangements for paid annual leave adopted in the various Member States. As the Advocate General observed in paragraph 34 of his Opinion, although they are free to lay down, in their domestic legislation, conditions for the exercise and implementation of the right to paid annual leave, by prescribing the specific circumstances in which workers may exercise that right, which is theirs in respect of all the periods of work completed, Member States are not entitled to make the existence of that right, which derives directly from Directive 93/104, subject to any preconditions whatsoever. 25. British Airways point out that both these passages were specifically directed to explaining why the Directive did not permit Member States to remove entirely any right to paid annual leave in particular circumstances. They were not concerned with the permissibility of defining paid annual leave or of leaving it to parties to define, in a way which does not undermine its taking or its enjoyment. 26. The appellants submit, however, that the Court of Justices later case law contains statements establishing that paid annual leave must now be regarded as having achieved a closely defined autonomous European meaning: any payment in respect of annual leave must correspond with the employees normal remuneration in order to ensure that the worker is, when on leave, in a position which is comparable to that when he or she is at work. They rely on statements to this effect in the Court of Justices judgments in Robinson Steele v RD Retail Services Ltd. (Cases C 131 and 257/04) [2006] ECR I 2531; [2006] ICR 932, paragraphs 50 and 57 to 59 and in Stringer v Revenue and Customs Commissioner (Case C 520/06) [R (D) v Secretary of State for the Home Department [2005] EWHC 728 (Admin) 2009] ECR I 179; [2009] ICR 932, paragraphs 57 to 62. In Robinson Steele, the Court of Justice repeated that Member States must ensure that the detailed national implementing rules take account of the limits flowing from the Directive itself (paragraph 57) and went on: 58 The Directive treats entitlement to annual leave and to a payment on that account as being two aspects of a single right. The purpose of the requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work. 59 Accordingly, without prejudice to more favourable provisions under article 15 of the Directive, the point at which the payment for annual leave is made must be fixed in such a way that, during that leave, the worker is, as regards remuneration, put in a position comparable to periods of work. 27. This was, however, again said in a very different context from the present. Part payments, ostensibly for holiday pay, were staggered over the corresponding annual period of work and paid together with remuneration for work done, leaving nothing specifically payable in respect of the weeks of leave. Further, the Court allowed such staggered payments, where transparently and comprehensibly attributable to annual leave, to be set off against the claim for holiday pay. An earlier statement (in paragraph 50) that workers must receive their normal remuneration for that period of rest was also said in a very different context. There had been agreement to attribute to holiday pay part of a sum which had previously been being paid as remuneration for work; the remuneration paid for work done was in other words being effectively reduced, by an amount attributed to the (staggered) holiday pay. 28. In Stringer, paragraphs 57 to 62, the Court of Justice cited Robinson Steele as authority that the expression paid annual leave means that, for the duration of annual leave , remuneration must be maintained and that, in other words, workers must receive their normal remuneration for that period of rest (paragraphs 58 and 61), and explained this on the basis that the purpose was to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work (paragraph 60). Two points however arise. First, once again, the context was quite different from the present. The issue in Stringer was whether employees absent on sick leave throughout an entire leave year were entitled to take their leave after the end of that year or, (since their employment had in fact terminated) to receive payment in lieu. In that context, the Court repeated the statements in BECTU (paragraphs 53 and 55: see paragraph 19 above) that Member States are not entitled to exclude, or make subject to any preconditions, the very existence of a right deriving from the Directive. 29. Second, the Court of Justices use of the word comparable in Stringer is itself to be compared with the Advocate Generals suggestion (in paragraphs 90 91 of her opinion) that a worker should receive an allowance in lieu equivalent to that of his normal pay. The choice of the wording comparable to periods of work to explain the concept of normal remuneration was no doubt deliberate. On one view, it indicates that the Court of Justice had in mind a relationship between pay while working and pay in respect of annual leave which was or could be more general and looser than the equivalence which the Advocate General would have favoured. In a sense, of course, even very different things are usually capable of a comparison, which will highlight the differences. The Court of Justice cannot have meant comparison in this sense. Nonetheless, it may have meant comparable in the sense of roughly similar (although this still leaves for consideration whether the right comparison was with pay which the worker could have earned if he or she had been working instead of on leave, or was earning during some other and. if so what, period) or it may, perhaps, have meant sufficiently similar to achieve the aim of the Directive, that is ensuring that employees could and would take and enjoy a restful or at all events restorative annual leave. The questions referred 30. these questions: In these circumstances, the Supreme Court refers to the Court of Justice (ii) (i) Under (a) articles 7 of Council Directives 93/104/EC and 2003/88/EC and (b) clause 3 of the European Agreement annexed to the Council Directive 2000/79/EC: (1) to what, if any, extent does European law define or lay down any requirements as to the nature and/or level of the payments required to be made in respect of periods of paid annual leave; and (2) to what, if any, extent may Member States determine how such payments are to be calculated? In particular, is it sufficient that, under national law and/or practice and/or under the collective agreements and/or contractual arrangements negotiated between employers and workers, the payment made enables and encourages the worker to take and to enjoy, in the fullest sense of these words, his or her annual leave; and does not involve any sensible risk that the worker will not do so? (iii) Or is it required that the pay should either (a) correspond precisely with or (b) be broadly comparable to the workers normal pay? Further, in the event of an affirmative answer to question (iii)(a) or (b): (iv) Is the relevant measure or comparison (a) pay that the worker would have earned during the particular leave period if he or she had been working, instead of on leave, or (b) pay which he or she was earning during some other, and if so what, period when he or she was working? (v) How should normal or comparable pay be assessed in circumstances where (a) a workers remuneration while working is supplemented if and to the extent that he or she engages in a particular activity; (b) where there is an annual or other limit on the extent to which, or time during which, the worker may engage in that activity, and that limit has been already exceeded or almost exceeded at the time(s) when annual leave is taken, so that the worker would not in fact have been permitted to engage in that activity had he been working, instead of on leave? On this basis, I would also remit the issues relating to TAFB to the employment tribunal, together with those relating to paid annual leave to which para 27 above refers. |
The issue surrounds out of country appeals. These are appeals against immigration decisions made by the Home Secretary which immigrants are entitled to bring before the First tier Tribunal (Immigration and Asylum Chamber) (the tribunal) but only if they bring them when they are outside the UK. Mr Kiarie, the first appellant, has Kenyan nationality. He is aged 23 and has lived in the UK with his parents and siblings since 1997, when he was aged three. In 2004 he was granted indefinite leave to remain in the UK. He has been convicted of serious offences in relation to drugs. Sent to him under cover of a notice dated 10 October 2014 was an order made by the Home Secretary for his deportation to Kenya. Mr Byndloss, the second appellant, has Jamaican nationality. He is aged 36 and has lived in the UK since the age of 21. In 2006 he was granted indefinite leave to remain in the UK. He has a wife and their four children living here; and he has three or four other children also living here. He has been convicted of a serious offence in relation to drugs. Sent to him under cover of a notice dated 6 October 2014 was an order made by the Home Secretary for his deportation to Jamaica. In deciding to make deportation orders against them, the Home Secretary rejected the claims of Mr Kiarie and Mr Byndloss that deportation would breach their right to respect for their private and family life under article 8 of the European Convention on Human Rights (the Convention). Mr Kiarie and Mr Byndloss have a right of appeal to the tribunal against her rejection of their claims and they propose to exercise it. But, when making the deportation orders, the Home Secretary issued certificates, the effect of which is that they can bring their appeals only after they have returned to Kenya and Jamaica. As I will explain in paras 33 and 55, it may well, for obvious reasons, be difficult for Mr Kiarie and Mr Byndloss to achieve success in their proposed appeals. But the question in these proceedings is not whether their appeals should succeed. It is: are the two certificates lawful? Yes, said the Court of Appeal (Richards LJ, who gave the substantive judgment, and Elias and McCombe LJJ, who agreed with it) on 13 October 2015, [2015] EWCA Civ 1020, [2016] 1 WLR 1961, when dismissing the applications of Mr Kiarie and Mr Byndloss for judicial review of the certificates. B: CERTIFICATION A requirement that some appeals against immigration decisions be brought out of country has been a feature of the legal system referable to immigration ever since the Immigration Act 1971 (the 1971 Act) came into force. An obvious example is when people abroad apply unsuccessfully to entry clearance officers in British embassies and High Commissions for entry clearance, ie permission to be admitted to the UK. They often have a right of appeal to the tribunal against the refusal of entry clearance and they are required to bring their appeals from abroad. But such appellants are already abroad; indeed their appeals are often in a narrow compass which surrounds their ability to satisfy the evidential (in particular the documentary) requirements of the Immigration Rules; their appeals do not usually include human rights claims and it is the oral evidence of their sponsors in the UK, rather than of themselves, which is often the more important. The situation is different when the proposed appeal is based on human rights and when the requirement to bring it from abroad is imposed on an appellant who is in the UK and who must therefore leave before he can bring it. The Home Secretary issued the two certificates which precipitated the present proceedings pursuant to a power conferred on her on 28 July 2014, when section 94B of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act), which had been inserted into it by section 17(3) of the Immigration Act 2014 (the 2014 Act), came into force. Until 30 November 2016, section 94B provided: (1) This section applies where a human rights claim has been made by a person (P) who is liable to deportation under (a) section 3(5)(a) of the Immigration Act 1971 (Secretary of State deeming deportation conducive to public good), or (b) (2) The Secretary of State may certify the claim if the Secretary of State considers that, despite the appeals process not having been begun or not having been exhausted, removal of P to the country or territory to which P is proposed to be removed, pending the outcome of an appeal in relation to Ps claim, would not be unlawful under section 6 of the Human Rights Act 1998 (public authority not to act contrary to Human Rights Convention). (3) The grounds upon which the Secretary of State may certify a claim under subsection (2) include (in particular) that P would not, before the appeals process is exhausted, face a real risk of serious irreversible harm if removed to the country or territory to which P is proposed to be removed. With effect from 1 December 2016, section 94B of the 2002 Act (to which I will refer simply as section 94B) has been amended by section 63 of the Immigration Act 2016 so as to extend the Home Secretarys power to certify under the section. Since then she has had power to certify any human rights claim irrespective of whether the claimant is liable to deportation. The extended power does not fall to be considered in these appeals but our decision today will surely impact on the extent of its lawful exercise. C: THE STATUTORY CONTEXT OF SECTION 94B Section 3(5)(a) of the 1971 Act provides that a person who is not a British citizen is liable to deportation from the UK if the Home Secretary deems his deportation to be conducive to the public good. Section 32(4) of the UK Borders Act 2007 (the 2007 Act) provides that, for the purpose of section 3(5)(a) of the 1971 Act, the deportation of a foreign criminal is conducive to the public good. Section 32(1) and (2) defines a foreign criminal as a person who is not a British citizen and who is convicted in the UK of an offence for which he is sentenced to a period of imprisonment of at least 12 months. My future references to a foreign criminal will be to a person as thus defined. Section 32(5) of the 2007 Act provides that, unless an exception specified in section 33 applies and therefore, in particular, unless his removal would breach his rights under the Convention, the Home Secretary must make a deportation order in respect of a foreign criminal. At the material times, section 82(1) and (3A) of the 2002 Act provided that, where a deportation order in respect of a person was stated to have been made in accordance with section 32(5) of the 2007 Act, he might appeal to the tribunal. By section 82(4), however, the right of appeal was subject to limitations. One limitation, relevant to the present appeals, arose in the conjunction of section 92(1) and (4)(a) of the 2002 Act with section 94(1) and (2) of it. Section 92(1) provided that an appeal under section 82 could not be brought while the appellant was in the UK unless it fell within one of the exceptions specified in later subsections. Subsection (4)(a) specified one exception, namely where the appellant had made a human rights claim while in the UK. Section 94(1) and (2), however, provided that an appellant could not rely on section 92(4)(a), ie in order to be entitled to bring his appeal from within the UK, if the Home Secretary certified that his human rights claim was clearly unfounded. But another limitation is of even greater relevance to the present appeals. This was the provision which accompanied the coming into force of section 94B on 28 July 2014. The provision was that, where under that section the Home Secretary certified a human rights claim made by a person liable to deportation, his appeal could be brought only from outside the UK. In relation to the deportation orders made in relation to Mr Kiarie on 10 October 2014 and to Mr Byndloss on 6 October 2014, such was the effect of article 4 of the Immigration Act 2014 (Commencement No 1, Transitory and Saving Provisions) Order 2014 (SI 2014/1820), continued by article 15 of a third commencement order (SI 2014/2771). In relation to deportation orders made on or after 20 October 2014, such was the effect of section 92(3)(a) of the 2002 Act. There is no right of appeal to the tribunal against a certification under section 94B. As these proceedings show, the challenge is by way of judicial review. D: MR KIARIE In January 2014, when aged 20, Mr Kiarie received a suspended sentence of imprisonment for two years for the offence of possessing Class A drugs with intent to supply. In May 2014 the suspended sentence was activated following further convictions for possession of Class A and Class B drugs. By letter dated 22 July 2014, the Home Secretary informed Mr Kiarie, who was detained in a Young Offender Institution, that his deportation to Kenya would be conducive to the public good, that he was therefore liable to deportation and that she was required to make a deportation order against him unless one of the exceptions in section 33 of the 2007 Act applied. She enclosed a questionnaire and invited him to complete and return it. Mr Kiarie did so: he claimed that his deportation would breach his human rights because it would separate him from his family and remove him to a place where he had no family, no place of residence and no means of fending for himself. By the notice to Mr Kiarie dated 10 October 2014, the Home Secretary rejected his claim that deportation would breach his human rights, in particular under article 8 of the Convention. She said that she accepted neither that he was socially and culturally integrated into the UK nor that there would be significant obstacles to his reintegration into Kenya nor that there were any very compelling circumstances which outweighed the public interest in his deportation. Nevertheless she did not certify that Mr Kiaries claim was clearly unfounded; the length of his life in the UK was probably thought to preclude her doing so. Prior to 10 October 2014 the Home Secretary had not invited Mr Kiarie to address whether she should exercise her new power under section 94B. In the notice of that date, however, she said as follows: 45. Consideration has been given to whether your article 8 claim should be certified under section 94B The Secretary of State has considered whether there would be a real risk of serious irreversible harm if you were to be removed pending the outcome of any appeal you may bring It is acknowledged that your parents and siblings are in 46. the United Kingdom. However, any relationships you may have with family members can be continued through modern means of communication upon your return to Kenya. There is nothing to suggest that you would be unable to obtain employment in Kenya. You are 20 years old and have no serious medical conditions. Furthermore, any skills/qualifications you have gained in the United Kingdom can only serve to assist you in finding employment in Kenya. It is noted that English is one of the official languages of Kenya and therefore it is considered that there would be no communication barriers upon your return. 47. For all the above reasons, it is not accepted that you face a real risk of serious irreversible harm if removed to Kenya while you pursue your appeal against deportation, should you choose to exercise that right. Therefore, it has been decided to certify your article 8 claim under section 94B and any appeal you may bring can only be heard once you have left the United Kingdom. E: MR BYNDLOSS In May 2013, when aged 32, Mr Byndloss was sentenced to imprisonment for three years for the offence of possessing Class A drugs with intent to supply. By letter dated 21 June 2013, the Home Secretary informed Mr Byndloss, who was in prison, that he was liable to deportation and that she was required to make a deportation order against him unless one of the exceptions in section 33 of the 2007 Act applied. She enclosed the same questionnaire later sent to Mr Kiarie. Under cover of a letter to the Home Office dated 4 October 2013, solicitors for Mr Byndloss returned the questionnaire which he had partially completed. He said little more than that in 2004 he had married a British woman living in England, by whom he had sons then aged eight, six and two and a daughter whose age he did not identify; that, by a second partner living here, he had sons then aged three and eight months and a daughter then aged two; and that, by a third partner living here, he had a daughter whose age he did not identify. The solicitors also enclosed letters from Mr Byndloss and from two of the mothers of his children and other witnesses, and birth certificates relating to six of the children; and the solicitors explained that they had had only a limited opportunity to assist Mr Byndloss and that he was claiming that deportation would breach his rights under article 8 of the Convention. It was more than a year later, namely on 6 October 2014, that the Home Secretary sent notice of her decision to Mr Byndloss, who remained in prison and who in the interim had sent further information to her. By the notice, she rejected his claim that deportation would breach his rights under article 8; and she enclosed the deportation order. She acknowledged that he was the father of the seven children by his wife and by his second partner but did not accept that he had a genuine and subsisting relationship with any of them. She said that, pursuant to section 55(1) and (2) of the Borders, Citizenship and Immigration Act 2009 (the 2009 Act), she had, in making her decision, had regard to the need to safeguard and promote the welfare of the children, including also that of the eighth child in case, which had not been demonstrated, she was indeed his daughter. Nevertheless the Home Secretary did not certify that Mr Byndloss claim was clearly unfounded; the existence of his children in the UK was probably thought to preclude her doing so. One of the consequences of the long unexplained delay in the Home Secretarys determination of Mr Byndloss claim was that in the interim section 94B had come into force. Although she had not at any time invited him to address whether she should exercise the new power, she explained in the notice dated 6 October 2014 that she had decided to do so. She concluded her reference to the section as follows: Consideration has been given to whether your article 8 claim should be certified under section 94B The Secretary of State has considered whether there would be a real risk of serious irreversible harm if you were to be removed pending the outcome of any appeal you may bring. The Secretary of State does not consider that such a risk exists. Therefore, it has been decided to certify your article 8 claim under section 94B and any appeal you may bring can only be heard once you have left the United Kingdom. In November 2014 Mr Byndloss issued an application for judicial review of the certificate under section 94B. He filed witness statements which gave further details about his relationship with the eight children; but at that time he was still detained, albeit in an immigration removal centre following completion of his sentence. Permission to apply for judicial review was refused in the High Court but he secured permission to appeal against the refusal; and the hearing of his appeal, together with that of Mr Kiarie who had also been refused permission to apply for judicial review of the certificate referable to him, was fixed to take place in the Court of Appeal on 23 September 2015. Less than three weeks before that hearing, namely on 3 September 2015, the Home Secretary sent to Mr Byndloss a 21 page letter which she described as supplementary to the decision dated 6 October 2014 but which she claimed to incorporate her entire reasoning. In effect it replaced the earlier notice and amounted to a fresh, up to date, decision to reject Mr Byndloss claim. She noted that in April 2015 he had been released from immigration detention and that he had therefore been incarcerated, in all, for 705 days. She maintained, contrary to prison records by then already provided to her, that there was no evidence that the four children of the marriage had visited him in prison. Following a detailed analysis she maintained her refusal to accept that he had a genuine or subsisting relationship with any of the eight children or that he played any meaningful parental role in their lives. In the letter dated 3 September 2015 the Home Secretary also reiterated her decision to certify Mr Byndloss claim under section 94B. But she expressed her reasons for doing so differently. She expanded her explanation in order to address the alleged difficulties in bringing an appeal from Jamaica to which Mr Byndloss had referred in the proceedings. She said that if necessary he could give evidence from there by video link; that the proposed evidence about his relationship with the children could be given orally by their mothers and in a written statement by himself; and that his concern to be able to react to whatever might be said against him at the hearing could be met by his study of her skeleton argument, by which he could in advance discern what would be said. She referred, as before, to her duty under section 55 of the 2009 Act; but she now placed her reference to it in the specific context of her function under section 94B. Her central conclusion was as follows: The Secretary of State does not consider that your removal pending the outcome of any appeal would be unlawful under section 6 of the Human Rights Act 1998 and considers that there is no real risk of serious irreversible harm in your case. It is considered that your removal pending your appeal would be proportionate in all the circumstances. In the days between receipt of the letter dated 3 September 2015 and the hearing in the Court of Appeal Mr Byndloss, by his solicitors, filed a mass of evidence intended to contradict some of what the Home Secretary had said in the course of it. In particular he filed a lengthy report by an independent social worker to the effect that following his release Mr Byndloss had had frequent contact with all eight children; had resumed a loving and committed relationship with each of them; and had maintained a good relationship with their mothers. In the event the Court of Appeal resolved to treat the Home Secretarys letter dated 3 September 2015 as the decision under challenge in Mr Byndloss appeal but not to consider the evidence filed subsequently on his behalf. In this connection it accepted an offer by the Home Secretary that, were his appeal dismissed, she would consider the new evidence when making yet a further determination whether to certify the claim under section 94B. On any view, however, the courts treatment of the letter dated 3 September 2015 as the decision under challenge cut away aspects of the argument proposed to be advanced on behalf of Mr Byndloss, including in particular an argument that the certification dated 6 October 2014 had run counter to published policy which had governed the use of section 94B during the initial 11 weeks for which it had been in force. Following delivery of the judgments of the Court of Appeal in the present case, a different constitution of that court has delivered valuable judgments relating to the difficulty which confronts courts and tribunals when deciding how to treat supplementary decision letters sent by the Home Secretary, often shortly before a hearing: R (Caroopen) v Secretary of State for the Home Department [2016] EWCA Civ 1307. Mr Byndloss does not suggest, and has never suggested, that it was wrong for the Court of Appeal to treat the letter dated 3 September 2015 as the more material decision by then under challenge; but, had the guidance in the Caroopen case been available to it, the court might have been more concerned to address the disadvantage which he had suffered as a result of the Secretary of States last minute reconstitution of the issues. F: OBJECTIVES OF SECTION 94B On 30 September 2013, at the Conservative Party Conference, the Home Secretary said: Where there is no risk of serious and irreversible harm, we should deport foreign criminals first and hear their appeals later. An Immigration Bill was swiftly laid before Parliament and clause 12 of it provided for the insertion of section 94B into the 2002 Act. The Bill had not been preceded by a green paper or other form of consultation. An Impact Assessment of the Bill, dated 14 October 2013, described the objective of the proposed insertion as the removal of unnecessary delay in the determination of appeals. On 22 October 2013, in proposing the second reading of the Bill, the Home Secretary said (HC Deb, vol 569, col 161): Foreign criminals will not be able to prevent deportation simply by dragging out the appeals process, as many such appeals will be heard only once the criminal is back in their home country. It cannot be right that criminals who should be deported can remain here and build up a further claim to a settled life in the United Kingdom. On 5 November 2013, when attending on the Public Bill Committee, the Minister for Immigration said (Immigration Bill Deb 5, cols 205, 206): The new power is to help to speed up the deportation of harmful individuals, including foreign criminals many people use the appeal mechanism not because they have a case but to delay their removal from the United Kingdom. In some cases, they attempt to build up a human rights based claim under article 8, which they subsequently use, sometimes successfully, to prevent their departure. Thus the specific, linked objectives of section 94B were alleged to have been to reduce delay in the determination by the tribunal of human rights appeals and to prevent an appellants abuse of the system by seeking to strengthen his claim during the pendency of his appeal. But, as the Secretary of State no doubt correctly submits, there was also a more fundamental objective, arising from the very fact that the potential subjects of certification were very largely, like the two appellants, foreign criminals. The deportation of a foreign criminal is conducive to the public good. So said Parliament in enacting section 32(4) of the 2007 Act: see para 11 above. Parliaments unusual statement of fact was expressed to be for the purpose of section 3(5)(a) of the 1971 Act so its consequence was that every foreign criminal became automatically liable to deportation. Parliaments statement exemplifies the strong public interest in the deportation of foreign nationals who have committed serious offences: Ali v Secretary of State for the Home Department [2016] UKSC 60, [2016] 1 WLR 4799, para 14, Lord Reed. In the Ali case the court was required to identify the criterion by reference to which the tribunal should determine an appeal of a foreign criminal on human rights grounds against a deportation order. The decision was that the public interest in his deportation was of such weight that only very compelling reasons would outweigh it: see paras 37 and 38, Lord Reed. The Home Secretary submits that the strong public interest in the deportation of foreign criminals extends to their deportation in advance of their appeals. Her submission found favour in the Court of Appeal. In para 44 of his judgment Richards LJ observed that the very fact of Parliaments enactment of section 94B exemplified the public interest in deportation even in that situation; that therefore substantial weight must be attached to that public interest in that context too; and that, in assessing the proportionality of a certificate, the public interest is not a trump card but it is an important consideration in favour of removal. Notwithstanding the respect which over many years this court has developed for the opinions of Richards LJ, particularly in this field, I disagree with his observations. I have explained in para 31 above that one aspect of this public interest is said to be a concern that, if permitted to remain in the UK pending his appeal, a foreign criminal might seek to delay its determination in order to strengthen his personal and family connections here. But the tribunal will be alert not to allow objectively unwarranted delay. A somewhat stronger aspect of the public interest is the risk that, if permitted to remain pending his appeal, the foreign criminal would, however prejudicially to its success, take that opportunity to re offend. To that extent there is a public interest in his removal in advance of the appeal. But in my view that public interest may be outweighed by a wider public interest which runs the other way. I refer to the public interest that, when we are afforded a right of appeal, our appeal should be effective. To be set alongside Parliaments enactment of section 94B was its enactment of section 82(1) and (3A) of the 2002 Act, by which it gave a foreign criminal a right of appeal against the deportation order: see para 13 above. In published guidance to her case workers the Home Secretary has made clear that there is no need to consider certification of a claim under section 94B if it can be certified under section 94, as to which see para 14 above. So, as exemplified in the cases of Mr Kiarie and Mr Byndloss, a certificate under section 94B is of a human rights claim which is not clearly unfounded, which in other words is arguable. In my view therefore the public interest in a foreign criminals removal in advance of an arguable appeal is outweighed unless it can be said that, if brought from abroad, the appeal would remain effective: as to which, see section I below. G: ANALYSIS OF SECTION 94B It is clear, for example from the Home Secretarys announcement to her partys conference set out at para 31 above, that the initial conception was of a power to require a foreign criminal to bring his appeal from abroad in all cases in which his removal created no risk that he would suffer serious irreversible harm. The criterion of serious irreversible harm was drawn from the practice of the European Court of Human Rights (the ECtHR) when it considers whether to indicate an interim measure under rule 39 of its Rules of Court: if, for, example, an applicant who is challenging a decision to deport or extradite him would face an imminent risk of irreparable damage if removed in advance of determination of the application, the ECtHR may indicate that it should not take place: Mamatkulov v Turkey (2005) 41 EHRR 494, para 104. There is clearly a parallel between the power of the ECtHR under rule 39 and the Home Secretarys power of certification under section 94B; but the parallel is not exact, if only because the demands made of an appellant in adducing evidence to a UK tribunal in an appeal against a deportation order, to which I will refer in para 55 below, have no parallel in those made of an applicant in pursuing an application before the ECtHR. For whatever reason, Parliament wisely decided that the overarching criterion for certification under section 94B should be that removal pending appeal would not breach the claimants human rights and that the real risk of serious irreversible harm should be only an example of when such a breach would occur. Subsections (2) and (3) might be thought to have made this clear but unfortunately it was made far from clear to case workers. Guidance issued by the Home Office entitled Section 94B certification guidance for Non European Economic Area deportation cases, in both its first version dated July 2014 and its second version dated 20 October 2014, stated: Section 94B allows a human rights claim to be certified where the appeal process has not yet begun or is not yet exhausted where it is considered that the person liable to deportation would not, before the appeal process is exhausted, face a real risk of serious irreversible harm if removed to the country of return. So it is easy to understand why the certification of Mr Kiaries claim on 10 October 2014 and the first certification of Mr Byndloss claim on 6 October 2014 were both expressly based on a conclusion that they would not face a real risk of serious irreversible harm if removed to Kenya and Jamaica in advance of any appeal: see paras 20 and 25 above. In the Court of Appeal Richards LJ inevitably held that those two certifications were based on a legal misdirection. He proceeded to hold, however, that the misdirection in Mr Kiaries case had not been material because, even had she applied the overarching criterion, the Home Secretary would still have certified his claim; and that the misdirection in the first certification of Mr Byndloss claim had been cured by a correct direction in the second certification of it. Earlier Richards LJ had observed: There may in practice be relatively few cases where removal for an interim period pending an appeal would be in breach of Convention rights in the absence of a risk of serious irreversible harm, but it is a possibility which must be focused on as a necessary part of the decision making process. With respect, I would not associate myself with this observation of Richards LJ. It would lull case workers into thinking that they would be safe to concentrate on weighing a real risk of serious irreversible harm to the prospective appellant himself. But, as I will explain, a specific focus on the risk of serious harm to the prospects of his appeal might very well ground a conclusion that his removal in advance of it would breach his Convention rights. Any analysis of section 94B must also include reference to the discretion which it confers on the Home Secretary not to certify the claim even when she concludes that to do so would not breach Convention rights. No doubt its exercise will be rare. H: JUDICIAL REVIEW OF CERTIFICATION In their proposed appeals to the tribunal Mr Kiarie and Mr Byndloss will argue that their deportation would breach their rights under article 8. In the present proceedings for judicial review they argue analogously that their deportation in advance of their proposed appeals would breach their rights under article 8. Although the focus of the two inquiries is different, should the judicial approach to the Home Secretarys respective decisions be different? After all, both the tribunal when it hears the appeals and the court or tribunal when it hears the applications for judicial review are public authorities, which act unlawfully if they act in a way which is incompatible with a Convention right: section 6(1) of the Human Rights Act 1998 (the 1998 Act). When on an appeal the tribunal considers an argument that deportation would breach the appellants Convention rights, for example under article 8, its approach to the Home Secretarys decision is not in doubt. It was recently explained by Lord Reed in the Ali case, cited at para 33 above, in paras 39 to 50. In summary, the tribunal must decide for itself whether deportation would breach the appellants Convention rights; in making that decision, it can depart from findings of fact made by the Home Secretary and indeed can hear evidence and make findings even about matters arising after her decision was made (section 85(4) of the 2002 Act); and, in making that same decision, it must assess for itself the proportionality of deportation, albeit attaching considerable weight to the considerations of public policy upon which the Home Secretary has relied and to any other part of her reasoning which, by virtue of her position and her special access to information, should carry particular authority. There is no doubt that, in proceedings for judicial review of a certificate under section 94B, the court or tribunal must also decide for itself whether deportation in advance of the appeal would breach the applicants Convention rights. There is no doubt that, in making that decision, it must assess for itself the proportionality of deportation at that stage. As Lord Neuberger of Abbotsbury said in the proceedings for judicial review in R (Lord Carlile of Berriew) v Secretary of State for the Home Department [2014] UKSC 60, [2015] AC 945, at para 67: where human rights are adversely affected by an executive decision, the court must form its own view on the proportionality of the decision, or what is sometimes referred to as the balancing exercise involved in the decision. Lord Neuberger proceeded, however, to add a qualification referable to the degree of respect to be afforded to the judgment in that regard of the primary decision maker; and he did so along the lines of the last part of my summary in para 42 above. The issue which arises relates to the courts treatment of the Home Secretarys findings of fact when it comes to decide for itself whether deportation in advance of the appeal would breach the applicants human rights. To what extent should it inherit and adopt them? In the Court of Appeal Richards LJ said of the Home Secretary: In my judgment, her findings of fact are open to review on normal Wednesbury principles, applied with the anxious scrutiny appropriate to the context: R (Giri) v Secretary of State for the Home Department [2015] EWCA Civ 784 In the Giri case, now reported at [2016] 1 WLR 4418, the issue was whether the Home Secretary had been entitled to refuse to grant the applicant leave to remain in the UK. She had been entitled to do so if, in making his application for leave, he had failed to disclose a material fact. She found as a fact that he had failed to do so. The Court of Appeal applied the Wednesbury criterion in holding that her finding of fact had not been unreasonable. The difficulty is that the Giri case did not engage the courts duty under section 6 of the 1998 Act. In Manchester City Council v Pinnock (Nos 1 and 2) [2010] UKSC 45, [2011] UKSC 6, [2011] 2 AC 104, a tenant of a house owned by a local authority argued that possession of the house pursuant to the order which it sought against him would breach his rights under article 8. This court held at para 74 that: where it is required in order to give effect to an occupiers article 8 Convention rights, the courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view. In the Lord Carlile case, cited at para 43 above, Lord Sumption said, more broadly, at para 30: when it comes to reviewing the compatibility of executive decisions with the Convention, there can be no absolute constitutional bar to any inquiry which is both relevant and necessary to enable the court to adjudicate. Even when elevated by the protean concept of anxious scrutiny, application of the Wednesbury criterion to the right to depart from the Home Secretarys findings of fact (including any refusal to make such findings) in the course of a judicial review of her certificate under section 94B is in my opinion inapt. If it is to discharge its duty under section 6 of the 1998 Act, the court may need to be more proactive than application of the criterion would permit. In many cases the court is likely to conclude that its determination will not depend on the Home Secretarys findings of fact or that, if it does, her findings are demonstrably correct and should not be revisited. Take the case of Mr Byndloss. He contends that, even by reference only to the evidence before her on 3 September 2015, she was wrong, by her letter of that date, to refuse to accept his contention that he had a genuine or subsisting relationship with any of his children. I will explain why, in my view, his application for judicial review can be determined without the need for a court to inquire into the correctness of her refusal to accept his contention. But, even in the course of a judicial review, the residual power of the court to determine facts, and to that end to receive evidence including oral evidence, needs to be recognised. I: THE REQUIREMENTS OF ARTICLE 8 At last I can begin to address the central issue. But, in answering the question did the certificates breach the rights of the appellants under article 8?, the first task is to identify what, in this context of proposed deportation in advance of an appeal, article 8 requires. In Al Nashif v Bulgaria (2003) 36 EHRR 655 the Bulgarian authorities had deported the first applicant to Syria on grounds of national security. When prior to his deportation he had sought to appeal against the deportation order, the court had ruled that, inasmuch as it was on grounds of national security, the order was not open to appeal. The ECtHR held that the deportation had interfered with the first applicants right to respect for his family life and that it followed from the absence of any facility to appeal against the order that the interference was not in accordance with the law within the meaning of article 8(2). It held: 123. Even where national security is at stake, the concepts of lawfulness and the rule of law in a democratic society require that measures affecting fundamental human rights must be subject to some form of adversarial proceedings before an independent body competent to review the reasons for the decision and relevant evidence, if need be with appropriate procedural limitations on the use of classified information. So the court held that Bulgaria had breached the first applicants rights under article 8. It proceeded to hold, separately, that it had breached his rights under article 13 of the Convention in conjunction with article 8. Article 13 provides: Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity. When domestic UK courts are asked to determine allegations of breach of Convention rights, it is of no consequence to them that article 13 was omitted from the articles included in Schedule 1 to the 1998 Act. The right to an effective remedy for breaches of the substantive Convention rights is generally recognised elsewhere in the 1998 Act (Brown v Stott (Procurator Fiscal, Dunfermline) [2003] 1 AC 681, 715, Lord Hope of Craighead) and indeed, in the case of the present appellants, has been specifically recognised by the grant of a right of appeal under section 82 of the 2002 Act. In subsequent decisions the ECtHR seems to have preferred to locate the right to an effective remedy for breach of article 8 within article 13 rather than within the phrase in accordance with the law in article 8(2). The leading authority, recently indorsed in Khlaifia v Italy, Application No 16483/12, is De Souza Ribeiro v France (2014) 59 EHRR 454. A Brazilian man was arrested in French Guiana and ordered to be removed on the basis that his presence there was illegal. On the day following his arrest he filed an application for judicial review of the order but, later on that very day, he was removed to Brazil. The Grand Chamber of the ECtHR held that France had breached his right under article 13 in conjunction with article 8. He had argued that, whenever an order for removal was challenged by reference to article 8, article 13 required an automatic suspension of the removal pending determination of the challenge, just as when the challenge was by reference to articles 2 or 3. But the Grand Chamber declined to go so far. It held: 83. By contrast [to challenges under articles 2 or 3], where expulsions are challenged on the basis of alleged interference with private and family life, it is not imperative, in order for a remedy to be effective, that it should have automatic suspensive effect. Nevertheless, in immigration matters, where there is an arguable claim that expulsion threatens to interfere with the aliens right to respect for his private and family life, article 13 in conjunction with article 8 of the Convention requires that states must make available to the individual concerned the effective possibility of challenging the deportation or refusal of residence order and of having the relevant issues examined with sufficient procedural safeguards and thoroughness by an appropriate domestic forum offering adequate guarantees of independence and impartiality. There was a powerful concurring opinion to the effect that article 13 did require automatic suspension of the order when removal would allegedly put migrants in danger of irreversible damage to their family lives (para OII 21). But the jurisprudence of the ECtHR seems to be clear that the facility for challenge has to be effective; an effective facility for challenge will not automatically require (a) (b) suspension of the removal order; and (c) whether its suspension is required in order to make the facility effective will depend on the circumstances. In R (Gudanaviciene) v Director of Legal Aid Casework [2014] EWCA Civ 1622, [2015] 1 WLR 2247, the Court of Appeal, by a judgment delivered by Lord Dyson MR, also, albeit by a different route, reached the conclusion that article 8 required that an appeal against a deportation order by reference to it should be effective. The court (a) cited at para 65 the decision of the ECtHR in W v United Kingdom (1987) 10 EHRR 29, para 64, to the effect that article 8 required that parents who had sought contact with a child in care should have been involved in the decision making process to a degree sufficient to provide the requisite protection of their interests; (b) held at para 69 that the same requirement applied to article 8 claims by immigrants; and (c) to the tribunal should be effective. concluded at para 70 that it amounted to a requirement that their access J: BACKGROUND TO THE CIRCUMSTANCES The relevant circumstances must be considered against four features of the background. The first is that the proposed deportations would be events of profound significance for the future lives of Mr Kiarie, his parents and siblings; and of Mr Byndloss and, to the extent that he has or might otherwise develop a genuine relationship with them, also of his children. In the absence of exceptional circumstances the Home Secretary would not even consider whether to readmit either of the appellants to the UK within ten years of the date of the deportation orders: para 391(a) of the Immigration Rules, HC 395 (as amended). The second is that, in the absence of certificates that they are clearly unfounded, the proposed appeals of these appellants must be taken to be arguable: see para 35 above. The third is that, particularly in the light of this courts decision in the Ali case, every foreign criminal who appeals against a deportation order by reference to his human rights must negotiate a formidable hurdle before his appeal will succeed: see para 33 above. He needs to be in a position to assemble and present powerful evidence. I must not be taken to be prescriptive in suggesting that the very compelling reasons which the tribunal must find before it allows an appeal are likely to relate in particular to some or all of the following matters: the quality of his relationship with any child, partner or other family the depth of the appellants integration in UK society in terms of (a) family, employment and otherwise; (b) member in the UK; the extent to which any relationship with family members might (c) reasonably be sustained even after deportation, whether by their joining him abroad or otherwise; (d) welfare of any child in the UK; (e) the country of his nationality; and, surely in every case, (f) any significant risk of his re offending in the UK, judged, no doubt with difficulty, in the light of his criminal record set against the credibility of his probable assertions of remorse and reform. the impact of his deportation on the need to safeguard and promote the the likely strength of the obstacles to his integration in the society of The fourth is that the authority responsible for having directed the dramatic alteration in the circumstances of the appellant even in advance of his appeal is the respondent to the appeal herself. In R (Detention Action) v First tier Tribunal (Immigration and Asylum Chamber) [2015] EWCA Civ 840, [2015] 1 WLR 5341, the Court of Appeal upheld the quashing of Fast Track Rules which, in particular, required asylum seekers, if detained by the Home Secretary at specified locations, to present any appeal against the refusal of asylum within seven days of the refusal. Having referred in para 27 of his judgment to the principle that only the highest standards of fairness will suffice in the context of asylum appeals, Lord Dyson explained at para 38 that the timetable for the conduct of the appeals was so tight that a significant number of appellants would be denied a fair opportunity to present them. He explained at paras 46 to 48 that in those circumstances the court had no need to address a further argument that it had been in breach of natural justice for the Home Secretary, as the respondent to any appeal, to have been able, by detaining the asylum seeker at a specified location, to cause him to be placed into the fast track. Lord Dyson suggested, however, that, had the rules for the fast track been fair, it would have been irrelevant that it was the Home Secretary who had caused them to be engaged. I respectfully agree. But the role of the respondent to the proposed appeals in seeking to achieve the removal of the appellants in advance of their determination, taken in conjunction with the first three of the background features set out above, requires this court to survey punctiliously, and above all realistically, whether, if brought from abroad, their appeals would remain effective. For that is what their human rights require. K: WEAKENING THE ARGUMENTS ON THE APPEAL On an appeal against a deportation order the overarching issue for the tribunal will be whether the deportation would be lawful. But, if the certificate under section 94B is lawful, the appellant will already have been deported. In determining the overarching issue the tribunal will be likely to address in particular the depth of his integration in UK society and the quality of his relationships with any child, partner or other family member: see para 55 (a) and (b) above. But, were the certificate under section 94B lawful, his integration in UK society would already have been cut away; and his relationships with them ruptured. Statistics now produced by the Home Secretary, which the appellants consider to be surprisingly optimistic, suggest that an appeal brought from abroad is likely to be determined within about five months of the filing of the notice. So, by the time of the hearing, an appellant, if deported pursuant to a certificate, will probably have been absent from the UK for a minimum of five months. No doubt the tribunal will be alert to remind itself of its duty to set aside the deportation order and thus to enable an appellant to re enter the UK if his human rights were so to require. But, by reason of his deportation pursuant to a certificate, his human rights are less likely so to require! It is one thing further to weaken an appeal which can already be seen to be clearly unfounded. It is quite another significantly to weaken an arguable appeal: such is a step which calls for considerable justification. The Home Secretary argues that, by definition, the foreign criminal will have been in prison, perhaps also later in immigration detention, in the UK and so he will already have suffered both a loosening of his integration, if any, in UK society and, irrespective of any prison visits, an interruption of his relationship with family members. I agree; but in my view the effect of his immediate removal from the UK on these two likely aspects of his case would probably be significantly more damaging than that of his prior incarceration here. For present purposes, however, I put these substantial concerns aside. In my view what is crucial to the disposal of these appeals is the effect of a certificate under section 94B in obstructing an appellants ability to present his appeal. L: OBSTRUCTING PRESENTATION OF THE APPEAL The first question is whether an appellant is likely to be legally represented before the tribunal at the hearing of an appeal brought from abroad. Legal aid is not generally available to an appellant who contends that his right to remain in the UK arises out of article 8: para 30, Schedule 1 to the Legal Aid, Sentencing and Punishment of Offenders Act 2012. So, in order to obtain legal aid, he must secure an exceptional case determination under section 10 of that Act. Although an appeal brought from abroad is in principle as eligible for such a determination as an appeal brought from within the UK, the determination cannot be made unless either the absence of legal aid would breach his rights under article 8 or it might breach them and provision of it is appropriate in all the circumstances: section 10(3). It suffices to say for present purposes that it is far from clear that an appellant relying on article 8 would be granted legal aid. One can say only that, were he required to bring his appeal from abroad, he might conceivably be represented on legal aid; that alternatively he might conceivably have the funds to secure private legal representation; that alternatively he might conceivably be able to secure representation from one of the specialist bodies who are committed to providing free legal assistance to immigrants (such as Bail for Immigration Detainees: see para 70 below); but that possibly, or, as many might consider, probably, he would need to represent himself in the appeal. Even if an appellant abroad secured legal representation from one source or another, he and his lawyer would face formidable difficulties in giving and receiving instructions both prior to the hearing and in particular (as I will explain) during the hearing. The issue for this court is not whether article 8 requires a lawyer to be made available to represent an appellant who has been removed abroad in advance of his appeal but whether, irrespective of whether a lawyer would be available to represent him, article 8 requires that he be not removed abroad in advance of it. The next question is whether, if he is to stand any worthwhile chance of winning his appeal, an appellant needs to give oral evidence to the tribunal and to respond to whatever is there said on behalf of the Home Secretary and by the tribunal itself. By definition, he has a bad criminal record. One of his contentions will surely have to be that he is a reformed character. To that contention the tribunal will bring a healthy scepticism to bear. He needs to surmount it. I have grave doubts as to whether he can ordinarily do so without giving oral evidence to the tribunal. In a witness statement he may or may not be able to express to best advantage his resolution to forsake his criminal past. In any event, however, I cannot imagine that, on its own, the statement will generally cut much ice with the tribunal. Apart from the assistance that it might gain from expert evidence on that point (see para 74 below), the tribunal will want to hear how he explains himself orally and, in particular, will want to assess whether he can survive cross examination in relation to it. Another strand of his case is likely to be the quality of his relationship with others living in the UK, in particular with any child, partner or other family member. The Home Secretary contends that, at least in this respect, it is the evidence of the adult family members which will most assist the tribunal. But I am unpersuaded that the tribunal will usually be able properly to conduct the assessment without oral evidence from the appellant whose relationships are under scrutiny; and the evidence of the adult family members may either leave gaps which he would need to fill or betray perceived errors which he would seek to correct. When the power to certify under section 94B was inserted into the 2002 Act, an analogous power was inserted into the Immigration (European Economic Area) Regulations 2006 (SI 2006/1003) (the 2006 Regulations), now recently replaced. Regulation 24AA(2) enabled the Home Secretary to add to an order that an EEA national be deported from the UK a certificate that his removal pending any appeal on his part would not be unlawful under section 6 of the 1998 Act. But regulation 24AA(4) enabled him to apply to the appropriate court or tribunal (whether by means of judicial review or otherwise) for an interim order to suspend enforcement of the removal decision. In Secretary of State for the Home Department v Gheorghiu [2016] UKUT 24 (IAC), the Upper Tribunal (Blake J and UTJ Goldstein) observed at para 22 that, on an application for an order to suspend enforcement, the court or tribunal would take due account of four factors. The fourth was that in cases where the central issue is whether the offender has sufficiently been rehabilitated to diminish the risk to the public from his behaviour, the experience of immigration judges has been that hearing and seeing the offender give live evidence and the enhanced ability to assess the sincerity of that evidence is an important part of the fact finding process It is also worthwhile to note that, even if an EEA national was removed from the UK in advance of his appeal, he had, save in exceptional circumstances, a right under regulation 29AA of the 2006 Regulations (reflective of article 31(4) of Directive 2004/58/EC) to require the Home Secretary to enable him to return temporarily to the UK in order to give evidence in person to the tribunal. The Home Secretary submits to this court that the fairness of the hearing of an appeal against deportation brought by a foreign criminal is highly unlikely to turn on the ability of the appellant to give oral evidence; and that therefore the determination of the issues raised in such an appeal is likely to require his live evidence only exceptionally. No doubt this submission reflects much of the thinking which led the Home Secretary to propose the insertion of section 94B into the 2002 Act. I am, however, driven to conclude that the submission is unsound and that the suggested unlikelihood runs in the opposite direction, namely that in many cases an arguable appeal against deportation is unlikely to be effective unless there is a facility for the appellant to give live evidence to the tribunal. But in any event, suggests the Home Secretary, there is, in each of two respects, a facility for an appellant in an appeal brought from abroad to give live evidence. The first suggested respect was the subject of a curious submission on the part of the Home Secretary to the Court of Appeal. It was that from abroad the appellant could apply for, or that the tribunal could on its own initiative issue, a summons requiring his attendance as a witness at the hearing pursuant to rule 15(1) of the Tribunal Procedure (First tier Tribunal) (Immigration and Asylum Chamber) Rules 2014 (SI 2014/2604) (the 2014 Rules). The curiosity of the submission is that such a summons is not enforceable in respect of a person outside the UK. Nevertheless the Court of Appeal held that the issue of a summons would be a legitimate way of putting pressure on the Home Secretary to allow the appellant to return to the UK to give oral evidence. Before this court the Home Secretary does not continue to contend for the suitability of a summons under rule 15(1). She nevertheless suggests that the tribunal could, by direction, stress the desirability of the appellants attendance before it and that, were she thereupon to fail to facilitate his attendance, the appellant could seek judicial review of the certificate under section 94B and, if successful, a consequential order for his return at least pending the appeal. But whether the tribunal could, or if so would, give such a direction in the teeth of a subsisting certificate is doubtful; and in any event it seems entirely impractical for an appellant abroad to apply first for the unenforceable direction and then for judicial review of any failure to comply with it. The second suggested respect has been the subject of lengthy and lively argument. The suggestion is that the appellant can seek to persuade the tribunal to permit him to give live evidence from abroad by video link or, in particular nowadays, by Skype. There is no doubt that, in the context of many appeals against immigration decisions, live evidence on screen is not as satisfactory as live evidence given in person from the witness box. The recent decision of the Upper Tribunal (McCloskey P and UTJ Rintoul) in R (Mohibullah) v Secretary of State for the Home Department [2016] UKUT 561 (IAC) concerned a claim for judicial review of the Home Secretarys decision to curtail a students leave to remain in the UK on the grounds that he had obtained it by deception. The Upper Tribunal quashed the decision but, in a footnote, suggested that the facility for a statutory appeal would have been preferable to the mechanism of judicial review and that it would be preferable for any statutory appeal to be able to be brought from within the UK. It said: (90) Experience has demonstrated that in such cases detailed scrutiny of the demeanour and general presentation of parties and witnesses is a highly important factor. So too is close quarters assessment of how the proceedings are being conducted for example, unscheduled requests for the production of further documents, the response thereto, the conduct of all present in the courtroom, the taking of further instructions in the heat of battle and related matters. These examples could be multiplied. I have found the mechanism of evidence by video link to be quite unsatisfactory in other contexts, both civil and criminal. It is not clear whether the aforementioned essential judicial exercises could be conducted satisfactorily in an out of country appeal. Furthermore, there would be a loss of judicial control and supervision of events in the distant, remote location, with associated potential for misuse of the judicial process. Although the Home Secretary stresses that the Upper Tribunal was addressing the determination of issues relating to deception, its reservations about the giving of evidence by electronic link seem equally apt to appeals under article 8 against deportation orders. Indeed one might add that the ability of a witness on screen to navigate his way around bundles is also often problematic, as is his ability to address cross examination delivered to him remotely, perhaps by someone whom he cannot properly see. But, although the giving of evidence on screen is not optimum, it might well be enough to render the appeal effective for the purposes of article 8, provided only that the appellants opportunity to give evidence in that way was realistically available to him. Inquiry into the realistic availability of giving evidence on screen to the tribunal gets off to a questionable start: for in her report entitled 2016 UK Judicial Attitude Survey, Professor Thomas, UCL Judicial Institute, records that 98% of the judges of the First tier Tribunal throughout the UK responded to her survey and that, of them, 66% rated as poor the standard of IT equipment used in the tribunal. In Secretary of State for the Home Department v Nare [2011] UKUT 443 (IAC) the Upper Tribunal (Mr CMG Ockelton VP, UTJ Grubb and IJ Holmes), in the course of considering an allegation that a judge of the First tier Tribunal had too readily allowed a witness to give evidence by telephone, gave guidance as to how the tribunal should approach any application for a direction that evidence be given by electronic link. At that time the rules specifically provided for such a direction to be given; now, by rules 1(4) and 14(1)(e) of the 2014 Rules, provision for it is encompassed in the definition of a hearing, together with the power to direct the manner in which any evidence or submissions are to be provided [including] orally at a hearing. The Upper Tribunal prefaced its guidance by observing at para 17 that departure from the usual model of oral evidence given directly in the courtroom was likely to reduce the quality of evidence and the ability both of the parties to test it and of the judge to assess it. Its guidance, given in para 21, included: that the application should be made and determined well before the (a) substantive hearing; (b) that the application should not only explain the reason for evidence to be given on screen and indicate the arrangements provisionally made at the distant site but also include an undertaking to be responsible for any expenses incurred; (c) that, were the evidence to be given from abroad, the applicant should be able to inform the tribunal that the foreign state raised no objection to the giving of evidence to a UK tribunal from within its jurisdiction; (d) that the applicant should satisfy the tribunal that events at the distant site were, so far as practicable, within its observation and control, that the evidence would be given there in formal surroundings and be subject to control by appropriate officials and that nothing could happen off camera which might cast doubt on the integrity of the evidence; and (e) suitable facilities. that a British Embassy or High Commission might be able to provide Bail for Immigration Detainees (BID), a charity which provides a small minority of those facing deportation with free legal advice and even representation and which intervenes in the appeals before the court, provides a helpful example of how the tribunal seeks to implement the guidance given in the Nare case. In 2016 BID represented a Nigerian citizen in his appeal against a deportation order by reference to his rights under article 8. His claim had been certified under section 94B so he had been removed to Nigeria in advance of the appeal. On his application, through BID, to give evidence on the appeal from Nigeria by Skype, the tribunal sought to implement the guidance summarised at para 69(d) above by the following direction: The tribunal must be advised in advance of the hearing of the arrangements made to enable the appellant to give evidence in a secure location, attended by a local agent or representative instructed by the appellants solicitors and whose identity has at the time of such advice been provided to the tribunal. In the same order the tribunal also sought to implement the guidance summarised at para 69(b) above by the following direction: All necessary equipment and Skype link must be provided and paid for by the appellant but must include: (i) Projection equipment (ii) Audio equipment (iii) Wi fi link to enable all present to see and hear the appellant give evidence. As is apparent from this direction, the tribunal requires an applicant to pay for provision of the necessary equipment not only at the distant end but also at the hearing centre itself. When, in a letter written in response to the direction, BID requested the tribunal to buy, install and maintain its own equipment for the purpose of hearing evidence from abroad, one of its judges replied: Unfortunately, the Tribunal has no funds to provide equipment or technical ability, hence the onus in that regard we have to place upon appellants and their representatives. In the event the appellant represented by BID was furnished by a friend with the equipment necessary for his use in Nigeria in giving evidence by Skype; and, since the friend was a lawyer, he was able and willing also to exercise free of charge the degree of control required by the tribunal. But the appellant could not afford to purchase the equipment for use at the hearing centre; and so it was BID which bought a laptop computer (240), a projector (252) and a 3G mobile telephone contract (33.97 per month), for use there at the hearing of his appeal. The researches of the solicitors for Mr Kiarie indicate that it would cost the equivalent of 240 per hour to rent a video conference room for his use in Nairobi and that therefore a rental for say seven hours, so as to enable counsel to conduct a pre hearing conference with him as well as to cover the probable length of the hearing, would cost 1,680. The researches of the solicitors for Mr Byndloss indicate that the hourly cost of renting a video conference room for his use in Kingston would be marginally less but they estimate that it would be necessary to rent it for 11 hours in order to cover the probably lengthier hearing of his appeal. It is already clear however that the cost of hiring the necessary equipment for use at the distant end of any evidence given by video link or Skype is only part of the cost which an appellant must bear. He must also bear the cost of providing the equipment for use at the hearing centre and he may well have to pay for the attendance beside him of someone able and willing to exercise the degree of control required by the tribunal. Apart, however, from having to meet the overall costs of giving evidence in that way, an appellant has to confront formidable technical and logistical difficulties. Powerful evidence is given by the appellants solicitors and other legal specialists in the field to the effect that: it can be a slow and tortuous process to obtain the consent of the (a) foreign state for evidence to be given from within its jurisdiction; (b) it can be difficult to achieve compatibility between the system adopted at the distant end and the system installed at the hearing centre, with the result that a bridging service sometimes needs to be engaged and funded; it can be difficult to alight upon a time for the link to begin and end (c) which is both acceptable to the tribunal and practicable at the distant end in the light of the time difference; and (d) if, as is not uncommon, the link fails during the hearing and cannot then and there be restored, the tribunal can prove reluctant to grant an adjournment to another date. Apart from the difficulty surrounding his giving live evidence to the tribunal, an appellant deported in advance of the appeal will probably face insurmountable difficulties in obtaining the supporting professional evidence which, so this court is told, can prove crucial in achieving its success. In support of his claim to present no significant risk of re offending, an appellant is likely to wish to submit evidence from his probation officer; but, upon his deportation, his probation officer will have closed his file and will apparently regard himself as no longer obliged to write a report about him. An appellant may also wish to submit evidence from a consultant forensic psychiatrist about that level of risk. But the evidence in these proceedings of Dr Basu MRC Psych, Clinical Director at Broadmoor Hospital, is that he has never sought to assess the risk posed by a person visible to him only on screen and that any such assessment would have to be treated with considerable caution. In support of an appellants likely claim to have a close and active relationship with a child, partner or other family member in the UK, an appellant will not uncommonly adduce, as in these preliminary proceedings Mr Byndloss has already sought to do, a report by an independent social worker who, so he hopes, will speak of the quality, and in particular for the family the importance, of the relationship. But a report compiled in the absence of the social workers direct observation of the appellant and the family together is likely to be of negligible value. It was more than 30 years ago that, in the appellate committee which preceded the creation of this court, concern was first expressed about the value of an appeal which was required to be brought from abroad. In R (Khawaja) v Secretary of State for the Home Department [1984] AC 74 Lord Fraser of Tullybelton observed at pp 97 98: in spite of [a] decision that the illegal immigrant be removed from this country, it will still be open to him to appeal under section 16 of [the 1971 Act] to an adjudicator against the decision to remove him. The fact that he is not entitled to appeal so long as he is in this country section 16(2) puts him at a serious disadvantage, but I do not think it is proper to regard the right of appeal as worthless. At least the possibility remains that there may be cases, rare perhaps, where an appeal to the adjudicator might still succeed. Today, however, this court is invested with responsibility for deciding whether two foreign criminals who, by reference to article 8, each have arguable appeals against the deportation orders made against them and who have rights thereunder for their appeals to be effective, would suffer a breach of those rights if they were to be deported in advance of the hearing of the appeals. I conclude that, for their appeals to be effective, they would need at least to be afforded the opportunity to give live evidence. They would almost certainly not be able to do so in person. The question is: as a second best, would they be able to do so on screen? The evidence of the Home Secretary is that in such appeals applications to give evidence from abroad are very rare. Why? Is it because an appellant has no interest in giving oral evidence in support of his appeal? I think not. It is because the financial and logistical barriers to his giving evidence on screen are almost insurmountable. In this case the Court of Appeal has indorsed a practice in which, so it seems, the Home Secretary has, not always but routinely, exercised her power under section 94B to certify claims of foreign criminals under article 8. But she has done so in the absence of a Convention compliant system for the conduct of an appeal from abroad and, in particular, in the absence of any provision by the Ministry of Justice of such facilities at the hearing centre, and of some means by which an appellant could have access to such facilities abroad, as would together enable him to give live evidence to the tribunal and otherwise to participate in the hearing. Between 28 July 2014 and 31 December 2016 the Home Secretary issued 1,175 certificates pursuant to section 94B in relation to foreign criminals, all, therefore, with arguable appeals. Of those 1,175 persons, the vast majority were no doubt duly deported in advance of their appeals. But by 31 December 2016 only 72 of them had filed notice of appeal with the tribunal from abroad. It may well be that on 13 February 2017 a few of those appeals remained undetermined. The fact remains, however, that, as of that date, not one of the 72 appeals had succeeded. It remains only to re cast the reasoning expressed in this judgment within its proper context of a claim that deportation pursuant to the two certificates under section 94B would breach the procedural requirements of article 8. The appellants undoubtedly establish that the certificates represent a potential interference with their rights under article 8. Deportation pursuant to them would interfere with their rights to respect for their private or family lives established in the UK and, in particular, with the aspect of their rights which requires that their challenge to a threatened breach of them should be effective. The burden then falls on the Home Secretary to establish that the interference is justified and, in particular, that it is proportionate: specifically, that deportation in advance of an appeal has a sufficiently important objective; that it is rationally connected to that objective; that nothing less intrusive than deportation at that stage could accomplish it; and that such deportation strikes a fair balance between the rights of the appellants and the interests of the community: see R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45, [2012] 1 AC 621, para 45. The alleged objectives behind the power to certify a claim under section 94B have been set out in section F above. I will not prolong this judgment by addressing whether the power is rationally connected to them and as to whether nothing less intrusive could accomplish them. I therefore turn straight to address the fair balance required by article 8 and I conclude for the reasons given above that, while the appellants have in fact established that the requisite balance is unfair, the proper analysis is that the Home Secretary has failed to establish that it is fair. I agree with Lord Wilson that these two appeals should be allowed, but my M: CONCLUSION So I would allow the appeals and quash the certificates. LORD CARNWATH: emphasis is rather different. The starting point is section 94B(2) of the 2002 Act, under which it is a precondition of certification that the Secretary of State considers that removal of P to the relevant country in advance of the hearing of the appeal would not be unlawful under section 6 of the Human Rights Act 1998 Given the important consequences of certification, I would read the section 6 precondition as implying a requirement for the Secretary of State to satisfy herself, on adequate information, that there will be no breach of section 6. In this case the alleged breaches relate to the appellants respective rights under article 8 of the Convention. If the section 6 precondition is satisfied, then (under subs (3)) the Secretary of State may certify, on grounds which include (in particular) that P would not, before the appeals process is exhausted, face a real risk of serious irreversible harm if removed to the (relevant) country The drafting is awkward. Although the power is discretionary, and the grounds are stated to include absence of risk of irreversible harm, there is no indication what other grounds there might be for exercise of the power, or indeed for declining to exercise it. Indeed, absence of such risk might be more readily understood as a pre condition to certification (under subs (2)) rather than as a positive ground for exercising the power. It is not clear why in this respect a distinction is drawn between the pre condition and the grounds. In any event, the policy of the Secretary of State at the relevant time, as stated in the then current guidance (dated 29 May 2015), and as confirmed by the evidence of Mr Kenneth Welsh (the Departmental witness), was that the power to certify should normally be exercised whenever the statutory criteria were satisfied: The Governments policy is that the deportation process should be as efficient and effective as possible. Case owners should therefore seek to apply section 94B certification in all applicable cases where doing so would not result in serious irreversible harm. (Guidance para 3.2) Mr Welsh tells us that applicable cases were intended to be confined to those which would satisfy the precondition of compliance with section 6 of the Human Rights Act 1998, although he accepts that the clarity of the guidance could be improved. It is unfortunate that, whether because of the awkward drafting of the section or lack of clarity in the guidance, the existence of the section 6 precondition was wholly overlooked at the time of the original decisions in both cases (made in October 2014). There was no express consideration whether removal pending any appeal would be consistent with the appellants rights under article 8. Nor had the appellants been given any notice of, or chance to comment on, the proposed certification. For those reasons, as the Court of Appeal correctly held, the decisions were legally flawed. They accordingly fell to be quashed, unless (in the case of Mr Byndloss) the error was remedied in the supplementary letter of 3 September 2015; or (in Mr Kiaries case, where there was no such supplementary letter) it was clear that the errors were immaterial, in the sense that proper consideration would have yielded the same result. The Court of Appeal so concluded in each case. In considering the reasoning of Richards LJ, it is necessary to distinguish as he did (para 39) between the substantive and the procedural aspects of rights afforded by article 8; or as Lord Wilson puts it (para 39) between harm to the prospective appellant himself, and harm to the prospects of his appeal. As to the former I see no reason to disagree with Richards LJs conclusion that the appellants substantive rights would not be disproportionately infringed by temporary removal pending a decision on their appeals, and that the Secretary of State was entitled so to find. On that aspect, I do not understand Lord Wilson ultimately to take a different view. His conclusions (para 78) focus on the procedural requirements of article 8. In fairness to Richards LJ, however, (and in respectful disagreement with Lord Wilson at para 35) I should add that, in the context of substantive rights, I would not criticise him for according weight to the public interest attached by Parliament to the removal of a foreign criminal, even in the interim period pending an appeal. Lord Wilson observes that the limited risk of reoffending in the period before appeal is not outweighed by the public interest in ensuring that any appeal is effective. However, that was not the issue. No one disputed that the appeal mechanism needed to be effective. On the other hand, the objectives of the new provision, indicated by the Ministerial statements quoted by Lord Wilson (para 31), were directed, not specifically to the risk of offending in the interim period, but rather to speeding up the process of deportation both as an end in itself, and for the purpose of reducing what was seen as abuse by building up further claims to a settled life. The emphasis given by Richards LJ to the public interest in deportation can be seen as a natural extension of this courts reasoning in Ali v Secretary of State for the Home Department [2016] UKSC 60, [2016] 1 WLR 4799 (see para 38) recognising the great weight attached to the public interest in the deportation of foreign offenders. That is now given statutory form in section 117C of the 2002 Act, introduced at the same time as section 94B by the Immigration Act 2014. I turn to the more difficult issue concerning the procedural aspects of article 8: whether (as Richards LJ put it para 40) the Secretary of State took the necessary steps to satisfy herself that the procedural guarantees of article 8 would be met by an out of country appeal before certifying under section 94B. He was right in my view to emphasise the duty of the Secretary of State in this respect. Under section 94B the responsibility for certification entrusted by Parliament to the Secretary of State carries with it the responsibility to satisfy herself (if necessary with the co operation of the Secretary of State for Justice, as the minister responsible for supporting the tribunal system) that the procedural mechanisms to ensure an effective appeal will (not may) be in place. Lord Wilson (para 50) has summarised the relevant Strasbourg jurisprudence. He refers in particular to the Grand Chamber decision in De Souza Ribeiro v France (2014) 59 EHRR 454, as establishing that, while suspension of removal is not a necessary requirement, the opportunity to challenge the removal decision must be effective, that is, at para 83 the effective possibility of challenging the deportation or refusal of residence order and of having the relevant issues examined with sufficient procedural safeguards and thoroughness by an appropriate domestic forum offering adequate guarantees of independence and impartiality. I note that the Chamber in IR v United Kingdom [2014] ECHR 340; [2014] 58 EHRR SE14 cited De Souza as illustrating the proposition that an effective remedy in this context is to be read as meaning a remedy that is as effective as can be having regard to the restricted scope for recourse inherent in the particular context (para 62). I agree with Richards LJ (para 64) that it is not enough that the out of country appeal may be less advantageous in some respects than an in country appeal; article 8 does not require access to the best possible procedure, but access to one which meets, as he puts it, the essential requirements of effectiveness and fairness. The relevant issues for this purpose will depend on the circumstances of each case. They will have to be considered within the framework explained by Lord Reed in Ali (paras 26, 38) (based on the so called Boultif v Switzerland (2001) 33 EHRR 50 criteria, as developed in later Strasbourg cases), and having regard to the need to show a very compelling case to outweigh the presumption in favour of deportation. It is not in dispute that judged by those criteria each of the appellants has at least an arguable case: for Mr Kiarie based on his relative youth, his dependence on his family in this country, and his lack of any significant connection with Kenya; for Mr Byndloss based principally on his ties with his various children and the need to safeguard their interests. I agree with Lord Wilson (para 7) that the issues in such cases, depending as they do primarily on evidence of the life, conduct and relationships of the appellants in this country, are quite different in kind from other more established forms of out of country appeal. As already noted, the need to consider this issue was overlooked at the time of the original decisions. By the time the appeals came before the Court of Appeal (23 September 2015) the issue had been given some consideration, albeit only very recently. The material available to the Secretary of State, and her consideration of this issue, are apparent from the witness statement of Mr Welsh (sworn on 14 September 2015), and in the case of Mr Byndloss, the supplementary letter sent (under Mr Welshs signature) a few days before. It is convenient to start with the latter. The letter, extending to 21 pages, contained a very detailed consideration of Mr Byndloss substantive case under article 8, but the procedural arguments were dealt with relatively shortly. The writer noted Mr Byndloss stated wish to participate in the hearing: by giving evidence of his remorse for his crimes and his reasons for committing them, and to show that he was a good father and was trying to maintain contact with his children; by listening to the Home Offices evidence and submissions; and by assisting his representatives with preparation for the hearing and reading. The response was that he would be able to submit a written statement of his own evidence, supported by evidence from the mothers of the children; and that he would be able to read the Home Offices statements and give instructions to his legal advisers by email. Further: It is open to you to apply to the Tribunal to give evidence by video link if you and your legal representatives consider that this is essential to the fair determination of the appeal. Alternatively, if the Tribunal considers that oral evidence from you on this point is essential to the fair determination of the appeal, it can order that you give evidence by video link. There appears to have been no equivalent letter in relation to Mr Kiaries procedural rights. However, Mr Welshs witness statement was addressed to both appeals. It was designed to provide evidence about the practice and procedure followed by the Secretary of State and the tribunals when dealing with out of country appeals. In respect of the latter he drew on statements said to have been obtained from resident judges of the FTT and UT on an informal basis, based on their vast experience of out of country appeals. Before the Court of Appeal it was accepted for the Secretary of State that such statements could not properly be relied on. But in any event both the statements, and Mr Welshs reliance on them, are open to the criticism that they did not adequately address the distinctive features of an article 8 appeal in a deportation case. On the other hand, Mr Welsh fairly noted the practical limitations of use of video link particularly in the First tier Tribunal, including the lack of facilities in some centres and competing demands from other priorities (such as bail hearings), the need for compatibility with overseas equipment, the need for the appellant to bear the costs, and the need to co ordinate timings with appeal hearings. As Richards LJ explained (para 56), in addition to evidence on this aspect for the appellants, the Court of Appeal received a joint note agreed by counsel providing an outline of out of country appellate procedures, including guidance from the Upper Tribunal on the use of video facilities. At the heart of the Court of Appeals reasoning, in line with the submissions of the Secretary of State, was the proposition that the tribunal, whose independence and impartiality were not in doubt, could be relied on to provide the necessary procedural safeguards to ensure a fair process. As Richards LJ said, at para 65: They will be alert to the fact that out of country appeals are a new departure in deportation cases, and they will be aware of the particular seriousness of deportation for an appellant and his family. All this can be taken into account in the conduct of an appeal. If particular procedures are needed in order to enable an appellant to present his case properly or for his credibility to be properly assessed, there is sufficient flexibility within the system to ensure that those procedures are put in place. That applies most obviously to the provision of facilities for video conferencing or other forms of two way electronic communication or, if truly necessary, the issue of a witness summons so as to put pressure on the Secretary of State to allow the appellants attendance to give oral evidence in person. He acknowledged the difficulties for any appellant, particularly when unrepresented, in preparing evidence for an appeal and presenting it to the tribunal. But he did not regard these as sufficient to amount to a denial of effective participation in the decision making process: In these days of electronic communications, an out of country appellant does not face serious obstacles to the preparation or submission of witness statements or the obtaining of relevant documents for the purposes of an appeal. He can instruct a lawyer in the UK if he has the funds to do so. If he does not have the funds to instruct a lawyer but the case is so complex that an appeal cannot properly be presented without the assistance of a lawyer, he will be entitled to legal aid under the exceptional funding provisions considered in R (Gudanaviciene) v Director of Legal Aid Casework (para 66) In considering that reasoning, in my view, it is necessary to distinguish between two separate elements: first, the ability of the appellant from abroad to assemble evidence and prepare and present his case; secondly, his ability to give oral evidence if required. In doing so we have the advantage of the new evidence (in the form of a witness statement by Mr Makhlouf, Assistant Director of BID), submitted by Mr Fordham without objection from the Secretary of State, as to the practical problems for appellants of conducting effective appeals from abroad. On the first element, as Lord Wilson explains (para 60), it is at best uncertain what assistance will be available to an appellant without resources of his own when conducting his appeal from abroad. Richards LJ, at para 66, referred to the potential availability of exceptional legal aid funding under the provisions considered in R (Gudanaviciene) v Director of Legal Aid Casework. However, Mr Makhlouf refers to the difficulties in practice for those in the position of the appellants to obtain legal aid under these provisions. Without such assistance, or assistance from a body such as BID, it is difficult to see how an appellant from abroad can realistically prepare and present an effective appeal. Even if such legal assistance were available (as it appears to be in the present cases), there are likely to be major logistical problems in ensuring that documents are made available and instructions obtained in the run up and during the course of the hearing. With regard to the second element, there is a dispute between the parties as to the likely importance of such direct oral evidence from the appellant in person. Mr Drabble submits that in deportation appeals, as contrasted with entry clearance appeals, such evidence is likely to be of central importance. He relies on comments of the Upper Tribunal (Blake J and Judge Goldstein) in Secretary of State for the Home Department v Gheorghiu [2016] UKUT 24 (IAC) para 22(iv): in cases where the central issue is whether the offender has sufficiently been rehabilitated to diminish the risk to the public from his behaviour, the experience of immigration judges has been that hearing and seeing the offender give live evidence and the enhanced ability to assess the sincerity of that evidence is an important part of the fact finding process (see for example the observations of this Tribunal as to the benefits of having heard the offender in Masih (Pakistan) [2012] UKUT 46 (IAC) at para 18; see also Lord Bingham in Huang [2007] 2 AC 167 at para 15). By contrast Lord Keen for the Secretary of State, at para 90 of his case, submits that the issues raised in a deportation appeal brought by a foreign criminal are unlikely to require live evidence from the appellant: The nature and extent of the foreign criminals ties to the UK, including his length of residence and relationship with family members, is rarely in dispute. In those rare cases in which there is a dispute concerning, for example, the extent of a foreign criminals relationship with a partner and/or her children, it is usually the evidence of the partner that is of most significance in resolving that dispute. The critical and determinative question is whether the interests of the foreign criminal and/or any affected family members are sufficient to outweigh the public interest in deportation. That resolves to a matter of judgment for the Tribunal, and very rarely turns on issues of disputed fact. He points out correctly that Gheorghiu was concerned with different legislation (Immigration (EEA) Regulations 2006, regulation 21(5)(c)) under which the issue was whether the applicant represented a present and sufficiently serious threat (judgment para 9), thus raising directly the issue of his propensity to reoffend. There is no equivalent in the Ali criteria. Indeed, the Upper Tribunal in Gheorghiu had expressly distinguished the decision of the Court of Appeal in the present case. Lord Wilson attaches weight in particular to the need, as he sees it, for the appellant to demonstrate by direct evidence (subject to cross examination) his remorse and that he is a reformed character (paras 55(f), 61). For my part I have considerable doubts whether an effective appeal is likely to turn on such subjective issues. I see force in Lord Keens submission that in general application of the Ali criteria is likely to turn on the evaluation of factual matters which are either not in dispute, or capable of proof by evidence other than of the appellant in person. It is true that one of the Boultif criteria concerns the time elapsed since the commission of the offences and the applicants conduct in during that period. As the Grand Chamber explained in Maslov v Austria [2008] ECHR 546, [2009] INLR 47, para 90, a significant period of good conduct since the offence has a certain impact on the assessment of the risk which that person poses to society. However, there is no suggestion in the courts own consideration of that issue in Maslov (paras 91 95) that it was seen as depending on subjective evidence as to the state of mind of the appellant, as opposed to objective evidence as to his actual conduct in the relevant period. So far as I am aware, there is nothing in the Strasbourg case law to support a general view that oral evidence by the appellant is a necessary part of an effective appeal in the sense explained in De Souza Ribeiro. However, I would be cautious about reaching a firm view on that issue, given my very limited practical experience of dealing with such issues at first hand, and I do not think it is necessary to do so. The problem for the Secretary of State seems to me more fundamental. As Lord Keen I think would accept, it would be wrong in principle for the Secretary of State, as the opposing party to the appeal, to be allowed to dictate the conduct of the appellants case or the evidence on which he chooses to rely. There may, as Mr Welsh acknowledges, be cases where the appellant fairly believes that direct oral evidence is necessary, and in any event he may reasonably wish to participate actively in the appeal by hearing and responding to the evidence as it emerges. Lord Keen relies on the appellants ability to apply to the tribunal to give evidence by video link, and on the tribunals power, if it considers the request well founded, to give effect to it by use of its extensive case management powers. That response only works if the Secretary of State is able, at the time of certification, to satisfy herself that the necessary facilities can and will be provided. She cannot afford to wait until the case comes before the tribunal, since by then it may be too late. I see no reason in principle why use of modern video facilities should not provide an effective means of providing oral evidence and participation from abroad, so long as the necessary facilities and resources are available. (Things have moved a long way since the comments of Lord Fraser in R (Khawaja) v Secretary of State for the Home Department [1984] AC 74, to which Lord Wilson refers: para 75.) However, the evidence of Mr Welsh shows how far the material before the Secretary of State at the time of the relevant decisions fell short of demonstrating how that objective was to be achieved. The agreed note before the Court of Appeal (para 56) did not take things much further. That put the burden on the applicant to make all the necessary arrangements at his own cost, as was arguably appropriate for a party seeking an indulgence to depart from the norm. It did not address the problem of a party who, due to his forced removal the country, and with limited resources, is unable to present his evidence or participate in the hearing in any other way. The problems are underlined by the unchallenged evidence of BID described by Lord Wilson (paras 70 73). There is no evidence that any serious consideration had been given by the Secretary of State, at the time of certification or later, to how those problems were to be overcome in practice. Without such consideration I do not see how she could satisfy herself that the appeal would be effective. Conclusion It is unfortunate that these appeals have come to us by a less than ideal route. They started with decisions by the Secretary of State on a flawed basis and without regard to what has become the critical issue. They proceeded to the Court of Appeal without any detailed consideration of this issue by the Upper Tribunal. Finally, some of the most compelling evidence (now available from BID) has come in very late in the day, and without time for evaluation by the tribunal or the Court of Appeal. With hindsight, it might have been better if the Court of Appeal, having decided to grant permission, had remitted the substantive application to be dealt with by a specially convened panel of the Upper Tribunal. That would have enabled it to look in detail at what is required to ensure an effective appeal in cases such as this. We are therefore lacking assistance from the body which is best equipped, and will ultimately be responsible, for determining what a fair and effective procedure requires. Neither the Court of Appeal, nor still less this court, has equivalent expertise or experience. It may be that the best way to clarify these issues would be some form of a test case before the Upper Tribunal, at which the practicalities can be looked at in more detail, and guidance developed for the future. For the moment, we have to deal with the appeals as best we can on the available material. As I have said, having made the initial decisions on a flawed basis it was for the Secretary of State to satisfy us that the error was immaterial. Her problem is that there is no real evidence of consideration of the practical problems involved in cases such as these in preparing and presenting a case from abroad. I am far from saying that those problems cannot be overcome. However, the evidence before us does not show that the Secretary of State had the material necessary to satisfy herself, before certification, that the procedural rights of these appellants under article 8 would be protected. On that limited basis I would allow the appeal. |
Iceland is one of the most productive countries per capita in the world. It ranks high in economic and political stability. But the global financial crisis of 2008 exposed its dependence on the banking sector, and in the autumn of that year the nations entire banking system failed. The dispute which has given rise to this appeal is one of the products of that crisis. It has its origin too in the fact that Iceland is a party, as are all the Member States of the European Union, to the Agreement on the European Economic Area (the EEA Agreement) which was established on 1 January 1994. On 6 December 2002 Annex IX (Financial Services) to the EEA Agreement was amended by the incorporation of Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions (the Directive). Landsbanki Islands hf (Landsbanki) and its wholly owned subsidiary Heritable Bank plc (Heritable) are both credit institutions for the purposes of article 1(1) of the Directive. Landsbanki is a company incorporated under the laws of Iceland with its registered office in Reykjavik. Heritable is a company incorporated under the Companies Act 1985 with its registered office in Glasgow. Both companies are the subject of proceedings resulting from insolvency which were commenced on 7 October 2008. On that date the Financial Services Authority of Iceland, in the exercise of emergency powers conferred on it the previous day by the Icelandic Parliament, took control of Landsbanki, which was later granted a moratorium on its liabilities. On 29 April 2009, under provisions by which financial undertakings which had been granted a moratorium were deemed to be in a winding up proceeding subject to the ordinary rules, the District Court of Reykjavik appointed a winding up board to the company. Landsbankis winding up board is the appellant in this appeal. On 7 October 2008 the Court of Session appointed joint administrators to Heritable under paragraph 13 of Schedule B1 to the Insolvency Act 1986 on the application of the Financial Services Authority. The joint administrators of Heritable are the respondents to the appeal. The Directive was implemented in the United Kingdom by The Credit Institutions (Reorganisation and Winding up) Regulations 2004 (the Regulations). Landsbanki is an EEA credit institution for the purpose of Part 2 of the Regulations. Heritable is a UK credit institution for the purposes of Parts 3 and 4. The issue before the court concerns claims submitted by Landsbanki in the administration of Heritable and claims by Heritable against Landsbanki. It relates to the effect in the administration of Heritable of a decision made by Heritable not to pursue its claims in the winding up of Landsbanki. Its resolution depends on the proper construction of the Regulations and the Directive. The competing claims On 8 December 2008 Landsbanki submitted three claims in the administration of Heritable: (1) a claim for about 86m in respect of a revolving credit facility dated 31 May 2002 which was governed by English law (the Landsbanki rcf claim); (2) a contingent claim for 50m under a subordinated loan agreement (the subordinated debt claim); and (3) a contingent claim of 1,011,817,245 in respect of liabilities under a guarantee of Heritables liabilities (the guarantee claim). On 6 November 2009 the administrators of Heritable rejected the Landsbanki rcf claim under section 49(2) of the Bankruptcy (Scotland) Act 1985 (the 1985 Act), as applied to administrations by rules 2.41(1) and 4.16 of the Insolvency (Scotland) Rules 1986. This was on the ground that Heritable had claims against Landsbanki which equalled or exceeded the amount of the Landsbanki rcf claim which served to extinguish it. This decision was based on the application of the rule of Scots law on the balancing of accounts in bankruptcy. On 26 November 2009 the administrators accepted the subordinated debt claim and the guarantee claim, but valued them at nil under paragraph 3(1) of Schedule 1 to the 1985 Act on the basis that there was no prospect of the relevant contingencies being satisfied. On 4 May 2010 a fourth claim was submitted by the winding up board of Landsbanki for 17,122,221.92 under a master participation agreement (the Landsbanki mpa claim). It also was rejected by the administrators of Heritable. On 20 November 2009 Landsbanki appealed to the Court of Session against the decision by the administrators of Heritable to reject the Landsbanki rcf claim. This was commenced by way of a note in the petition for the making of an administration order in respect of Heritable. The note was later amended to include an appeal against the decisions to value the subordinated debt claim and the guarantee claim at nil. It has not yet been amended to include an appeal against the rejection of the Landsbanki mpa claim. The issue in the appeal to this court is concerned only with the rejection of the Landsbanki rcf claim by the administrators. On 30 October 2009 Heritable submitted four claims in the winding up of Landsbanki: (1) a claim for 661,673,236 as damages for breach of the revolving credit facility dated 31 May 2002 (the Heritable rcf claim); (2) a claim of 234,850,801 as damages under the master participation agreement (the Heritable mpa claim); (3) a claim for 7,665,032 under certain interest swap transactions in connection with an ISDA Master Agreement dated 23 December 2004 (the swap claim); and (4) a claim for 1,099,978 as reimbursement of payments made by Heritable in connection with Landsbankis Icesave accounts in the United Kingdom (the Icesave claim). In each claim letter it was stated that, subject to the extent to which Heritable was required or permitted by the law governing Heritables administration to set off any liabilities it owed to Landsbanki against amounts owed by Landsbanki to Heritable, Heritables claims were to rank as unsecured claims in the winding up of Landsbanki. By notices dated 14 January 2010 Landsbankis winding up board rejected the Heritable rcf claim, the Heritable mpa claim and the Icesave claim. The swap claim was accepted, but only to the extent of 7,247,284. The proceedings in Iceland The administrators of Heritable objected to the decision by the winding up board of Landsbanki to reject their claims by a notice of objection dated 22 February 2010. As Landsbanki had already commenced proceedings in the Court of Session, the administrators asked that no further steps be taken in relation to their objection until Landsbankis appeal before the Court of Session had been finally determined. By letters dated 8 March and 19 March 2010 the winding up board of Landsbanki declined to accede to this request. On 23 March 2010 the winding up board referred the administrators objections to the District Court of Reykjavik under article 120 of the Icelandic Bankruptcy Act 1991 (the BA 1991). On 14 April 2010 the administrators sought a stay of the proceedings before that court pending a final determination of the preliminary issues that had been identified in relation to Landsbankis appeal before the Court of Session. On 17 May 2010 the District Court of Reykjavik declined to grant a stay of those proceedings. On 12 August 2010 the administrators of Heritable formally withdrew the Heritable claims, including the swap claim, from Landsbankis winding up. On 2 September 2010 the winding up board of Landsbanki issued a counterclaim in the District Court of Reykjavik in which it sought a declaration that the Heritable claims had been extinguished by article 118 of the BA 1991. On 14 September 2010 the administrators applied to discontinue the article 120 proceedings before that court in relation to the rejection of Heritables claims by the winding up board. Their application was granted on 20 September 2010. The winding up board appealed against that decision to the Icelandic Supreme Court, but it was affirmed by the Supreme Court on 21 October 2010. It concluded that there was no need to rule on the counterclaim by Landsbankis winding up board because it was incompetent. The proceedings in Scotland The argument for Landsbankis winding up board in the note which they lodged in the proceedings in the Court of Session was that the decision to reject the Heritable claims in the Icelandic proceedings had effect and was binding in the United Kingdom in terms of regulation 5(1) of the Regulations. The administrators of Heritable were therefore bound to hold that Heritable had no claim against Landsbanki which could operate by way of set off. It was averred that, as there were no other defences to the Landsbanki rcf claim, the administrators were bound to allow that claim in full. In their answers to the note the administrators took a plea to the relevancy of the note in so far as it relied on the decision in the winding up of Landsbanki. A debate took place on the relevancy of the Landsbanki winding up boards averments before the Lord Ordinary, Lord Glennie, in June 2010. There were two issues. The first was whether, under regulation 5(1) of the Regulations, the decision by the winding up board to reject the Heritable claims had effect and should be recognised in the United Kingdom. The second was whether any future determination by the District Court of Reykjavik of the winding up boards rejection of Heritables claims would found a plea of res judicata in the Court of Session. On 20 July 2010 the Lord Ordinary rejected the arguments which had been submitted by the administrators in support of their plea to the relevancy on both grounds: [2010] CSOH 100, [2011] 2 BCLC 437. He held, having regard to the terms of the Directive, that a ruling by Landsbankis winding up board in the Icelandic winding up proceedings should, to the extent that it was final and binding in Iceland, be recognised and given effect in the United Kingdom, and that effect should also be given to the extinguishment of a claim under Icelandic law if not presented within a particular time: para 65. He was not persuaded that there was any limit on the recognition to be given to a ruling in the Landsbanki proceedings in Iceland as to the validity of Heritables claims against Landsbanki. So if the Icelandic court were to decide that there was no valid claim, its decision would have effect in the United Kingdom as if it were part of the general law of insolvency of the United Kingdom and would have to be given effect in the administration of Heritable: para 81. The administrators of Heritable reclaimed against the Lord Ordinarys interlocutor. By the time of the hearing in the Inner House res judicata was no longer a live issue, as Heritable had withdrawn its claims in the Landsbanki winding up. On 6 July 2011 Landsbankis winding up board was given permission to amend its pleadings to enable it to argue that, as the effect of the withdrawal of Heritables claims and the discontinuance of the article 120 proceedings in Iceland was that the winding up boards determination of those claims was final and binding under Icelandic law, Heritables claims had been extinguished as a matter of the insolvency law of Iceland and that they had also been extinguished by reason of not having been submitted within the prescribed time. On 28 September 2011 the First Division (Lord President Hamilton, Lord Mackay of Drumadoon and Lord Marnoch) recalled the Lord Ordinarys interlocutor: [2011] CSIH 61, 2012 SC 209. It held that, in accordance with the principles of unity and universality required by the Directive, the affairs of Heritable, a United Kingdom credit institution which was itself in insolvency, should be wound up with the defences available under its own general law to protect the interests of its creditors, and in particular that effect should be given to regulation 22(3)(d) of the Regulations under which the law of the United Kingdom was to determine the conditions under which set off might be invoked in Heritables winding up: para 38. Landsbankis winding up board now have appealed against that decision to this court. The legal framework (a) Icelandic law In paragraph 17 of its note Landsbankis winding up board made averments about Icelandic law in relation to the winding up of Landsbanki to the following effect, which the Lord Ordinary accepted as well founded for the purposes of the debate before him: para 21. The winding up of a financial undertaking such as Landsbanki is subject to the same rules as apply to bankruptcy proceedings generally. Article 116 of BA 1991 provides that legal action cannot be brought against a bankrupt estate unless expressly permitted by law. An action for payment cannot be commenced against a bankrupt, although an action which is still pending can be continued. Article 117 provides that a party who is unable to pursue his claim by action but wishes to maintain a claim against a bankrupts estate must submit a statement of his claim to the trustee in bankruptcy. The claim must be submitted within the period stated in the trustees notice issued to creditors under article 85. It will have the same effects as if a legal action had been filed in respect of it at the point in time when the trustee receives the statement. Article 118 provides that, if a claim which is not the subject of a pending action is not submitted to the trustee in bankruptcy within the prescribed time, it is cancelled with respect to the bankrupts estate. This is a more rigid system than that which applies to the adjudication of claims in Scotland under sections 48 53A of the 1985 Act. But every system has to set a timetable for the submission of claims, and the Icelandic system has the merit of certainty and of minimising the risk of delay. Article 119 provides that, once the period for stating claims is over, the trustee in bankruptcy is required to prepare a list of the submitted claims and a statement of how he thinks each claim should be recognised. An opportunity is given by article 120 to a claimant who is unwilling to accept the ruling of the trustee in bankruptcy as to the recognition of his claim to state his objection at a meeting of the creditors held to consider the stated claims, or to notify his objection by letter no later than the date of the meeting. If the trustee is unable to settle the issue, he is required to refer the matter to the district court. If his position on the claim is not challenged, it is to be regarded as finally approved during the bankruptcy proceedings. Applying the law as so described to the claims by Heritable, it was averred for Landsbankis winding up board that the submission of claims by Heritable was the equivalent of the bringing of a legal action against Landsbanki. Any claim that was not submitted in the winding up had been extinguished, and those claims that were submitted had been adjudicated upon. The administrators of Heritable had objected to the determination of the winding up board and the matter had been referred to the district court in Reykjavik. The question whether or not Heritables claims could be maintained against Landsbanki would depend on the result of the proceedings in Iceland. On 12 August 2010, following the decision of the Lord Ordinary that the arguments for the winding up board were well founded, the administrators of Heritable withdrew Heritables claims from the winding up. In their notice of withdrawal the administrators said that this was being done without prejudice to Heritables right to rely on its claims against Landsbanki for the purpose of insolvency set off under Scots insolvency law. On 21 October 2010 (as already narrated in para 11, above) the Icelandic Supreme Court refused the winding up boards appeal against the decision of the district court to discontinue the article 120 proceedings in relation to the winding up boards rejection of the Heritable rcf claim, the Heritable mpa claim, the Icesave claim and the balance of the swap claim. Landsbankis winding up board submits that, according to Icelandic insolvency law, the effect of these developments is that there was a rejection of the Heritable claims which was never overturned and that their withdrawal has served to extinguish them under article 118 of BA 1991. So they are no longer maintainable against Landsbanki, and the administrators attempt to reserve Heritables rights was meaningless and ineffective as the consequences of Icelandic law have effect in Scotland under regulation 5(1). The meaning and effect of that regulation is at the heart of the winding up boards argument. (b) the Directive The primary EU instrument dealing with cross border insolvency is Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (the 2000 Insolvency Regulation). But article 1(2) of the 2000 Insolvency Regulation provides that it shall not apply to insolvency proceedings concerning credit institutions and a number of other undertakings in the financial sector. The reorganisation and winding up of credit institutions is provided for instead by the Directive, which required national implementation by the Member States and by non EU countries in the EEA, including Iceland, by 5 May 2004. Among the recitals to the Directive are the following: (6) The administrative or judicial authorities of the home Member State must have sole power to decide upon and to implement the reorganisation measures provided for in the law and practices in force in that Member State. Owing to the difficulty of harmonising Member States laws and practices, it is necessary to establish mutual recognition by the Member States of the measures taken by each of them to restore to viability the credit institutions which it has authorised. (14) In the absence of reorganisation measures, or in the event of such measures failing, the credit institutions in difficulty must be wound up. Provision should be made in such cases for mutual recognition of winding up proceedings and of their effects in the Community. (16) Equal treatment of creditors requires that the credit institution is wound up according to the principles of unity and universality, which require the administrative or judicial authorities of the home Member State to have sole jurisdiction and their decisions to be recognised and to be capable of producing in all the other Member States, without any formality, the effects ascribed to them by the law of the home Member State, except where this Directive provides otherwise. (17) The exemption concerning the effects of reorganisation measures and winding up proceedings on certain contracts and rights is limited to those effects and does not cover other questions concerning reorganisation measures and winding up proceedings such as the lodging, verification, admission and ranking of claims concerning those contracts and rights and the rules governing the distribution of the proceeds of the realisation of the assets, which are governed by the law of the home Member State. (23) Although it is important to follow the principle that the law of the home Member State determines all the effects of reorganisation measures or winding up proceedings, both procedural and substantive, it is also necessary to bear in mind that those effects may conflict with the rules normally applicable in the context of the economic and financial activity of the credit institution in question and its branches in other Member States. In some cases reference to the law of another Member State represents an unavoidable qualification of the principle that the law of the home Member State is to apply. Article 2 of the Directive defines the expression reorganisation measures as meaning measures which are intended to preserve or restore the financial situation of a credit institution and which could affect third parties pre existing rights, including among other things reduction of claims. It defines winding up proceedings as meaning proceedings whose aim is to realise assets under the supervision of the administrative or judicial authorities of a Member State, including where the proceedings are terminated by a composition or other similar measure. Article 3 provides that the administrative or judicial authorities of the home Member State shall alone be empowered to decide on the implementation of one or more reorganisation measures in a credit institution, including branches established in other Member States. These reorganisation measures are to be applied in accordance with the laws, regulations and procedures applicable in the home Member State, unless otherwise provided in the Directive, and they are to be fully effective in accordance with the legislation of that Member State throughout the Community without any further formalities, including as against third parties in other Member States. Article 9, which deals with winding up proceedings, is to a similar effect. It provides that the administrative or judicial authorities of the home Member State which are responsible for the winding up shall alone be empowered to decide on the opening of the winding up proceedings concerning a credit institution, including branches established in other Member States. A decision to open winding up proceedings taken by the administrative or judicial authority of the home Member State is to be recognised without further formality within the territory of all other Member States and shall be effective there when the decision is effective in the Member State in which the proceedings are opened. Article 10, which is headed Law applicable, provides in paragraph 1 that a credit institution is to be wound up in accordance with the laws, regulations and procedures applicable in its home Member State insofar as the Directive does not provide otherwise. Paragraph 2 of this article states that the law of the home Member State shall determine in particular, among other things (c) the conditions under which set offs may be invoked; (g) the rules governing the lodging, verification and admission of claims; (h) the rules governing the distribution of the proceeds of the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings by virtue of a right in re or through set off; (l) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors. Article 21 is headed third parties rights in re. It provides that the adoption of reorganisation measures or the opening of winding up proceedings shall not affect the rights in re of creditors or third parties in respect of tangible or intangible, moveable or immoveable assets belonging to the credit institution which are situated within the territory of another Member State at the time of the adoption of such measures or the opening of such proceedings. Article 23 is headed Set off. It provides: (1) The adoption of reorganisation measures or the opening of winding up proceedings shall not affect the right of creditors to demand the set off of their claims against the claims of the credit institution, where such a set off is permitted by the law applicable to the credit institutions claim. (2) Paragraph 1 shall not preclude the actions for voidness, voidablity or unenforceability laid down in article 10(2)(l). (c) the Regulations As the Lord President observed, the structure of the Regulations which were made to implement the Directive as from 5 May 2004 does not mirror exactly that of the Directive which they transpose: 2012 SLT 247, para 9. But it has not been suggested that the Directive has not been properly implemented by the Regulations. Their effect, as described in the Explanatory Note, is that no winding up proceedings or reorganisation measures in respect of EEA credit institutions can be undertaken in the United Kingdom except in the circumstances permitted by the Regulations, and that EEA reorganisation measures and winding up proceedings are to be recognised in the United Kingdom. An EEA credit institution is defined in regulation 2 as meaning an EEA undertaking, other than a UK institution, of a description which applies to Landsbanki. A UK credit institution means an undertaking whose head office is in the United Kingdom of a description that applies to Heritable. The provisions dealing with the matters as so described are set out in regulations 3 and 5 in Part 2 of the Regulations, which is headed Insolvency Measures and Proceedings: Jurisdiction in Relation to Credit Institutions. Regulation 3(1) provides that on or after 5 May 2004 a court in the United Kingdom may not, in relation to an EEA credit institution or any branch of an EEA credit institution, make a winding up order, appoint a provisional liquidator or make an administration order. It gives effect to the principle of mutual recognition referred to in recital 14 of the Directive. Regulation 5(1), the meaning and effect of which (as mentioned earlier: see para 22, above) lies at the heart of the argument for Landsbanki, provides: An EEA insolvency measure has effect in the United Kingdom in relation to (a) any branch of an EEA credit institution, (b) any property or other assets of that credit institution, (c) any debt or liability of that credit institution, as if it were part of the general law of insolvency of the United Kingdom. Regulation 5(2) provides that a competent officer may exercise in the United Kingdom in relation to a credit institution which is subject to an EEA insolvency measure any function which he is entitled to exercise in relation to that credit institution in the relevant EEA State. Regulation 5(6), read together with the definition of the expressions it uses in regulation 2, provides that an EEA insolvency measure means, as the case may be, a reorganisation measure or winding up proceeding as defined in article 2 of the Directive (see para 25, above) which has effect in relation to an EEA credit institution by virtue of the law of the relevant EEA State. The winding up of Landsbanki would appear to be an insolvency measure for the purposes of regulation 5(1). Part 3 of the Regulations is headed Modifications of the Law of Insolvency: Notification and Publication. Regulation 7, which is in that Part, provides: The general law of insolvency has effect in relation to UK credit institutions subject to the provisions of this Part. There then follow provisions dealing with various procedural matters, such as consultation with the Financial Services Authority prior to a voluntary winding up, notification to the Financial Services Authority by the court of any decision, order or appointment that it makes, notification by the Financial Services Authority to the EEA regulator of any EEA state in which the UK credit institution has a branch, notification to creditors, submission of claims by EEA creditors, reports to creditors, service of notices and documents and disclosure of confidential information received from an EEA regulator. Part 4 of the Regulations is headed Reorganisation or winding up of UK Credit Institutions: Recognition of EEA Rights. Regulation 19(1)(b) provides that this Part applies where an administration order made under paragraph 13 of Schedule B1 to the 1986 Act on or after 5 May 2004 is in force in relation to a UK credit institution. It applies therefore to the administration of Heritable. Regulation 21(1) provides that for the purposes of Part 4 affected credit institution means a UK credit institution which is the subject of a relevant reorganisation or winding up. It also provides that relevant reorganisation or relevant winding up means any voluntary arrangement, administration, winding up, or order referred to in regulation 19(1) to which Part 4 applies. Heritable is an affected credit institution within the meaning of that expression as defined in this article. Regulation 22 is headed EEA rights: applicable law in the winding up of a UK credit institution. It provides, so far as material to this case, as follows: (1) This regulation is subject to the provisions of regulations 23 to 35. (2) In a relevant winding up, the matters mentioned in paragraph (3) are to be determined in accordance with the general law of insolvency of the United Kingdom. (3) Those matters are (d) the conditions under which set off may be invoked; (g) the claims which are to be lodged against the estate of the affected credit institution; (i) the rules governing (i) the lodging, verification and admission of claims, (ii) the distribution of proceeds from the realisation of assets, (iii) the ranking of claims, (iv) the rights of creditors who have obtained partial satisfaction after the opening of the relevant winding up by virtue of a right in rem or set off. Regulation 26 deals with third parties rights in rem in a way that gives domestic effect to article 21 of the Directive. A relevant reorganisation or winding up is not to affect the rights in rem of creditors or third parties in respect of assets belonging to the affected credit institution which are situated within the territory of an EEA state at the relevant time. Regulation 28 deals with creditors rights to set off in a way that gives domestic effect to article 23 of the Directive. It provides: (1) A relevant reorganisation or a relevant winding up shall not affect the right of creditors to demand the set off of their claims against the claims of the affected credit institution, where such a set off is permitted by the law applicable to the affected credit institutions claim. (2) Paragraph (1) does not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom. The issue As will be apparent from what has been said so far, the issue in this case is how cross claims between two credit institutions are to be dealt with in insolvency proceedings in two different EEA States. As at the date when each EEA proceeding was opened, there were claims by Landsbanki against Heritable in Scotland and claims by Heritable against Landsbanki in Iceland. The winding up board of Landsbanki rejected Heritables claims, and Heritable later withdrew them. The result is that they are no longer provable in Landsbankis winding up under Icelandic law. The administrators of Heritable have rejected the Landsbanki rcf claim by the application of set off. This was done by applying the principle known to Scots law as the balancing of accounts in bankruptcy. If this principle is available to the administrators under regulation 22(3)(d), it will determine how much if anything will be recoverable by Landsbanki in satisfaction of its claim from the administration of Heritable. Scots law has long recognised that it would be inequitable for a debtor of a bankrupt to be required to pay his debt in full, while he could only get a dividend for the debt due to him by the bankrupt: Bell, Commentaries 7th ed, (1990) pp 118 et seq; Goudy, Bankruptcy 4th ed, (1914) p 550. Bell expresses the principle in this way at p 118: It is not only expedient, but required by the plainest principles of equity, that where one of the parties becomes unable to pay his debt to the other, he should not be entitled to require payment from that other of an equal debt that is due to him. Thus, the settlement of mutual debts may be referred to two distinct principles: the one is virtual payment and extinction; the other, retention till counter performance. At p 119, having noted that the latter operates only in bankruptcy, he observes: The former is known by the name of Compensation (in England Set off), and is amply discussed by our authors; the latter, sometimes vaguely, called Retention, but which may be distinguished as the Balancing of Accounts in Bankruptcy. The latter he describes as the more important branch of the doctrine. It is not merely an arrangement of convenience, but is an equitable adjustment of mutual debts and credits, to avoid manifest injustice. As Lord Hodge pointed out in Integrated Building Services Engineering Consultants Ltd v PIHL UK Ltd [2010] CSOH 80, [2010] BLR 622, para 23, there is no consensus as to whether this principle is a species of retention, as Lord McLaren in Ross v Ross (1895) 22 R 461, 465 suggests, or an extension of compensation by which one claim may be set off against another, resulting in the extinction of the former claim. In many contexts, such as the present, this question is of no practical importance. What the administrators are seeking to do in this case is to strike a balance between the competing claims for the purpose of working out how much, if anything, is due to Landsbanki by way of a dividend in the administration of Heritable. This procedure is, in essence, no different from that which is referred to in articles 10(2)(c) and 23 of the Directive and regulations 22(3)(d) and 28 as set off. Landsbanki submits that the issue is to be determined by construing regulation 5(1) in accordance with the Directive. So construed, the effects of Icelandic insolvency law on the claims that Heritable lodged in Landsbankis winding up must be held to apply automatically in the United Kingdom. If and to the extent that they have been rejected or extinguished under Icelandic insolvency law, that rejection or extinction applies automatically to EEA insolvency proceedings in the United Kingdom. The rejection or extinction of claims in the main proceedings takes effect throughout the EEA in accordance with the laws of the State in which these proceedings are opened. It follows that these claims have no part to play in the administration of Heritable. They may not be raised by way of a defence to Landsbankis claims against Heritable. Heritable submits that the effect of the Directive is that each Member State has exclusive jurisdiction to open proceedings with respect to credit institutions with head offices within its territory and to make legal rulings applying its own law. In a case such as this, where a parent credit institution has its head office in one Member State and its wholly owned subsidiary has its head office in another, each Member State must recognise the other Member States proceedings. The Regulations, transposing the Directive into United Kingdom law, allocate the proceedings relating to Heritable to the Scottish courts. Scots law is the law governing all issues arising in and with respect to its administration. They include the determination and quantification of Landsbankis proof in the administration, questions as to whether Heritable is able to rely on its cross claims against Landsbanki to reduce its liabilities to Landsbanki and questions as to the amount for which Landsbanki is to be admitted in the administration as a creditor. The question, in short, is whether Icelandic law binds the administrators of Heritable. Does it govern the question whether the claim that Heritable wishes to maintain in its administration against Landsbanki by way of set off against Landsbankis claim against it still subsists for this purpose? Must it be taken to have been extinguished for this purpose because it can no longer be maintained against Landsbanki in the winding up proceedings in Iceland? The parties are agreed that there is no previous case law which addresses this issue. Some preliminary observations The position at common law was explained in the Inner House by Lord President Hamilton: 2012 SC 209, para 29. A debt under a contract whose proper law is the law of another jurisdiction may, for the purposes of Scots law, be discharged by insolvency proceedings in that other jurisdiction: Rochead v Scot (1724) M 4566. But such proceedings will not, for the purposes of Scots law, discharge a debt where the proper law of the contract is not the law of the jurisdiction in which the proceedings are taking place: Adams v National Bank of Greece SA [1961] AC 255, where the proper law of the contract was that of England: St Clair and Drummond Young, The Law of Corporate Insolvency in Scotland 4th ed, (2011) para 22.31. The position under the common law of England is the same: Antony Gibbs & Sons v La Socit Industrielle et Commerciale des Mtaux (1890) LR 15 QBD 339. The question whether an obligation has been extinguished is governed by its proper law: Wight v Eckhardt Marine GmbH [2003] UKPC 37, [2004] 1 AC 147, para 11, per Lord Hoffmann; Dicey, Morris & Collins, The Conflict of Laws 14th ed, (2006) vol 2, para 31R 092, Rule 200. The proper law of the revolving credit facility is English law. So, if the matter were to be regulated by the common law, the position would be that what happened to Heritables rcf claim in Iceland would have no bearing on the question whether it could be used by way of set off against Landsbankis rcf claim in the administration of Heritable in Scotland. The effect of the Directive, however, is that the common law must give way to the law under which proceedings resulting from the insolvency of credit institutions must be conducted by the Member States to the extent, if any, that it directs. The question is whether it, and the Regulations which give it effect, contains such a direction. The answer is to be found by construing the Directive and the Regulations which implement it, and applying that construction to the facts. The principle of mutual recognition on which the scheme of the Directive proceeds is indicated by recitals (6) and (16). The administrative or judicial authorities of the home Member State must have sole power to decide upon and to implement the reorganisation measures provided for by the law and practices in force in that Member State. Equal treatment of creditors requires that the credit institution is wound up according to the principles of unity and universality. Those principles require the administrative or judicial authorities of the home Member State to have sole jurisdiction for the conduct of such proceedings. They also require that the decisions of those authorities will be recognised and be capable of producing in all the other Member States, without any further formality, the effects ascribed to them by the law of the home Member State. There is no indication here that any one home Member State is to have priority over the others. On the contrary, the insolvency proceedings in each Member State are to be conducted solely in accordance with the laws and procedures of that Member State. These recitals indicate that the separate regime of the Directive for credit institutions is modelled on the principle which is set out in article 16(1) of the 2000 Insolvency Regulation. The basic rule of jurisdiction which article 3(1) of the 2000 Insolvency Regulation lays down is that the courts of the Member State within the territory of which the centre of a debtors main interests is situated has jurisdiction to open insolvency proceedings. There is to be a single forum for this purpose, except where the debtor possesses an establishment within the territory of another Member State, in which case article 3(2) provides that the other Member State has jurisdiction restricted to the assets of the debtor situated in that other Member State. Article 16(1) of the 2000 Insolvency Regulation states: Any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to Article 3 shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of the proceedings. The effects of that recognition are set out in article 17(1). It states that the judgment opening the proceedings referred to in article 3(1) shall, with no further formalities, produce the same effects in any other Member State as under the law of the State of the opening of proceedings. Articles 3, 9 and 10 of the Directive (see paras 26 28, above) carry the principles referred to in the recitals forward into the provisions of the Directive, except that the home Member State alone is empowered to take measures with regard to branches of a credit institution established in other Member States: article 3(1). It follows that the fact that Heritables claims against Landsbanki have been extinguished for all the purposes of the winding up of Landsbanki in Iceland cannot be questioned in the administration of Heritable in Scotland. Iceland, as Landsbankis home EEA State, has sole jurisdiction for this purpose, and the effects of the insolvency proceedings in Iceland must be recognised in Scotland. But does it follow that the administrators of Heritable must treat Heritables rcf claim as having been extinguished here too because of the effects on that claim of what has happened in Iceland? The answer indicated by article 10(2) suggests the contrary. It states that the law of the home Member State shall determine, among other things, the conditions under which set offs may be invoked, the rules governing the admission of claims and the distribution of the proceeds of the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings. Landsbankis argument, however, is that the meaning and effect of regulation 5(1) is that the extinction of Heritables claim that results from the fact that the claim is no longer being pursued in Iceland has effect in the United Kingdom as if the EEA insolvency measure in Iceland in respect of Landsbanki was part of the law of insolvency of the United Kingdom too. It starts from the position that there is nothing in the Directive to prevent the relevant body of the home Member State of an insolvent credit institution from adjudicating upon the validity of claims lodged by creditors who are also the debtors of the credit institution or to prevent the law of that Member State from extinguishing claims by creditors who have themselves become insolvent. It takes this to mean that it is the insolvency law of that credit institutions home Member State that has effect also in the place where the insolvency proceedings in respect of its creditor were opened. This, it says, is made clear so far as the law of the United Kingdom is concerned by regulation 5(1). That regulation states that an EEA insolvency measure has effect in the United Kingdom in relation to any debt or liability of an EEA credit institution as if it were part of the general law of insolvency of the United Kingdom. Mr Alexander QC for Landsbanki submitted that the insolvency measure for the purposes of that regulation, as defined by regulation 5(6), is the winding up of Landsbanki in Iceland. The words as if it were part of the general law of insolvency of the United Kingdom meant that the effects of that insolvency measure were automatically incorporated into that law and must be given effect here. Everything turned on the meaning of that phrase. It gave effect to the collective nature of insolvency proceedings and the principle of equality among creditors. There was a level playing field, with one set of rules for all. Each creditor must lodge his claim in the credit institutions home Member State. That was what Heritable did when the proceedings were opened in Iceland. But there were no longer any rival cross claims, as Heritable had withdrawn its claim in the winding up of Landsbanki. It is a striking feature of this argument, well presented though it was, that it is based entirely on regulation 5(1). Mr Moss QC for Heritable had no quarrel with the proposition that, according to the principles of unity and universality, the Directive required that insolvency proceedings in respect of a credit institution should proceed on a strict entity basis in the home Member State of that institution, irrespective of where it had its branches. He was willing to assume too that Iceland had implemented the Directive correctly into its own law. He submitted that, if Heritable and Landsbanki had both been Scottish companies and were both being wound up in Scotland, it would not have been open to doubt that Heritable could assert a set off against Landsbanki in its own winding up even though it had not claimed in Landsbankis winding up. This was simply a matter of common sense. The liability of the debtor company was still an asset for the purposes of the creditors winding up. The question was whether that position was fundamentally altered by regulation 5(1) in the case of a winding up in another EEA State. He submitted that, when that regulation was examined in its context and regard was had to the consequences of Landsbankis argument, it was not. Discussion There is much more to the Regulations than regulation 5(1). The first point to notice is that Part 2, as its heading indicates, is concerned with jurisdiction in relation to EEA credit institutions. One can, of course, take from the provisions of this Part that the Regulations are designed to adopt the strict entity approach, based upon the principle which is to be found in article 9 of the Directive, that it is the administrative or judicial authorities of the credit institutions home Member State that shall alone be responsible for the opening of proceedings for its winding up. Seen in that context, there is nothing remarkable about what regulation 5 sets out. Even if that credit institution has branches in the United Kingdom, the entire process of winding up must be conducted in the home Member State. So an EEA insolvency measure in another EEA State must, as regulation 5(1)(a) says, have effect in the United Kingdom in relation to any of its branches here as if it were part of the general law of insolvency of the United Kingdom. Regulations 5(1)(b) as to the credit institutions property or other assets, and 5(1)(c) as to its debt and liabilities, are mirror images of each other. They are to be dealt with in the proceedings in the other EEA State. Property or assets located in Scotland are not to be disposed of in accordance with the rules of diligence that are available under Scots law, and steps by a creditor to enforce a claim against the credit institution are to be pursued solely in the proceedings in the other EEA State. Regulation 5(2) provides that, for the purposes of those proceedings, decisions taken by a person entitled to exercise any function which he is entitled to exercise in those proceedings are to be given effect in this country. In this way the integrity of the exclusive jurisdiction that is given to the home EEA State is preserved. But these provisions are concerned only with an EEA insolvency measure in relation to a credit institution which is located in another EEA State. It is only for that purpose that an EEA measure is to have effect as if it were part of the general law of insolvency in the United Kingdom. They apply to the winding up of Landsbanki in Iceland. But they do not apply to the administration of Heritable in Scotland. The rules which apply to Heritable, which is a UK credit institution, are set out in Parts 3 and 4 of the Regulations. Mr Alexander submitted that the effect of the phrase as if it were part of the general law of insolvency of the United Kingdom was that the winding up proceedings in Iceland had to be regarded as having been incorporated into the general law of insolvency of the United Kingdom, and that the reference to the general law of insolvency in regulation 7 had to be read in the same way. But in my opinion this reads too much into this phrase. It has the effect for which he contended in relation to the winding up of Landsbanki. But it does not extend to the proceedings relating to Heritable. The phrase as used in regulation 7 is a reference to the laws, regulations and procedures applicable in the UK credit institutions home Member State, as article 10(1) of the Directive indicates. The rules which are most directly in point for the purposes of this appeal are set out in regulations 7 and 22. Regulation 7, which is in Part 3, gives effect to article 10(1) of the Directive. It provides that the general law of insolvency has effect in relation to UK credit institutions subject to the provisions of that Part. The general law of insolvency must be taken for this purpose to be the general law of insolvency of the part of the United Kingdom in which the credit institution is located: see the definition in regulation 2(3). The modifications that Part 3 makes to the general law of insolvency are summarised in para 34, above. Regulation 22, which is in Part 4, deals with the applicable law in relation to EEA rights in the winding up of a UK credit institution. Regulation 22(1) states that its provisions are subject to the provisions of regulations 23 to 35. Regulation 22(2), which gives effect to article 10(2) of the Directive, states that the matters mentioned in regulation 22(3) are to be determined in accordance with the general law of insolvency of the United Kingdom. They include the conditions under which set off may be invoked and the rules governing, among other things, the admission and ranking of claims: regulations 22(3)(d) and (i). Regulation 28 preserves the right of creditors to demand the set off of their claims against the claims of the affected credit institution, where set off is permitted by the law applicable to the credit institutions claim. This is the other side of the application of the principle of set off that is referred to in regulation 22(3)(d). It reinforces the point that issues of set off are to be determined in the home EEA State, as the common law of Scotland requires, according to the proper law of the contract. It is conceived in the interests of creditors in other EEA States, bearing in mind that exclusive jurisdiction is given to the United Kingdom as the home Member State. Their right to claim set off is put onto the same basis as creditors in the United Kingdom. This gives effect to article 23(1) of the Directive, and it respects the principle of unity and universality on which the Directives provisions are based. The key to a proper understanding of regulation 5(1), therefore, lies in an appreciation of the fact that, while it is designed to give effect to the mandatory choice of the law of insolvency of the EEA State in which the foreign credit institution is located, it is not concerned in the least with the effects of the mandatory choice of Scots law for the administration of Heritable in Scotland. Those effects are provided for in Part 3 and 4 of the Regulations, which have nothing to do with the effects of the mandatory choice of the law of Iceland for the winding up of Landsbanki. I would therefore reject the argument for Landsbanki, on the ground that it fails to take account of the scheme of the Directive and the Regulations. But I think that there is also much force in Mr Mosss argument, which built on points made by the Lord President in his opinion at 2012 SC 209, paras 32 and 40, that Landsbankis argument produces an arbitrary and unprincipled outcome. As the Lord President observed in para 32, the logic of Landsbankis argument is that Heritables claims against Landsbanki would have been extinguished even if Heritable had been a wholly solvent company. It might have decided that there was no point in pursuing a claim in Landsbankis winding up because the prospects of a dividend were remote and the costs of doing that outweighed any possible advantage. However sound that assessment might have been, its effect would have been that Heritable would have been unable to set off its claim by way of a defence to a claim pursued against it in Scotland by Landsbanki. The only way for a creditor to avoid that result would be to lodge and maintain its claim in the insolvency proceedings in the other Member State, even if the prospects of recovering anything were nil. This would also be, as the Lord President said in para 40, to give universal priority to the process in which a decision happened to be made first. That would encourage forum shopping, especially where there was a prospect of inconsistent findings as to the validity of a claim in different Member States. It is hard to believe that this was intended by the framers of the Directive. These arguments do not, of course, provide an answer in themselves to Landsbankis case. But they do suggest that it is crucial to pay close attention to the scheme of the Directive to which the Regulations give effect. When this is done the answer is, in my opinion, entirely clear. Conclusion For these reasons I would dismiss the appeal and affirm the First Divisions interlocutor. |
In 1981 Samuel Brush worked as a postman. He was also a member of the Ulster Defence Regiment. Members of that regiment were frequently targeted by paramilitary groups then operating in Northern Ireland. Because of that Mr Brush was wearing light body armour and carrying a personal protection weapon when he was ambushed by two gunmen on 13 June 1981. The ambush took place in a remote area of County Tyrone, some four and a half miles from the village of Aughnacloy. Although suffering bullet wounds from the attack on him, Mr Brush managed to fire his gun at one of his assailants. One of the bullets which he fired struck one of the gunmen. Some time later that person was admitted to hospital in Monaghan which, despite the fact that it is in the Republic of Ireland, is not far from Aughnacloy. On his trial for the attempted murder of Mr Brush, it was held that the appellant was the man who had been admitted to that hospital and that he had been engaged in the attack and was guilty of attempted murder. Those findings and the appellants conviction of the attempted murder of Mr Brush are not under challenge in this appeal. The injuries that the appellant had sustained were serious. He was airlifted to a hospital in Dublin. There he underwent significant surgery. A bullet was removed from his body. This was handed to police and was later subjected to ballistic tests. Inevitably, as a result of the operation, there was substantial scarring of the patients torso. The results of the ballistic tests and the appearance of scarring on the appellants body were significant items of evidence on his trial. After a relatively short period of convalescence in Dublin, the appellant was returned to Monaghan General Hospital on 22 June 1981. Although he was thereafter under police guard, he managed to escape on 27 June and some time after that, he left the country. On 22 August 1983, a man calling himself Terence Gerard McGeough made an application for asylum in Sweden. The name, the date of birth, the place of birth and the next of kin that were given on the asylum application all matched those of the appellant. His Irish passport was submitted with the application. An expert gave evidence on his trial that the handwriting on the application form was that of the appellant. The trial judge expressed himself as satisfied that it was the appellant who had made the asylum application. Although it was not formally accepted by the appellant that he had made that application, this has not been disputed throughout the various hearings which have taken place. Nor has it been disputed that the form in which the application for asylum was made contained information to the effect that the appellant had become an operational member of the Irish Republican Army in early 1976 and that thereafter he was given increasing levels of responsibility. These led to his being assigned to take part in the attack on Mr Brush. He carried out that attack as a member of the Irish Republican Army. That group was a proscribed organisation throughout the time of the appellants admitted membership of it. The appellant was charged with offences of attempted murder and possession of a firearm. He was convicted of both. Neither of these charges is the subject of this appeal. On the basis of the material contained in the asylum application form, he was further charged with being a member between 1 January 1975 and 1 June 1978 of the Irish Republican Army contrary to section 19(1) of the Northern Ireland (Emergency Provisions) Act 1973. He was also charged with the same offence in relation to the period between 31 May 1978 and 14 June 1981, contrary to section 21(1) of the Northern Ireland (Emergency Provisions) Act 1978. He was convicted of those charges also. The proceedings The appellants trial on all four charges took place at Belfast Crown Court in November 2010 before Stephens J, sitting without a jury. The appellant did not give evidence. On 18 February 2011, the judge delivered judgment, convicting the appellant of all the offences with which he had been charged. The convictions on the first two counts, those of the attempted murder of Mr Brush and possession of a firearm, were based on the identification of the appellant as the man whom Mr Brush had shot. This is turn depended on a number of factors, including the name and age given by the person admitted to Monaghan hospital, the presence of a tattoo on the patients arm which matched that found on the appellant after his arrest, operation scars on the appellants body which were precisely where one would expect to find them in light of the surgery which had been carried out and the fact that ballistic tests carried out on Mr Brushs personal protection weapon had rifling marks which matched the bullet removed from the patient during the operation in Dublin. The judge also drew an adverse inference against the appellant because of his failure to give evidence or to account for the scarring on his body. An application had been made during Mr McGeoughs trial that the information that had been supplied when he sought asylum in Sweden should not be admitted in evidence. The application was made on two bases. Firstly, it was contended that the evidence should be excluded under article 76 of the Police and Criminal Evidence (Northern Ireland) Order 1989 (PACE) because it would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it. Secondly, it was suggested that the admission of the evidence would offend the rule against self incrimination. Before ruling on the application to exclude the evidence, Stephens J heard the testimony of Mrs Helene Hedebris, a legal expert from the migration board in Sweden. She explained that an application for asylum is made to the police department. It is then transferred to the migration board. The board takes the decision on the application. There is a right of appeal from the boards decision. Mr McGeoughs application for asylum was rejected by the board. He exercised his right to appeal. His appeal was dismissed. Mrs Hedebris gave evidence that Sweden had a centuries old tradition of openness in relation to public documents. The only exception to this related to documents whose disclosure was forbidden by a specific secrecy code made under a Secrecy Act. While this code applied to files for asylum applications generally, it did not prohibit the disclosure of information from those files which was required for a criminal investigation unless the asylum application had been successful. In that event, material obtained in the course of an asylum application was not disclosed. This is not relevant in Mr McGeoughs case, however, because, as already noted, his application was refused and his appeal against the refusal was dismissed. There was therefore no reason under Swedish law to withhold the material from the prosecuting authorities in the United Kingdom. Mrs Hedebris said that the position about disclosure of such material was widely known in Sweden. The appellant had had the benefit of two lawyers advice, the first at the time of his application for asylum and the second when he appealed against the decision to dismiss his application. It was inconceivable that he had not been advised of the position. He could not have been in doubt when he made the application, that in the event of its not succeeding, the material that it generated would enter the public domain. In the course of the application by Mr McGeough to have the information contained in the application form excluded from evidence, it was drawn to the judges attention that if, in 2009, an individual applied in the United Kingdom for asylum, an immigration officer would give him, on what is described as a statement of evidence form numbered ASL 1123, the following explanation as to how his application would be treated: The information you give us will be treated in confidence and the details of your claim for asylum will not be disclosed to the authorities of your own country. However, information may be disclosed to other government departments, agencies, local authorities, international organisations and other bodies where necessary for immigration and nationality purposes, or to enable them to carry out their functions. Information may also be disclosed in confidence to the asylum authorities of other countries which may have a responsibility for considering your claim. If your asylum application is unsuccessful and you are removed from the United Kingdom, it may be necessary for us to provide information about your identity to the authorities in your own country in order to obtain travel documentation. Stephens J was also asked to consider paragraph 339IA of the Immigration Rules 1994. This provides that information supplied in support of an application (and the fact that an application had been made), would not be disclosed to the alleged actors of persecution of the applicant. The judge held that the undertaking contained in form ASL 1123 went further than was required by Council Directive 2005/85/EC of 1 December 2005 on minimum standards on procedures in member states for granting and withdrawing refugee status (the Procedures Directive). He found that the relevant obligation (in article 22 of the Procedures Directive) was restricted to the disclosure of information for the purposes of examining individual cases. It did not restrict the disclosure of information for the purposes of undertaking criminal prosecutions. Since, in order to make the application for asylum, the appellant was not under compulsion to reveal the information that he did (and there was therefore no question of a breach of the rule against self incrimination); since the appellant must have been aware that the information that he disclosed would enter the public domain if the application was unsuccessful; and since there was nothing in Swedish law, the Procedures Directive or general public policy considerations which contraindicated the disclosure of the information to prosecuting authorities in the United Kingdom, the judge decided that the conditions necessary for the exercise of his power under section 76 of PACE were not present and he directed that the material produced by the appellant in making his asylum application should be admitted in evidence. It was on this material that the appellant was convicted on the third and fourth counts of membership of a proscribed organisation. On appeal to the Court of Appeal, the basis of the objection to the admission of the evidence was described in para 10 of the judgment of the Lord Chief Justice, Sir Declan Morgan: the appellant submitted that the learned trial judge should not have admitted the Swedish asylum materials. It was argued that assertions in such an application were inherently unreliable since applicants for asylum were liable to exaggerate the basis for their claims. Secondly, it was contended that these were admissions made without caution and the approach to their admission should correspond with the admission of statements made to police in similar circumstances. Thirdly, it was submitted that since it was necessary to set out the background to the appellant's asylum claim in this documentation these statements ought to be treated as statements made under compulsion. Lastly, the appellant argued that reliance on such statements would undermine the purpose of the Refugee Convention by creating a chill factor which would prevent deserving claimants disclosing valid circumstances for fear of subsequent victimisation in their home territory if the application failed. As well as article 22 of the Procedures Directive, the appellant relied on article 41 which stipulates that state authorities responsible for implementing the Directive are bound by the confidentiality principle as defined in national law, in relation to any information they obtain in the course of their work. The Court of Appeal dismissed the appeal. In rejecting the arguments in relation to the admission of the Swedish material, the Lord Chief Justice observed that the evidence was lawfully obtained in Sweden and in the United Kingdom in accordance with the international conventions applicable at the time. The appellant was not under compulsion. There was no question, therefore, of the rule against self incrimination being engaged. The appellant had had legal advice in Sweden as to the effect of Swedish law. Under that law the asylum documents could properly be revealed to the authorities in another jurisdiction if the asylum application was unsuccessful. The arguments On the hearing of the appeal before this court, the appellant accepted that there was nothing in the Procedures Directive or the Immigration Rules which explicitly forbade the disclosure of information concerning applications for asylum. It was contended, however, that the clear purpose of the Directive was to encourage applicants for asylum to make full disclosure to the relevant authorities. In order that this be achieved, applicants should feel secure that the information that they supplied would not be revealed to state authorities in the country from which they had fled. It was acknowledged that the relevant instruments referred to the withholding of information from the actors of persecution but it was suggested that this reflected a broader public policy that all applicants for asylum should be encouraged to be candid and open in their applications. Candour depended on assurance that the information revealed would not be disclosed. Quite apart from the need to inspire applicants with confidence that the material would not be disclosed, there was, it was argued, a distinct public policy imperative which dictated that such material would not be used in criminal proceedings against the asylum seeker. Two principal grounds were advanced in support of this contention. First, it was pointed out that undertakings given to asylum seekers in the United Kingdom would preclude the disclosure of that material. Secondly, by analogy with provisions in the Children Act 1989, the appellant argued that where an applicant for asylum was effectively compelled to give information which exposed him to the possibility of criminal sanction, that disclosure should not be used in subsequent criminal proceedings. Discussion The need for candour in the completion of an application for asylum is self evident. But this should not be regarded as giving rise to an inevitable requirement that all information thereby disclosed must be preserved in confidence in every circumstance. Obviously, such information should not be disclosed to those who have persecuted the applicant and this consideration underlies article 22 of the Procedures Directive. It provides: Collection of information on individual cases For the purposes of examining individual cases, member states shall not: (a) directly disclose information regarding individual applications for asylum, or the fact that an application has been made, to the alleged actor(s) of persecution of the applicant for asylum; (b) obtain any information from the alleged actor(s) of persecution in a manner that would result in such actor(s) being directly informed of the fact that an application has been made by the applicant in question, and would jeopardise the physical integrity of the applicant and his/her dependants, or the liberty and security of his/her family members still living in the country of origin. As the appellant has properly accepted, there is no explicit requirement in this provision that material disclosed by an applicant for asylum should be preserved in confidence for all time and from all agencies. On the contrary, the stipulation is that it should not be disclosed to alleged actors of persecution and the injunction against its disclosure is specifically related to the process of examination of individual cases. The appellants case had been examined and his application had been refused. The trigger for such confidentiality as article 22 provides for was simply not present. The appellant is therefore obliged to argue that the need for continuing confidentiality in his case arises by implication from the overall purpose of the Directive. But neither article 22 nor article 41 provides support for that claim. Article 22 is framed for a specific purpose and in a deliberately precise way. To imply into its provisions a general duty to keep confidential all material supplied in support of an asylum application would unwarrantably enlarge its scope beyond its obvious intended purpose. Article 41 provides: Member states shall ensure that authorities implementing this Directive are bound by the confidentiality principle as defined in national law, in relation to any information they obtain in the course of their work. It is not disputed that Swedish national law does not define the confidentiality principle as extending to the non disclosure of information supplied in support of an asylum application, where that application has been unsuccessful. On the contrary, the tradition of the law in that country is that information generated by such applications should enter the public domain. Article 41 cannot assist the appellant, therefore. Neither of the specific provisions of the Directive that the appellant has prayed in aid supports the proposition that its overall purpose was to encourage candour by ensuring general confidentiality for information supplied in support of an application for asylum. The Directive in fact makes precise provision for the circumstances in which confidentiality should be maintained. It would therefore be clearly inconsistent with the framework of the Directive to imply a general charter of confidentiality for such material. The fact, if indeed it be the fact, that material which an applicant for asylum in the United Kingdom supplied, in circumstances such as those which confronted the appellant when making his application in Sweden, would not be disclosed here, likewise cannot assist his case. The information which the Swedish authorities provided was properly and legally supplied. When the authorities in this country obtained that material, they had a legal obligation to make appropriate use of it, if, as it did, it revealed criminal activity on the appellants part. Neither the terms of the Directive nor the circumstances in which material would have been dealt with, if obtained in the United Kingdom, impinged on the manner in which the trial judge was required to approach his decision under article 76 of PACE. There was nothing that was intrinsic to that material nor in the circumstances in which it was provided that would support the conclusion that its admission would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it. The judge was plainly right to refuse the application. The purported analogy with the provisions of the Children Act 1989 is inapt. That Act imposed an obligation on all persons giving evidence in proceedings concerning the care, supervision and protection of children to answer any relevant question irrespective of whether the answer might incriminate him or his spouse or civil partner section 98(1). In light of that compulsive provision, it is unsurprising that section 98(2) should provide that statements or admissions shall not be admissible in evidence against the person making it or his spouse or civil partner in proceedings for an offence other than perjury. There is no correlative situation of compulsion in the case of an application for asylum and, consequently, no occasion for a prohibition on the use of evidence obtained through that procedure. In any event, the need for a specific provision forbidding the use of such material in the Children Act and the absence of any corresponding provision in the law relating to asylum applications underscores the inaptness of the claimed comparison. Conclusion The appeal must be dismissed. |
The appellant, a litigant in person, purported to serve the claim form in these proceedings on the defendants solicitors by email, without obtaining any prior indication that they were prepared to accept service by that means. It is common ground that this was not good service. As a result, the claim form expired unserved on the following day. The question at issue on this appeal is whether the Court should exercise its power retrospectively to validate service. To date, the District Judge, the County Court judge and the Court of Appeal have declined to do so. If their order stands, the result will be that Mr Barton can proceed with his claim only by a fresh action. The present appeal has been conducted on the assumption that such an action would be statute barred. The facts Mr Barton has been locked in litigation for the past 12 years with two firms of solicitors who have successively acted for him. In October 2005, he brought an action in the Coventry County Court against a firm called Bowen Johnsons, which had acted for him in 1999 in proceedings for ancillary relief following his divorce. He alleged that they had failed properly to protect his interests in the drawing of the consent order by which those proceedings were terminated. The respondent, Wright Hassall LLP, acted for him in the litigation against Bowen Johnsons until 17 May 2007, when they were taken off the record on their own application by order of the District Judge, after an acrimonious dispute about fees. Mr Barton had resisted that application, and costs were awarded against him. His appeal to the County Court judge against the costs order was dismissed, also with costs, on 14 December 2007. In the meantime, acting in person, he had settled the proceedings against Bowen Johnsons on terms which were embodied in a consent order. There followed two actions between Mr Barton and Wright Hassall. In the first, Wright Hassall claimed their costs of acting for him before they came off the record, and obtained summary judgment. The second was the present action for professional negligence against the firm, which Mr Barton, acting in person, began by a claim form issued on 25 February 2013. In it, he alleged that Wright Hassall were in breach of their duties to him in their conduct of the action against Bowen Johnsons and in coming off the record at the time that they did. He claimed damages consisting in the difference between the value of the settlement and what he alleged to be the full value of his claim, together with the costs of unsuccessfully resisting Wright Hassalls application to come off the record and appealing against the costs order. In the ordinary course, the claim form would have been served on the defendant by the Court: CPR rule 6.4(1). But Mr Barton elected to serve it himself pursuant to the exception at (b). He had four months in which to do so, expiring on 25 June 2013: CPR rule 7.5. His first step, after correspondence in accordance with the Pre Action Protocol, was to ask for an extension of time to serve the claim form and particulars of claim, which was refused. On 26 March 2013, Wright Hassall instructed solicitors, Berrymans Lace Mawer. They sent an email on the same day to Mr Barton asking him to address all future correspondence to them. On 17 April 2013, Berrymans emailed Mr Barton to tell him that they had now been instructed in addition by Wright Hassalls liability insurers. They referred to a request which Mr Barton had apparently made for clarification of Wright Hassalls position on the costs of the earlier proceedings, which they said had already been made clear by Wright Hassall themselves. The email concluded I will await service of the Claim Form and Particulars of Claim. So far as the material before us shows, that was the full extent of the communications between Mr Barton and Berrymans until 24 June 2013, the last day before the expiry of the claim form. At 10.50 am on that day Mr Barton emailed them as follows: Please find attached by means of service upon you. Particulars of Claim 1. Claim Form and Response Pack 2. 3. Duplicated first and last pages of the Particulars of Claim showing the court seal and the signature on the statement of truth. The Particulars of Claim were filed into Chesterfield County Court this morning. I would appreciate if you could acknowledge receipt of this email by return. Mr Barton received an automatic reply, with a number to contact if the case was urgent, which he did not use. There was no substantive reply until 4 July. On that day, Berrymans wrote to Mr Barton saying that they had not confirmed that they would accept service by email. In the absence of that confirmation, email was not a permitted mode of service. In those circumstances, they said that they did not propose to acknowledge service or to take any other step. They added that the claim form had therefore expired unserved and that the claim was statute barred. On the same date they wrote in similar terms to the Court. The stage was set for the present issue. The rules Part 6 of the Civil Procedure Rules deals with the service of documents. Service of a claim form is governed by section II. CPR rule 6.3 provides for the permitted modes of service of a claim form. These include, at (1)(d), fax or other means of electronic communication in accordance with Practice Direction 6A. CPR 6APD contains directions supplementary to CPR 6. CPR 6APD.4 provides as follows: 4.1 Subject to the provisions of rule 6.23(5) and (6), where a document is to be served by fax or other electronic means (1) the party who is to be served or the solicitor acting for that party must previously have indicated in writing to the party serving that the party to be served or the solicitor (a) is willing to accept service by fax or other electronic means; and (b) the fax number, email address or other electronic identification to which it must be sent; and the following are to be taken as sufficient written (2) indications for the purposes of paragraph 4.1(1) (a) a fax number set out on the writing paper of the solicitor acting for the party to be served; (b) an email address set out on the writing paper of the solicitor acting for the party to be served but only where it is stated that the email address may be used for service; or (c) a fax number, email address or electronic identification set out on a statement of case or a response to a claim filed with the court. 4.2 Where a party intends to serve a document by electronic means (other than by fax) that party must first ask the party who is to be served whether there are any limitations to the recipients agreement to accept service by such means (for example, the format in which documents are to be sent and the maximum size of attachments that may be received). A claimant who is unable to serve the claim form in accordance with the rules within the four month period allowed by CPR rule 7.5 has two courses open to him. He may apply for an extension of the four month period, under CPR rule 7.6. If he makes the application after the expiry of that period (or any extension of it), then rule 7.6(3) provides that the court may make such an order only if the court has failed to serve the claim form; or (a) (b) the claimant has taken all reasonable steps to comply with rule 7.5 but has been unable to do so; and (c) in either case, the claimant has acted promptly in making the application. His other course is to apply under CPR rule 6.15 for an order that some step that he has taken or proposes to take is to stand as good service notwithstanding that it would not otherwise comply with the rules. CPR rule 6.15 provides: 6.15. Service of the claim form by an alternative method or at an alternative place (1) Where it appears to the court that there is a good reason to authorise service by a method or at a place not otherwise permitted by this Part, the court may make an order permitting service by an alternative method or at an alternative place. (2) On an application under this rule, the court may order that steps already taken to bring the claim form to the attention of the defendant by an alternative method or at an alternative place is good service. Before the District Judge, Mr Bartons primary case was that his service complied with the rules, because Berrymans correspondence with him before 24 June 2013 amounted to an indication that they would accept service by email. Alternatively, he asked for service to be validated under CPR rule 6.15(2). In the further alternative, he asked for the validity of the claim form to be extended under CPR rule 7.6. He failed in all three contentions, and was given leave to appeal on the second one only. Accordingly, all subsequent hearings have been conducted on the footing that service by email was not valid, and that the sole question was whether it should be validated. Exercising the discretion under CPR 6.15(2) The Civil Procedure Rules contain a number of provisions empowering the court to waive compliance with procedural conditions or the ordinary consequences of non compliance. The most significant is to be found in CPR 3.9, which confers a power to relieve a litigant from any sanctions imposed for failure to comply with a rule, practice direction or court order. These powers are conferred in wholly general terms, although there is a substantial body of case law on the manner in which they should be exercised: see, in particular, Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) (Practice Note) [2014] 1 WLR 3926 (CA), esp at para 40 (Lord Dyson MR and Vos LJ), Global Torch Ltd v Apex Global Management Ltd (No 2) [2014] 1 WLR 4495 (SC(E)). The short point to be made about them is that there is a disciplinary factor in the decision whether to impose or relieve from sanctions for non compliance with rules or orders of the court, which has become increasingly significant in recent years with the growing pressure of business in the courts. CPR rule 6.15 is rather different. It is directed specifically to the rules governing service of a claim form. They give rise to special considerations which do not necessarily apply to other formal documents or to other rules or orders of the court. The main difference is that the disciplinary factor is less important. The rules governing service of a claim form do not impose duties, in the sense in which, say, the rules governing the time for the service of evidence, impose a duty. They are simply conditions on which the court will take cognisance of the matter at all. Although the court may dispense with service altogether or make interlocutory orders before it has happened if necessary, as a general rule service of originating process is the act by which the defendant is subjected to the courts jurisdiction. What constitutes good reason for validating the non compliant service of a claim form is essentially a matter of factual evaluation, which does not lend itself to over analysis or copious citation of authority. This court recently considered the question in Abela v Baadarani [2013] 1 WLR 2043. That case was very different from the present one. The defendant, who was outside the jurisdiction, had deliberately obstructed service by declining to disclose an address at which service could be effected in accordance with the rules. But the judgment of Lord Clarke of Stone cum Ebony JSC, with which the rest of the court agreed, is authority for the following principles of more general application: (1) The test is whether, in all the circumstances, there is good reason to order that steps taken to bring the claim form to the attention of the defendant is good service (para 33). (2) Service has a number of purposes, but the most important is to ensure that the contents of the document are brought to the attention of the person to be served (para 37). This is therefore a critical factor. However, the mere fact that the defendant learned of the existence and content of the claim form cannot, without more, constitute a good reason to make an order under rule 6.15(2) (para 36). (3) The question is whether there is good reason for the Court to validate the mode of service used, not whether the claimant had good reason to choose that mode. (4) Endorsing the view of the editors of Civil Procedure (2013), vol i, para 6.15.5, Lord Clarke pointed out that the introduction of a power retrospectively to validate the non compliant service of a claim form was a response to the decision of the Court of Appeal in Elmes v Hygrade Food Products plc [2001] EWCA Civ 121; (2001) CP Rep 71 that no such power existed under the rules as they then stood. The object was to open up the possibility that in appropriate cases a claimant may be enabled to escape the consequences for limitation when a claim form expires without having been validly served. This is not a complete statement of the principles on which the power under CPR rule 6.15(2) will be exercised. The facts are too varied to permit such a thing, and attempts to codify this jurisdiction are liable to ossify it in a way that is probably undesirable. But so far as they go, I see no reason to modify the view that this court took on any of these points in Abela v Baadarani. Nor have we been invited by the parties to do so. In the generality of cases, the main relevant factors are likely to be (i) whether the claimant has taken reasonable steps to effect service in accordance with the rules and (ii) whether the defendant or his solicitor was aware of the contents of the claim form at the time when it expired, and, I would add, (iii) what if any prejudice the defendant would suffer by the retrospective validation of a non compliant service of the claim form, bearing in mind what he knew about its contents. None of these factors can be regarded as decisive in themselves. The weight to be attached to them will vary with all the circumstances. Mr Bartons case Mr Bartons case on CPR 6.15(2) was argued with considerable skill by Mr Elgot, who also appeared for him in the Court of Appeal. It rested essentially on three points. The first was that the premise of the power to validate a service under CPR rule 6.15(2) was that service had purportedly been effected by some non compliant means. That was, so to speak, a given. It followed that the dominant consideration when deciding to exercise that power was whether the mode of service chosen had been effective to achieve the main purpose of service, namely to bring the contents of the claim form to the defendants attention. Mr Elgots second point was that, so far as it mattered what the reasons were for Mr Bartons failure to serve in accordance with the rules, he was entitled to assume that Berrymans would accept service by email. This was because (i) although he was aware that some solicitors did not accept service of documents by email, he did not know about CPR rule 6.3 or, presumably, Practice Direction 6A, which were relatively inaccessible to a litigant in person such as him; and (ii) he was entitled to assume that Berrymans were prepared to accept service of documents by email, because they had corresponded with him by email without saying that they were not prepared to do so. Third, he submitted that their failure to accept service of his claim form by email and their failure to respond before the expiry of the limitation period to his attempt to serve them, amounted to playing technical games, from which they should not be allowed to derive any advantage. The District Judge directed himself that there was a two stage test. The first stage was whether CPR rule 6.15(2) was engaged at all, which depended on whether there was good reason to make the order. The second was whether, if there was good reason, the court should exercise its discretion to do so. This was in accord with the literal language of the rule. But the parties were, I think, right to accept that it was unsatisfactory. If there is good reason to make the order, it would be irrational for a court to decline to make it as a matter of discretion. There is in reality only one stage to the inquiry, namely whether there is good reason to make the order. However, this error did not vitiate the District Judges reasoning, because he concluded that there was no good reason to make the order, and on that footing Mr Barton had to fail whether there be one stage or two. He reached that conclusion on the simple ground that the only reason why Mr Barton did not comply with the rules for service was that he did not know what those rules were, and that was not a good reason to make the order. The District Judge was not referred to Abela v Baadarani, but it is difficult to point to any respect in which his reasoning would have been different if he had directed himself in accordance with it. His Honour Judge Godsmark QC approached the matter on the basis that, the District Judge not having been referred to the relevant authorities, including Abela v Baadarani, he should deal with it afresh. He regarded the whole issue as turning, in the circumstances of Mr Bartons case, on the question posed at para 48 of Lord Clarkes judgment in Abela, namely whether there was any reason why the claim form could not be served within the period of its validity. He rejected Mr Bartons application on the ground that there was a number of ways in which service could have been properly effected, and his only reason for not adopting one of them was his ignorance of the rules. He rejected the suggestion that Mr Barton had been in some way lulled into a false sense of the position by the fact that Berrymans had been corresponding with him by email, and declined to accept that Mr Barton was entitled to greater indulgence because he had been unrepresented. His conclusion was that CPR 6.15 is not there to protect litigants in person or those who do not know the rules. It is there to protect those who for some reason have been unable to effect service satisfactorily within the rules. In the Court of Appeal, the main thrust of the argument, at least as they understood it, was that Judge Godsmark had concentrated too much on the reasons why the claim form had not been served in accordance with the rule, and not enough on the fact that Berrymans were aware of the claim and had received the claim form. A claimant could, it was submitted, succeed in an application under CPR rule 6.15(2) even if he had not taken all reasonable steps to serve the claim form in accordance with the rules. The only reasoned judgment was that of Floyd LJ, with whom Black LJ and Moylan J agreed. He dealt with the issue less summarily than Judge Godsmark, but reached substantially the same conclusion. He pointed out that the judge had accepted that the claim form had been successfully drawn to Berrymans attention, but had proceeded in accordance with Lord Clarkes analysis in Abela v Baadarani on the footing that that was not enough. The essential point was that although the question whether the claim form could have been served in accordance with the rules was not the totality of the legal test, it was the decisive consideration on the particular facts of Mr Bartons case. Floyd LJ accepted that a claimant who had failed to take all reasonable steps to serve in accordance with the rules might nevertheless succeed in obtaining an order under CPR rule 6.15(2). But he agreed with the judge that in circumstances where the claimant had done nothing at all other than attempt service in breach of the rules, and that through ignorance of what they were, there was no good reason to make the order. This ignorance was not excused by the fact that Mr Barton was unrepresented. He was no more impressed than the circuit judge had been by the argument that Berrymans had lulled Mr Barton into a false position. The present appeal Mr Barton is appealing against a discretionary order, based on an evaluative judgment of the relevant facts. In the ordinary course, this court would not disturb such an order unless the court making it had erred in principle or reached a conclusion that was plainly wrong. In my opinion both Judge Godsmark and the Court of Appeal identified the critical features of the facts of this case and reached a conclusion which they were entitled to reach. Indeed, save for one minor misdirection, which I have pointed out, I think that the same was true of the District Judge. The first point to be made is that it cannot be enough that Mr Bartons mode of service successfully brought the claim form to the attention of Berrymans. As Lord Clarke pointed out in Abela v Baadarani, this is likely to be a necessary condition for an order under CPR rule 6.15, but it is not a sufficient one. Although the purpose of service is to bring the contents of the claim form to the attention of the defendant, the manner in which this is done is also important. Rules of court must identify some formal step which can be treated as making him aware of it. This is because a bright line rule is necessary in order to determine the exact point from which time runs for the taking of further steps or the entry of judgment in default of them. Service of the claim form within its period of validity may have significant implications for the operation of any relevant limitation period, as they do in this case. Time stops running for limitation purposes when the claim form is issued. The period of validity of the claim form is therefore equivalent to an extension of the limitation period before the proceedings can effectively begin. It is important that there should be a finite limit on that extension. An order under CPR rule 6.15 necessarily has the effect of further extending it. For these reasons it has never been enough that the defendant should be aware of the contents of an originating document such as a claim form. Otherwise any unauthorised mode of service would be acceptable, notwithstanding that it fulfilled none of the other purposes of serving originating process. There are, moreover, particular problems associated with electronic service, especially where it is sought to be effected on a solicitor. A solicitor must have his clients authority to accept service of originating process. If he has that authority, it will in practice normally cover any mode of service. But a solicitors office must be properly set up to receive formal electronic communications such as claim forms. As the Law Societys Practice Guidance on electronic mail (May 2005) points out, email presents new problems, because it can arrive unperceived by other members of staff. The volume of emails and other electronic communications received by even a small firm may be very great. They will be of unequal importance. There must be arrangements in place to ensure that the arrival of electronic communications is monitored, that communications constituting formal steps in current litigation are identified, and their contents distributed to appropriate people within the firm, including those standing in for the person primarily responsible for the matter when he is unable to attend to such communications as they arrive. Turning to the reasons for Mr Bartons failure to serve in accordance with the rules, I start with Mr Bartons status as a litigant in person. In current circumstances any court will appreciate that litigating in person is not always a matter of choice. At a time when the availability of legal aid and conditional fee agreements have been restricted, some litigants may have little option but to represent themselves. Their lack of representation will often justify making allowances in making case management decisions and in conducting hearings. But it will not usually justify applying to litigants in person a lower standard of compliance with rules or orders of the court. The overriding objective requires the courts so far as practicable to enforce compliance with the rules: CPR rule 1.1(1)(f). The rules do not in any relevant respect distinguish between represented and unrepresented parties. In applications under CPR 3.9 for relief from sanctions, it is now well established that the fact that the applicant was unrepresented at the relevant time is not in itself a reason not to enforce rules of court against him: R (Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472, para 44 (Moore Bick LJ); Nata Lee Ltd v Abid [2015] 2 P & CR 3. At best, it may affect the issue at the margin, as Briggs LJ observed (para 53) in the latter case, which I take to mean that it may increase the weight to be given to some other, more directly relevant factor. It is fair to say that in applications for relief from sanctions, this is mainly because of what I have called the disciplinary factor, which is less significant in the case of applications to validate defective service of a claim form. There are, however, good reasons for applying the same policy to applications under CPR rule 6.15(2) simply as a matter of basic fairness. The rules provide a framework within which to balance the interest of both sides. That balance is inevitably disturbed if an unrepresented litigant is entitled to greater indulgence in complying with them than his represented opponent. Any advantage enjoyed by a litigant in person imposes a corresponding disadvantage on the other side, which may be significant if it affects the latters legal rights, under the Limitation Acts for example. Unless the rules and practice directions are particularly inaccessible or obscure, it is reasonable to expect a litigant in person to familiarise himself with the rules which apply to any step which he is about to take. Mr Barton contends that CPR rule 6.3 and Practice Direction 6A are inaccessible and obscure. I do not accept this. They are accessible on the internet. Part 6 is clearly headed Service of Documents. Electronic service under rule 6.3 is expressly required to be in accordance with Practice Direction 6A, which is prominently flagged in the table of contents. Furthermore, when the claim form was issued, the Courts Service sent Mr Barton in the usual way on 26 February 2013 a blank certificate of service for him to complete when he had served it. This included the statement: Rules relating to the service of documents are contained in Part 6 of the Civil Procedure Rules (www.justice.gov.uk) and you should refer to the rules for information. Since he did not in fact refer to them, their alleged obscurity is perhaps immaterial. But they are not in my view obscure. They do not justify Mr Bartons assumption that Berrymans would accept service in that way unless they said otherwise. On the contrary, the paragraph 4.1(2)(b) of the Practice Direction clearly states that even where a solicitors writing paper includes an email address, service by that means was permissible only where it is stated that the email address may be used for service. It is fair to say that others have made the same mistake as Mr Barton, including the authors of A Handbook for Litigants in Person, ed HHJ Edward Bailey (2013), at p 157. But this is not for want of clarity in the rules. As it happens, Mr Barton never saw the Handbook, which was published after his abortive attempt at service. The salient facts in his case are that he was by June 2013 an experienced litigant. He knew, as he accepts, about limitation. He knew that not all solicitors accepted service by email. Yet, apart from looking at the legal notices on Berrymans website (which said nothing about email service), he took no steps to check whether Berrymans did so, or to ascertain what the rules regarding service by email were, but simply relied on his own assumption. Nor would I accept that that assumption was in itself reasonable. Berrymans had initially contacted Mr Barton by email and they engaged in brief and desultory email correspondence with him between the initial contact and the attempted service of the claim form. In rejecting Mr Bartons case that he had complied with the Practice Direction, the District Judge held his email correspondence with Berrymans did not amount to an indication that he could serve the claim form upon them in that way. I think that that was right. But in any event the point is not before us because of the limited basis on which Mr Barton received leave to appeal from the District Judge. If the correspondence did not amount to an indication for the purpose of the CPR 6APD.4 that Berrymans would accept service of the claim form by email, I find it difficult to see how Mr Barton could be entitled to assume they would. Like the Court of Appeal, I would readily accept Mr Elgots submission that the claimant need not necessarily demonstrate that there was no way in which he could have effected service according to the rules within the period of validity of the claim form. The Court of Appeal rejected this suggestion in Power v Meloy Whittle Robinson [2014] EWCA Civ 898. That, however, was a case in which the problem was that the court itself had failed to effect proper service because of an administrative error. The submission that the Court of Appeal rejected was that this did not justify relief under CPR rule 6.15 because it had been open to the claimants solicitor to effect personal service. However, I agree with the general point that it is not necessarily a condition of success in an application for retrospective validation that the claimant should have left no stone unturned. It is enough that he has taken such steps as are reasonable in the circumstances to serve the claim form within its period of validity. But in the present case there was no problem about service. The problem was that Mr Barton made no attempt to serve in accordance with the rules. All that he did was employ a mode of service which he should have appreciated was not in accordance with the rules. I note in passing that if Mr Barton had made no attempt whatever to serve the claim form, but simply allowed it to expire, an application to extend its life under CPR rule 7.6(3) would have failed because it could not have been said that he had taken all reasonable steps to comply with rule 7.5 but has been unable to do so. It is not easy to see why the result should be any different when he made no attempt to serve it by any method permitted by the rules. Mr Elgot repeated before us the submission that he made in the Court of Appeal that Berrymans had been playing technical games, with his client. However, the sole basis for that submission was that they had taken the point that service was invalid. Since they did nothing before the purported service by email to suggest that they would not take the point, this does nothing to advance his case. After the purported service by email, there is nothing that they could reasonably have been expected to do which could have rectified the position. The claim form expired the next day. Even on the assumption that they realised that service was invalid in time to warn him to re serve properly or begin a fresh claim within the limitation period, they were under no duty to give him advice of this kind. Nor could they properly have done so without taking their clients instructions and advising them that the result might be to deprive them of a limitation defence. It is hardly conceivable that in those circumstances the client would have authorised it. Naturally, none of this would have mattered if Mr Barton had allowed himself time to rectify any mishap. But having issued the claim form at the very end of the limitation period and opted not to have it served by the Court, he then made no attempt to serve it himself until the very end of its period of validity. A person who courts disaster in this way can have only a very limited claim on the courts indulgence in an application under CPR rule 6.15(2). By comparison, the prejudice to Wright Hassall is palpable. They will retrospectively be deprived of an accrued limitation defence if service is validated. If Mr Barton had been more diligent, or Berrymans had been in any way responsible for his difficulty, this might not have counted for much. As it is, there is no reason why Mr Barton should be absolved from his errors at Wright Hassalls expense. Article 6 of the European Convention on Human Rights It is submitted that the result arrived at by the courts below is incompatible with Mr Bartons right to a fair trial under article 6 of the Convention. This point does not appear to have been taken below. I deal with it for completeness, and briefly since in my view it is without merit. The rules governing the period of validity of a claim form and the mode of service are sufficiently accessible and clear, and serve a legitimate purpose in the procedure of the Court. Moreover, it is not the rules that have deprived Mr Barton of the ability to press his claim. It is the Limitation Act which has produced that result. A reasonable limitation period does not contravene article 6 even where (as in England and Wales) it operates procedurally. Perhaps because of these difficulties, the argument seems to have mutated into an allegation of bias, said to be implicit in the manner in which Mr Bartons arguments were addressed in the judgment of the Court of Appeal. The point was only faintly pressed, and in my opinion does not even have sufficient coherence to warrant reasoned refutation. Disposal I agree with the observations of Lord Briggs in his final paragraph that it is desirable that the Rules Committee should look at the issues dealt with on this appeal, if only because litigants in person are more likely to read the rules than the judgments of this court. In the meantime, however, I would dismiss this appeal. LORD BRIGGS: (dissenting) (with whom Lady Hale agrees) The Applicable Principles The courts task on the hearing of an application to validate service under CPR rule 6.15 is to decide whether there is good reason to do so. The question only arises where (i) there has been an attempt at service which (ii) was not in accordance with the rules as to service. The question is not expressed to be, and is not, was there good reason for failing to comply with the rules as to service although, as part of its review of all relevant circumstances, the court will generally wish to be appraised of the full reasons, good and bad, why the rules were not complied with. While I would not wish in any way to depart from Lord Clarkes dictum in the Abela case that the most important purpose of service is to ensure that the contents of the claim form (or other originating document) are brought to the attention of the person to be served, there is a second important general purpose. That is to notify the recipient that the claim has not merely been formulated but actually commenced as against the relevant defendant, and upon a particular day. In other words it is important that the communication of the contents of the document is by way of service, rather than, for example, just for information. This is because I would have allowed this appeal. service is that which engages the courts jurisdiction over the recipient, and because important time consequences flow from the date of service, such as the stopping of the running of limitation periods and the starting of the running of time for the recipients response, failing which the claimant may in appropriate cases obtain default judgment. There is (or at least was when promulgated), as Lord Sumption observes, a third particular purpose behind the specific provisions in Part 6APD regulating service by email, namely to ensure that recipients or their solicitors have the opportunity to put in place administrative arrangements for monitoring and dealing with what was then a new mode of service before being exposed to its consequences. Para 4.1(2)(b) permits service by email on the recipients solicitors once they advertise their readiness on their headed paper. Para 4.2 requires a prior inquiry of the intended recipient whether there are any relevant technical constraints. Now that issue and filing is required to be carried out online, by legally represented parties in the Business and Property Courts in London, as the first stage in eventually extending this as the mandatory method for all civil proceedings, it may be questioned for how long these constraints upon service upon solicitors by email will continue to serve a useful purpose, but any relaxation of them is of course a matter for the Civil Procedure Rule Committee. In a case where not merely the first, but all those three purposes of the rules about service by email have been achieved, that is in my judgment capable of being, at least prima facie, a good reason for validating service under rule 6.15. By prima facie I mean a sufficiently good reason provided that there are not, on a full review of the circumstances, adverse factors pointing against validation sufficient to outweigh the full achievement of those purposes. A non exhaustive list of such adverse factors might include a deliberate failure to comply by someone cognisant of the relevant rules, failure due to negligence (in particular by a trained professional who is expected to know the rules), or failure due to sheer neglect of the requirement for due service until the very last moment. That the presence of one or more of these adverse factors may frequently outweigh the full achievement of the purposes behind the rules as to service so as to lead the court to refuse validation is necessitated by the following matters. First, compliance with the rules is now part of the Overriding Objective, although I agree with Lord Sumption that the maintenance of good discipline may be of less importance in this context than in the context of relief from sanctions. Secondly, service of a claim form (or other originating process) is an important stage in civil procedure, with potentially serious consequences, as summarised above. Thirdly, if the identification of good reason were limited to the question whether all the underlying purposes of service had been achieved, claimants could choose to ignore the rules so long as they achieved those purposes by another route of their own devising. That would be a step on the road to procedural anarchy. I consider that both the judge and the Court of Appeal treated it as an essential aspect of an application for validation that there needed to be identified some additional good reason for validation beyond the complete achievement of the three underlying purposes of the rules as to service by email. In substance this led, and will always lead, to a search for a good reason for not having served in time in accordance with the rules. Sometimes that search will bear fruit, for example where the intended recipient is shown to be playing games, as in the Abela case. Sometimes there will be real and protracted difficulty in identifying an intended recipients last known residence or place of business. Sometimes service through diplomatic channels proves impossible to achieve in time. But it would be wrong in my judgment to confine the power to validate to such cases, where all the underlying purposes of service have been achieved. There are bound to be cases where the purposes have been fully achieved but there are no other good reasons for validation, where the failure to comply with the rules, though not excusable by a good reason for failure, is nonetheless only a minor or technical breach, or one readily understandable either because the relevant rule is obscure, or less accessible to a litigant in person than to an experienced and skilled lawyer. In such cases there should not be a vain search for an additional good reason beyond full achievement of the purposes of the rules as to service, but rather a weighing of all the circumstances leading to defective service, to see whether the inevitable element of culpability of the claimant is or is not sufficiently large to displace the prima facie good reason constituted by the full achievement of those purposes. I acknowledge that, at para 36 in the Abela case, Lord Clarke said: The mere fact that the defendant learned of the existence and content of the claim form cannot, without more, constitute a good reason to make an order under rule 6.15(2). I agree. First, that is not the end of the matter, for the reasons given above. The circumstances in which the failure to serve in accordance with the rules will need to be explained and considered. Secondly, mere knowledge of the existence and content of the claim form does not achieve the second general purpose, namely to bring home to the recipient that he is being served with, rather than just informed about, the claim form, with the important procedural consequences that flow. Thirdly, in the context of service by email, the absence of, or limitations upon, the recipients email handling facilities may have proved a real hindrance to a prompt response. I do not however consider that Lord Clarke was intending to lay down a requirement that there be identified in every case a separate good reason for validation beyond the complete fulfilment of the purposes of the relevant rules as to service. It was not necessary for him to do so in that case, because there was an independently good reason, in the form of the game playing by the intended recipient. But I do not read that as an invariable condition built into what Lord Clarke was at pains to point out was a single test, based upon a weighing of all relevant circumstances. He noted, as the editors of the White Book also acknowledged, that the new power retrospectively to validate otherwise deficient service was introduced to remedy a lack of jurisdiction to deal with mistakes as to service of the type addressed in Elmes v Hygrade Food Products plc [2001] EWCA Civ 121; (2001) CP Rep 71, where the claimants solicitors served the defendants insurers (who were by then handling the case) rather than the defendant, incidentally by fax. It appears to have been a case where no good reason other than the achievement of the purposes of service on the case handler was relied upon, and where the claimants solicitors should have known better than to serve upon the insurers. Similarly I do not read Lord Clarkes observation, at para 48 of the Abela case, that the relevant focus is on the reason why the claim form cannot or could not be served within the period of its validity as erecting the finding of a good reason for having failed to serve in accordance with the rules as an independent obstacle to validation, still less as confining validation so as to exclude cases where the claim form could have been validly served in time. Read in context he was merely explaining why, in the necessary analysis of the reasons for that failure, the focus is on the period after, rather than before, the issue of the claim form. The Judges Analysis Having embarked, by consent, upon a fresh decision making process, for reasons about the District Judges approach which do not matter, HHJ Godsmark decided that the central question for him to decide was whether there was a good reason why service had not been effected in accordance with the rules, and that ignorance of the relevant rule about service by email was not a good reason: see paras 10 and 15 to 16 of his concise and lucid ex tempore judgment. In the Court of Appeal Floyd LJ acknowledged (at para 45) that the judge could be said to have imposed upon himself an illegitimate threshold test, namely whether there was a good reason why service was not achieved in accordance with the rules, but in the end exonerated the judge from any error of principle, having regard to his judgment read as a whole. The Court of Appeal did not therefore conduct its own independent appraisal, being content with a conclusion that the outcome was one which the judge was entitled to reach; (see eg para 48). It is however fair comment that, had it conducted its own appraisal, the Court of Appeal would probably have reached the same conclusion as did the judge. In my view the judge did err in principle, for the reasons already given, so that the question whether service should be validated should be addressed afresh by this court, applying the principles which I have sought to identify. The starting point is that Mr Bartons attempt to serve both the claim form and the particulars of claim by email did fully achieve the three purposes underlying the rules about service by email. As to the first, it is and always has been common ground that the defendant firm was, through its agent solicitors, fully appraised by the email of the contents of the claim form. As to the second, the claim form was sent expressly by means of service upon you. The recipient solicitors could have been in no doubt that Mr Barton was seeking to achieve service, with its important consequences, rather than just sending the claim form by way of information. As to the third, it has not been suggested that, by comparison with postal service, the recipient firm was in any way hampered by not having appropriate monitoring procedures in place, or that its email systems were insufficient to permit prompt receipt of the whole of the documentation actually sent, although the particulars of claim were voluminous. There was therefore a prima facie good reason to validate service, unless the circumstances of Mr Bartons failure to comply with the rules were such as to swing the balance against validation. There are aspects of those circumstances which may be said to point both ways. Against validation may be said to be the following: i) Mr Barton does not appear to have taken the trouble to work through the relevant rules sufficiently to alight upon the key provisions about service by email in 6APD para 4. His fault was not therefore one of misinterpretation. ii) He elected to effect service himself, rather than leave it to the court. But he gave a reason for this, namely a desire first to complete his lengthy particulars of claim, rather than serve early and then have to seek an extension of time for the pleading. That may not have been a good reason for delaying service of the claim form, but it is at least understandable. iii) He left it until a very late stage to serve, after the expiry of the limitation period and in the last two days of the validity of the claim form, even though he says he still had time to achieve personal service by driving to the solicitors address if the email was not received. iv) He probably knew broadly of the very serious consequences of failure to serve validly within time. v) The rules about service by email are not expressed in lawyerish language, nor are they difficult to understand. vi) Mr Barton was by this time, although unrepresented, a reasonably experienced litigant, quite capable of criticising his former solicitors for wasting his money by serving documents personally rather than by post. In respectful disagreement with Lord Sumption, I do not regard the fact that validation would deprive the defendant of an accrued limitation defence as a factor militating against validation (or for that matter in favour of it). The defendants solicitors were aware of Mr Bartons attempt to serve them before the expiry of the claim form. The acquisition of a limitation defence would have been, in the words of Simon Brown LJ in the Elmes case (at para 13), a windfall. In mitigation of those aspects of Mr Bartons conduct are the following factors (although none of them add up to an independent good reason for validation): i) Mr Barton made an innocent mistake, rather than committed a deliberate breach of the rules. ii) His reasoning, that solicitors with authority to accept service who had communicated with him by email were impliedly content to be served by email, was understandable, even though wrong. iii) The rules about service by email are tucked away in a Practice Direction rather than in a rule. It may not be obvious to a lay litigant that non compliance with a PD attracts the same dire consequences as breach of a rule. Although Mr Barton did not read the PD, this has some mitigating effect upon the seriousness of the breach. iv) He was in extremely good company in thinking that solicitors with authority to accept service who have an email address on their headed paper are willing to accept service by email. This is what is (wrongly) stated in terms in the Handbook for litigants in person to which Lord Sumption refers. Again this did not actually mislead Mr Barton, since it had yet to be published, but it does seem to me to mitigate his offence that the distinguished judicial editors of that guide should have made the same mistake, even after (I do not doubt) reading the relevant rules. v) As an unrepresented litigant, Mr Barton has no recourse to solicitors insurers of the type which would be available to a represented litigant whose solicitor made the same mistake as he did. Although a number of the mitigating factors listed above are in a sense characteristics of Mr Barton being a litigant in person, that comes nowhere near saying that being a litigant in person constitutes a free standing good reason why his botched attempt at service should be validated. In that respect I adhere to what I said in Nata Lee Ltd v Abid [2015] 2 P & CR 3, at para 53, to which Lord Sumption refers. Save to the very limited extent to which the CPR now provides otherwise, there cannot fairly be one attitude to compliance with rules for represented parties and another for litigants in person, still less a general dispensation for the latter from the need to observe them. If, as many believe, because they have been designed by lawyers for use by lawyers, the CPR do present an impediment to access to justice for unrepresented parties, the answer is to make very different new rules (as is now being planned) rather than to treat litigants in person as immune from their consequences. The good reason in the present case is not that he is a litigant in person, but rather the fact that Mr Bartons attempted service by email achieved all the underlying purposes of the relevant rules. His being a litigant in person, with the particular consequences described above merely mitigates, at the margin, the gravity of non compliant conduct which, had it been done by a legal representative, would have been more serious as an impediment to validation. Taking all the relevant considerations into account, I consider that Mr Bartons attempt at service by email should be validated. He may fairly be criticised for having failed to read the relevant part of the rules, and making an incorrect assumption instead, but this does not on balance detract from the good reason constituted by his having, albeit in a modestly non compliant way, achieved all that which the rules as to service by email are designed to achieve. It troubles me that the meaning and effect of CPR 6.15 has now been considered by this court, which does not lightly embark upon procedural questions, twice in recent years and that, on this occasion, its meaning has divided the court. While recognising the pressures upon its time during a period of major procedural reform, I hope that the Rule Committee might be able to find time to satisfy itself that this rule, and the provisions in the PD about service by email, still satisfy current requirements, in the context of giving effect to the Overriding Objective, and do so with sufficient clarity. |
The appellant (Autoclenz) provides car cleaning services to motor retailers and auctioneers. It has contracts with British Car Auctions (BCA) for cleaning vehicles at a number of different places. The respondents (the claimants) are 20 individual valeters who at the relevant time provided car cleaning services at BCAs Measham site in Derbyshire. In these proceedings the claimants say that they were workers within the meaning of the National Minimum Wage Regulations 1999 (NMWR) (SI 1999/584) and of the Working Time Regulations 1998 (WTR) (SI 1998/1833) and that, as workers, they were entitled to be paid in accordance with the NMWR and to receive statutory paid leave under the WTR. Their case is that they were paid neither. The question is whether the claimants were workers within regulation 2(1) of the NWMR, which adopted the definition in section 54(3) of the National Minimum Wage Act 1998, and in regulation 2(1) of the WTR. The definition of worker is in materially identical terms in both sets of regulations as follows: . worker means an individual who has entered into or works under (a) a contract of employment; or (b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. Materially identical definitions of employee and worker appear in various other statutes and regulations concerning employment rights and protection against unlawful discrimination in the employment field. The proceedings to date Proceedings were issued in the Employment Tribunal (ET) by the claimants on 19 November 2007. The question whether the claimants were workers as so defined was determined by the ET as a preliminary issue. In a judgment sent to the parties on 1 March 2008 the ET (Employment Judge Foxwell) held that the claimants were workers within the definition on the basis that they were employed under contracts of employment within limb (a) of the definition and that they were in any event working pursuant to contracts within limb (b). Autoclenz appealed to the Employment Appeal Tribunal (EAT), which heard the appeal on 4 June 2008. The EAT (Judge Peter Clark) held that they were not within (a) but that they were within (b). Both sides appealed to the Court of Appeal. The Court of Appeal (Sedley, Smith and Aikens LJJ) restored the judgment of the ET, holding that the claimants were within both (a) and (b). Autoclenz was granted permission to appeal by this Court. The written contract In each case there was a written contract contained in or evidenced by two documents. I take as an example the position of Paul Huntington. His original contract was dated 18 June 1991, in which he was described as a sub contractor. Clauses 1 to 3 of the contract provided: 1. The Sub contractor shall perform the services which he agrees to carry out for Autoclenz within a reasonable time and in a good and workmanlike manner. 2. The Sub contractor hereby confirms that he is a self employed independent contractor and that his tax affairs are handled by . tax office under Schedule D ref No . 3. The Sub contractor and Autoclenz agree and acknowledge that the Sub contractor is not, and that it is the intention of the parties that the Sub contractor should not become, an employee of Autoclenz. Accordingly, the Sub contractor is responsible for the payment of all income tax and national insurance contributions arising on or in respect of payments made to the Sub contractor by Autoclenz and the Sub contractor agrees that he shall indemnify Autoclenz in respect of any liability to tax and national insurance contributions for which Autoclenz may be held liable on or in respect of such payments. That contract did not contain any clause permitting Mr Huntington to provide a substitute to perform the services he was contracted to perform. Nor did it state that he was not obliged to perform services or that Autoclenz was not obliged to provide work under the agreement. In 2004 the Inland Revenue carried out a review of the arrangements between Autoclenz and the valeters. On 20 May 2004 it said, somewhat enigmatically, that it is felt that the balance of probability leans more towards self employment than PAYE. In 2007 Autoclenz decided to produce two new documents, which formed the contract between it and the claimant in each case. The first document, which was not itself signed by the claimant, included the following: For the purpose of providing car valeting services to its clients garages, Autoclenz wishes to engage the services of car valeters FROM TIME TO TIME on a sub contract basis. We understand that YOU ARE AN EXPERIENCED CAR VALETER and might be prepared to offer your services to Autoclenz. If so would you please complete and return to us the form of agreement set out below, which is intended to confirm that any contractual relationship between Autoclenz and yourself is one of client and independent contractor and not one of employer/employee and to protect Autoclenz against any claim on Autoclenz for Income Tax and/or National Insurance contributions in respect of payments made to yourself. For the avoidance of doubt, as an independent contractor, you are entitled to engage one or more individuals to carry out the valeting on your behalf, provided that such an individual is compliant with Autoclenzs requirements of sub contractors as set out in this agreement Those requirements were, in short, that the individual was capable of providing the services, had been fully trained and held a current full UK driving licence which he would make available to Autoclenz, that he complied with health and safety guidance and that he had permission to work in the UK. The document asked the claimant to note the following. For security reasons the valeter would be obliged to wear protective overalls which would identify him as a contractor of Autoclenz and that such overalls could be purchased from Autoclenz. The valeter would be required to provide cleaning materials for himself and those who worked for him. Given the nature of the work it might be necessary for the valeter and those who worked for him to drive motor vehicles. Accordingly the valeter would be required to hold a current valid driving licence. The document concluded: If you wish to provide services to Autoclenz would you please sign and return to Autoclenz the form agreement attached. YOU WILL NOT BE OBLIGED TO PROVIDE YOUR SERVICES ON ANY PARTICULAR OCCASION NOR, IN ENTERING INTO SUCH AGREEMENT, DOES AUTOCLENZ UNDERTAKE ANY OBLIGATION TO ENGAGE YOUR SERVICES ON ANY PARTICULAR OCCASION. The second document was a contract which Mr Huntington signed on 21 May 2007. A copy of the contract is annexed to this judgment marked A. It can be seen that Mr Huntington was described as a sub contractor throughout. Moreover, by clause 3 it was expressly agreed that it was the intention of the parties that the sub contractor was not and should not become an employee of Autoclenz. Further, by clause 7(a) Mr Huntington promised that he would ensure that those who worked for him in providing services to Autoclenz held a current driving licence as set out in the clause. The ET held that both documents were put in front of Mr Huntington and that he signed the contract set out in Annex A, although he was not provided with a copy. The judge said that he strongly suspected that Mr Huntington signed it without reading it. It is common ground that both documents formed part of the contract between the parties. If the relevant contract was, as a matter of law, solely contained in those two documents, it would be impossible to bring the case within limb (a) of the definition and very difficult to bring it within limb (b). However, the ET made certain further findings of fact, including the following. If the valeters had not signed the revised contracts, they would not have been offered further work. The valeters had no input into the negotiation of the terms, which were imposed by Autoclenz. However, as the ET put it at para 32, the claimants went into their agreements . with their eyes open as Autoclenz has made no secret of the fact that it regards the claimants as self employed. The operation The ET made further findings of fact in respect of the operation carried on by Autoclenz as follows. There was a relatively low turnover of personnel among the valeters. Mr Huntington started with Autoclenz in 1991 and continued right through almost on a full time basis apart from a few weeks in 2002 and 2003 when he tried working for a competitor. New valeters were recruited either by personal recommendation and word of mouth or through advertisements placed in the local press or at a job centre. Examples of such advertisements seen by the ET invited applications for well paid full time work and emphasised that Autoclenz was looking for self employed people. The claimants all knew that they were being offered a role which was described and intended by Autoclenz to be one of self employment. The vehicles were required to be cleaned in accordance with a detailed specification set by BCA. The valeters generally worked in teams of four, with one valeter as team leader. Each team took a batch of six vehicles at a time and the members shared the task between them. The more experienced valeters were able to get through more batches than others. On most days there was enough work to keep a group of 14 valeters busy. In the year before the hearing in the ET there was more work, although the ET also found that because of the fluctuations in the level of work there was occasionally no work to be done but that that was the exception rather than the rule. The payments to the valeters were calculated on a piecework basis. The valeters kept records which were then passed to Autoclenz, first locally and then to head office. The valeters rendered weekly invoices which, although nominally from the valeters, were calculated and prepared by Autoclenz, being generated by Autoclenz at head office based on the information provided by the valeters. The valeters undertook responsibility for payment of tax and national insurance. This was done on a self employed basis. The arrangements for the provision of equipment and materials varied over the years but at the time the ET was considering, Autoclenz provided all the equipment and materials used by the valeters including jet washers, vacuum cleaners, sponges and chemicals. From 2007 Autoclenz introduced a 5 per cent charge for materials, which was contained in a separate invoice. The valeters were supplied with overalls bearing BCAs logo for security reasons. The first two sets of overalls were free of charge but the valeters had to pay for subsequent sets. The critical findings of fact are set out in paragraphs 34 to 40 of the ETs judgment. I will return to these after considering the correct approach in principle to issues of this kind. The legal principles It is common ground that the issues are (1) whether the ET was correct to find that the claimants were at all material times working under contracts of employment and were therefore workers within limb (a) of the definition and (2) whether in any event the ET was correct to find that they were at all material times within limb (b). This involves consideration of whether and in what circumstances the ET may disregard terms which were included in a written agreement between the parties and instead base its decision on a finding that the documents did not reflect what was actually agreed between the parties or the true intentions or expectations of the parties. As Smith LJ explained in the Court of Appeal at para 11, the classic description of a contract of employment (or a contract of service as it used to be called) is found in the judgment of MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, 515C: A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service. Freedom to do a job either by ones own hands or by anothers is inconsistent with a contract of service, though a limited or occasional power of delegation may not be. Three further propositions are not I think contentious: i) As Stephenson LJ put it in Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612, 623, There must be an irreducible minimum of obligation on each side to create a contract of service. ii) If a genuine right of substitution exists, this negates an obligation to perform work personally and is inconsistent with employee status: Express & Echo Publications Ltd v Tanton (Tanton) [1999] ICR 693, per Peter Gibson LJ at p 699G. iii) If a contractual right, as for example a right to substitute, exists, it does not matter that it is not used. It does not follow from the fact that a term is not enforced that such a term is not part of the agreement: see eg Tanton at p 697G. The essential question in each case is what were the terms of the agreement. The position under the ordinary law of contract is clear. It was correctly summarised thus by Aikens LJ in the Court of Appeal: 87. Express contracts (as opposed to those implied from conduct) can be oral, in writing or a mixture of both. Where the terms are put in writing by the parties and it is not alleged that there are any additional oral terms to it, then those written terms will, at least prima facie represent the whole of the parties' agreement. Ordinarily the parties are bound by those terms where a party has signed the contract: see eg L'Estrange v F Graucob Ltd [1934] 2 KB 394. If a party has not signed a contract, then there are the usual issues as to whether he was made sufficiently aware of the clauses for a court to be able to conclude that he agreed to the terms in them. That is not an issue in this case. 88. Once it is established that the written terms of the contract were agreed, it is not possible to imply terms into a contract that are inconsistent with its express terms. The only way it can be argued that a contract contains a term which is inconsistent with one of its express terms is to allege that the written terms do not accurately reflect the true agreement of the parties. 89. Generally, if a party to a contract claims that a written term does not accurately reflect what was agreed between the parties, the allegation is that there was a continuing common intention to agree another term, which intention was outwardly manifested but, because of a mistake (usually a common mistake of the parties, but it can be a unilateral one) the contract inaccurately recorded what was agreed. If such a case is made out, a court may grant rectification of a contract. See, generally, the discussion in the speech of Lord Hoffmann, [48] to [66], in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 with whom all the other law lords agreed. Nothing in this judgment is intended in any way to alter those principles, which apply to ordinary contracts and, in particular, to commercial contracts. There is, however, a body of case law in the context of employment contracts in which a different approach has been taken. Again, Aikens LJ put it correctly in the remainder of para 89 as follows: But in cases of contracts concerning work and services, where one party alleges that the written contract terms do not accurately reflect the true agreement of the parties, rectification principles are not in point, because it is not generally alleged that there was a mistake in setting out the contract terms as they were. There may be several reasons why the written terms do not accurately reflect what the parties actually agreed. But in each case the question the court has to answer is: what contractual terms did the parties actually agree? In this context there are three particular cases in which the courts have held that the ET should adopt a test that focuses on the reality of the situation where written documentation may not reflect the reality of the relationship: Consistent Group Ltd v Kalwak (Kalwak) [2007] IRLR 560 in the EAT (but cf [2008] EWCA Civ 430, [2008] IRLR 505 in the Court of Appeal), Firthglow Ltd (t/a Protectacoat) v Szilagyi (Szilagyi) [2009] EWCA Civ 98, [2009] ICR 835 and the Court of Appeal decision in the present case. Those cases must be set in their historical context, which includes Snook v London and West Riding Investments Ltd (Snook) [1967] 2 QB 786 and Tanton. Although Snook was not an employment case but arose out of the hire purchase of a car, I refer to it because of the statement of Diplock LJ, which has been often referred to in the employment context. He said this at p 802 with reference to the suggestion that the transaction between the parties was a sham. I apprehend that, if it [ie the concept of sham] has any meaning in law, it means acts done or documents executed by the parties to the sham which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities that for acts or documents to be a sham, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. I would accept the submission made on behalf of the claimants that, although the case is authority for the proposition that if two parties conspire to misrepresent their true contract to a third party, the court is free to disregard the false arrangement, it is not authority for the proposition that this form of misrepresentation is the only circumstance in which the court may disregard a written term which is not part of the true agreement. That can be seen in the context of landlord and tenant from Street v Mountford [1985] AC 809 and Antoniades v Villiers [1990] 1 AC 417, especially per Lord Bridge at p 454, Lord Ackner at p 466, Lord Oliver at p 467 and Lord Jauncey at p 477. See also in the housing context Bankway Properties Ltd v Pensfold Dunsford [2001] 1 WLR 1369 per Arden LJ at paras 42 to 44. Those cases were examples of the courts concluding that relevant contractual provisions were not effective to avoid a particular statutory result. The same approach underlay the reasoning of Elias J in Kalwak in the EAT, where the questions were essentially the same as in the instant case. One of the questions was whether the terms of the written agreement relating to the right to refuse to work or to work for someone else were a sham. Elias J referred to part of the judgment in Snook quoted above at para 53. At para 56 he noted that in Tanton Peter Gibson LJ had recognised (at p 697G) that such terms might be a sham. He also noted that the Court of Appeal had emphasised that the question whether there was an obligation personally to perform the work had to be determined by asking what legal obligations bound the parties rather than by asking how the contract was actually carried out. The employers appeal in Tanton was allowed on the ground that the ET wrongly drew an inference from the way the contract was carried out. At paras 57 59 Elias J said this: 57. The concern to which tribunals must be alive is that armies of lawyers will simply place substitution clauses, or clauses denying any obligation to accept or provide work in employment contracts, as a matter of form, even where such terms do not begin to reflect the real relationship. Peter Gibson LJ was alive to the problem. He said this (p 697G) Of course, it is important that the industrial tribunal should be alert in this area of the law to look at the reality of any obligations. If the obligation is a sham it will want to say so. In other words, if the reality of the situation is that no one seriously expects that a worker will seek to provide a substitute, or refuse the work offered, the fact that the contract expressly provides for these unrealistic possibilities will not alter the true nature of the relationship. But if these clauses 58. genuinely reflect what might realistically be expected to occur, the fact that the rights conferred have not in fact been exercised will not render the right meaningless. 59. Tribunals should take a sensible and robust view of these matters in order to prevent form undermining substance There is in my opinion considerable force in the approach set out in those paragraphs. Elias J dismissed the employers appeal from the ET but his decision was reversed by the Court of Appeal, comprising May, Rimer and Wilson LJJ. The differences between the reasoning of Elias J and that of the Court of Appeal were discussed in some detail by the Court of Appeal in the later case of Szilagyi (comprising Sedley, Keene and Smith LJJ) and indeed by the Court of Appeal in this case. In Szilagyi the court was considering similar questions. The principal question was whether written partnership agreements were a sham. The principal judgment was given by Smith LJ. Smith LJ referred to the dicta of Diplock LJ in Snook. She also referred in detail to Kalwak in the EAT and in the Court of Appeal, and to Tanton. She quoted para 58 from Elias Js judgment in Kalwak which I have set out above. At para 48 she noted that in the Court of Appeal Rimer LJ scrutinised Elias Js judgment and was critical of the reasoning by which he had upheld the ETs decision. However, she added that the court allowed the appeal on the ground that the ETs decision was inadequately reasoned and remitted the case for rehearing. She then said that it did not appear to her that the court was critical of Elias Js test and added that it seemed to her that Rimer LJ approved that test as being in compliance with Diplock LJs definition of a sham. For my part, I am not persuaded that that is so. It appears to me that the reasoning of Rimer LJ and that of Elias J are not consistent. In this regard I agree with the view of Judge Clark to that effect in the EAT. See also a valuable article by Alan Bogg in (2010) 126 LQR 166, 167 168. Rimer LJ said at para 28 in Kalwak that a finding that the contract was in part a sham required a finding that both parties intended it to paint a false picture as to the true nature of their respective obligations. He was there applying the approach of Diplock LJ in Snook to this situation. In my opinion that is too narrow an approach to an employment relationship of this kind. In this regard I agree with the views expressed by ACL Davies in an illuminating article entitled Sensible Thinking About Sham Transactions in (2009) 38 ILJ 318, which was a note on Szilagyi published before the decision of the Court of Appeal in the instant case. However, the question for this court is not whether the two approaches are consistent but what is the correct principle. I unhesitatingly prefer the approach of Elias J in Kalwak and of the Court of Appeal in Szilagyi and in this case to that of the Court of Appeal in Kalwak. The question in every case is, as Aikens LJ put it at para 88 quoted above, what was the true agreement between the parties. I do not perceive any distinction between his approach and the approaches of Elias J in Kalwak, of Smith LJ and Sedley LJ in Szilagyi and this case and of Aikens LJ in this case. In para 57 of Kalwak (set out above) Elias J quoted Peter Gibson LJs reference to the importance of looking at the reality of the obligations and in para 58 to the reality of the situation. In this case Smith LJ quoted (at para 51) para 50 of her judgment in Szilagyi: The kernel of all these dicta is that the court or tribunal has to consider whether or not the words of the written contract represent the true intentions or expectations of the parties, not only at the inception of the contract but, if appropriate, as time goes by. She added in paras 52, 53 and 55: 52. I regret that that short paragraph [ie para 51] requires some clarification in that my reference to 'as time goes by' is capable of misunderstanding. What I wished to say was that the court or tribunal must consider whether or not the words of the written contract represent the true intentions or expectations of the parties (and therefore their implied agreement and contractual obligations), not only at the inception of the contract but at any later stage where the evidence shows that the parties have expressly or impliedly varied the agreement between them. In my judgment the true position, consistent with Tanton, Kalwak and Szilagyi, is that where there is a dispute as to the genuineness of a written term in a contract, the focus of the enquiry must be to discover the actual legal obligations of the parties. To carry out that exercise, the tribunal will have to examine all the relevant evidence. That will, of course, include the written term itself, read in the context of the whole agreement. It will also include evidence of how the parties conducted themselves in practice and what their expectations of each other were. Evidence of how the parties conducted themselves in practice may be so persuasive that the tribunal can draw an inference that that practice reflects the true obligations of the parties. But the mere fact that the parties conducted themselves in a particular way does not of itself mean that that conduct accurately reflects the legal rights and 53. 55. obligations. For example, there could well be a legal right to provide a substitute worker and the fact that that right was never exercised in practice does not mean that it was not a genuine right. It remains to consider whether the EJ directed himself correctly when he considered the genuineness of the written terms. I am satisfied that he directed himself correctly in accordance with, although in advance of, Szilagyi. In effect, he directed himself that he must seek to find the true nature of the rights and obligations and that the fact that the rights conferred by the written contract had not in fact been exercised did not mean that they were not genuine rights. Aikens LJ stressed at paras 90 to 92 the importance of identifying what were the actual legal obligations of the parties. He expressly agreed with Smith LJs analysis of the legal position in Szilagyi and in paras 47 to 53 in this case. In addition, he correctly warned against focusing on the true intentions or true expectations of the parties because of the risk of concentrating too much on what were the private intentions of the parties. He added: What the parties privately intended or expected (either before or after the contract was agreed) may be evidence of what, objectively discerned, was actually agreed between the parties: see Lord Hoffmann's speech in the Chartbrook case at [64] to [65]. But ultimately what matters is only what was agreed, either as set out in the written terms or, if it is alleged those terms are not accurate, what is proved to be their actual agreement at the time the contract was concluded. I accept, of course, that the agreement may not be express; it may be implied. But the court or tribunal's task is still to ascertain what was agreed. I agree. At para 103 Sedley LJ said that he was entirely content to adopt the reasoning of Aikens LJ: recognising as it does that while employment is a matter of contract, the factual matrix in which the contract is cast is not ordinarily the same as that of an arms length commercial contract. I agree. commercial dispute is identified by Aikens LJ in para 92 as follows: The critical difference between this type of case and the ordinary 92. I respectfully agree with the view, emphasised by both Smith and Sedley LJJ, that the circumstances in which contracts relating to work or services are concluded are often very different from those in which commercial contracts between parties of equal bargaining power are agreed. I accept that, frequently, organisations which are offering work or requiring services to be provided by individuals are in a position to dictate the written terms which the other party has to accept. In practice, in this area of the law, it may be more common for a court or tribunal to have to investigate allegations that the written contract does not represent the actual terms agreed and the court or tribunal must be realistic and worldly wise when it does so. So the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem. If so, I am content with that description. The facts With characteristic clarity and brevity Sedley LJ described the factual position as follows: 104. Employment judges have a good knowledge of the world of work and a sense, derived from experience, of what is real there and what is window dressing. The conclusion that Autoclenz's valeters were employees in all but name was a perfectly tenable one on the evidence which the judge had before him. The elaborate protestations in the contractual documents that the men were self employed were odd in themselves and, when examined, bore no practical relation to the reality of the relationship. 105. The contracts began by spelling out that each worker was required to perform the services which he agrees to carry out for Autoclenz within a reasonable time and in a good and workmanlike manner an obligation entirely consistent with employment. Notwithstanding the repeated interpolation of the word sub contractor and the introduction of terms inconsistent with employment which, as the judge found, were unreal, there was ample evidence on which the judge could find, as he did, that this was in truth an employment relationship. 106. His finding did not seek to recast the contracts: it was a finding on the prior question of what the contracts were. Rightly, it was uninfluenced by the fiscal and other consequences of the relationship, which were by no means all one way. I entirely agree with those conclusions. They are in my opinion justified by the critical findings of fact in paras 35 to 38 of the judgment of Employment Judge Foxwell in the ET. They were these: 35. In my judgment these claimants are employees. I do not think it can be said that Mr Huntington and his colleagues are businessmen in business on their own account. They have no control over the way in which they do their work. They have no real control over the hours that they work, save and except that they can leave when their share of the work on site has been completed. They do not have any real economic interest in the way in which the work is organised, other than the fact that the more work they do the more they earn. They cannot source materials for themselves. They are subject to the direction and control of the respondent's employees on site. They work in teams and not as individuals. It crossed my mind that each team might constitute a partnership, but it has never been suggested that these claimants are partners running businesses together and, whilst the makeup of each team seems to be fairly static, they can be adjusted to meet the respondent's needs. The claimants have no say in the terms upon which they perform work, the contracts which are placed before them are devised entirely by the respondent and the services they provide are subject to a detailed specification. The invoices which they submit are prepared by the respondent. The respondent determines the deductions which are applied to those invoices and the amounts charged in respect of insurance and materials. There has been no evidence to confirm that these deductions bear any real relation to the actual cost of the services to which they refer. Rates of pay are determined by the respondent and the respondent has felt able to increase or reduce those rates 36. 37. unilaterally. Really there is nothing that these claimants can do to make their putative businesses any more profitable by the way in which they organise themselves. I have noted that the claimants are required to wear company overalls and some of these are supplied free. I have also noted that they are provided with some training by the respondent. I do not think that either of these factors is determinative in this case. I accept that training must be provided to people who handle chemicals whatever their status for the purposes of health and safety. Equally I accept that requiring some badge of identification, in this case a uniform, is simply an incident of the fact that valeters are permitted to drive high value goods, motorcars and vans. That said, I accept the claimants' evidence that they are fully integrated into the respondent's business and that they have no real other source of work. I accept that occasionally individual claimants might work elsewhere but only on days when the respondent has no work for them to do. In Mr Huntington's case, for example, this occurred once in 17 years of service. I am satisfied that the claimants are required to provide personal service under their agreements with the respondent notwithstanding the substitution clause that was introduced in 2007. I do not find that this clause reflects what was actually agreed between the parties, which was that the claimants would show up each day to do work and that the respondent would offer work provided that it was there for them to do. Mr Hassell confirmed in evidence that this was the true nature of the agreement between the parties and that his work could not have been done without an understanding that the valeters could be relied on to turn up and do the work put in front of them. I have of course noted that in 2007 the respondent introduced a clause saying that there was no obligation on it to offer work or on the claimants to accept work. I find that this clause was wholly inconsistent with the practice described in paragraph 18 of Mr Hassell's witness statement where he refers to a requirement for valeters to notify him in advance if they were unavailable for work. This indicates that there was an obligation to attend for work unless a prior arrangement had been made. In my judgment these factors place these new clauses within the proposition identified at paragraph 58 in the judgment [of Elias J] in Consistent Group Ltd v Kalwak (supra) and I find that the substitution clause and the right to refuse work were unrealistic possibilities that were not truly in the contemplation of the parties when they entered into their agreements. Accordingly, I find that the claimants entered into contracts under which they provided personal service, where there were mutual obligations, namely the provision of work in return for money, that these obligations placed the contracts within the employment field and that the degree of control exercised by the respondent in the way that those contracts were performed placed them in the category of contracts of employment. Mr Hassell was the Autoclenz manager at the Measham site. 38. These are findings of fact which Autoclenz cannot sensibly challenge in this Court. In short, they are findings which were open to the ET. It is true that, as Smith and Aikens LJJ both observed, the reasoning of the ET could have been fuller, but I also agree with them (and Sedley LJ) that the ET was entitled to hold that the documents did not reflect the true agreement between the parties and that, on the basis of the ETs findings, four essential contractual terms were agreed: (1) that the valeters would perform the services defined in the contract for Autoclenz within a reasonable time and in a good and workmanlike manner; (2) that the valeters would be paid for that work; (3) that the valeters were obliged to carry out the work offered to them and Autoclenz undertook to offer work; and (4) that the valeters must personally do the work and could not provide a substitute to do so. See in particular, per Aikens LJ at para 97. It follows that, applying the principles identified above, the Court of Appeal was correct to hold that those were the true terms of the contract and that the ET was entitled to disregard the terms of the written documents, in so far as they were inconsistent with them. CONCLUSION Autoclenz and PAUL HUNTINGTON (Name of Sub contractor) HEREBY AGREE as follows: 1. The Sub contractor shall perform the services, which he agrees to carry out for Autoclenz within a reasonable time and in a good and workmanlike manner. 2. The Sub contractor hereby confirms that he is a self employed independent contractor and that he is responsible for payment of his National Insurance contributions and for making his returns to HM Inspector of Taxes paying his Income Tax under schedule D. 3. The Sub contractor and Autoclenz agree and acknowledge that the Sub contractor is not, and it is the intention of the parties that the Sub contractor should not become, an employee of Autoclenz. Accordingly, the Sub contractor is responsible for payments of all Income Tax and National Insurance contributions arising on or in respect of payments made to the Sub contractor by Autoclenz and the Sub contractor agrees that he shall indemnify Autoclenz in respect of any liability to Income Tax and National Insurance contributions for which Autoclenz may be held liable on or in respect of such payments. Sums agreed to be paid by Autoclenz to the Sub contractor shall be net of VAT (if any). For as long as the Sub contractor is, or becomes or remains liable to be, registered for VAT then Autoclenz shall, in addition, pay VAT on such sums. 5. Autoclenz shall, if requested by the Inland Revenue or the Department of Social Security, provide to those government departments details of payments made to the Sub contractor. 6. The Sub contractor confirms that he is not suffering and has never suffered from back trouble, skin rashes, eczema, dermatitis, asthma or epilepsy and has never been refused work or been terminated from work due to ill health. EITHER: 4. 7. (a) The Sub contractor confirms that he holds a current valid Driving Licence, free of endorsements And that he will ensure that those who work for him, in providing services to Autoclenz, hold the same. (b) The Sub contractor confirms that he DOES NOT hold a current valid Driving Licence. OR: PLEASE DELETE AS NECESSARY Although no deletions were made, details of Mr Huntingtons driving licence were included in clause 7(a). The agreement was signed by both Autoclenz and Paul Huntington. An agreement in the same or substantially the same form was signed between Autoclenz and each of the other claimants. For the reasons given above, I agree with the Court of Appeal that the ET was entitled to hold that the claimants were workers because they were working under contracts of employment within the meaning of regulation 2(1) of each of the NWMR and the WTR. They were within limb (a) of the definitions set out in para 2 above. Since the question whether the claimants were workers within limb (b) would only arise if the claimants had not entered into a contract of employment, that question does not arise, although, like the ET, I would have held that they were in any event working under contracts within limb (b). It follows that I would dismiss the appeal. ANNEX A Agreement |
The issue in this case is whether the future of two little girls, one now aged four years and two months and the other now aged two years and 11 months, should be decided by the courts of this country or by the authorities in Hungary. Both children were born in England and have lived all their lives here. But their parents are Hungarian and the children are nationals of Hungary, not the United Kingdom. Under article 8.1 of Council Regulation (EC) No 2201/2003, concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, known as the Brussels II revised Regulation (the Regulation), the primary rule is that jurisdiction lies with the courts of the member state where the child is habitually resident. That would be England in this case. However, an exception is made by article 15, under which those courts can transfer the case to a court in another member state with which the child has a particular connection, if that court would be better placed to hear the case, or part of it, and the transfer is in the best interests of the child. These children have a particular connection with Hungary, as it is the place of their nationality. The issue, therefore, is the proper approach to deciding whether a Hungarian court would be better placed to hear the case and to whether transferring it would be in the best interests of the children. The context in which these questions arise is important. Free movement of workers and their families within the European Union has led to many children living, permanently or temporarily, in countries of which they are not nationals. Inevitably, some of them will come to the attention of the child protection authorities, because of ill treatment or neglect or the risk of it. In the past, the courts in this country might assume that they had jurisdiction simply because of the childs presence here. It is now clear, however, that public law proceedings fall within the scope of the Regulation (see In re C (Case C 435/06) [2008] Fam 27), so that in every case with a European dimension (more properly, a Regulation dimension) the courts of this country have to ask themselves whether they have jurisdiction. Even if they do have jurisdiction, Sir James Munby P has said that in every case they will need to consider whether the case should be transferred to another member state: see In re E (A Child) (Care Proceedings: European Dimension): Practice Note [2014] EWHC 6 (Fam); [2014] 1 WLR 2670, para 31; also Merton London Borough Council v B (Central Authority of the Republic of Latvia intervening) [2015] EWCA Civ 888; [2016] 2 WLR 410, para 84(ii). As the Family Rights Group observe in their helpful intervention, this has led to a remarkable proliferation of case law over the last three years. Hitherto, courts would manage cases with a foreign element by evaluating foreign placement options and deciding upon the best outcome for the child themselves. Now, they may be more inclined to transfer the decision making abroad. One reason for this change in approach may be the concerns voiced in many parts of Europe about the law and practice in England and Wales in relation to what is sometimes referred to as forced adoption (referred to by the President in his judgment in this case: [2015] EWCA Civ 1112; [2016] 2 WLR 713, para 8). Research compiled by the Council of Europe (O Borzova, Social services in Europe: legislation and practice of the removal of children from their families in Council of Europe member states, Report to the Parliamentary Assembly, 2015, Doc 13730) and commissioned by the European Union (C Fenton Glynn, Adoption without Consent, Directorate General for Internal Policies of the EU Parliament, Policy Department C: Citizens Rights and Constitutional Affairs, 2015) shows that other member states do permit adoption without parental consent. However, England and Wales is unusual in permitting parental consent to be dispensed with where the welfare of the child requires this (Adoption and Children Act 2002, section 52(1)(b)) rather than on more precise grounds of parental absence or misconduct. This country is also unusual in the speed and frequency with which it resorts to adoption as the way to provide a permanent home for children who for one reason or another cannot live with their families. The European Court of Human Rights has, however, held our law to be compatible with the right to respect for private and family life, protected by article 8 of the European Convention on Human Rights: YC v United Kingdom (2012) 55 EHRR 967. It goes without saying that the provisions of the Regulation are based upon mutual respect and trust between the member states. It is not for the courts of this or any other country to question the competence, diligence, resources or efficacy of either the child protection services or the courts of another state (see In re M (Brussels II Revised: Article 15) [2014] EWCA Civ 152; [2014] 2 FLR 1372, para 54(v), per Munby P). As the Practice Guide for the application of the Brussels IIa Regulation puts it, the assessment of whether a transfer would be in the best interests of the child should be based on the principle of mutual trust and on the assumption that the courts of all member states are in principle competent to deal with a case (p 35, para 3.3.3). This principle goes both ways. Just as we must respect and trust the competence of other member states, so must they respect and trust ours. Article 15 So far as relevant, article 15 of the Regulation reads as follows: 1. By way of exception, the courts of a member state having jurisdiction as to the substance of the matter may, if they consider that a court of another member state, with which the child has a particular connection, would be better placed to hear the case, or a specific part thereof, and where this is in the best interests of the child: (a) stay the case or the part thereof in question and invite the parties to introduce a request before the court of that other member state in accordance with paragraph 4; or (b) request a court of another member state to assume jurisdiction in accordance with paragraph 5. Paragraph 1 shall apply: (a) upon application from a party; or (b) of the courts own motion; or (c) upon application from a court of another member state with which the child has a particular connection, in accordance with paragraph 3. 2. A transfer made of the courts own motion or by application of a court of another member state must be accepted by at least one of the parties. 3. The child shall be considered to have a particular connection to a member state as mentioned in paragraph 1, if that member state: (c) is the place of the childs nationality; 4. The court of the member state having jurisdiction as to the substance of the matter shall set a time limit by which the courts of that other member state shall be seised in accordance with paragraph 1. If the courts are not seised by that time, the court which has been seised shall continue to exercise jurisdiction in accordance with articles 8 to 14. 5. The courts of that other member state may, where due to the specific circumstances of the case, this is in the best interests of the child, accept jurisdiction within six weeks of their seisure in accordance with paragraph 1(a) or 1(b). In this case, the court first seised shall decline jurisdiction. Otherwise, the court first seised shall continue to exercise jurisdiction in accordance with articles 8 to 14. The courts shall cooperate for the purposes of this article, either directly or through the central authorities designated pursuant to article 53. This case 6. The parents are in their 20s. The father is of Hungarian Roma descent, the mother of mixed Hungarian and Roma descent. The father has two older children, a girl now aged seven and a boy now aged five, half siblings of the children with whom we are concerned. These parents met and began their relationship in 2010. In July 2011, when the mother was pregnant with the older of the two children in this case, whom I shall call Janetta, they travelled to this country. Janetta was born here in January 2012. The family had some contact with the local authority in April and May 2012, because of their accommodation problems, and both the local authority and the Hungarian embassy offered to support their return to Hungary, but in fact they stayed here. Their second child, whom I shall call Ella, was born here in May 2013. The mother had had no ante natal care. The baby was born in the room in which the family were living without any medical assistance. The London Ambulance Service arrived after the baby was born but before the placenta was delivered. They called the police, as the father was reported to be resisting the mother and baby receiving medical attention or being taken to hospital. The family were living in circumstances of extreme squalor, with no food, clothing or bedding seen for either child. Janetta was removed from her parents that same day. Ella was discharged from hospital into foster care when she was eight days old. They were initially placed separately but since 28 May 2013 they have both been living with the same foster carers. The local authority originally applied for an emergency protection order, but this was not pursued because the parents agreed to the children being accommodated by the local authority under section 20 of the Children Act 1989 while an assessment was carried out. The local authority originally arranged for the children to have contact with their parents three times a week; this was reduced to twice a week because the parents often failed to attend or left early; and in February 2014, it was reduced to once a week. Care proceedings were not issued until January 2014 and the first interim care order was made in February. Before beginning the proceedings, the local authority had commissioned assessments of the childrens maternal grandmother and great grandmother in Hungary from Children and Families Across Borders (CFAB). The maternal grandmother was unable to offer a home but the great grandmother had suitable accommodation and was willing to offer the mother and children a home, provided that the father played no part in their lives. At that stage the father did not want his own mother to be assessed as a possible carer. The local authority had also been in touch with the Hungarian Central Authority (HCA), which had, in January 2014, suggested that the solution was for the Hungarian authorities to bring the children back to Hungary, as they were Hungarian citizens and their relatives could keep in contact with them there. Also, if they were to be adopted, only the Hungarian authorities have the right to adopt Hungarian citizen minors. That has been the consistent position of the HCA throughout. At the first hearing in the High Court, the mother, then pregnant with the couples third child, indicated her intention to return to Hungary to have the baby and also to apply for the transfer of the proceedings under article 15. This she duly did and gave birth to a baby boy in March 2014 (she later accepted that her return was in order to avoid care proceedings here in respect of him). At a hearing on 18 March 2014, Holman J declared that the girls were habitually resident here and that is not now in dispute. He adjourned the article 15 application so that there could be some clearer understanding of what arrangements might exist for the transfer of the children themselves to live, whether long term or even during the course of the proceedings, under suitable arrangements in Hungary ([2014] EWHC 999 (Fam), para 12). Accordingly, the allocated social worker visited Hungary in April 2014. She met the mother and the new baby, who were then living with the maternal great grandmother. The great grandmother was adamant that the father would not be allowed near her home, whereas the mother intended to reunite with the father as soon as they could find accommodation in Hungary. The social worker also met with representatives of the HCA and with social care professionals. The mothers application under article 15 came before Sir Peter Singer, sitting as a Deputy Judge of the High Court, on 9 May 2014. At that stage, both the local authority and the childrens guardian were supporting a transfer to Hungary, but only once the requisite assessments had been completed there and a clear recommendation made about the appropriate placement for the girls. By a judgment delivered on 12 May 2014, Sir Peter Singer refused the transfer application, but provided that a further application could be considered after the fact finding hearing listed for 25 June 2014. The purpose of that hearing was to establish whether the facts were such as to meet the threshold for compulsory state intervention in family life, set out in section 31(2) of the Children Act 1989: A court may only make a care order if it is satisfied (a) that the child concerned is suffering, or is likely to suffer, significant harm; and (b) that the harm, or likelihood of harm, is attributable to (i) the care given to the child, or likely to be given to him if the order were not made, not being what it would be reasonable to expect a parent to give to him; or (ii) the childs being beyond parental control. Only if that threshold is crossed can the court go on to consider whether making the order that the local authority seek will best promote the welfare of the child, which is the courts paramount consideration (1989 Act, section 1(1)). Neither parent attended the hearing on 25 June 2014, although both were legally represented. The fathers whereabouts were unknown but the mother had been in touch with her solicitor by telephone. At that stage she accepted 11 of the findings sought by the local authority. Five of these related to the circumstances in which the family were living and the lack of medical attention when Ella was born. Two related to the risk of harm stemming from domestic abuse in the parents relationship and the fathers aggressive and volatile personality. Two related to the parents inconsistent and unsatisfactory contact with, and effective abandonment of, the girls: by the time of the hearing, the mother had not seen them since February and the father had not seen them since March 2014. The last finding was the parents lack of insight into the local authoritys concerns and failure to co operate with attempts to assess them. Hogg J made findings accordingly, which all agreed were sufficient to satisfy the threshold in section 31(2). The hearing to decide what orders to make was planned for September 2014. In August, the social worker discovered that the mother, father and the new baby were all living with the paternal grandmother. The social workers assessment of the paternal grandmother (over the telephone) was negative. There being no viable family placement in Hungary, the local authoritys final care plan, supported by the Childrens Guardian, was that the girls should be adopted. Their current foster parents were being given active consideration as their adopters (and have since been approved as such). Accordingly the local authority issued a further application for a placement order under section 21 of the Adoption and Children Act 2002. This authorises the authority to place a child for adoption without parental consent (it is a separate question whether parental consent to the actual adoption order should be dispensed with). Under section 21(2), a court may not make a placement order unless: the child is subject to a care order, (a) the court is satisfied that the conditions in section 31(2) (b) of the 1989 Act (conditions for making a care order) are met, or the child has no parent or guardian. (c) Thus, unless the child has no parent or guardian, the threshold conditions for state intervention must be met, but they can be met either by the prior making of a care order, or by making the requisite findings in the placement order proceedings, which may (but need not) be contemporaneous with the care proceedings. The hearing listed for September could not proceed because interpreters failed to attend. It was relisted for November 2014. The mothers position was that she wanted to look after the children in Hungary; failing that, she wanted them to live with the paternal grandmother in Hungary; failing that, she wanted them to live with the maternal great grandmother in Hungary; and failing that, for them to be placed in a childrens home in Hungary. The father wanted to look after them with the mother in the paternal grandmothers home; if the parents cohabitation was not acceptable, the children should live with the mother in the maternal great grandmothers home and he would stay in England; in his oral evidence he said that he would stay and work in England, but spend holidays living with the mother and children at the maternal great grandmothers home. The HCA now took the view, apparently based on the CFAB and English social workers assessments, that there was no suitable family member in Hungary; so the children should be placed with a foster parent there, so that they could keep the connection with their parents. The local competent authority would make a decree appointing a guardian and foster parent for them. Two professional colleagues would come to England to escort the children to their foster placement in Hungary. Only the Hungarian authorities had the right to adopt them. The High Court decision The case was tried over five days, from 3 to 7 November 2014, by His Honour Judge Bellamy, sitting as a Deputy High Court Judge. The mother renewed her application for an article 15 transfer on the first day, but the judge postponed deciding this until the end of the hearing, because the fathers counsel was unprepared for it and further submissions were expected from the HCA. He proceeded to hear evidence and submissions on all aspects of the case. On 11 November 2014 he delivered judgment only on the article 15 application, which he granted: In re J (Children: Brussels II Revised: Article 15) [2014] EWFC 45. The judge directed himself (at para 70) in accordance with the guidance given by Sir James Munby P, in In re M (Brussels II Revised: Article 15) [2014] EWCA Civ 152; [2014] 2 FLR 1372, at para 54: The language of article 15 is clear and simple. It requires no gloss. The court had to ask itself the three questions set out in article 15.1. Unless they were answered in the affirmative there was no power to seek a transfer. If they were, there was still a discretion, but it is not easy to envisage circumstances in where, those conditions having been met, it would nonetheless be appropriate not to transfer the case. In answering those questions, it is not permissible for the court to enter into a comparison of such matters as the competence, diligence, resources or efficacy of either the child protection services or the courts of the other state. The judge cited two further important passages from Sir James judgment: I wish to emphasise that the question of whether the other court will have available to it the full list of options available to the English court for example, the ability to order a non consensual adoption is simply not relevant to either the second or the third question. As Ryder LJ has explained, by reference to the decisions of the Supreme Court in In re I (A Child) (Contact Application: Jurisdiction) [2009] UKSC 10; [2010] 1 AC 319 and of this court in In re T (A Child) (Care Proceedings: Request to Assume Jurisdiction) [2013] EWCA Civ 895, [2014] Fam 130, the question asked by article 15 is whether it is in the childs best interests for the case to be determined in another jurisdiction, and that is quite different from the substantive question in the proceedings, what outcome to these proceedings will be in the best interests of the child?. Article 15 contemplated a relatively simple and straightforward process: As Lady Hale observed in Re I, para 36, the task for the judge under article 15, will not depend upon a profound investigation of the childs situation and upbringing but upon the sort of considerations which come into play when deciding upon the most appropriate forum. So the judge proceeded to ask himself the three questions. It was common ground that, because of their nationality, the children had a particular connection with Hungary (para 80). In considering whether a Hungarian court was better placed to hear the case, he set out the following factors in favour (para 82): (i) the mothers only language is Hungarian; the father speaks only a little English; in England they require the support of an interpreter; (ii) one full sibling and two half siblings are habitually resident in Hungary; the Hungarian court could promote contact between them in ways not open to an English court and is likely to be better placed to assess whether the girls should establish a relationship with their baby brother; (iii) any further assessment required (given that he had already expressed concern about the brevity of the CFAB assessment of the maternal great grandmother and the social workers telephone assessment of the paternal grandmother) would be better undertaken in Hungary than in England; (iv) the Hungarian authorities would have access to background information about the family (the mothers step fathers conviction for physically abusing her; the fathers time in foster care; the removal of the two half siblings from their mother and placement in foster care); (v) the limits to what the English court could do to ensure that the childrens cultural and linguistic needs are met (the final care plan being silent about what the authority intended to do to promote this); (vi) a change of placement might be necessary, should the current foster carers not be approved as adopters for them and not be willing to become their special guardians; and (vii) there was good reason to believe that force of circumstances might compel both parents to return to Hungary. He then turned to the factors pointing the other way (para 83): (i) the English court had heard all the evidence and it was possible that a final determination could be made immediately; further delay would be avoided; (ii) social work assessments had been completed of the parents, the maternal grandmother and great grandmother, and the paternal grandmother, and of the childrens best interests by a very experienced Childrens Guardian; no detailed assessments had been undertaken by the Hungarian authorities although they had had time to do so; (iii) the parents had had full legal representation and interpretation before the English court; (iv) the allocated social worker had a relationship with the children and a thorough knowledge of the case and had travelled to Hungary to make her own inquiries; (v) retaining the proceedings in England would retain judicial continuity in the sense of having access to all the case papers and a picture of the development of the case over time (including the frequent changes in the parents positions); and (vi) the children had lived here all their short lives; their ethnic, cultural and linguistic needs must be weighed against the importance of growing up in a safe, stable, secure and risk free environment. He discussed the issue of delay (paras 84 to 92). He concluded that, although it was inevitable that there would be some further delay in settling the childrens future if the case were transferred, and he did not know what the extent of that would be, it had to been seen in the context of the significant delay so far, much of which was attributable to the local authority. He was not therefore persuaded that significant weight should be attached to it. He concluded (para 93) that the Hungarian court was better placed to hear the case. He attached particular weight to the point made at para 20(ii) above (the potential for contact with siblings), a factor which had tipped the balance for Pauffley J in In re J (A Child: Brussels II revised: Article 15: Practice and Procedure) [2014] EWFC 41. The judge then turned to consider whether transfer of the proceedings to Hungary would be in the childrens best interests. The local authority argued that the stark choice now facing the court on the article 15 application is for the children to keep their long term carers and preserve the status quo or be removed to foster care in Hungary. The judge however did not accept that this is a point which the court may take into account in determining best interests in this context. It is relevant to the determination of the question what outcome to these proceedings will be in the best interests of these children?; it is not relevant to the determination of the question is transfer of these proceedings to the Hungarian court in these childrens best interests?. (para 94) Having found that the Hungarian court was better placed to hear the case, it followed that it would be in their best interests to transfer it (para 95). Finally, he considered the exercise of his discretion under article 15. Having answered all three of the questions in article 15.1 in the affirmative, there were no features which would properly entitle him to exercise his discretion against requesting the Hungarian court to assume jurisdiction (para 98). Accordingly, his order asked the courts of Hungary to accept the request for a transfer of the case; the request would be transmitted by the local authority to the HCA for onward transmission to the Hungarian court; in the event that the Hungarian courts accepted the request within the six week time limit laid down in article 15, the case would be urgently re listed before him for consequential orders, including the transfer of the children to Hungary; in the event that the request was not accepted within that time, it would be relisted for further directions. It would appear that by the case he had in mind, not only the care proceedings, but also the placement order proceedings. The Court of Appeal decision The local authority and the Childrens Guardian appealed to the Court of Appeal with the permission of Black LJ. The hearing took place in March 2015, before Sir James Munby P, Black LJ and Sir Richard Aikens, but judgment was not delivered until November (this time adopting the initial of the childrens surname): In re N (Children) (Adoption: Jurisdiction) [2015] EWCA Civ 1112; [2016] 2 WLR 713. A great deal of the Presidents leading judgment is devoted to some very important questions relating to jurisdiction in adoption generally, which are not before this court on this appeal. In summary, these are (para 63): (i) Does an English court have jurisdiction (a) to make an adoption order in relation to a child who is a foreign national, and (b) to dispense with the consent of a parent who is a foreign national? This was a difficult question, given that the Brussels II revised Regulation does not cover adoption or measures preparatory to adoption, nor is there any other international instrument covering the matter. The Court of Appeal answered both (a) and (b) in the affirmative and this issue is not before this court. (ii) If the English court does have such jurisdiction, how should that be exercised? The President gave guidance on this issue (paras 104 to 111). Once again, this guidance is not before this Court on this appeal, but it does have some relevance to the issue which is before us, as we shall see. (iii) What is the scope of the Brussels II revised Regulation? It is well established that the Regulation applies to care proceedings, as well as to proceedings between private parties: see In re C (Case C 435/06) [2008] Fam 27. However, by excluding decisions on adoption, measures preparatory to adoption, or the annulment or revocation of adoption from the scope of the Regulation, does article 1.3.b also exclude (a) care proceedings where the care plan is adoption, or (b) placement order proceedings? The court concluded that (a) was within the scope of the Regulation, but (b) was not. This is not under appeal to this court. That leaves the remaining three issues, which related to article 15 (para 63): (iv) What, upon the true construction of article 15 of the Regulation, are the requirements before the English court can make a request for a transfer to another member state? The President observed that there is much English learning on the meaning and application of article 15.1 (para 113). He repeated the guidance he had given in In re M (Brussels II Revised: Article 15) [2014] EWCA Civ 152; [2014] 2 FLR 1372, para 54 (see para 18 above), on which the judge had also relied. He went on to emphasise how important it is that article 15 is considered at the earliest possible opportunity (para 114), although it could be considered at any stage of the proceedings (para 117); that repeat applications were to be deprecated and would usually fail unless there had been a change of circumstances, although they might sometimes be appropriate (para 118); that a transfer could be considered after a fact finding hearing, but only in exceptional circumstances (para 120); and that the process should be summary, measured in hours not days and not dependent on a profound investigation of the evidence (para 122). (v) Leaving on one side any question arising in relation to article 1.3.b, was the judge justified in deciding as he did? Could it be said that he was wrong to do so? The court concluded that he was justified in deciding to exercise jurisdiction to request transfer under article 15; he undertook a careful examination of all the relevant factors; he did not consider any irrelevant factors; he did not err in the weight he attached to the relevant factors, or misdirect himself in law (para 64(v)). (vi) Was the judges decision vitiated by his failure to address article 1.3.b? What were the consequences of his omission to do so? The court held that the fact that he did not appreciate the effect of article 1.3.b did not vitiate his decision. His decision in relation to the care proceedings could and should stand and they should be stayed. His decision in relation to the placement order proceedings could not stand, but as they were of their nature consequential on the care proceedings, they too were stayed (para 64(vi)). Black LJ and Sir Richard Aikens delivered short concurring judgments. The appeal was therefore dismissed. The issues in this appeal The Childrens Guardian, on behalf of the children, and with the support of the local authority, now appeals to this court. The mother and the father resist that appeal. Although not formally represented before this Court, the HCA also supports the decision. Their letter of 3 February 2016 informs the court that the HCA accepted jurisdiction under article 15.5 on 15 January 2015 following the High Courts request; they were notified of the Court of Appeal decision on 2 December 2015; while waiting for the childrens social worker to contact them about the details of bringing the children to Hungary, their competent local authority Guardianship Office had ascertained that the parents living circumstances were not convenient to take care of the children; however they wished to keep the connection with them; and the girls had two half sister/brother who are living in the mothers care (sic?). An English speaking foster parent had been identified for the girls, as had a child protection guardian. The HCA reiterated their consistent view that only the Hungarian authorities have the right to adopt Hungarian citizens and that the children have the possibility of keeping connection with their parents and family members if they live in Hungary. In addition, this court has received valuable written submissions from three interveners: the AIRE Centre, the Family Rights Group and the International Centre for Family Law, Policy and Practice. The principal issue before this Court is the proper approach to the assessment of the childs best interests in the context of an application for transfer under article 15. In particular, is it limited to questions of forum, and if so, how does it differ from the question of whether the foreign court is better placed to hear the case? Is the court entitled to take into account the consequences for the child of transferring the proceedings where, as here, the transfer will also result in the childs removal from her current placement to a placement in another country? A further issue is whether the judge was correct to find that the Hungarian court was better placed when he had heard all the evidence and was in a position to give a final judgment upon it. The local authority has raised additional issues relating to the placement order proceedings. As the Regulation does not apply to these, was the Court of Appeal correct to impose a stay upon them in consequence of staying the care proceedings? As this is the United Kingdoms court of final instance, the further issue arises as to whether we are obliged to make a reference to the Court of Justice of the European Union on the ground that the interpretation of article 15 is not acte clair. Between the hearing in the Court of Appeal and the handing down of judgment, the CJEU accepted a reference from the Supreme Court of Ireland in the case of Child and Family Agency (CAFA) v JD (Case C 428/15). Four of the six questions referred are relevant to this case: (1) Does article 15 of Regulation 2201/2003 apply to public law care applications by a local authority in a member state, when if the court of another member state assumes jurisdiction, it will necessitate the commencement of separate proceedings by a different body pursuant to a different legal code and possibly, if not probably, relating to different factual circumstances? If the best interests of the child in article 15.1 of (3) Regulation 2201/2003 refers only to the decision as to forum, what factors may a court consider under this heading, which have not already been considered in determining whether another court is better placed? (4) May a court for the purposes of article 15 of Regulation 2201/2003 have regard to the substantive law, procedural provisions, or practice of the courts of the relevant member state? (6) Precisely what matters are to be considered by a national court in determining which court is best placed to determine the matter? At the time of writing, the CJEU has not given judgment. The Guardian sought permission to appeal to this court on question (1) above. It is certainly arguable, for the reasons sketched in the question from the Irish court, that article 15 is not applicable to care proceedings. The case cannot be transferred in the same way that a case between parents or other private parties can be transferred. The proceedings in the other member state will inevitably be different proceedings, with different parties, different procedures, and possibly different substantive law. Indeed, there may not be proceedings in a court at all, but only within administrative authorities, as in this case. As Black LJ elegantly put it, what is being transferred is not the case but the problem (para 189(i)). However, given that the Regulation clearly does apply to public law proceedings, the question whether article 15 does not apply in public law proceedings is obviously not acte clair. It must await the determination of the Irish reference. For that reason, it seemed to this court more convenient to refuse permission to appeal on that ground and proceed on the basis that article 15 can apply to public law proceedings. Whether it is necessary to await the decision of the CJEU on questions (3), (4) and (6) before deciding this case is another matter, to which I shall return. The proper approach to article 15.1 The argument before us has principally focussed on the nature of the best interests evaluation required by article 15.1 and in particular whether it is limited to questions relevant to the choice of forum. This has been described as the attenuated welfare test (see In re T (A child: Article 15, Brussels II Revised) [2013] EWHC 521 (Fam); [2013] 2 FLR 909, para 21). Its source appears to be my own observation in In re I, quoted in In re M (see above at para 18). Contrary to the impression given there, In re I was not a case about article 15, but a case about article 12 of the Regulation, which relates to Prorogation of Jurisdiction. Article 12.1 allows a court dealing with divorce, separation or nullity proceedings also to deal with connected parental responsibility matters if the spouses and holders of parental responsibility agree. Article 12.3 gives the courts of a member state jurisdiction in relation to parental responsibility, even though the child is not habitually resident there, where: the child has a substantial connection with that member a. state, in particular by virtue of the fact that one of the holders of parental responsibility is habitually resident in that member state or that the child is a national of that member state; and b. the jurisdiction of the courts has been accepted expressly or otherwise in an unequivocal manner by all the parties to the proceedings at the time the court is seised and is in the best interests of the child. It was in that context that I observed (at para 36): The final requirement in article 12(3) is that the jurisdiction of the English courts should be in the best interests of the child. Nothing turns, in my view, on the difference between the best interests of the child in article 12(3), the superior interests of the child in article 12(1) and the childs interest in article 12(4). They must mean the same thing, which is that it is in the childs interests for the case to be determined in the courts of this country rather than elsewhere. This question is quite different from the substantive question in the proceedings, which is what outcome to these proceedings will be in the best interests of the child? It will not depend upon a profound investigation of the childs situation and upbringing but upon the sort of considerations which come into play when deciding upon the most appropriate forum. The fact that the parties have submitted to the jurisdiction and are both habitually resident within it is clearly relevant though by no means the only factor. It appears to have been the Court of Appeals endorsement of this approach to the best interests test in article 15.1 which led the judge to hold (see para 24 above) that the consequences for these children of being removed from their long term carers and taken to new foster carers in Hungary was completely irrelevant to whether transferring the case would be in their best interests. The first point made by the appellants is that the requirement in article 12.3 is quite different from the requirement in article 15.1. In article 12.3 (as also in article 12.1) it is the court which is deciding whether to accept jurisdiction, which it would not otherwise have, that has to decide whether to do so is in the best interests of the child. This is roughly equivalent to the requirement in article 15.5 that the court which is requested to take the case (here the Hungarian court) must consider that it is the best interests of the child to accept jurisdiction. Article 15.1 is directed towards the court which already has jurisdiction in an existing case. It imposes an additional requirement that the transferring court considers this to be in the best interests of the child. Obviously, the considerations applicable when deciding whether to relinquish jurisdiction may be somewhat different from the considerations applicable when deciding whether to accept it. Secondly, article 12.3 contains no requirement that the court accepting jurisdiction be better placed to hear the case than the court which would otherwise have it. Interestingly, the draft of article 15.1 proposed by the EU Commission did not contain this requirement, although the Explanatory Memorandum referred to situations (albeit exceptional) where the courts of another member state would be better placed to hear the case. The requirement does, however, appear in article 8 of the 1996 Hague Convention on Jurisdiction, Applicable Law, Recognition, Enforcement and Co operation in respect of Parental Responsibility and Measures for the Protection of Children, which the Commission described as a similar mechanism in their Explanatory Memorandum. That may be why it found its way into the eventual Regulation. The European legislator must have considered that the better placed requirement was something different from the best interests requirement, otherwise they would not both be there. Thirdly, as originally drafted, article 15.1 limited transfer to exceptional circumstances. As finally adopted, it no longer does so, merely introducing the power with the words by way of exception. An exception does not necessarily require that the circumstances be exceptional. Nevertheless, it is an exception to the general rule, that the future of children should be decided in the courts of the member state where they are habitually resident. In general, it is expected that exceptions will be narrowly construed and applied (see, for example, Somafer SA v Saar Ferngas AG (Case C 33/78) [1978] ECR 2183; [1979] 1 CMLR 490, para 7), although the text which was eventually adopted is more open ended than that originally proposed. Fourthly, however, it is clear that the Commission regarded the requirement that the court proposing the transfer, as well as the court accepting it, should evaluate whether the transfer would be in the best interests of the child as an additional safeguard. By this they must have meant an additional safeguard for the child. In this connection, recital 12 to the Regulation is relevant: The grounds of jurisdiction in matters of parental responsibility established in the present Regulation are shaped in the light of the best interests of the child, in particular on the criterion of proximity. This means that jurisdiction should lie in the first place with the member state of the childs habitual residence, except for certain cases of a change in the childs residence or pursuant to an agreement between the holders of parental responsibility. Recital 33 is also relevant: This Regulation recognises the fundamental rights and observes the principles of the Charter of Fundamental Rights of the European Union. In particular, it seeks to ensure respect for the fundamental rights of the child as set out in article 24 of the Charter of Fundamental Rights of the European Union. Article 24 of the Charter of Fundamental Rights is headed The rights of the child: 1. Children shall have the right to such protection and care as is necessary for their well being. They may express their views freely. Such views shall be taken into consideration on matters which concern them in accordance with their age and maturity. 2. In all actions relating to children, whether taken by public authorities or private institutions, the childs best interests must be a primary consideration. 3. Every child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents, unless that is contrary to his or her interests. As the AIRE Centre point out in their helpful intervention, article 24.2 is clearly modelled on article 3.1 of the United National Convention on the Rights of the Child. They further point out that secondary EU legislation, such as the Regulation, must be interpreted consistently with the Treaties, including the Charter of Fundamental Rights: Criminal proceedings against Lindqvist (Case C 101/01) [2003] ECR I 12971, Ordre des barreaux francophones et germanophone v Conseil des ministres (Case C 305/05) [2007] ECR I 5395. The provisions of the Charter only apply when member states are implementing EU law, but we are clearly doing so in this case. If there were any doubt about the need to interpret and apply the Regulation consistently with article 24 of the Charter, recital 33 puts that beyond doubt. This is a case about childrens rights, and in particular, the right to have their best interests regarded as a primary consideration in all actions relating to them. As the AIRE Centre also point out, the line of case law leading to the attenuated welfare test does not appear to have had any explicit regard to the best interests obligation. The test might have looked very different if it had done. It is the case, as argued on behalf of the mother, that the better placed and best interests questions are inter related. Some of the same factors may be relevant to both. But it is clear that they are separate questions and must be addressed separately. The second one does not inexorably follow from the first. The question remains, what is encompassed in the best interests requirement? The distinction drawn in In re I remains valid. The court is deciding whether to request a transfer of the case. The question is whether the transfer is in the childs best interests. This is a different question from what eventual outcome to the case will be in the childs best interests. The focus of the inquiry is different, but it is wrong to call it attenuated. The factors relevant to deciding the question will vary according to the circumstances. It is impossible to be definitive. But there is no reason at all to exclude the impact upon the childs welfare, in the short or the longer term, of the transfer itself. What will be its immediate consequences? What impact will it have on the choices available to the court deciding upon the eventual outcome? This is not the same as deciding what outcome will be in the childs best interests. It is deciding whether it is in the childs best interests for the court currently seised of the case to retain it or whether it is in the childs best interests for the case to be transferred to the requested court. Application in this case It follows that the judge was wrong to accept that it followed from his decision that the Hungarian court was better placed to hear the case that it would be in the best interests of the children to transfer it. He ought to have addressed his mind to the short and long term consequences for them of doing so and also of not doing so. The short term consequence was that these little girls would be removed from the home where Ella had lived for virtually all her life and Janetta had lived for most of hers, where they were happy and settled, and doing well (Janettas behaviour having been seriously disturbed when they first arrived). They would be transferred to a foster placement about which the court knew nothing other than that the foster carer spoke English. The country, the language and the surroundings would be completely unfamiliar to them. The long term consequence would be to rule out one possible option for their future care and upbringing, that is, remaining in their present home on a long term legally sanctioned basis, whether through adoption, or through a special guardianship order, or through an ordinary residence order. It would not be in the best interests of these children to transfer a dispute about their future to a court which would be unable to consider one of the possible outcomes, indeed the outcome which those professionals with the closest knowledge of the case and the children now consider would be best for them. That is not, of course, to say that that is the outcome which the court should eventually decide. There is a very live issue as to whether in the long run these little girls of Hungarian nationality and descent, with mixed Hungarian and Roma ethnicity, and many family members in Hungary, including their parents, grandparents, a sibling and half siblings, would be better living in Hungary. The judge took into account the importance of their siblings and their background when addressing the question of which court was better placed. But in addressing that question, he did not take into account what the real issues in the case were. The real issues were that the parents wanted the girls to come to Hungary, preferably to live with them or with members of the extended family. The advantages and disadvantages of this had been explored by the girls social worker. The underlying problem was that the mothers family would have nothing to do with the father, whom they saw as abusive, while the fathers family supported him, and the mother wished to stay with him. The HCA, therefore, apparently relying largely on the assessments carried out by or for the local authority, did not see family placement as viable, and so proposed foster care, but preserving the possibility of some sort of relationship with the parents and siblings. The local authority, with the support of the Childrens Guardian, now proposed placement for adoption, preferably with the existing foster carers. The judge considered the Hungarian authorities better placed to achieve the first two of these outcomes. He did not consider how far it would be open to him to achieve the same outcomes without transferring the case. Yet there clearly would have been ways of securing that the children were placed under the aegis of the relevant Guardianship Office in Hungary. As the Family Rights Group observe, the courts have been arranging foreign placements for years. The mother is right to say that the court cannot dictate the content of a local authoritys care plan when it makes a final care order in care proceedings. On the other hand, the local authority may be willing to change its care plan in the light of clear findings as to the childrens best interests. In any event, a placement abroad can be achieved without making a care order. If the child is not subject to a care order, the inherent jurisdiction of the High Court may be used in a flexible way to secure the desired outcome. The prohibitions on its use in section 100(2) of the Children Act 1989 would not preclude the court from making orders in favour of the relevant Hungarian authority. A similar result might be achieved through orders under section 8 of the Children Act 1989, which again would not be precluded by section 9(5) (sections 100(2) and 9(5) preclude the use of such orders in effect to place children in the care of a local authority). Nor did the judge consider which court would be better placed to achieve the third outcome. There could only be one answer to this. But there would be a variety of ways of achieving that outcome. The local authority did propose a closed adoption, but there are other ways of achieving permanence and stability in this country without cutting off all links with the childrens family and background. There are orders in favour of foster parents which fall short of adoption. Whether the children remain in foster care under a care order or under some order in favour of the foster carers, the court is in charge of contact. It could make contact orders which would be recognisable and enforceable in Hungary. Alternatively, it could transfer the contact part of the proceedings to Hungary under article 15. All of these things should have been taken into account in deciding which court was better placed. Above all, in this particular case, the judge had heard and read all the evidence that anyone involved wished to put before him. He was in a position to decide the outcome. Although a transfer request can be made and determined at any time, it would be rare indeed that, the case having reached such a point, another court would be better placed to hear it. Thus, in my view, not only did the judge take the wrong approach to the best interests question, he also left out of account some crucial factors in deciding upon the better placed question. I shall return to the consequences of that after considering the other issues in the case. The placement order proceedings The local authority argue that, as the placement order proceedings are not within the scope of the Regulation, there was no power to stay them with a view to transfer under article 15. The Court of Appeal was correct to recognise that, but wrong to stay them as consequential on the care proceedings. Section 21(2) of the Adoption and Children Act 2002 (para 15 above) makes it clear that the threshold may be determined either in care proceedings or in separate placement order proceedings. Thus they argue that the placement order proceedings should have been left to take their course. It is, of course, correct that article 15 does not apply to placement order proceedings. The judge was wrong to think that it did. But that, in itself, did not invalidate his decision to transfer the care proceedings. If it was right to transfer the care proceedings, then it made no sense to leave the placement order proceedings to continue as if nothing had happened. The object of the transfer was that the childrens future should be decided in Hungary and not in England. As the mother points out, under the Family Procedure Rules 2010, the court has wide case management powers, including, under rule 4.1(3)(g), the power to stay the whole or part of any proceedings either generally or until a specified later date. The Court of Appeal has the same powers as the trial judge. It clearly had the power to do this. If it had been right to uphold the transfer, it would clearly have been right to stay the placement order proceedings. Reference to the CJEU? As already noted, there is a live question before the CJEU as to whether article 15 is capable of applying to public law proceedings such as these. This cannot be regarded as acte clair. This court has to decide whether to make its own reference of essentially the same question that the Supreme Court of Ireland has already referred; whether to delay its decision until the outcome of that reference is known; or whether to proceed on the assumption that article 15 is capable of applying to public law proceedings and review the decisions of the courts below on their merits. In my view, the third course is infinitely preferable to the other two. These proceedings have already taken far too long. Some of the delay is attributable to the local authority, which should have brought proceedings long before they did, rather than relying upon the parents agreement for the children to be accommodated; some of the delay is attributable to the vacillations of the parents and their failure to co operate with the authority over assessments and contact with their children; some of it is attributable to the courts. There may be good, or at least understandable, reasons for much of this. But the children are the last people who should be made to suffer for the actions or inaction of others. Janetta is now aged four years and two months. Ella is now aged two years and 11 months. For almost all of Ellas life the girls have lived with their present foster parents. One way or another, their best interests demand that their future should be decided as soon as possible. But does that leave this court free to decide upon the correct approach to an article 15 application? The Supreme Court of Ireland has referred questions which are essentially the same as the principal issue in this case. However, it has done so in a very different context a pregnant woman who had deliberately left England and moved to have her baby in Ireland in order to avoid care proceedings here. The transfer question therefore also raised issues about the free movement of workers within the European Union which do not arise in this case. I share the Presidents view that the language of article 15.1 is simple and clear. It requires no gloss or explanation. The court has three questions to answer: does the child have a particular connection (as defined in article 15.3) with another member state; would a court in that member state be better placed to hear the case, or a specified part of it; and would this be in the best interests of the child? The better placed and best interests questions are separate questions and the best interests question is intended to be an additional safeguard for the child. The question is not what eventual outcome to the case will be in the best interests of the child but whether the transfer will be in her best interests. Subject to that, the scope of the inquiry will depend upon all the circumstances of the case. I would therefore proceed on the basis that the meaning of article 15.1 is acte clair, albeit not yet clair, and we are merely applying it to the facts of the case, which is the task of the national courts. Furthermore, for the reasons already explained, the judge was, in my view, plainly wrong to conclude that the Hungarian authorities were, on the particular facts of this case, better placed to hear the case. He left out of account the vital factor that to transfer the case would preclude one possible outcome which might be in the best interests of the children concerned, whereas retaining jurisdiction would allow all the possible outcomes to be considered. Transfer would also precipitate their removal from their long standing home without any evaluation of the impact of this upon their psychological well being. In my view, therefore, it is not necessary for this court to make a reference to the CJEU or to await the outcome of the reference made by the Supreme Court of Ireland. We should proceed to decide the case. Conclusion It follows that the appeal must be allowed and the transfer request set aside. After this period of time, there can be no question of re opening the transfer application. It is in the best interests of these children for their future to be decided as soon as possible. Unfortunately, it will be necessary for the evidence to be updated. The case should therefore be returned to the Family Division of the High Court, to be heard by a judge of that division, as soon as possible. As has already been made clear, the range of possible outcomes for these two children is not limited to the primary case presented to the judge: closed adoption here as against foster placement in Hungary. There are several other options in between. The guidance given by the President in this case (paras 104 to 111) is relevant. He emphasised the importance in the checklist of factors to be considered when deciding whether to make an adoption order in section 1(4) of the 2002 Act, (c) the likely effect on the child (throughout his life) of having ceased to be a member of the original family and become an adopted person and (d) the childs background (para 104). The court and the professionals must give the most careful consideration to those parts of the checklist which focus attention, explicitly or implicitly, on the childs national, cultural, linguistic, ethnic and religious background. The court is directed to consider the likely effect, throughout her life, of having ceased to be a member of her original family (para 105). As he had said in Merton London Borough Council v B [2015] EWCA Civ 888; [2016] 2 WLR 410, para 84, We must be understanding of the concerns about our processes voiced by European colleagues; and the court must rigorously apply the principle that [non consensual] adoption is the last resort and only permissible if nothing else will do (para 106). On the other hand, as he had said in In re J (Care Proceeding: Appeal) [2014] EWFC 4; [2015] 1 FLR 850, para 36, at the end of the day matters had to be judged according to the law of England and by reference to the standards of reasonable men and women in contemporary English society. The parents views, whether religious, cultural, secular or social, are entitled to respect but cannot be determinative (para 108). One important factor, in considering the childs welfare, is whether an adoption order would be recognised in the country where the child is domiciled, or a national, or has been habitually resident. If it would not be, the court will have to consider the disadvantages of a limping adoption order (see In re B(S) (An Infant) [1968] Ch 204), which might make it difficult for them ever to visit Hungary. This might tell in favour of finding other ways of giving the children the security and stability they need. Much will, of course, depend upon the evidence before the judge at the rehearing. It will be for him or her to decide upon the outcome which will be in the best interests of these little girls. |
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